Chapter 40

40.03(2)(r) (r) Shall promulgate rules governing the times for making lump sum payments that are authorized under this chapter to be made to or from the Wisconsin retirement system and governing the valuation of money that has been sent, delivered or withdrawn, and the distribution of investment income to be credited on those amounts. The rules may modify the accounting and valuation bases and the investment earnings distribution procedures of the Wisconsin retirement system to the extent necessary to achieve equity among the various types of payments and contributions to, and payments from, the Wisconsin retirement system.

40.03(2)(s) (s) Shall reimburse the legislative audit bureau for the cost of audits required to be performed under s. 13.94 (1) (dc) and (dd).

40.03(2)(t) (t) Shall ensure that the Wisconsin retirement system complies with the Internal Revenue Code as a qualified plan for income tax purposes and shall ensure that each benefit plan is administered in a manner consistent with all Internal Revenue Code provisions that authorize and regulate the benefit plan.

40.03(2)(u) (u) Shall ensure that the department include on all publications that are printed beginning on October 14, 1997, and that are intended for distribution to participants the toll-free telephone number of the department, if the department has such a telephone number.

40.03(2)(v) (v) May settle any dispute in an appeal of a determination made by the department that is subject to review under sub. (1) (j), (6) (i), (7) (f), or (8) (f), or s. 40.80 (2g), but only with the approval of the board having the authority to accept the appeal. In deciding whether to settle such a dispute, the secretary shall consider the cost of litigation, the likelihood of success on the merits, the cost of delay in resolving the dispute, the actuarial impact on the trust fund, and any other relevant factor the secretary considers appropriate. Any moneys paid by the department to settle a dispute under this paragraph shall be paid from the appropriation account under s. 20.515 (1) (r).

40.03(2)(vm) (vm) Annually, before July 1, shall submit a report to the secretary of administration and the joint committee on finance on the department’s progress in modernizing its business processes and integrating its information technology systems.

40.03(2)(w) (w) If the secretary determines that an otherwise eligible participant has unintentionally forfeited or otherwise involuntarily ceased to be eligible for any benefit provided under this chapter principally because of an error in administration by the department, may order the correction of the error to prevent inequity. A decision under this paragraph is not subject to review. The secretary shall submit a quarterly report to the employee trust funds board on decisions made under this paragraph.

40.03(2)(x) (x)

40.03(2)(x)1. 1. May enter into a memorandum of understanding with the commissioner of the opportunity schools and partnership program under subch. IX of ch. 115 to include the commissioner and individuals employed at schools transferred to the program as participating employees and eligible for health care coverage under s. 40.51 (7). For purposes of s. 40.21 (1), a memorandum of understanding under this subdivision shall be considered a resolution adopted by a governing body. The secretary may not enter into the memorandum of understanding under this subdivision if the memorandum of understanding would result in the violation s. 40.015.

40.03(2)(x)2. 2. May enter into a memorandum of understanding with the superintendent of schools of the school district operating under ch. 119 to include individuals employed at schools transferred to the superintendent of schools opportunity schools and partnership program under s. 119.33 as participating employees and eligible for health care coverage under s. 40.51 (7). For purposes of s. 40.21 (1), a memorandum of understanding under this subdivision shall be considered a resolution adopted by a governing body. The secretary may not enter into the memorandum of understanding under this subdivision if the memorandum of understanding would result in the violation s. 40.015.

40.03(2)(x)3. 3. May enter into a memorandum of understanding with the commissioner of the opportunity schools and partnership program under subch. II of ch. 119 to include the commissioner and individuals employed at schools transferred to the program as participating employees and eligible for health care coverage under s. 40.51 (7). For purposes of s. 40.21 (1), a memorandum of understanding under this subdivision shall be considered a resolution adopted by a governing body. The secretary may not enter into a memorandum of understanding under this subdivision if the memorandum of understanding under this subdivision would result in a violation of s. 40.015.

40.03(3) (3) Department of justice. The department of justice shall furnish legal counsel and shall prosecute or defend all actions brought by or against the board, department, group insurance board or any employee of the department as a result of the performance of the department employee’s duties.

40.03(4) (4) State treasurer. The state treasurer shall be the treasurer of the fund.

40.03(5) (5) Actuary. The actuary or actuarial firm retained under sub. (1) (d):

40.03(5)(a) (a) Shall be the technical adviser of the board, the secretary and the group insurance board on any matters of an actuarial nature affecting the soundness of the fund or requiring any changes for more satisfactory operation.

40.03(5)(b) (b) Shall make a general investigation at least once every 3 years of the experience of the Wisconsin retirement system relating to mortality, disability, retirement, separation, interest, employee earnings rates and of any other factors deemed pertinent and to certify, as a result of each investigation, the actuarial assumptions to be used for computing employer contribution rates, the assumed rate and the tables to be used for computing annuities and benefits, provided the tables shall not provide different benefits on the basis of sex for participants or beneficiaries similarly situated. If the assumed rate changes, the actuary shall at the same time adjust the assumptions for future changes in employee earnings rates to be consistent with the new assumed rate. The recommended actuarial assumptions shall be based on the system’s own experience as identified in the general investigations unless lack of adequate information or unusual circumstances are specifically identified and fully described which require use of other groups’ experience and such other experience is not inconsistent with the system’s own experience. When considering or implementing new or changed benefit provisions and areas of risk, the assumptions may be based solely on the experience of other groups until 5 years of the system’s own experience is available for use as long as such other experience is not inconsistent with the system’s own experience.

40.03(5)(c) (c) Shall determine the proper rates of premiums and contributions required, or advise as to the appropriateness of premium rates proposed by independent insurers, for each of the benefit plans provided for by this chapter. For the purpose of determining separate required contribution rates for participants under s. 40.05 (1) (a) 1. and 2., and for employers under s. 40.05 (2) (a), the actuary or actuarial firm may recommend, and the board may approve, combining the participant groups under s. 40.05 (1) (a) 1. and 2. if the combination is in the actuarial interest of the fund and would result in administrative efficiency.

40.03(5)(d) (d) Shall make an annual valuation of the liabilities and reserves required to pay both present and prospective benefits.

40.03(5)(e) (e) Shall certify the actuarial figures on the annual financial statements required under sub. (2) (e).

40.03(6) (6) Group insurance board. The group insurance board:

40.03(6)(a) (a)

40.03(6)(a)1. 1. Except as provided in par. (m), shall, on behalf of the state, enter into a contract or contracts with one or more insurers authorized to transact insurance business in this state for the purpose of providing the group insurance plans provided for by this chapter; or

40.03(6)(a)2. 2. Except as provided in par. (m), may, wholly or partially in lieu of subd. 1., on behalf of the state, provide any group insurance plan on a self-insured basis in which case the group insurance board shall approve a written description setting forth the terms and conditions of the plan, and may contract directly with providers of hospital, medical or ancillary services to provide insured employees with the benefits provided under this chapter.

40.03(6)(b) (b) Except as provided in par. (m), may provide other group insurance plans for employees and their dependents and for annuitants and their dependents in addition to the group insurance plans specifically provided under this chapter. The terms of the group insurance under this paragraph shall be determined by contract, and shall provide that the employer is not liable for any obligations accruing from the operation of any group insurance plan under this paragraph except as agreed to by the employer.

40.03(6)(c) (c) Shall not enter into any agreement to modify or expand benefits under any group insurance plan, unless the modification or expansion is required by law or would maintain or reduce premium costs for the state or its employees in the current or any future year. A reduction in premium costs in future years includes a reduction in any increase in premium costs that would have otherwise occurred without the modification or expansion. This paragraph shall not be construed to prohibit the group insurance board from encouraging participation in wellness or disease management programs or providing optional coverages if the premium costs for those coverages are paid by the employees.

40.03(6)(d) (d) May take any action as trustees which is deemed advisable and not specifically prohibited or delegated to some other governmental agency, to carry out the purpose and intent of the group insurance plans provided under this chapter, including, but not limited to, provisions in the appropriate contracts relating to:

40.03(6)(d)1. 1. Eligibility of active and retired employees to participate, or providing the employee the opportunity to decline participation or to withdraw.

40.03(6)(d)2. 2. The payments by employees for group insurance.

40.03(6)(d)3. 3. Enrollment periods and the time group insurance coverage shall be effective.

40.03(6)(d)4. 4. The time that changes in coverage and premium payments shall take effect.

40.03(6)(d)5. 5. The terms and conditions of the insurance contract or contracts, including the amount of premium.

40.03(6)(d)6. 6. The date group insurance contracts shall be effective.

40.03(6)(d)7. 7. Establishment of reserves.

40.03(6)(e) (e) Shall apportion all excess moneys becoming available to it through operation of the group insurance plans to reduce premium payments in following contract years or to establish reserves to stabilize costs in subsequent years. If it is determined that the excess became available due to favorable experience of specific groups of employers or specific employee groups, the apportionment may be made in a manner designated to benefit the specific employers or employee groups only, or to a greater extent than other employers and employee groups.

40.03(6)(f) (f) Shall take prompt action to liquidate any actuarial or cash deficit which occurs in the accounts and reserves maintained in the fund for any group insurance benefit plan.

40.03(6)(g) (g) Shall determine the amount of insurance and extent of coverage provided and amount of premiums required during a union service leave. The amount of insurance and extent of coverage shall be not less than that in effect immediately preceding the commencement of the union service leave.

40.03(6)(h) (h) Shall, on behalf of the state, offer as provided in s. 40.55 long-term care insurance policies. For purposes of this section, the offering by the state of long-term health insurance policies shall constitute a group insurance plan under par. (a) 1.

40.03(6)(i) (i) Shall accept timely appeals of determinations made by the department affecting any right or benefit under any group insurance plan provided for under this chapter.

40.03(6)(j) (j) May contract with the department of health services and may contract with other public or private entities for data collection and analysis services related to health maintenance organizations and insurance companies that provide health insurance to state employees.

40.03(6)(k) (k) Shall establish health savings accounts for state employees who select a high-deductible health plan under s. 40.515 for their health care coverage plan.

40.03(6)(L) (L) In consultation with the division of personnel management in the department of administration, shall notify the joint committee on finance that it intends to execute a contract to provide self-insured group health plans on a regional or statewide basis to state employees. The group insurance board may not execute the contract unless authorized under this paragraph. If the cochairpersons of the joint committee on finance do not notify the group insurance board that the committee has scheduled a meeting for the purpose of approving the execution of the contract within 21 working days after the date of the group insurance board’s notification, the group insurance board may execute the contract. If, within 21 working days after the date of the group insurance board’s notification, the cochairpersons of the committee notify the group insurance board that the committee has scheduled a meeting for the purpose of approving the execution of the contract, the group insurance board may not execute the contract without the approval of the committee.

40.03(6)(m) (m) May not enter into, extend, modify, or renew any contract for a group insurance plan or provide a group insurance plan or other benefit on a self-insured basis that provides coverage or services for an abortion, the performance of which is ineligible for funding under s. 20.927.

40.03(7) (7) Teachers retirement board. The teachers retirement board:

40.03(7)(a) (a) Shall appoint 4 members of the employee trust funds board as provided under s. 15.16 (1).

40.03(7)(b) (b) Shall study and recommend to the secretary and the employee trust funds board alternative administrative policies and rules which will enhance the achievement of the objectives of the benefit programs for teacher participants.

40.03(7)(c) (c) Shall appoint one member of the investment board as provided under s. 15.76 (3).

40.03(7)(d) (d) Shall approve or reject all administrative rules proposed by the secretary under sub. (2) (i) that relate to teachers, except rules promulgated under s. 40.30.

40.03(7)(e) (e) Shall authorize and terminate the payment of disability annuity payments to teacher participants in accordance with this chapter.

40.03(7)(f) (f) Shall accept timely appeals of determinations made by the department regarding disability annuities for teacher participants in accordance with s. 40.63 (5) and (9) (d).

40.03(7)(g) (g) May amend any rule of the department, the Milwaukee teachers retirement board, the state teachers retirement board and the Wisconsin retirement fund board, which are in effect on January 1, 1982, in such a manner as to make it no longer applicable to teacher participants.

40.03(8) (8) Wisconsin retirement board. The Wisconsin retirement board:

40.03(8)(a) (a) Shall appoint 4 members of the employee trust funds board as provided under s. 15.16 (1).

40.03(8)(b) (b) Shall study and recommend to the secretary and the employee trust funds board alternative administrative policies and rules which will enhance the achievement of the objectives of the benefit programs for participants other than teachers.

40.03(8)(c) (c) Shall appoint one member of the investment board as provided under s. 15.76 (3).

40.03(8)(d) (d) Shall approve or reject all administrative rules proposed by the secretary under sub. (2) (i) that relate to participants other than teachers, except rules promulgated under s. 40.30.

40.03(8)(e) (e) Shall authorize and terminate the payment of disability annuity payments to participants other than teachers in accordance with this chapter.

40.03(8)(f) (f) Shall accept timely appeals of determinations made by the department regarding disability annuities for participants other than teachers in accordance with s. 40.63 (5) and (9) (d).

40.03(8)(g) (g) May amend any rule of the department, the Milwaukee teachers retirement board, the state teachers retirement board and the Wisconsin retirement fund board, which are in effect on January 1, 1982, in such a manner as to make it no longer applicable to participants other than teachers.

40.03(9) (9) Deferred compensation board. The deferred compensation board shall have the powers and duties provided under s. 40.80 (2) and (2m).

40.03 History History: 1981 c. 96 ss. 24, 32; 1981 c. 386; 1983 a. 247; 1985 a. 29; 1985 a. 332 ss. 53, 251 (1); 1987 a. 356; 1989 a. 31, 166, 323; 1991 a. 116, 141, 152, 269; 1993 a. 16; 1995 a. 302, 414; 1997 a. 27; 1999 a. 9; 2001 a. 16; 2003 a. 33; 2005 a. 25, 153; 2007 a. 20 s. 9121 (6) (a); 2007 a. 131; 2011 a. 10, 32, 258; 2013 a. 20; 2015 a. 55, 119, 187; 2017 a. 191.

40.03 Cross-reference Cross-reference: See also ETF, Wis. adm. code.

40.03 Annotation The insurance subrogation law permitting a subrogated insurer to be reimbursed only if the insured has been made whole applies to the state employee health plan. Leonard v. Dusek, 184 Wis. 2d 267, 516 N.W.2d 463 (Ct. App. 1994).

40.03 Annotation An appeal to the board was an inadequate remedy under the facts of the case because the board does not have the statutory authority to award interest on delayed benefit payments based either on a claim of unjust enrichment or a takings claim under Art. I, s. 13. The doctrine of exhaustion of administrative remedies did not require an appeal of the department’s dismissal of the claim to the board before filing a court action. Fazio v. Department of Employee Trust Funds, 2002 WI App 127, 255 Wis. 2d 801, 645 N.W.2d 618, 01-2595.

40.03 Annotation Affirmed on other grounds. 2006 WI 7, 287 Wis. 2d 106, 708 N.W.2d 326, 04-0064.

40.03 Annotation Under sub. (6) (a) 2. and s. 40.51 (7) (a), the board may offer any group insurance plan on a self–insured basis, and a municipal employer may offer a health care coverage plan through a program offered by the group insurance board. Applying these sections as written, a municipal employer may offer a self-insured plan if offered by the board. Article VIII, section 3 of the Wisconsin Constitution poses no bar because offering self-insured plans does not extend the state’s credit. OAG 3-17.

40.04 40.04 Accounts and reserves.

40.04(1) (1) The separate accounts and reserves under subs. (2) to (10) and any additional accounts and reserves determined by the department to be useful in achieving the fund’s purposes, or necessary to protect the interests of the participants or the future solvency of the fund, shall be maintained within the fund. The accounts and reserves maintained for each benefit plan shall fairly reflect the operations of that benefit plan. Any deficit occurring within the accounts of a benefit plan shall be eliminated as soon as feasible by increasing the premiums, contributions or other charges applicable to that benefit plan. Until eliminated, any deficit shall be charged with interest at the rate the funds would have earned if there had been no deficit.

40.04(2) (2) 

40.04(2)(a) (a) An administrative account shall be maintained within the fund from which administrative costs of the department shall be paid, except charges for services performed by the investment board.

40.04(2)(b) (b) Except as otherwise provided in this section, investment income of this fund and moneys received for services performed or to be performed by the department shall be credited to this account.

40.04(2)(c) (c) The secretary shall estimate the administrative costs to be incurred by the department in each fiscal year and shall also estimate the investment income which will be credited to this account in the fiscal year. The estimated administrative costs less the estimated investment income shall be equitably allocated by the secretary, with due consideration being given to the derivation and amount of the investment income, to the several benefit plans administered by the department. In determining the amount of the allocation, adjustments shall be made for any difference in prior years between the actual administrative costs and investment income from that originally estimated under this paragraph. An amount equal to the adjusted allocated costs shall be transferred to this account from the investment earnings credited to the respective benefit plan accounts and from payments by the respective insurers or employee-funded reimbursement plan providers for administrative services.

40.04(2)(d) (d) The costs of investing the assets of the benefit plans and retirement systems, including all costs due to s. 40.03 (1) (n), shall be paid from the appropriation under s. 20.515 (1) (r) and charged directly against the appropriate investment income or reserve accounts of the benefit plan or retirement system receiving the services.

40.04(3) (3) A core retirement investment trust and a variable retirement investment trust shall be maintained within the fund under the jurisdiction and management of the investment board for the purpose of managing the investments of the retirement reserve accounts and of any other accounts of the fund as determined by the board, including the accounts of separate retirement systems. Within the core retirement investment trust there shall be maintained a market recognition account, and any other accounts as are established by the board or the investment board. A current income account shall be maintained in the variable retirement investment trust. All costs of owning, operating, protecting, and acquiring property in which either trust has an interest shall be charged to the current income or market recognition account of the trust having the interest in the property.

40.04(3)(a) (a) The net gain or loss of the variable retirement investment trust shall be distributed annually on December 31 to each participating account in the same ratio as each account’s average daily balance within the respective trust bears 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 value of the assets of the trust resulting from income from the investments of the trust and from the sale or appreciation in value of any investment of the trust, over the decrease within the period in the value of the assets resulting from the sale or the depreciation in value of any investments of the trust.

40.04(3)(am) (am)

40.04(3)(am)1. 1. Beginning on January 1, 2000, there shall be maintained within the core retirement investment trust a market recognition account. The department shall establish and administer the market recognition account as recommended by the actuary or actuarial firm retained under s. 40.03 (1) (d) and as approved by the board.

40.04(3)(am)2. 2. Annually, the total market value investment return earned by the core retirement investment trust during the year shall be credited to the market recognition account.

40.04(3)(am)3. 3. Annually, on December 31, the sum of all of the following shall be distributed from the market recognition account to each participating account in the core retirement investment trust in the same ratio as each account’s average daily balance bears to the total average daily balance of all participating accounts in the trust:

40.04(3)(am)3.a. a. The expected amount of investment return in the core retirement investment trust during the year based on the assumed rate.

40.04(3)(am)3.b. b. An amount equal to 20 percent of the difference between the total market value investment return earned by the core retirement investment trust and the expected amount of investment return of the core retirement investment trust during the year ending on December 31 based on the assumed rate.

40.04(3)(am)3.c. c. An amount equal to 20 percent of the sum of the differences between the total market value investment return earned by the core retirement investment trust and the expected amount of investment return of the core retirement investment trust at the end of the 4 preceding years. For the purpose of making this calculation, the amount in the market recognition account at the end of each year that occurs before the year 2000 shall be assumed to be zero.

40.04(3)(b) (b) The assets of the core retirement investment trust shall be commingled and the assets of the variable retirement investment trust shall be commingled. No particular contributing benefit plan shall have any right in any specific item of cash, investment, or other property in either trust other than an undivided interest in the whole as provided in this paragraph. The department of administration shall maintain any records as may be required to account for each contributing account’s share in the corresponding trust except that the employee accumulation reserve, the employer accumulation reserve and the annuity reserve shall be treated as a single account, except as provided in sub. (7).

40.04(3)(c) (c) The department shall advise the investment board and the secretary of administration as to the limitations on the amounts of cash to be invested from investment trusts under this subsection in order to maintain the cash balances deemed advisable to meet current annuity, benefit and expense requirements.

40.04(3)(d) (d) Notwithstanding par. (a), assets of the core retirement investment trust which are authorized to be invested in common or preferred stock may, if authorized by rule, be invested as a part of the variable retirement investment trust with that portion of the annual distributions of net gains or losses to the core retirement investment trust from the variable retirement investment trust being credited to the market recognition account.

40.04(4) (4) 

40.04(4)(a) (a) An employee accumulation reserve, within which a separate account shall be maintained for each participant, shall be maintained within the fund and:

40.04(4)(a)1. 1. Credited with all employee contributions made under s. 40.05 (1), all employer additional contributions made under s. 40.05 (2) (g) 1., all additional contributions under s. 40.05 (2) (g) 2. and all contribution accumulations reestablished under s. 40.63 (10).

40.04(4)(a)2. 2. Credited as of each December 31 with interest on the prior year’s closing balance at the effective rate on all employee required contribution accumulations in the variable annuity division, on all employee required contributions in the core annuity division on December 31, 1984, on all employee required contributions in the core annuity division of participants who are not participating employees after December 31, 1984, and on all employee and employer additional contribution accumulations and with interest on the prior year’s closing balance at the assumed benefit rate on all employee required contribution accumulations in the core annuity division for participants who are participating employees after December 31, 1984, but who terminated covered employment before December 30, 1999.

40.04(4)(a)2g. 2g. Credited as of each December 31, with interest on the prior year’s closing balance at the effective rate on all employee required contribution accumulations in the core annuity division for participants who are participating employees on or after December 30, 1999.