MI-SERA

Pension Matters

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

October 2013

By June Morse

Morningstar Releases Its 2013 Edition of The State of State Pension Plans

“Morningstar’s 2013 Edition of The State of State Pension Plans notes that, in aggregate, state plans are 72.6 percent funded, with a unfunded actuarial accrued liability (UAAL) per capita of roughly $2,600, although funded percentages and UAAL per capita vary radically among the states. Overall, state pension funded levels continued to decline in 2012, the annual drop in funded percentage 2.1 percent. The report noted that six states have funded levels of more than 90 percent, and seven have UAALs of less than $100 per capita. Wisconsin remains the strongest system, with a 99.9 percent funded ratio and a UAAL of $18 per capita. Twelve states have funded ratios of at least 80 percent.” I have put a copy of the Morningstar report on the SERA web site at www.mi-sera.org.

National Institute on Retirement Security (NIRS) Cites Five Key Facts on Retirement Security.

Americans are deeply worried about retirement. Some 85 percent report that they are highly anxious about their retirement prospects. Read The Washington Post article, “Americans anxious about Retirement.”
Pensions are highly cost efficient. They can provide a given retirement benefit at about HALF the cost of an individual 401(k) account because pensions pool longevity risk and achieve better returns by investing for the long term. Read the report, “A Better Bang for the Buck: The Economic Efficiencies of Pensions.”
Pension benefits provide critical economic stability and accounted for a $1 trillion in economic output. In 2009, pensions supported some 6.5 million jobs. Read the report, “Pensionomics 2012: Measuring the Economic Impact of DB Pension Expenditures.”
Pensions reduce the risk of elder poverty and reduce public assistance costs. In 2010, older American households with pension income were nine times less likely to fall into poverty than those who had no pension income. Read the report, “The Pension Factor 2012: The Role of Pensions in Reducing Elder Economic Hardships.”
Americans overwhelmingly support Congressional action to provide all Americans with access to a new type of privately run pension plan. More than 90 percent would favor a new pension plan that is available to all Americans that is portable, and provides a monthly check in retirement. Read the report, “Pensions & Retirement Security 2013: A Roadmap for Policy Makers.”

Most Workers Still Have No Retirement Plan

The data in the report is from the U.S. Census Bureau’s latest Survey of Income and Program Participation (SIPP) on retirement plan participation, covering December 2011 to March 2012.

Some key points in the report are:

61 percent of all workers over age 16 had an employer that sponsored a pension or retirement plan for employees in 2012, up from 59 percent in 2009.
Workers participating in a plan increased to 46 percent in 2012, up slightly from 2009 (45 percent) but below 2003 (48 percent).
The vesting rate (the percentage of workers who say they were entitled to some pension benefit or lump-sum distribution if they left their job) stood at 43 percent in 2012, up from 24 percent in 1979.
This change is largely due to the increased number of workers participating in defined contribution retirement plans (such as 401(k) plans), where employee contributions are immediately vested, and faster vesting requirements in private-sector pension plans.
401(k)-type plans were considered the primary plan by 78 percent of workers with a plan. Defined benefit (pension) plans were the primary plan for 21 percent of workers.

Take a look at notes from the Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2012.

Status of the new 457/401k Contract

by Dick Weller, SERA member

Two companies (Great West and ING) submitted proposals to ORS to administer the State’s 457/401k program. ING was awarded the bid in June 2013. The agreement went to the State Administrative board for approval on July 7, 2013. We have requested a copy of this agreement was informed that ORS was still negotiating some of the terms and conditions of the agreement with ING. As of September 16, 2013, ORS had not finalized the agreement.

Retirement Inequality Chart Book: How the 401(k) Revolution Created a Few Big Winners and Many Losers

A new report from the Economic Policy Institute (EPI) demonstrates that the shift from pensions to individual savings accounts has left the vast majority of Americans without enough money to live on. I have also put the entire article on our Facebook page. It is well worth a read. http://tiny.cc/bdbz3w

Did You Know?

The Retirement Savings Contributions Credit is available in addition to other tax benefits which may result from the retirement contributions. To qualify for the credit on your 2012 tax return, your adjusted gross income must be $28,750 or less if you’re single, $43,125 or less if you file your tax return as head of a household, or $57,500 or less if you are married filing jointly. The credit is worth 10percent to 50percent of up to $2,000 that you contribute to a retirement-savings plan. Read more at http://tiny.cc/2ebz3w

FYI

“Nearly 40percent of the U.S. population falls below 200percent of the poverty level, and in some states, including Arkansas, Louisiana, Mississippi and New Mexico, half the population falls below that level. For a family of four, that’s $47,100 a year.” Read more at http://tiny.cc/sibz3w See Michigan’s standing at http://tiny.cc/3jbz3w

Wage Declines

Governing analyzed mean weekly wages for all industries reported in the Labor Department’s Quarterly Census of Employment and Wages, adjusting for inflation using CPI. In the five-year period from 2007 (the recession officially started in December of that year) to 2012, the following states recorded the largest declines in real wages:

Nevada: -6.5percent
New York: -4.8percent
Connecticut: -3.3percent
Idaho: -2.7percent
Michigan: -2.7percent
Florida: -1.8percent
New Jersey: -1.8percent
Delaware: -1.2percent
Illinois: -1.1percent
Georgia: -0.9percent

Read the entire article at http://tiny.cc/ykbz3w

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

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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 October 2013 By June Morse Morningstar Releases Its 2013 Edition of The State of State Pension Plans “Morningstar’s 2013 Edition of The State of State Pension Plans notes that, in aggregate, state plans are 72.6 percent funded, with a unfunded actuarial accrued liability (UAAL) per capita of roughly $2,600, although funded percentages and UAAL per capita vary radically among the states. Overall, state pension funded levels continued to decline in 2012, the annual drop in funded percentage 2.1 percent. The report noted that six states have funded levels of more than 90 percent, and seven have UAALs of less than $100 per capita. Wisconsin remains the strongest system, with a 99.9 percent funded ratio and a UAAL of $18 per capita. Twelve states have funded ratios of at least 80 percent.” I have put a copy of the Morningstar report on the SERA web site at www.mi-sera.org. National Institute on Retirement Security (NIRS) Cites Five Key Facts on Retirement Security. Americans are deeply worried about retirement. Some 85 percent report that they are highly anxious about their retirement prospects. Read The Washington Post article, “Americans anxious about Retirement.” Pensions are highly cost efficient. They can provide a given retirement benefit at about HALF the cost of an individual 401(k) account because pensions pool longevity risk and achieve better returns by investing for the long term. Read the report, “A Better Bang for the Buck: The Economic Efficiencies of Pensions.” Pension benefits provide critical economic stability and accounted for a $1 trillion in economic output. In 2009, pensions supported some 6.5 million jobs. Read the report, “Pensionomics 2012: Measuring the Economic Impact of DB Pension Expenditures.” Pensions reduce the risk of elder poverty and reduce public assistance costs. In 2010, older American households with pension income were nine times less likely to fall into poverty than those who had no pension income. Read the report, “The Pension Factor 2012: The Role of Pensions in Reducing Elder Economic Hardships.” Americans overwhelmingly support Congressional action to provide all Americans with access to a new type of privately run pension plan. More than 90 percent would favor a new pension plan that is available to all Americans that is portable, and provides a monthly check in retirement. Read the report, “Pensions & Retirement Security 2013: A Roadmap for Policy Makers.” Most Workers Still Have No Retirement Plan The data in the report is from the U.S. Census Bureau’s latest Survey of Income and Program Participation (SIPP) on retirement plan participation, covering December 2011 to March 2012. Some key points in the report are: 61 percent of all workers over age 16 had an employer that sponsored a pension or retirement plan for employees in 2012, up from 59 percent in 2009. Workers participating in a plan increased to 46 percent in 2012, up slightly from 2009 (45 percent) but below 2003 (48 percent). The vesting rate (the percentage of workers who say they were entitled to some pension benefit or lump-sum distribution if they left their job) stood at 43 percent in 2012, up from 24 percent in 1979. This change is largely due to the increased number of workers participating in defined contribution retirement plans (such as 401(k) plans), where employee contributions are immediately vested, and faster vesting requirements in private-sector pension plans. 401(k)-type plans were considered the primary plan by 78 percent of workers with a plan. Defined benefit (pension) plans were the primary plan for 21 percent of workers. Take a look at notes from the Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2012. Status of the new 457/401k Contract by Dick Weller, SERA member Two companies (Great West and ING) submitted proposals to ORS to administer the State’s 457/401k program. ING was awarded the bid in June 2013. The agreement went to the State Administrative board for approval on July 7, 2013. We have requested a copy of this agreement was informed that ORS was still negotiating some of the terms and conditions of the agreement with ING. As of September 16, 2013, ORS had not finalized the agreement. Retirement Inequality Chart Book: How the 401(k) Revolution Created a Few Big Winners and Many Losers A new report from the Economic Policy Institute (EPI) demonstrates that the shift from pensions to individual savings accounts has left the vast majority of Americans without enough money to live on. I have also put the entire article on our Facebook page. It is well worth a read. http://tiny.cc/bdbz3w Did You Know? The Retirement Savings Contributions Credit is available in addition to other tax benefits which may result from the retirement contributions. To qualify for the credit on your 2012 tax return, your adjusted gross income must be $28,750 or less if you’re single, $43,125 or less if you file your tax return as head of a household, or $57,500 or less if you are married filing jointly. The credit is worth 10percent to 50percent of up to $2,000 that you contribute to a retirement-savings plan. Read more at http://tiny.cc/2ebz3w FYI “Nearly 40percent of the U.S. population falls below 200percent of the poverty level, and in some states, including Arkansas, Louisiana, Mississippi and New Mexico, half the population falls below that level. For a family of four, that’s $47,100 a year.” Read more at http://tiny.cc/sibz3w See Michigan’s standing at http://tiny.cc/3jbz3w Wage Declines Governing analyzed mean weekly wages for all industries reported in the Labor Department’s Quarterly Census of Employment and Wages, adjusting for inflation using CPI. In the five-year period from 2007 (the recession officially started in December of that year) to 2012, the following states recorded the largest declines in real wages: Nevada: -6.5percent New York: -4.8percent Connecticut: -3.3percent Idaho: -2.7percent Michigan: -2.7percent Florida: -1.8percent New Jersey: -1.8percent Delaware: -1.2percent Illinois: -1.1percent Georgia: -0.9percent Read the entire article at http://tiny.cc/ykbz3w Editor’s note: June Morse may be contacted at jmorse10@comcast.net or 517-886-9323. Return to top of page
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