Pension Matters

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

July 2016

Pension Fund In Sourcing a Good Thing

A recent article in Pensions and Investments indicates the “in sourcing” trend is up to save on the high cost of fees. Both Municipal Employees’ Retirement System of Michigan, Lansing and Michigan Department of Treasury, Bureau of Investments (BOI) are noted in this article. BOI  is said to save a” net $20 million to $30 million per year through managing 35% of the total portfolio internally”. Read more at

Employer Costs For Employee Compensation — March 2016

Employer costs for employee compensation averaged $33.94 per hour worked in March 2016, according to the U.S. Bureau of Labor Statistics recent report. Wages and salaries, averaging $23.25 per hour worked, accounted for 68.5 percent of these costs and benefits averaged $10.70 accounting for the remaining 31.5 percent. Total employer compensation costs for private industry workers averaged $32.06 per hour worked in March 2016. Total employer compensation costs for state and local government workers averaged $45.23 per hour worked in March 2016. See the full report at EMPLOYER COSTS FOR EMPLOYEE COMPENSATION – MARCH 2016

Retirement Savings Rule Vetoed

” President Obama vetoed an effort to roll back new rules intended to protect retirement savings Wednesday, solidifying his administration’s regulations requiring investment advisers to look out for their clients’ best interests.” What a concept. Read more at

Support for Caregivers

Gov. Rick Snyder signed the Michigan CARE Act on April 13, providing help to an unpaid silent army about 2 million strong who make it possible for older Michiganders to live independently at home.

The Michigan Caregiver Advise, Record, Enable (CARE) Act, which takes effect in 90 days, will support and equip family caregivers with the basic information and training they need when their loved ones go into the hospital and as they transition home.

The Michigan CARE Act is intended to help families when a loved one is admitted to a hospital by ensuring that hospitals:

  • Record the name of the family caregiver;
  • Notify the family caregiver when the patent is going to be discharged back home or moved to another facility;
  • Provide instructions to the caregiver about any medical tasks he or she will need to perform when the patient comes home. Find out more at

“Behind every pension is a public servant who has dedicated their career to keeping our communities safe and prosperous.

Popular rhetoric around public pensions often distracts from the true issue at hand; these aren’t numbers, these are real people whose livelihoods depend on receiving the secure and dignified retirement they were promised.” ( National Public Pension Coalition)

A Roth is Not an Option for Avoiding Taxes on RMD Money

Got a little money left over from the annual required minimum distribution (RMD)? Don’t look to a Roth to help you save tax dollars. ANY funds taken from your RMD is taxable, no matter where you put it per the IRS. Now if you don’t want it taxed a second time, you can put it in a Roth or other tax free investment if you still have earned income. Check it out with the IRS.

State Retirement Systems Reform

Historically states have made changes to public pension plan design and financing. But never more than after the “great recession” which prompted changes to the plans financing. The National Association of State Retirement Administrators has published a review of changes throughout the public pension systems. While public pension changes took different forms throughout the country, reforms generally kept those core features known to balance retirement security, workforce management, and economic efficiencies. To see their analysis and review go to

Investment Advisory Committee (IAC) Meeting

I attended the June quarterly meeting of the IAC. The Committee heard an update on their bond strategy given by representatives of Fidelity Institutional Asset Management who manage a portion of the fixed assets of the retirement fund and have done so for many years. As we all know bond yields are low but according to their report much higher than in other parts of the world. Any yields above 3% are much riskier assets to hold.

The Executive summary indicates the retirement fund had a one year return of 1.4% compared to its peers with 0%. However, the three, five and seven year returns were above 8 percent. There is no indication that the Michigan pension fund has any plan to lower the 8% return rate although other pension funds have begun to do so. Equities continue to be a large percentage of the portfolio and do well.

The report shows between April 2015 and March 2016 $2,137 million in net benefit payments were made.

The Quarterly Investment Review as well as other informational materials can be found on the Department of Treasury website at The next meeting is scheduled for September 1, 2016.

Social Security COLA

It is being projected that Social Security’s more than 60 million beneficiaries will receive a tiny 0.2 percent cost-of-living adjustment next year, while some Medicare recipients could see steep premium increases. That’s according to the annual trustees reports released June 22 about the financial health of Social Security and Medicare. Read more at

Income Inequality

Income trends have varied from state to state and even within states. But a pattern is apparent: the growth of top 1% incomes continues. Want to see how Michigan compares, go to

Compare Long Term Care Costs Across the United States

The Genworth Cost of Care Survey has been the foundation for long term care planning since 2004. Knowing the costs of different types of care — whether the care is provided at home or in a facility — can help you plan for these expenses. The 2016 survey, conducted by Carescout,® covers 440 regions across the U.S. and is based on data collected from more than 15,000 completed surveys. The data for Michigan is below:

  • Monthly Costs for Michigan: Genworth 2016 Cost of Care Survey, conducted by CareScout , April 2016 Based on annual rate divided by 12 months
  • Private, one bedroom Home Health Care 2016 Homemaker Services $4,099
  • Home Health Aide $4,290
  • Adult Day Health Care Adult Day Health Care $1,560
  • Assisted Living Facility Private, One Bedroom $3,150
  • Nursing Home Care Semi Private Room $7,118 Private Room $7,908

Use the following web site to compare national median costs to Michigan costs.

Watch Those Fees

Morningstar data reveals that investors, while increasingly are moving from high-fee funds into lower-fee funds are still losing much of their return in fees. This data also reveals that investors still paid an average annual fee of 0.64 percent, which is “giving away more than 25 percent of the expected return for a 50-50 stock and bond portfolio.” See the Morningstar report at

Workplace Benefits of Major Importance to Workers According to new report from Employee Benefit Research Institute (EBRI)

This is a report that I’m sure none of us are surprised by. EBRI states “Workers overwhelmingly consider health insurance to be the most important workplace benefit”  See the entire report at

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

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