Pension Matters

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

February 2020

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

“Michigan Department of Treasury, Bureau of Investments, committed $1.07 billion to alternative funds on behalf of the $74.8 billion Michigan Retirement Systems, East Lansing, in the quarter ended Sept. 30.

In private equity, the bureau committed $315 million to five funds, including $150 million to Apax X USD, a middle-market buyout fund managed by Apax Partners. It also committed $100 million to Veritas Capital Fund VII, a buyout fund focused on the middle market managed by Veritas Capital Fund Management; $25 million to Lightspeed Opportunity Fund, a late-stage venture/growth fund managed by Lightspeed Venture Partners; $25 million to Science Ventures Fund III, an early-stage technology venture fund managed by Science Ventures Management; and $15 million to Riverside Micro-Cap Fund IV B, a lower-middle-market supplemental fund managed by Riverside Co.

In real return and opportunistic, a $250 million commitment was made to Blackstone Strategic Capital Holdings II, a commingled fund that invests in minority stakes of asset management firms, managed by Blackstone Strategic Capital Advisors. Separately, a $100 million co-investment went to the same fund in a separately managed account, allowing Michigan to invest in select opportunities alongside the fund.

Also in real return and opportunistic, the bureau committed $100 million to AG Credit Solutions Fund, a credit fund that seeks to provide financing solutions to firms across public and private credit markets that are facing stressed or distressed situations and is managed by Angelo, Gordon & Co.; $75 million to Orion Mine Finance Fund III, a commingled fund strategy that seeks to provide comprehensive capital solutions for the construction of mid- to late-stage mine projects managed by Orion Resource Partners ; and $75 million to Turning Rock Fund I, an opportunistic credit fund focused on providing capital to North American lower-middle-market privately held businesses managed by Turning Rock Partners.

Within real estate and infrastructure, the bureau committed $100 million to Invesco Strategic Opportunities III, a closed-end fund specializing in opportunistic investments in the U.S. and Europe across real estate sectors including debt; and $50 million to AEW Senior Housing Investors IV, a closed-end fund specializing in investments in the senior housing market in the U.S. managed by www.pionline.com.

As of Sept. 30, the Michigan Retirement Systems’ actual allocation was 22.5% domestic equities, 18.6% private equity, 15.9% international equities, 13.6% fixed income, 10.8% real return and opportunistic strategies, 9.5% real estate and infrastructure, 5.5% absolute return and 3.6% short-term investments.” Taken from www.pionline.com.

Tax Time Audit Red Flags for Retirees

The odds increase as your income goes up, as it might if you sell a valuable piece of property or get a big payout from a retirement plan. The more income shown on your return, the more likely it is that you’ll be hearing from the IRS. (Duh)

Failing to report taxable income from wages, dividends, pensions, IRA distributions, Social Security benefits and other sources will almost certainly draw unwanted attention from the IRS.

If deductions on your return are disproportionately large compared with your income; the IRS may pull your return for review.

We all know that charitable contributions are a great write-off and help you feel all warm and fuzzy inside. However, if your charitable deductions are disproportionately large compared with your income, it raises a red flag.

Make sure you take your RMD

Claiming a large rental loss can bring on the IRS’s attention.

Schedule C is a treasure trove of tax deductions for self-employed people. But it’s also a gold mine for IRS agents, who know from experience that self-employed people sometimes claim excessive deductions and don’t report all their income

Your audit risk grows if you have multiple years of hobby losses and you have lots of income from other sources.

Claiming large gambling losses can also be risky. You can deduct these only to the extent that you report gambling winnings.

Failure to report a foreign bank account can lead to severe penalties

Read more on this at www.kiplinger.com.

FYI
  • 40% of Older Americans Rely Solely on Social Security for Retirement Income
  • Only 7% of Retirees Have Ideal Situation of Income from Three Sources: Social Security, Pension & Savings
  • Social Security Kept More Than 7.5 Million Households out of Poverty, reduced Public Assistance Costs by $10 billion
  • Pensions Kept Nearly One Million Retirees Out of Poverty, Reduced Public Assistance Costs by $4 Billion

Source: National Institute on Retirement Security

Social Security Changes for 2020

The average individual retired Social Security beneficiary is expected to see a monthly benefit jump from $1,479 to $1,503, an increase of roughly $24 per month or $288 for the year.

As a result of the COLA, the maximum monthly benefit a single recipient can get also will grow. That benefit will increase from $2,861 per month in 2019 to $3,011 per month in 2020.

Workers pay 6.2 percent of their earnings to fund the benefit (employers pay the same). Next year, the maximum amount of earnings subject to the Social Security tax will increase from $132,900 to $137,700

The earnings required for one work credit — that is, three months of Social Security coverage — edges up from $1,360 to $1,410 for 2020.

Beneficiaries receiving Supplemental Security Income (SSI) will also see an increase in their monthly payment. The individual amount grows by $12 a month, from $771 to $783. The amount for couples will increase $18, from $1,157 to $1,175. (More information at AARP.Org).

National Institute on Retirement Security Factoid
  • 40% of Older Americans Rely Solely on Social Security for Retirement Income
  • Only 7% of Retirees Have Ideal Situation of Income from Three Sources: Social Security, Pension & Savings
  • Social Security kept More Than 7.5 Million Households Out of Poverty, Reduced Public Assistance Costs by $10 billion
  • Pensions Kept Nearly One Million Retirees Out of Poverty, Reduced Public Assistance Costs by $4 Billion 
Involuntary transfer or discharge process for nursing homes

The Department of Licensing and Regulatory Affairs (LARA) Bureau of Community and Health Systems (BCHS) is pleased to announce the launch of new and updated forms for the involuntary transfer or discharge process for nursing homes.  The forms and updated guidance is located on the department website at: www.michigan.gov/lara.

OMG

The cost of employing state government workers in Michigan increased very modestly in 2019, mostly due to continued growth in benefits, according to data provided by the state to the Mackinac Center for Public Policy in response to a document request.

The average annual cost to taxpayers for each State of Michigan employee rose from $122,157 in 2018 to $122,959 in 2019, or 0.6%.

The total number of state government workers also rose to 47,324, an increase of 0.8% over the previous year, according to the data.

HOWEVER “Both average wages and benefits in 2019 were below their historic highs ($69,793 for wages in 2008, and $57,508 for benefits in 2015), according to state figures. Read more at https://www.michigancapitolconfidential.com/

Some Lucky Pensioners

More than 31,000 retirees in the Illinois State Employees’ Retirement System (51%) will receive an expected lifetime payout of more than $1 million, with half retiring before age 60. Read more at www.effinghamdailynews.com.

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