MI-SERA

Pension Matters

State Employees Retirement Fund
Most Recent Market Value | Archived Monthly Profiles

July 2012

By June Morse

Bear Stearns Ex-Executives Settle Shareholder Suit for $275 Million

According to an article in the WSJ, “former senior executives of Bear Stearns Cos. have agreed to settle a shareholder suit for $275 million. The 2008 lawsuit, led by the State of Michigan Retirement Systems, had accused the executives of misleading investors about the firm’s business and financial well-being in the run-up to the financial crisis. The proposed cash settlement was disclosed in papers filed in Manhattan federal court on Wednesday. The pension fund lost $62 million from its Bear Stearns investment, the largest amount among the plaintiffs in the class, according to court documents.

Bear Stearns was acquired in a last-minute rescue by J.P. Morgan Chase & Co. in March 2008, with assistance from the Federal Reserve, after nearly collapsing during the subprime-mortgage meltdown.

June Investment Advisory Committee Meeting

A great deal of this meeting dealt with a new investment focus in “infrastructure investments”. R. V. Kuhns and Associates provided an educational presentation on global infrastructure investing. Basically, infrastructure is the basic facilities needed by society and communities to function. These can include toll roads, airports, schools, transportation, utilities, etc. Why would pension funds be interested in this type of investing – stable cash flows and asset prices? According to R.V. Kuhns, “private infrastructure investments are increasing in popularity due to the increasing frequency of public-private partnership structures.” Learn more about this on our Facebook Page, Michigan SERA. Or simply type in infrastructure investing for pension funds in your browser.

Key performance highlights for MPSERS indicate

1 year returns at 5%; 3 year returns at 14.3%; 5 year returns 2.8% and 10 year returns at 5.6%
Domestic equity reduced by 6.5% and Infrastructure added as a new separate asset class with a 3% allocation.

GASB Set to Vote on New Pension Standards

As the Governmental Accounting Standards Board prepares to vote on new standards for public pension fund accounting that shed light on unfunded liabilities, a recently formed state and local task force is developing guidance to keep governments focused on their annual required contributions.

GASB’s shift in focus on unfunded liabilities from annual required contributions, or ARC, “is the most significant change that has happened as it relates to pension accounts in the last 20 years,” she said. “Everyone who has historically looked at that funding is going to have to look at these financial statements with a whole different perspective in order to interpret them.” Plan trusts that administer pension benefits would have to comply with them for fiscal years beginning after June 15, 2013. Employers that sponsor pension plans would have to comply for fiscal years beginning after June 15, 2014. The GASB standards are not binding, but state and local governments must meet them in order to receive clean, or nonqualified, opinions from auditors on their financial statements. See the full story at http://tinyurl.com/7aq564k

Pew: ‘Serious Concerns’ About MI Public Pension

Michigan’s public retirement plans have a $123.3 billion liability, according to a new Pew Study report, making it one of 34 states with structural retirement system problems. The nonprofit rated the retirement systems of all 50 states and found that there’s a total liability of $757 billion. Michigan’s $77.8 billion pension liability warrants “serious concern,” Pew found. The $45.5 billion health care liability “needs improvement.”

“Keeping up with the annual required contribution is perhaps the most effective way that states can responsibly manage their long-term liabilities for public sector retirement benefits,” according to the report. “Research shows that states that consistently make their full payments have better funded retirement systems and smaller gaps.”

The Center said Michigan underfunded its retirement contribution four times between 2005 and 2010. While experts call for long-term obligations to be paid at a minimum of 80 percent, Michigan has only paid 72 percent. Michigan contributed $1.4 billion for pensions in 2010. The recommended amount was $1.6 billon. For health care, Michigan contributed $1.4 billion in 2010, far short of the recommended $3.9 billion. Pew found that 17 states did not set aside any money to fund their retiree health care liabilities. Only seven states had funded at least 25 percent of health care liabilities — Alaska, Arizona, North Dakota, Ohio, Oregon, Virginia and Wisconsin. Alaska and Arizona are the best among states, according to Pew, with nearly 50 percent of their health care liabilities funded. To read the full report http://tinyurl.com/7ps5j8z

NCPERS Survey Finds Public Pensions Remain Solidly Funded, Funds Express High Confidence in Plan Sustainability

(The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada)

The most comprehensive and up-to-date study addressing retirement issues for public pension plans finds state and local pension funds (in general) remain solidly funded, have strong confidence in their ability to address retirement trends and issues and continue to adopt organizational and operational changes to ensure their long-term sustainability.

The 2012 NCPERS Public Fund Study, conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, surveyed no less than 147 public pension funds in April and May. The vast majority — 84 percent — were local pension funds; while the remaining 16 percent were state pension funds (funds reviewed were not identified).

“The data we collected — the most current data available — shows public pension funds are continuing their strong recovery from the historic market downturn of 2008-2009,” said Hank Kim, Esq., NCPERS’ Executive Director and Counsel. “The survey shows public pensions are managing their assets efficiently and effectively, making plan design changes to ensure sustainability, continuing to implement sound operational controls and are expressing strong and growing confidence about their readiness to address the challenges ahead.”

Among the study’s key findings:

Participating funds reported a solid average funded level of 74.9 percent
Both one-year and 20-year returns reported by participating funds point to continuing long-term improvement in funded status

Pension funds are designed to pay off liabilities over an extended period of time (the amortization period), to ensure long-term stability and to make annual budgeting easier through more predictable contribution levels. This year’s survey found that amortization period averages 24.6 years — down from 25.8 years in 2011.

The full text of the 2012 NCPERS Public Fund Study is available at www.ncpers.org and the story is at http://tinyurl.com/7mslft4

Michigan Data from AARP

1.3 million residents age 65 and older review Social Security benefits
42% of the state’s 65 plus population would have incomes below the poverty level with SS.
28% rely on it as their only source of income
1.6 million Residents have health insurance through Medicare.

Audit of SOM 401K Plan and 457

According to the Auditor General, their audit of the 401K plan found incorrectly classified investments totally $184.6 million; understatement of depreciation in fair value of investments by $21.1 million; overstatement of interest and dividends income by $26.0 million and overstatement of administrative and investment expenses by $5.0 million’ 216 participants and approximately $16.9 million in investment balances had to be reclassified from the defined contribution retirement due to incorrect retirement codes; the beginning FY plan net assets balance for the 401K deferred compensation fund was overstated by $8.3 million and the defined contribution retirement fund was understated by $7.6 million due to improper reclassification of $4.3 million, improper classification of $3.9 million . Per the Auditor General report, corrections were made and “process improvements are expected to be implemented by August 2012”.

Findings for the audit of the 457 plan found financial statement misstatements and misclassifications resulted in contributions and benefit payments that were understated by $7.4 million during FY 2010-11.

Both reports can be found on the Auditor General website.

SERA Advised of new BCBS Cards coming out

(Employee Benefits Division has advised that BCBSM is in the process of doing a system upgrade to improve their service. There will be no changes to benefits or out-of-pocket amounts paid; the only changes members will notice is that new ID cards will be mailed to all members with BCBSM health and vision coverage. Cards will begin to be mailed on June 26th. There will be information with the ID cards mailed and also located in the For Your Benefits newsletter as to why members are receiving new cards. Upon receipt of the new cards, members should begin using them immediately and discard any old cards at that time. If you have questions, please call your State of Michigan Customer Service Center at 1-800-843-4876, Monday through Friday, 8 a.m. to 6 p.m., excluding holidays.

A Crisis of Poverty

In just 10 years, from 2010 to 2020, the number of people over 65 years of age will have increased by more than 14 million, from 40.2 million to 54.8 million, and in another 10 years it will increase to 72 million. Older workers near retirement lost 25 percent of their assets in the financial crisis. They’re coming into retirement with lots of debt — mortgages, credit cards, even student loans — and with lower-than-anticipated levels of income. Their ability to save has been diminished. The U.S. Census Bureau’s Survey of Income and Program Participation forecasts that when current workers ages 50- 64 reach age 65, over 48 percent will be poor or near-poor. For more information go to http://tinyurl.com/886ua5r

Editor’s note: June Morse may be contacted at jmorse10@comcast.net or 517-886-9323.

Return to top of page


Pension Matters	Home About SERA Join SERA Now SERA Plus Benefits Meeting Dates Chair Talk Capitol News Retirement Matters Insurance Information SERA Council Directories Michigan Government Links Testimony Letters and Press Releases Resources Links
State Employees Retirement Fund Most Recent Market Value \| Archived Monthly Profiles July 2012 By June Morse Bear Stearns Ex-Executives Settle Shareholder Suit for $275 Million According to an article in the WSJ, “former senior executives of Bear Stearns Cos. have agreed to settle a shareholder suit for $275 million. The 2008 lawsuit, led by the State of Michigan Retirement Systems, had accused the executives of misleading investors about the firm’s business and financial well-being in the run-up to the financial crisis. The proposed cash settlement was disclosed in papers filed in Manhattan federal court on Wednesday. The pension fund lost $62 million from its Bear Stearns investment, the largest amount among the plaintiffs in the class, according to court documents. Bear Stearns was acquired in a last-minute rescue by J.P. Morgan Chase & Co. in March 2008, with assistance from the Federal Reserve, after nearly collapsing during the subprime-mortgage meltdown. June Investment Advisory Committee Meeting A great deal of this meeting dealt with a new investment focus in “infrastructure investments”. R. V. Kuhns and Associates provided an educational presentation on global infrastructure investing. Basically, infrastructure is the basic facilities needed by society and communities to function. These can include toll roads, airports, schools, transportation, utilities, etc. Why would pension funds be interested in this type of investing – stable cash flows and asset prices? According to R.V. Kuhns, “private infrastructure investments are increasing in popularity due to the increasing frequency of public-private partnership structures.” Learn more about this on our Facebook Page, Michigan SERA. Or simply type in infrastructure investing for pension funds in your browser. Key performance highlights for MPSERS indicate 1 year returns at 5%; 3 year returns at 14.3%; 5 year returns 2.8% and 10 year returns at 5.6% Domestic equity reduced by 6.5% and Infrastructure added as a new separate asset class with a 3% allocation. GASB Set to Vote on New Pension Standards As the Governmental Accounting Standards Board prepares to vote on new standards for public pension fund accounting that shed light on unfunded liabilities, a recently formed state and local task force is developing guidance to keep governments focused on their annual required contributions. GASB’s shift in focus on unfunded liabilities from annual required contributions, or ARC, “is the most significant change that has happened as it relates to pension accounts in the last 20 years,” she said. “Everyone who has historically looked at that funding is going to have to look at these financial statements with a whole different perspective in order to interpret them.” Plan trusts that administer pension benefits would have to comply with them for fiscal years beginning after June 15, 2013. Employers that sponsor pension plans would have to comply for fiscal years beginning after June 15, 2014. The GASB standards are not binding, but state and local governments must meet them in order to receive clean, or nonqualified, opinions from auditors on their financial statements. See the full story at http://tinyurl.com/7aq564k Pew: ‘Serious Concerns’ About MI Public Pension Michigan’s public retirement plans have a $123.3 billion liability, according to a new Pew Study report, making it one of 34 states with structural retirement system problems. The nonprofit rated the retirement systems of all 50 states and found that there’s a total liability of $757 billion. Michigan’s $77.8 billion pension liability warrants “serious concern,” Pew found. The $45.5 billion health care liability “needs improvement.” “Keeping up with the annual required contribution is perhaps the most effective way that states can responsibly manage their long-term liabilities for public sector retirement benefits,” according to the report. “Research shows that states that consistently make their full payments have better funded retirement systems and smaller gaps.” The Center said Michigan underfunded its retirement contribution four times between 2005 and 2010. While experts call for long-term obligations to be paid at a minimum of 80 percent, Michigan has only paid 72 percent. Michigan contributed $1.4 billion for pensions in 2010. The recommended amount was $1.6 billon. For health care, Michigan contributed $1.4 billion in 2010, far short of the recommended $3.9 billion. Pew found that 17 states did not set aside any money to fund their retiree health care liabilities. Only seven states had funded at least 25 percent of health care liabilities — Alaska, Arizona, North Dakota, Ohio, Oregon, Virginia and Wisconsin. Alaska and Arizona are the best among states, according to Pew, with nearly 50 percent of their health care liabilities funded. To read the full report http://tinyurl.com/7ps5j8z NCPERS Survey Finds Public Pensions Remain Solidly Funded, Funds Express High Confidence in Plan Sustainability (The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada) The most comprehensive and up-to-date study addressing retirement issues for public pension plans finds state and local pension funds (in general) remain solidly funded, have strong confidence in their ability to address retirement trends and issues and continue to adopt organizational and operational changes to ensure their long-term sustainability. The 2012 NCPERS Public Fund Study, conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, surveyed no less than 147 public pension funds in April and May. The vast majority — 84 percent — were local pension funds; while the remaining 16 percent were state pension funds (funds reviewed were not identified). “The data we collected — the most current data available — shows public pension funds are continuing their strong recovery from the historic market downturn of 2008-2009,” said Hank Kim, Esq., NCPERS’ Executive Director and Counsel. “The survey shows public pensions are managing their assets efficiently and effectively, making plan design changes to ensure sustainability, continuing to implement sound operational controls and are expressing strong and growing confidence about their readiness to address the challenges ahead.” Among the study’s key findings: Participating funds reported a solid average funded level of 74.9 percent Both one-year and 20-year returns reported by participating funds point to continuing long-term improvement in funded status Pension funds are designed to pay off liabilities over an extended period of time (the amortization period), to ensure long-term stability and to make annual budgeting easier through more predictable contribution levels. This year’s survey found that amortization period averages 24.6 years — down from 25.8 years in 2011. The full text of the 2012 NCPERS Public Fund Study is available at www.ncpers.org and the story is at http://tinyurl.com/7mslft4 Michigan Data from AARP 1.3 million residents age 65 and older review Social Security benefits 42% of the state’s 65 plus population would have incomes below the poverty level with SS. 28% rely on it as their only source of income 1.6 million Residents have health insurance through Medicare. Audit of SOM 401K Plan and 457 According to the Auditor General, their audit of the 401K plan found incorrectly classified investments totally $184.6 million; understatement of depreciation in fair value of investments by $21.1 million; overstatement of interest and dividends income by $26.0 million and overstatement of administrative and investment expenses by $5.0 million’ 216 participants and approximately $16.9 million in investment balances had to be reclassified from the defined contribution retirement due to incorrect retirement codes; the beginning FY plan net assets balance for the 401K deferred compensation fund was overstated by $8.3 million and the defined contribution retirement fund was understated by $7.6 million due to improper reclassification of $4.3 million, improper classification of $3.9 million . Per the Auditor General report, corrections were made and “process improvements are expected to be implemented by August 2012”. Findings for the audit of the 457 plan found financial statement misstatements and misclassifications resulted in contributions and benefit payments that were understated by $7.4 million during FY 2010-11. Both reports can be found on the Auditor General website. SERA Advised of new BCBS Cards coming out (Employee Benefits Division has advised that BCBSM is in the process of doing a system upgrade to improve their service. There will be no changes to benefits or out-of-pocket amounts paid; the only changes members will notice is that new ID cards will be mailed to all members with BCBSM health and vision coverage. Cards will begin to be mailed on June 26th. There will be information with the ID cards mailed and also located in the For Your Benefits newsletter as to why members are receiving new cards. Upon receipt of the new cards, members should begin using them immediately and discard any old cards at that time. If you have questions, please call your State of Michigan Customer Service Center at 1-800-843-4876, Monday through Friday, 8 a.m. to 6 p.m., excluding holidays. A Crisis of Poverty In just 10 years, from 2010 to 2020, the number of people over 65 years of age will have increased by more than 14 million, from 40.2 million to 54.8 million, and in another 10 years it will increase to 72 million. Older workers near retirement lost 25 percent of their assets in the financial crisis. They’re coming into retirement with lots of debt — mortgages, credit cards, even student loans — and with lower-than-anticipated levels of income. Their ability to save has been diminished. The U.S. Census Bureau’s Survey of Income and Program Participation forecasts that when current workers ages 50- 64 reach age 65, over 48 percent will be poor or near-poor. For more information go to http://tinyurl.com/886ua5r Editor’s note: June Morse may be contacted at jmorse10@comcast.net or 517-886-9323. Return to top of page
©2021 Michigan State Employee Retirees Association Council (MI-SERA) Contact SERA Webmaster