2019 - 2020 LEGISLATURE
February 11, 2020 - Introduced by
Law Revision Committee. Referred to
Committee on Rules.
1An Act to repeal
40.08 (1m) (f) 3.;
40.86 (1), 40.86 (2), 40.86 (3) and 2
40.86 (4); to amend
40.04 (3) (a), 40.04 (3) (am) 3. (intro.), 40.08 (1m) (f) 1., 40.08 3
(1m) (f) 2., 40.24 (7) (a) (intro.), 40.24 (7) (b), 40.285 (2) (b) 1. a. to d. and 40.63 4
(10); and to create
40.86 (1) (intro.) of the statutes; relating to: named various
5changes to the Wisconsin Retirement System (suggested as remedial
6legislation by the Department of Employee Trust Funds).
Analysis by the Legislative Reference Bureau
Under current law, investment gains and losses of the core and variable
retirement investment trust funds are distributed in a ratio of each participating
account's average daily balance to the total average daily balance of all participating
accounts. The State of Wisconsin Investment Board invests assets of the core and
variable investment trust funds, which are commingled under current law, and all
activity is not recorded on a daily basis for the separate participating accounts.
SWIB provides certified annual earnings reports for the core and variable trust
This bill provides that the Department of Employee Trust Funds may distribute
the earnings to each participating account by calculating a simple average balance,
which uses beginning and end-of-year balances for each participating account, and
comparing that average balance to the total average balance of all participating
The bill clarifies that only an employee who is currently employed with an
participating employer under the Wisconsin Retirement System may purchase other
governmental service. As currently written, the statute uses the term “participant”
and “participating employee.” The term “participant” includes a person who
previously worked for a participating employer but has not yet taken a WRS benefit.
Under current law, the Employee Trust Funds Board contracts with
employee-funded reimbursement account plan providers to provide accounts to be
used by state agencies. Employee-funded reimbursement accounts are governed by
provisions of the Internal Revenue Code. The bill aligns the statutory language with
the language in the IRC.
Under the bill, references to beneficiaries and named survivors in statutes
regarding annuity options under the WRS are amended to distinguish between a
named survivor who will receive a benefit and a beneficiary.
The bill eliminates an expired provision regarding the execution of domestic
relations orders (DRO) that divide a WRS account. Under current law, a DRO must
be provided to DETF within 20 years after the judgment of divorce is entered. Under
the original DRO law, DETF could not accept a DRO for a judgment of divorce entered
before April 28, 1990. The law was amended by 1997 Wisconsin Act 125
DROs for a judgment of divorce entered between January 1, 1982, and April 27, 1990.
The Wisconsin Supreme Court held in Johnson v. Masters
, 2013 WI 43, 347 Wis.
2d 238, 830 N.W. 2d 647 (2012), that the 20-year limit for execution of DROs issued
under the amended law did not begin until the date DETF was able to divide a WRS
account. The 20-year period did not begin to toll until May 2, 1998. DETF has not
been authorized to accept a DRO to divide an account under the 1997 Wisconsin Act
since May 2, 2018.
Finally, under current law, when a disability annuity under the WRS is
terminated, the person's WRS account is reestablished and credited with interest.
While a person is receiving an annuity from the WRS, the person cannot also be
credited with contributions and service. The bill removes obsolete language from the
For further information, see the Notes provided by the Law Revision
Committee of the Joint Legislative Council.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
40.04 (3) (a) of the statutes is amended to read:
(a) The net gain or loss of the variable retirement investment trust 3
shall be distributed annually on December 31 to each participating account in the 4
same ratio as each account's average daily
balance within the respective trust bears 5
to the total average daily
balance of all participating accounts in the trust. The
amount to be distributed shall be the excess of the increase within the period in the 2
value of the assets of the trust resulting from income from the investments of the 3
trust and from the sale or appreciation in value of any investment of the trust, over 4
the decrease within the period in the value of the assets resulting from the sale or 5
the depreciation in value of any investments of the trust.
40.04 (3) (am) 3. (intro.) of the statutes is amended to read:
(am) 3. (intro.) Annually, on December 31, the sum of all of the 8
following shall be distributed from the market recognition account to each 9
participating account in the core retirement investment trust in the same ratio as 10
each account's average daily
balance bears to the total average daily
balance of all 11
participating accounts in the trust:
Note: Sections 1 and 2 eliminate the requirement for ETF to distribute the annual
certified earnings for the core and variable investment trust funds by calculating an
average daily balance, and instead, simply require use of an average balance.
40.08 (1m) (f) 1. of the statutes is amended to read:
(f) 1. Subject to subd. 3., if If
the participant is not an annuitant on 14
the decree date, an amount equal to the total of the alternate payee share distributed 15
under par. (e), including creditable service, shall be subtracted from the participant's 16
Note: Sections 3 and 4 delete cross-references to the statute in Section 5.
40.08 (1m) (f) 2. of the statutes is amended to read:
(f) 2. Subject to subd. 3., if If
the participant is an annuitant on the 19
decree date, the annuity shall be recomputed using the total value of the participant's 20
account determined under par. (b) reduced by the total of the alternate payee share 21
transferred under par. (e) 1., in accordance with the actuarial tables in effect and 22
using the participant's age on the decree date. The decree date shall be the effective
date of recomputation. If the optional annuity form before division of the 2
participant's account under par. (b) was not a joint and survivor annuity with the 3
alternate payee as the named survivor, the same annuity option with no change in 4
the remaining guarantee period, if any, shall be continued upon recomputation to the 5
participant. The present value of the alternate payee's share of the annuity after 6
division shall be paid to the alternate payee as a straight life annuity based on the 7
age of the alternate payee on the decree date. The alternate payee's annuity shall 8
have the same remaining guarantee period, if any, as the participant's annuity. If 9
the optional annuity form before division of the participant's account under par. (b) 10
was a joint and survivor annuity with the alternate payee as the named survivor, the 11
present value of the annuity after division shall be paid to both the participant and 12
the alternate payee as a straight life annuity based upon their respective ages on the 13
decree date. If the participant's account is reestablished under s. 40.63 (10) after the 14
decree date, the amounts and creditable service reestablished shall be reduced by an 15
amount equal to the percentage of the alternate payee share computed under this 16
40.08 (1m) (f) 3. of the statutes is repealed.
Note: This Section repeals an obsolete statute relating to the division of Wisconsin
Retirement System benefits for any participant whose marriage is terminated by a court
during the period that begins on January 1, 1982, and ends on April 27, 1990, and for
whom the Department of Employee Trust Funds receives a qualified domestic relations
order after May 2, 1998.
40.24 (7) (a) (intro.) of the statutes is amended to read:
(a) (intro.) Any participant who has been married to the same spouse, 20
or in a domestic partnership with the same domestic partner, for at least one year 21
immediately preceding the participant's annuity effective date shall elect the 22
annuity option under sub. (1) (d), the annuity option under sub. (1) (e), if the reduced
annuity under sub. (1) (e) is payable in an optional life form provided under sub. (1) 2
(d), or an annuity option in a form provided by rule, if the annuity is payable for life 3
with monthly payments of at least 75 percent of the amount of the annuity to be 4
continued to the beneficiary named survivor
, for life, upon the death of the 5
participant, and the participant shall designate the spouse or domestic partner as 6
the beneficiary named survivor
, unless the participant's application for a retirement 7
annuity in a different optional annuity form is signed by both the participant and the 8
participant's spouse or domestic partner or unless the participant establishes to the 9
satisfaction of the department that, by reason of absence or other inability, the 10
spouse's or domestic partner's signature may not be obtained. This subsection does 11
not apply to any of the following:
6 and 7 replace the term “beneficiary” with “named survivor” in
statutes relating to annuity options for the Wisconsin Retirement System.
40.24 (7) (b) of the statutes is amended to read:
(b) In administering this subsection, the secretary may require the 14
participant to provide the department with a certification of the participant's marital 15
or domestic partnership status and of the validity of the spouse's or domestic 16
partner's signature. If a participant is exempted from the requirements under par. 17
(a) on the basis of a certification which the department or a court subsequently 18
determines to be invalid, the liability of the fund and the department shall be limited 19
to a conversion of annuity options at the time the certification is determined to be 20
invalid. The conversion shall be from the present value of the annuity in the optional 21
form originally elected by the participant to an annuity with the same present value 22
but in the optional form under sub. (1) (d) and with monthly payments of 100 percent
of the amount of the annuity paid to the annuitant to be continued to the spouse or 2domestic partner beneficiary named survivor
40.285 (2) (b) 1. a. to d. of the statutes are amended to read:
(b) 1. a. The participant participating employee
has at least 3 5
continuous years of creditable service at the time of application.
b. The number of years of creditable service applied for under this paragraph 7
does not exceed the number of years of creditable service that the
participant 8participating employee
has at the date of application, excluding all creditable service 9
purchased under this section or s. 40.02 (17) (b), 1981, 1983, 1985, 1987, 1989, 1991, 10
1993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (e), 1987, 1989, 1991, 1993, 11
1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (i), 1989, 1991, 1993, 1995, 1997, 1999, 12
and 2001 stats., s. 40.02 (17) (k), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats., 13
s. 40.25 (6), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001 14
stats., or s. 40.25 (7), 1991, 1993, 1995, 1997, 1999, and 2001 stats., less the number 15
of years of creditable service previously purchased under this paragraph or s. 40.25 16
(7), 1991, 1993, 1995, 1997, 1999, and 2001 stats.
c. At the time of application, the participant
evidence of such service that is acceptable to the department.
d. Except as provided in sub. (4) (b), at the time of application, the participant 20participating employee
pays to the department a lump sum equal to the present 21
value of the creditable service applied for under this paragraph, in accordance with 22
rates actuarially determined to be sufficient to fund the cost of the increased benefits 23
that will result from granting the creditable service under this paragraph. The 24
department shall by rule establish different rates for different categories of 25
participants, based on factors recommended by the actuary.
Note: This Section replaces the term “participant” with “participating employee”
in a statute relating to purchasing creditable service for purposes of the Wisconsin
40.63 (10) of the statutes is amended to read:
Upon termination of an annuity in accordance with sub. (9), each 3
participant whose annuity is so terminated shall, as of the beginning of the calendar 4
month following termination, be credited with additional contributions equal to the 5
then present value of the portion of the terminated annuity which was originally 6
provided by the corresponding type of additional contributions. Except for additional 7
contributions, the retirement account of the participant shall be reestablished as if 8
the terminated annuity had never been effective, including crediting of interest and
9of any contributions and creditable service earned during the period the annuity was
Note: This Section clarifies that, under the Wisconsin Retirement System, an
individual may not earn contributions and creditable service during a period in which the
individual receives an annuity from the Wisconsin Retirement System based on the
individual's own service as a participating employee.
40.86 (1) (intro.) of the statutes is created to read:
(intro.) Expenses authorized under section 125
of the Internal 13
Revenue Code, which may include any of the following:
40.86 (1) of the statutes is renumbered 40.86 (1) (a).
40.86 (2) of the statutes is renumbered 40.86 (1) (b).
40.86 (3) of the statutes is renumbered 40.86 (1) (c).
40.86 (4) of the statutes is renumbered 40.86 (2m).