Pension Matters

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

January 2017

Pension and Then Some

Since I am always interested in pension issues, I couldn’t help but read the article in the Lansing Journal about the CEO pensions being a “nice nest egg”. The article went on to say, “One hundred U.S. CEOs have company retirement funds collectively worth $4.7 billion ”(that’s with a B). It goes on to say that this amount of money will “generate an average $253,088 in MONTHLY retirement payments for the rest of their lives.

Corporate Pensions

According to Pensions and Investments, “The funded status of the largest U.S. corporate pension plans fell 1 percentage point to an estimated 80% in 2016, down from 81% at the end of 2015.

Correction to Last Month’s Newsletter Article

In my article, Most Recent Funded Levels for the Retirement Funds on page 8, there was a statement that should have been worded differently. In the first sentence it should have stated, “As part of a Treasury presentation from 2015, information was presented that the then most recent estimate (not statement) of funded ratio based on market (not actuarial) value was 77.3 percent at the end of calendar year 2014.” My apologies and thanks to ORS for the correction.

Six Part Series on Pension

The first in a six-part series on the state of pensions in Michigan is being published by the Mining Journal in Marquette. You can read the first series at

Treasury Report

I was unable to make it to the Investment Advisory Committee meeting in December but here is the executive summary from the Quarterly Investment Review that you can find on line at

Executive Summary September 2016 Performance An overview.

MPSERS Plan (9/30/16) Annualized Returns reported
1-Year 7.6%   3-Years 8.5%   5-Years 10.2%   7-Years 9.5%   10-Years 6.2%

“The ten-year return includes the impact of the global financial crisis. Over the past three, five, and seven years the annualized returns were higher than the 8% actuarial assumed rate. Over a very long horizon, since 1979, the annualized rate of return on the plan assets have been approximately 9.3%.

  • Over the intermediate term, the returns are much higher than peer median returns. Over the past year, however, the median return was 2% higher than the plan return. Favorable asset allocation was offset by overall selectivity. It appears that peer plans have a high exposure to equity beta within their alternatives portfolios, an expensive source for beta. SMRS looks for low equity market risk within the STARR portfolio.
  • Compounding even slightly higher than peer returns on $61.6 billion of SMRS assets, significantly adds up over time. For example, an annualized return of 6.2% compared to the 5.8% peer median return adds roughly $4.2 billion of value to SMRS over ten years.
  • The returns fell below the policy benchmark over the past year by -2.2%. In general, it was a tough market for alpha strategies in the active domestic equity portfolio, private equity, and absolute return portfolios. Asset Allocation A low return environment. “

Investment Advisory Committee 2017 Meeting Schedule All meetings start at 9:30 a.m.

  • Thursday, March 9, 2017
  • Thursday, June 8, 2017
  • Thursday, September 7, 2017
  • Tuesday, December 12, 2017
Civil Service Commission

Gov. Snyder is in position to appoint another person to the Civil Service Commission which will leave only one Granholm appointee left on the panel. Read more at

Are My Social Security Benefits Going To Be Subject To Federal Income Tax?

A. Generally speaking, that will depend on your total income. The higher your income, the more taxes you’ll pay on your benefits.

“If you file as an individual and your combined income — by this, Social Security means adjusted gross income and nontaxable interest plus one-half of your Social Security benefits — is below $25,000, your benefits won’t be taxed at all. If income is between $25,000 and $34,000, up to 50 percent of your benefits may be subject to tax. For income of more than $34,000, up to 85 percent of your benefits may be considered taxable income.

If you and your spouse file a joint return with a combined income below $32,000, your benefits are out of reach. For income between $32,000 and $44,000, up to 50 percent of benefits may be taxable, and up to 85 percent if combined income is more than $44,000. ”(AARP)

California Pension Plan (CalPERS) lowers Assumed Rate

The full CalPERS board approved Wednesday a plan to reduce the pension fund’s rate of return to 7% from the current 7.5% over a three-year period.

“Under the three-year reduction, phased in to soften the blow on employers, the rate of return for the pension fund would be lowered to 7.375% for the fiscal year starting July 1, 2017; 7.25% for the following fiscal year; and 7% for the year after that.”

CalPERS is far from the only public pension plan lowering its return assumption. Statistics from the National Association of State Retirement Administrators (NASRA) show that 43 of 137 public plans have lowered their return assumption since June 30, 2014. But NASRA statistics show only nine plans out of 127 are below 7% and none has gone below 6.5%. Read more at

You can also go to to review the NASRA Public Fund Survey which show survey results for Michigan Public Schools at 59percent, Michigan SERS at 61.6 percent and Michigan Municipal at 70.6 percent for FY 2015.


According to the U.S. Census  Bureau, Michigan’s annual median household income for the 2011-2015 period was $49,576.  (Source: 2011-2015 American Community Survey 5-year Estimates.)

Did You Know?

“If you become self-employed—say, as a consultant—after you leave your job, you can deduct the premiums you pay for Medicare Part B and Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan.

This deduction is available whether or not you itemize and is not subject to the 7.5%-of-AGI test that applies to itemized medical expenses for those age 65 and older in 2016. One caveat: You can’t claim this deduction if you are eligible to be covered under an employer-subsidized health plan offered by either your employer (if you have retiree medical coverage, for example) or your spouse’s employer (if he or she has a job that offers family medical coverage). ”(Kiplinger)

State Budget Office Q&A

The Michigan State Budget Office has created a page of “Frequently Asked Questions ”you may find helpful as tax time approaches. Check it out at

Next on the Horizon

Plenty of GOP lawmakers have already voiced their support for taking on in the next session the Michigan Public School Employee Retirement System in the upcoming session. It is said to have an underfunded liability of $26.7 billion. The pension system is said to consume 36 percent of school payroll costs. Read more about this at

New To Social Security?

Follow this link to see the benefit payment schedule for 2017,

Contacts you might find helpful

Adult Protective Services: 1-855-444-3911

Long Term Care Ombudsman: 1-517-394-3027

Tri-County Office on Aging: 1-800-405-9141

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

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