LRB-5546/1
MIM:skw/cjs/ahe
2019 - 2020 LEGISLATURE
February 11, 2020 - Introduced by Law Revision Committee. Referred to
Committee on Rules.
AB880,1,6 1An Act to repeal 40.08 (1m) (f) 3.; to renumber 40.86 (1), 40.86 (2), 40.86 (3) and
240.86 (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
funds.
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
accounts.

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 to cover
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
125
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
statute.
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:
AB880,1 1Section 1 . 40.04 (3) (a) of the statutes is amended to read:
AB880,3,52 40.04 (3) (a) The net gain or loss of the variable retirement investment trust
3shall be distributed annually on December 31 to each participating account in the
4same ratio as each account's average daily balance within the respective trust bears
5to the total average daily balance of all participating accounts in the trust. The

1amount to be distributed shall be the excess of the increase within the period in the
2value of the assets of the trust resulting from income from the investments of the
3trust and from the sale or appreciation in value of any investment of the trust, over
4the decrease within the period in the value of the assets resulting from the sale or
5the depreciation in value of any investments of the trust.
AB880,2 6Section 2 . 40.04 (3) (am) 3. (intro.) of the statutes is amended to read:
AB880,3,117 40.04 (3) (am) 3. (intro.) Annually, on December 31, the sum of all of the
8following shall be distributed from the market recognition account to each
9participating account in the core retirement investment trust in the same ratio as
10each account's average daily balance bears to the total average daily balance of all
11participating 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.
AB880,3 12Section 3 . 40.08 (1m) (f) 1. of the statutes is amended to read:
AB880,3,1613 40.08 (1m) (f) 1. Subject to subd. 3., if If the participant is not an annuitant on
14the decree date, an amount equal to the total of the alternate payee share distributed
15under par. (e), including creditable service, shall be subtracted from the participant's
16account.
Note: Sections 3 and 4 delete cross-references to the statute in Section 5.
AB880,4 17Section 4 . 40.08 (1m) (f) 2. of the statutes is amended to read:
AB880,4,1618 40.08 (1m) (f) 2. Subject to subd. 3., if If the participant is an annuitant on the
19decree date, the annuity shall be recomputed using the total value of the participant's
20account determined under par. (b) reduced by the total of the alternate payee share
21transferred under par. (e) 1., in accordance with the actuarial tables in effect and
22using the participant's age on the decree date. The decree date shall be the effective

1date of recomputation. If the optional annuity form before division of the
2participant's account under par. (b) was not a joint and survivor annuity with the
3alternate payee as the named survivor, the same annuity option with no change in
4the remaining guarantee period, if any, shall be continued upon recomputation to the
5participant. The present value of the alternate payee's share of the annuity after
6division shall be paid to the alternate payee as a straight life annuity based on the
7age of the alternate payee on the decree date. The alternate payee's annuity shall
8have the same remaining guarantee period, if any, as the participant's annuity. If
9the optional annuity form before division of the participant's account under par. (b)
10was a joint and survivor annuity with the alternate payee as the named survivor, the
11present value of the annuity after division shall be paid to both the participant and
12the alternate payee as a straight life annuity based upon their respective ages on the
13decree date. If the participant's account is reestablished under s. 40.63 (10) after the
14decree date, the amounts and creditable service reestablished shall be reduced by an
15amount equal to the percentage of the alternate payee share computed under this
16subdivision.
AB880,5 17Section 5 . 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.
AB880,6 18Section 6 . 40.24 (7) (a) (intro.) of the statutes is amended to read:
AB880,5,1119 40.24 (7) (a) (intro.) Any participant who has been married to the same spouse,
20or in a domestic partnership with the same domestic partner, for at least one year
21immediately preceding the participant's annuity effective date shall elect the
22annuity option under sub. (1) (d), the annuity option under sub. (1) (e), if the reduced

1annuity 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
3with monthly payments of at least 75 percent of the amount of the annuity to be
4continued to the beneficiary named survivor, for life, upon the death of the
5participant, and the participant shall designate the spouse or domestic partner as
6the beneficiary named survivor, unless the participant's application for a retirement
7annuity in a different optional annuity form is signed by both the participant and the
8participant's spouse or domestic partner or unless the participant establishes to the
9satisfaction of the department that, by reason of absence or other inability, the
10spouse's or domestic partner's signature may not be obtained. This subsection does
11not apply to any of the following:
Note: Sections 6 and 7 replace the term “beneficiary” with “named survivor” in
statutes relating to annuity options for the Wisconsin Retirement System.
AB880,7 12Section 7 . 40.24 (7) (b) of the statutes is amended to read:
AB880,6,213 40.24 (7) (b) In administering this subsection, the secretary may require the
14participant to provide the department with a certification of the participant's marital
15or domestic partnership status and of the validity of the spouse's or domestic
16partner'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
18determines to be invalid, the liability of the fund and the department shall be limited
19to a conversion of annuity options at the time the certification is determined to be
20invalid. The conversion shall be from the present value of the annuity in the optional
21form originally elected by the participant to an annuity with the same present value
22but in the optional form under sub. (1) (d) and with monthly payments of 100 percent

1of the amount of the annuity paid to the annuitant to be continued to the spouse or
2domestic partner beneficiary named survivor.
AB880,8 3Section 8. 40.285 (2) (b) 1. a. to d. of the statutes are amended to read:
AB880,6,54 40.285 (2) (b) 1. a. The participant participating employee has at least 3
5continuous years of creditable service at the time of application.
AB880,6,166 b. The number of years of creditable service applied for under this paragraph
7does not exceed the number of years of creditable service that the participant
8participating employee has at the date of application, excluding all creditable service
9purchased under this section or s. 40.02 (17) (b), 1981, 1983, 1985, 1987, 1989, 1991,
101993, 1995, 1997, 1999, and 2001 stats., s. 40.02 (17) (e), 1987, 1989, 1991, 1993,
111995, 1997, 1999, and 2001 stats., s. 40.02 (17) (i), 1989, 1991, 1993, 1995, 1997, 1999,
12and 2001 stats., s. 40.02 (17) (k), 1989, 1991, 1993, 1995, 1997, 1999, and 2001 stats.,
13s. 40.25 (6), 1981, 1983, 1985, 1987, 1989, 1991, 1993, 1995, 1997, 1999, and 2001
14stats., or s. 40.25 (7), 1991, 1993, 1995, 1997, 1999, and 2001 stats., less the number
15of years of creditable service previously purchased under this paragraph or s. 40.25
16(7), 1991, 1993, 1995, 1997, 1999, and 2001 stats.
AB880,6,1817 c. At the time of application, the participant participating employee furnishes
18evidence of such service that is acceptable to the department.
AB880,6,2519 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
21value of the creditable service applied for under this paragraph, in accordance with
22rates actuarially determined to be sufficient to fund the cost of the increased benefits
23that will result from granting the creditable service under this paragraph. The
24department shall by rule establish different rates for different categories of
25participants, 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
Retirement System.
AB880,9 1Section 9. 40.63 (10) of the statutes is amended to read:
AB880,7,102 40.63 (10) Upon termination of an annuity in accordance with sub. (9), each
3participant whose annuity is so terminated shall, as of the beginning of the calendar
4month following termination, be credited with additional contributions equal to the
5then present value of the portion of the terminated annuity which was originally
6provided by the corresponding type of additional contributions. Except for additional
7contributions, the retirement account of the participant shall be reestablished as if
8the terminated annuity had never been effective, including crediting of interest and
9of any contributions and creditable service earned during the period the annuity was
10in force
.
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.
AB880,10 11Section 10 . 40.86 (1) (intro.) of the statutes is created to read:
AB880,7,1312 40.86 (1) (intro.) Expenses authorized under section 125 of the Internal
13Revenue Code, which may include any of the following:
AB880,11 14Section 11 . 40.86 (1) of the statutes is renumbered 40.86 (1) (a).
AB880,12 15Section 12 . 40.86 (2) of the statutes is renumbered 40.86 (1) (b).
AB880,13 16Section 13 . 40.86 (3) of the statutes is renumbered 40.86 (1) (c).
AB880,14 17Section 14 . 40.86 (4) of the statutes is renumbered 40.86 (2m).
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