Pension Matters
State Employees Retirement Fund
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January 2012
Pension Tax
As of January 2012, pensions for retirees born after 1952 in the state of Michigan will no longer be exempt from state income taxes. Information about the new pension law has been not always been clear and subject to much misinformation. Some retirees believe their pensions will be taxed at a high rate until the day they die. Others are afraid that existing exemptions will be eliminated all together.
What to do: Consult your tax advisor or visit www.michigan.gov/taxes/0,4676,7-238--260229--,00.html to see what pensions are taxed and which ones aren’t. The new law goes into effect Jan. 1, 2012 however, retirees won’t have to grapple with the new pension tax until the 2013 tax season.
Pension Pay Dates for 2012
Mark your calendars: January 25, February 24, March 23, April 25, May 25, June 25, July 25, August 24, September 25, October 25, November 21, and December 18.
Governor appoints two new members to the Investment Advisory Committee
Gov. Rick Snyder today announced the appointments of Naif “Nick” Khouri, of Plymouth, and L. Erik Lundberg, of Ann Arbor, to the state’s Investment Advisory Committee.
The committee reviews investments, goals and objectives of the state’s various retirement funds and may submit recommendations to the state treasurer, or with votes, direct the state treasurer to dispose of or enter into investments.
“Nick and Erik bring extensive experience to these posts and I am confident their background, knowledge and skills will help the state continue to ensure prudent and effective investing,” Snyder said.
Khouri is the vice president and treasurer of DTE Energy. He previously served as vice president and partner at Public Sector Consultants, chief deputy treasurer for the Michigan Department of Treasury, chief economist for the Michigan Senate Fiscal Agency, and an analyst for the U.S. Congressional Budget Office. Khouri serves as chair for the EEI Treasurer’s Forum, Children’s Hospital of Michigan Board of Directors and the Detroit Local Initiatives Support Corporation. He is a member of the Detroit Medical Center’s finance committee and serves as treasurer for the Citizens Research Council of Michigan. Khouri earned a bachelor’s degree in economics from the University of Michigan and a master’s degree in economics from Michigan State University. Khouri will serve the remainder of a three-year term expiring Dec. 15, 2012, filling a vacancy created by the resignation of Roger Robinson. He is also appointed chair for a term at the pleasure of the governor.
Lundberg is the chief investment officer at the University of Michigan where he is responsible for directing the university’s investment programs, which includes the seventh largest endowment of a higher learning institution valued at approximately $7.8 billion. Prior to joining U of M in 1999, Lundberg held positions with Ameritech where he helped develop overall investment strategy, led global asset allocation activities and managed both U.S. and non-U.S. equity programs. He earned his bachelor’s in business administration from the University of Wisconsin, his MBA from Ohio State University, and is also a chartered financial analyst through the Institute of Chartered Financial Analysts. Lundberg will serve a term that expires Dec. 15, 2014, and replaces David Sowerby. Both appointments are subject to the advice and consent of the Senate. (Governor’s Office Press Release Thursday, Dec. 29, 2011)
Many Private Pension Plans In Deficit
The aggregate deficit in pension plans sponsored by S&P 1500 companies decreased by $80 billion during November, from a deficit of approximately $471 billion as of October 31, 2011, to $391 billion as of November 30, according to new figures from Mercer (HR and related financial advice, products and services provider). This deficit corresponds to an aggregate funded ratio of 78% as of November 30, compared to a funded ratio of 75% at October 31, 2011 and 81% at December 31, 2010. To read the entire article, go to www.mercer.com/press-releases/1437435
Older Americans Expect to Work Longer, and Many Expect Never to Retire, Data Show
“WASHINGTON — Not only are older American workers (age 50 and over) expecting to work longer, but many now say they expect to never retire, according to the nonpartisan Employee Benefit Research Institute (EBRI). Data suggest the trend may be tied to the recent economic recession.
In 2006 (just before the recent recession), 11.2 percent of workers age 50 or over expected to retire at age 70, but by 2010 (after it had officially ended) that had increased to 14.8 percent. Even at higher ages, the expected retirement age has jumped: Just 1.7 percent of workers age 50 or over planned to retire at age 80 in 2006, while that more than tripled to 5.2 percent in 2010, EBRI found.
Expected retirement at earlier ages (62 and 65) also steadily declined over the four-year period of 2006 2010, the study found.
“The general trend shows that older Americans are expecting to retire later,” said Sudipto Banerjee, EBRI research associate and author of the study. “But the most striking finding is that nearly 20 percent of the sample expects never to stop working and more than 15 percent of the sample don’t know when they are going to retire.”
In addition, in 2008, during the recession, 22.4 percent of the workers age 50 or over said they plan to never retire. That declined to 16.3 percent in 2010. Over the 2006 2010 period, another 14 18 percent of workers said they don’t know when they will retire.
Full results are published in the December 2011 EBRI Notes, “Retirement Age Expectations of Older Americans Between 2006 and 2010,” online at www.ebri.org The EBRI study examines data from the University of Michigan’s Health and Retirement Survey on how the expected retirement ages of older Americans changed during the period of 2006 2010, covering the periods just before, during, and after the recent economic recession.
The EBRI report notes that while the rising age of expected retirement may reflect a growing awareness of economic and fiscal reality among Americans workers (especially at a time of rising longevity), other research by EBRI indicates many of them will be unable to actually work longer: The 2011 Retirement Confidence Survey finds that a large percentage of retirees (45 percent in 2011) leave the work force earlier than planned.”
Pension by the Numbers
Did you know....
- 40% of all public school teachers are not covered by Social Security.
- 72% of employees cite retirement benefits as a key factor in loyalty to their employer.
- 84% of retirement plans sponsors believe that their defined benefit pension has some impact on employee retention. (www.ebri.org)
Looking Back On 2011 with 11 Telling Charts
“As we approach the holiday season and a new year, it is the perfect opportunity to reflect on the progress the nation has made to a healthier economy and ponder the steps still ahead. These 11 charts from 2011 provide a summary of just how bad the U.S. economy was in 2011 and foreshadow the long road the country must travel to economic recovery.
The unemployment rate fails to capture the full story of the weak labor market, which has been characterized by double-digit underemployment and millions of jobless workers giving up the job search altogether because job prospects are so bleak. Together these 11 charts illustrate the state of the nation’s economy. Here are some salient points:
- The jobs crisis is affecting everyone, regardless of education levels. Those with higher levels of education are leaving (or never entering) the workforce at the same rate as those with just a high school degree.
- The recession has been particularly hard for children as 18.4 percent of children had at least one unemployed or underemployed parent.
- Inequality, which has been growing steadily over the past four decades, has increased sharply, and many workers, especially minority workers, are experiencing downward mobility. Click link to see all 11 charts. www.epi.org/publication/11-telling-charts-about-2011-economy
From these charts, one clear answer emerges: In the new year, more policies can and should be implemented to lift more people out of poverty, provide better, family-sustaining jobs, and to ensure the nation’s economy truly works for its families. “ (Economic Policy Institute)
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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