Pension Matters
State Employees Retirement Fund
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February 2011
Alternative Investments may not be the best for Pension funds
A recent article in Forbes by Edward Siedle chastises the Florida Board of Trustees for the Florida Retirement System for shifting large sums of pension funds to “alternative investments.” Siedle cites Warren Buffet as saying, “The onerous fees hedge funds and other alternative managers demand are to be avoided and that a low cost S&P 500 index fund will outperform these pricey poker players.”
Hopefully, our own pension fund investors are taking small steps and careful strategy in their investments in that section of our fund devoted to “alternative funds” which makes up about 20% of the pension investment based on the most recent figures.
To read more about this and also be directed to Buffett’s “bet against hedge funds” click on the link below.
http://blogs.forbes.com/edwardsiedle/2010/09/23/florida-state-pension-to-transfer-wealth-to-hedge-fund-and-private-equity-billionaires-9-23-10/
Bankruptcy being considered as an option for States
A recent article in the New York Times says work is going on behind the scenes to help states file for bankruptcy which will allow them to get debt relief including promised pensions. States are precluded from filing bankruptcy in federal courts, but if enough skullduggery is maneuvered, some say it’s possible. To read the entire article to go www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?pagewanted=1&_r=1&sq=states bankruptcy&st=cse&scp=1
Increased taxes out of January Pension
It was a surprise to many of us to see a decrease in our pension amount due to increased taxes being deducted. ORS had information on their web site regarding this possible change, but if you didn’t check or didn’t have access, it came as quite a surprise. What we have determined to have happened is that Congress did not continue a tax credit called the “Making Work Pay’ credit. Pensioners do not qualify for the Making Work Pay credit, unless they receive earned income. However, the 2009 and the 2010 withholding tables do apply to pensioners and this credit changed the tax tables. The IRS provided pension plans with an optional adjustment procedure which was implemented in January.
New Census Data
Due to rising medical and other costs, poverty for persons 65 and over is increasing according to the new census. Overall poverty in 2009 was 15.7%. Government aid programs such as Medicaid, tax credits and food stamps have been given credit for keep even more persons out of poverty.
InvestMichigan
Beringea, Michigan’s largest venture capital firm, has invested in ReCellular, a Dexter, Mich.-based e-waste company specializing in the collection, reuse and recycling of used personal electronics, particularly mobile phones. (Press release)
The Michigan Opportunities Fund invested in Novo 1, a Fort Worth, Texas company which is expanding in Michigan. Its Holland based call center is hiring 48 full time call center staff. They plan to employ 300 when fully staffed. (MLive 12/17/10) Now that’s what we like to hear retirement money doing for Michigan.
Who’s On First?
Former Gov. Granholm announced she was turning over the reins of Michigan with a “balanced state budget that even had a surplus” But The Institute for Truth In Accounting says $50.1 billion the state owes to its workers, mostly for retiree pensions and health care is not included. Sheila Weinberg, CEO of The Institute for Truth in Accounting, said their analysis of Michigan's 2009 audited financial statement found the state in a “precarious financial position.”
The Institute for Truth in Accounting has reviewed other states’ budgets and found the state with the highest burden on taxpayers was New Jersey at $47,000 per taxpayer, just short of three times as much as Michigan. So I guess what we can take from this, is that our pension and benefits are in the hole but apparently not as deep a hole as some others. Phew, I feel better. (Jan. 8, 2011 Capital Confidential)
As of September 30, 2009, the state had set aside only 52 cents to pay for each dollar of benefits promised. As of that date only $43.4 billion was deposited into the retirement systems, even though the actuaries calculated that a minimum of $84.2 billion should have already been contributed. http://michigan.statebudgetwatch.org/
No Real Difference Between Public and Private Compensation
Jack Lessenberry, Dome Magazine, recent wrote, “a number of studies indicate that what everybody thinks they know about worker compensation may be just wrong. Two years ago, Charles Ballard, an economics professor at Michigan State, and Nicole Funari, now with the Federal Aviation Administration, made a detailed study of the Michigan workforce. Their conclusions? The number of state employees in Michigan has fallen sharply since 2001, and their salaries and benefits haven’t kept pace either — especially for the highly skilled. “State employees with a high school education receive salaries that are roughly comparable with their counterparts in the private sector,” they conclude. However, that changes dramatically for workers with at least a bachelor’s degree. “In terms of salaries, on average, these highly educated state employees fall substantially short of their private sector counterparts.”
Pensions by the Numbers
- A 2008 survey found that 72% of employees cite retirement benefits as an important factor in their loyalty to their employer.
- For each dollar paid out in public pension benefits in 2006, $2.36 in total economic output was supported.
- Among U.S. workers with a DB pension plan, there are currently more private sector employees with pensions than public sector employees. In 2007, 21.0 million private sector
- American workers had a workplace DB pension plan, while state and local pension plans served 14.2 million workers. (From NIRSonline.org)
Editor’s note: June Morse is the Lansing SERA Chapter President. She may be contacted at jmorse10@comcast.net or 517-886-9323.
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