Pension Matters

State Employees Retirement Fund
Most Recent Market Value | Michigan Treasury Bureau of Investments

June 2015

2015 Actuarial Reports Presented to Retirement Board

At its meeting on Thursday, May 21, the State Employee Retirements System Board heard from its actuaries about the financial health of both the pension fund and the state employee retiree health care trust fund as of September 30, 2014. I have attached the slides from the actuarial reports with my notes from the actuary’s oral presentation.  Basically, because the market is doing well, our pension fund is doing better. Market value of the fund exceeds actuarial value by about $1 billion. However there is a substantial $6 billion unfunded accrued liability. We are 62 or 68% funded depending on whether you are talking about actuarial value or market value of investment assets. This is the first year since 2007 that we had an investment gain. There are only 15,000 defined benefit active employees (about 26% of state employees) and 58,000 state employee retirees with 5,000 vested but not yet retired. The average pension benefit is $21,042 (average state employee pay is $67,000).

As to the retiree health care trust fund, partial pre-funding only began in Fiscal Year 2012. It has been pay-as-you-go funding for state employee retiree health care. In FY 2014, state employee retiree health care cost was $517.1 million. There is a $7.7 billion shortfall actuarially. Put another way, there are 12 cents of assets for every one dollar of actuarial liability. The state needs to make a higher contribution to the state employee retiree health care trust fund.” (thanks to Mary Pollock for this update.)

You can find the 2015 Retirement Board Special Reports (Pension, Health and Investment) on the ORS web site.

Fossil Fuels Good for Pension Funds

The oil and gas industry has been one of the better investments made by Michigan’s two largest government employee pension funds, according to a recent report by Sonecon LLC, a Washington D.C. economic advisory firm.

The report examined the combined investment returns of Michigan’s separate pension funds for school and state employees. Together, their investments in oil and natural gas companies gave a rate of return that was 37 percentage points higher than the return on all of their investments. Oil and gas investments outpaced investments in other industries by 43 percentage points.” The full report can be found at

Illinois Supreme Court Rules Pension Reform Unconstitutional

”On Friday, the Illinois Supreme Court ruled that pension reform legislation passed in 2013, commonly referred to as Senate Bill 1, violates the pension protection clause of the Illinois Constitution. The Court upheld a previous circuit court ruling that invalidated the law in its entirety. The Court held that the State could not rely on its inherent “police powers” to diminish the benefits of membership in a pension system. Finding that Senate Bill 1 is “merely the latest assault in this ongoing political battle against public pension rights,” the Court held the pension reform legislation unconstitutional.” Read the rest of the article at

Most Of $25M For Film Incentives Will Retire Bonds That Pension Funds Owe On Pontiac Studio

Lawmakers are allocating most of $25 million in funding for Michigan’s movie incentives program to resolve debt that the state owes for a film studio in Pontiac.

Legislation approved Tuesday by a conference committee dedicates $19 million to the State of Michigan Retirement Systems in the next fiscal year. That leaves $6 million to lure film and TV productions to Michigan. Under a 2010 deal, Michigan’s pension funds are on the hook because Michigan Motion Picture Studios failed to make payments to bondholders.

Republican Sen. Jim Stamas of Midland says it appears legislators are on a path toward ending movie incentives. The program initially had $50 million this budget year.

In 2012, the studio’s hard times were blamed on Michigan severely slashing some of the country’s most generous movie-making incentives.”


”Salesmen” Cost Pensions Big Bucks

An analysis from researchers at the U.S. Securities and Exchange Commission, University of California at Berkeley’s School of Law, and the University of Oregon, indicates that pension investments pushed by the finance industry’s politically connected salesmen — known as “placement agents” — are delivering inferior returns in comparison with investments that pension officials pick on their own. Check it out at or

IRA Balances Continue to Rise

”The latest update from the Employee Benefit Research Institute (EBRI) IRA database shows that the average account balance for individuals owning at least one IRA increased to $119,804 in 2013 — an increase of 30.4 percent from 2010 to 2013, and 14.1 percent from 2012 to 2013. The median (mid-point) followed the same pattern, going from $25,296 in 2010 to $32,179 in 2013, representing increases of 27.2 percent between 2010 and 2013 and 15.0 percent between 2012 and 2013.” Bottom line is that IRA savings are finally going up. The full report, “Individual Retirement Account Balances, Contributions, and Rollovers, 2013; With Longitudinal Results 2010–2013: The EBRI IRA Database,” is published in the May 2015 EBRI Issue Brief, online at

Nursing Homes Received Relatively Low Overall Ratings on Nursing Home Compare Website

”More than one third of the nation’s 15,500 nursing homes, accounting for 39 percent of all nursing home residents, received relatively low ratings of 1 or 2 stars under the federal government’s recently revamped Five-star Quality Rating System, according to a new analysis by the Kaiser Family Foundation.

The rating system, overseen by the Centers for Medicare and Medicaid Services, assigns ratings of 1 to 5 stars to all Medicare- and Medicaid-certified nursing homes based on deficiencies that may be reported during health inspections, and measures relating to staffing and quality. The ratings, part of CMS’s Nursing Home Compare tool, were developed to give consumers better information to compare and choose among nursing homes in their area, which is especially important given concerns about reported problems arising from inadequate staffing, fire safety hazards and substandard care — serious issues in light of the vulnerability of the nursing home population.”

The Center for Medicaid and Medicare Services (CMS) launched its Nursing Home Compare website in 1998 to help seniors and their families find a quality nursing home while encouraging nursing care facilities to increase the quality of their care. The website was upgraded in 2008, to provide a “star rating” based on quality scores for all Medicare- and Medicaid-certified nursing homes. While the ratings have helped, it is still based on self reported data. In February 2015, CMS modified its star rating system to begin to address some of these concerns, and is planning additional changes in the future.

The current CMS Five-Star Quality Rating System calculates an overall star rating — with one star being the lowest possible score and five being the highest — based on performance in three types of measures, each of which also has its own five-star rating. These three domains are: 1) state health inspections; 2) staffing ratios; and 3) quality measures. The chart below is a section of the chart for Michigan.

The following information is taken from Kaiser’s Appendix Table of Overall Star Rating, for the State of Michigan, February 2015

   Overall Star Rating
 Number of Nursing Homes1 star2 stars3 stars4 stars5 stars

For the full analysis, Reading the Stars: Nursing Home Quality Star Ratings, Nationally and by State, as well as more resources on Medicare, visit and CMS Nursing Home Data at

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

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