The Employes’ Retirement System of the City of Milwaukee (Retirement System) was created in 1937 and is a cost-sharing, multiple-employer, defined-benefit pension plan with 29,223 members and a fiduciary net position of $6.0 billion as of December 31, 2024. The Retirement System is administered by a staff of 51 full-time equivalent positions.
We provided an unmodified opinion on the Retirement System’s financial statements as of and for the year ended December 31, 2024. Our unmodified opinion is included in the Retirement System’s Annual Comprehensive Financial Report, which can be found on the Retirement System’s website. These financial statements account for the financial position and activity of the Retirement System.
We conducted this financial audit by auditing the Retirement System’s financial statements in accordance with applicable government auditing standards, issuing our auditor’s opinion, reviewing internal controls, and issuing our auditor’s report on internal control and compliance.
Under Act 12, the City of Milwaukee was permitted to impose a sales and use tax of 2.0 percent and use the revenue to address the Retirement System’s unfunded actuarial liability. Act 12 had other requirements, including:
- the Retirement System long-term expected rate of return assumption is 6.8 percent;
- employees hired after December 31, 2023, are required to join the Wisconsin Retirement System; and
- no increases or enhancements may be made to the Retirement System benefits for employees remaining in the Retirement System after December 31, 2023, except those required for compliance with federal law.
The Retirement System is funded by investment income and contributions.
As of December 31, 2024, the Retirement System reported total investment assets of $6.1 billion. Under the Retirement System’s investment policy, the Annuity and Pension Board of the Retirement System is required to contract with investment managers to invest and manage the assets of the Retirement System. During 2024, the Retirement System contracted with 25 investment managers. In 2024, the Retirement System reported net investment income of $408.5 million. From 2020 through 2024, net investment income represented 68.8 percent of total funding for the Retirement System.
Retirement System contributions due from employers are calculated using actuarial methods and contributions from members are defined in the City of Milwaukee Charter. In 2024, the Retirement System reported $251.7 million in total contributions, including $217.6 million from employers and $34.1 million from members. Member contributions varied between 4.0 to 7.0 percent of employee pay. From 2020 through 2024, total contributions represented 31.2 percent of total funding for the Retirement System.
Pension benefit payments totaled $488.0 million in 2024
The amount of pension benefits provided to retired members or their beneficiaries as annuity payments increased from $466.6 million in 2023 to $488.0 million in 2024, or by 4.6 percent. Retirement System pension benefits are based on a member’s years of service, a percentage multiplier, and a final average salary. The effective date and amount of any applicable pension escalator, which is an annual increase in a retired member’s benefit payment to account for cost-of-living adjustments, vary by the member’s employee group and several other factors. The average annual benefit payment increased from $33,601 in 2023 to $34,498 in 2024, or by 2.7 percent.
Administrative expenses of the Retirement System totaled $9.3 million in 2024
Administrative expenses include salaries and fringe benefits, information technology and other professional services, and general office expenses. Administrative expenses, which are paid by the City of Milwaukee and then reimbursed by the Retirement System, increased from $8.0 million in 2023 to $9.3 million in 2024, or by 15.9 percent. This increase is largely due to the 10.2 percent increase in salaries and 14.3 percent increase in fringe benefits for Retirement System staff during this period.
As of December 31, 2024, the net pension liability was $2.1 billion
The Retirement System has reported a net pension liability for each of the last five years. As of December 31, 2024, the net pension liability was $2.1 billion, which was $40.7 million more than the $2.1 billion as of December 31, 2023. The Retirement System was 73.7 percent funded as of December 31, 2024.
The Retirement System had a fiduciary net position of $6.0 billion as of December 31, 2024
Fiduciary net position, which represents the value of the Retirement System’s assets that are restricted either for pensions or for other governments, is a measure of overall financial condition. The fiduciary net position of the Retirement System on the basis of generally accepted accounting principles (GAAP) increased from $5.8 billion as of December 31, 2023, to $6.0 billion as of December 31, 2024, or by 2.7 percent.
This increase is primarily attributable to realized and unrealized gains from investments and an increase in employer contributions.
We report a finding of noncompliance
During our audit work, we identified nine employees hired after December 31, 2023, who were enrolled in the Retirement System in error. We recommended that the Retirement System implement procedures to follow up with employers to assess the eligibility of new enrollments, refund the employee contributions for the employees enrolled in error, and report to the Joint Legislative Audit Committee by December 1, 2025, on the status of its efforts to implement these recommendations.
We make 3 recommendations to the Retirement System for improvements
Please see the complete list of our recommendations on our website.
