Pension Matters
State Employees Retirement Fund
Most Recent Market Value | Archived Monthly Profiles
November 2013
The fund continues to increase steadily since the decline in 2008. September data shows the total fund at a market value of $54 billion and the MSERS fund at $9.9 million. Domestic Equities continue to be a large section of the fund at 28.3%. Full profiles are available on the SERA web site and quarterly investment reviews are on the Department of Treasury, Bureau of Investment website.
Dillon Resigns - Snyder Appoints New Treasurer
The Lansing State Journal reports that Kevin Clinton, current Director of the Michigan Department of Insurance and Financial Services has been appointed to replace resigning Treasurer, Andy Dillon. His duties as Treasurer will start November 1, 2013. He has served in positions in State government since 2011. He has executive experience in various insurance companies and is a trained actuary. Clinton, who has a bachelor’s in business administration and master’s in actuarial science from the University of Michigan, will make the same as Dillon, $174,204 a year.
Many Feel They Will Never be Able to Retire
“The annual Wells Fargo Middle Class Retirement study, a survey conducted of 1,000 middle-class Americans between the ages of 25 and 75, was released Wednesday. Highlights:
- 59% say their top day-to-day concern is paying the bills
- 42% say both saving and paying the bills is not possible
- 48% are not confident they will be able to save enough for a comfortable retirement
- 34% say they will have to work until they are at least 80 because they have not saved enough.”
Read more at http://tiny.cc/c8z85w
When is a Pension a PENSION?
“According to the Royal Oak Daily Tribune, Michigan’s Attorney General is among 282 Michigan lawmakers, or their survivors, who are drawing monthly pensions, some while they remain elected officials in a new role or continue to hold other paid public office. A few of them have pensions that exceed their salaries when they were in the Michigan Legislature.” Read more at http://tiny.cc/k9z85w
Got a 401k? A Guide for New Retirees
Upon retiring, you suddenly have access to a chunk of money that’s been accumulating in your 401(k). It’s easy to make a move that could cause you tax consequences or otherwise jeopardizes your hard-earned savings.
Based on interviews with financial planners, as well as experts at the Center for Retirement Research the following check list was developed for soon to be and new retirees. Take a look at the check list at http://tiny.cc/ya085w
It’s Shocking
“Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $25,000 put away ... a full 30% have less than $1,000. Americans age 55 to 64 have a median net worth of $180,000 — less than they’ll likely need for health care spending alone during retirement.” Read the whole story at http://tiny.cc/sc085w
State Employees’ Retirement System Board Meeting
I attended the November 7th Board meeting. The Board received a presentation from Ian Broughton of the Office of Retirement Services (ORS) on their social media strategy. As I mentioned in previous reports, ORS has a Facebook page and, thus far, is the most "liked" public pension system. They have received over 15,500 “likes” in the first two months. The plan is to expand to sites such as Wikipedia, YouTube and Twitter. Their hope is to provide more self service options and thus reduce call center business. Current users are predominately retirees/over 55. Way to go guys. Let’s keep clicking, liking and commenting on this Facebook page.
For those interested in attending these Board meetings, the meeting schedule for 2014 is December 12, 2013; January23, 2014, March 20, 2014, May 15, 2014, July 24, 2014, September 25, 2014, November 6, 2014. Be sure to check their web page http://www.michigan.gov and click on Board Information for possible cancellations before going.
Pension Benefit Guaranty Corporation (PBGC) yearly Maximum Guarantee goes up June 2014
Most retirees who get their pension through PBGC (government insurance for private sector pensions that default) — receive almost 85 percent of the full amount of their promised benefit. The PBGC maximum guarantee is based on a formula prescribed by federal law. Beginning in 2014, the maximum yearly guarantee for a 65-year-old retiree will be almost $59,320 — a 3.2% increase from the $57,500 rate in 2013. Good news for private sector pensions.
IRS Announces 2014 Pension Plan Limitations
The Internal Revenue Service has announced a cost of living adjustment affecting dollar limitations for pension plans and other retirement-related items for tax year 2014. See what’s changed and how it might affect you at http://tiny.cc/ye085w
Are Governments Masking Their Pension Liabilities?
Stanford University Finance Professor Joshua Rauh said, “using past investment performance to plan for future investment returns was so dangerously optimistic, it would be a jailable offense if done in the private sector.” Rauh, was speaking at the Manhattan Institute for Policy Research event in New York City on reforming pensions. Pointing to the most often used 7.75 percent rate of return that many pension plans project (including ours), Rauh said, “that means governments are planning on every dollar invested doubling roughly every 10 years.” Read more of his comments at http://tiny.cc/2f085w
Quotable
Attorney Thomas R. Morris, who represents an association of retirees, told U.S. Bankruptcy Judge Steven Rhodes, “If the city of Detroit were to cease to exist,” Michigan’s constitution would still require the pensions to be paid.” http://tiny.cc/nh085w
Worth Repeating
In case you missed an article in the most recent Connections from ORS, here is a replay. The article was about have a power of attorney. It reminds us to make sure we have a notarized copy of this type of legal document on file with ORS to prevent any problems with your legal representative acting on your behalf. So if you have not provided ORS with a POA, conservator/guardian document, you might want to do so.
How Big is the Gap?
The Securities and Exchange Commission, as part of its implementation of the 2010 Dodd—Frank financial reform law, has proposed a new rule requiring publicly owned firms to disclose the ratio of CEO compensation to median worker compensation. The Economic Policy Institute has put a chart on their website showing the CEO-to-worker compensation ratio in 2012 of 273 is far above that of the late 1990s, and 14 times the ratio of 20 in 1965. EPI has been tracking CEO compensation — specifically the CEO-to-worker pay ratio — since 1996. See more at http://tiny.cc/ki085w
Middle America not Recovering from Recession
The 2012 income and poverty data released this week by the U.S. Census Bureau showed most Americans’ incomes have barely begun to recover from the losses incurred during the recession. An analysis done by the Economic Policy Institute (EPI) found that incomes are substantially lower than they were before the recession began for all but the top 5 percent. A major recession following the lengthy weak economy of 2000—2007 produced the first business cycle on record where incomes for those at the middle did not rise. The analysis found that most of the gains to low- and moderate-income families in the strong labor market of the late 1990s have been erased by the weak labor market of the last 12 years.
Reduced Medicare Reimbursement Causes Cuts?
Both Lansing hospitals indicate they have to make staffing cuts due to the cuts in Medicare reimbursements. Is this really the reason? Most of us have a “back up” insurance or “medigap” insurance which will pick up most of what Medicare does not pay for. Hospital spokespersons say that the staffing reduction is due to “decreased inpatient volume.” It always interests me that health care facilities can expand (Sparrow building a $25 million hospital in Ionia) but complain they don’t get paid enough for their services due to cuts in payments from insurers. Then why do they need to expand? This is just me, thinking out loud. I put a news report out on Facebook about this story. Check it out.
Affordable Care Act and Seniors
I have had a few calls from members about how the Affordable Care Cat might impact retirees. So I went to my most reliable source for some information. According to their Health News Report, a newsletter put out by the Kaiser Family Foundation, the Affordable Care Act will have little impact on persons on Medicare. Some positive benefits currently in place are increased preventative care services (such as wellness visits, mammograms, colorectal screenings). Future benefits will include closing the “donut hole” in the prescription drug coverage.
It is quite likely we will see lowered reimbursements rates to health care agencies which could create access to their services problematic if they choose not to accept Medicare’s rate. There will also be an increase in cost for prescription drug coverage for seniors with incomes of over $85,000 ($170,000 for couples). To read the entire article from Kaiser go to www.kaiserhealthnews.org
You can also find “Health Law fact sheets” from AARP on their web site at http://www.aarp.org
Other online resource
Editor’s note: June Morse may be contacted at jmorse10@comcast.net or 517-886-9323.
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