Will MOSERS Investments Staff Receive Incentive Compensation?

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I assume that since MOSERS lost 19% last year, that there will not be any bonuses paid to MOSERS employees for a job well done. Is this accurate, or will they receive a bonus for not losing 30%, only 19%?
MOSERS’ return for the year ended June 30, 2012 was 2.24% while the average large public fund return for that year was 1.20%. MOSERS’ investment returns for the years ended June 30, 2010 and 2011 were 14.31% and 21.04% respectively, net of all expenses. In combination, the system’s compound annual return on investments for the three year period ended June 30, 2012 was 12.25%. 

Our return for the year ended June 30, 2009, was -19.05%. That year the broad global stock market had a return of -29%.That was a very difficult year for all investors but MOSERS did better than most.

When determining whether or not incentive compensation is to be paid, the test is how well the system did over a five year period relative to what the outcome would have been based on market returns on the assets in which we invest. The excess return from staff decisions over the five year period ended June 30, 2012, resulted in $420 million in value added to the system's assets. For next year alone, and decades thereafter, that will reduce the state’s annual contribution by $28 million relative to what it would have been without the additional return. In addition, the system's net of fees return for that five year period ranked MOSERS as having the best annual rate of return among statewide pubic retirement funds in the nation.

Contractually, incentive compensation was paid to the chief investment officer based on the fund’s exceptional investment performance during the last five years.Whether or not other investment staff members will receive incentive compensation this year has not yet been determined.


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Key Facts Regarding MOSERS Funding

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Getting Retirement Security Right. MOSERS has the basic elements necessary to provide a sound income replacement to retirees and to help stimulate Missouri’s economy. Through a history of reasonable benefit levels, mandatory participation, consistent employer contributions, economies of scale, and pooled and professionally managed investments, MOSERS continues to be very financially viable. Financed through Employer/Employee Contributions and Investment Earnings. MOSERS is an advance funded retirement system. Unlike “pay-as-you-go” plans, employer/employee  contributions and investment earnings are accumulated and professionally managed during employees’ public service and paid out over their retirement years. The major source of revenue is investment earnings. From FY03 through FY12 (which includes the recent unprecedented market decline), investment earnings accounted for more than two-thirds of MOSERS’ revenues. The state’s FY13 contribution to MOSERS accounted for only 1.14% of the total state budget.

Recent Passage of Pension Reform. The MSEP 2011, a new tier created under the MSEP 2000 plan, was created for state employees employed for the first time in a benefit-eligible position on or after January 1, 2011. This new tier requires members to contribute 4% of their gross pay to the retirement system. MOSERS remains a non-contributory defined benefit plan for employees who worked in a benefit-eligible position prior to January 1, 2011, but is a contributory defined benefit plan for employees first hired in a benefit-eligible position on or after January 1, 2011. The new tier also includes a longer vesting period and higher normal retirement age. The changes to the plan for new employees were made in order to help the state of Missouri continue to provide financial security for all members by maintaining the defined benefit plan structure. It is important to point out that the state’s defined benefit plan was preserved for all state employees, current and future.

Establishing Level Contribution Rate Sufficient to Meet Financial Obligations. The basic financial objective of MOSERS is to establish and receive contributions which, when expressed as a percentage of active member payroll, will remain approximately level from generation to generation of Missouri citizens, and which, when combined with present
assets and future investment returns and contributions, will be sufficient to meet the  present and future obligations of the plan. State law (Section 104.436, RSMo) requires the MOSERS Board of Trustees to establish and certify the contribution rate to the Commissioner of Administration for the ensuing fiscal year no later than September 30 of each year. During the September 20, 2012 meeting, the MOSERS Board of Trustees certified the contribution rate for FY14, which will begin July 1, 2013, at 16.98%.

Reasonable Benefit Payout. Generally speaking, combined pension and social security benefits should replace approximately 75 percent of a career employee’s (30 years) final average pay as a reasonable benefit level. Additional personal savings through programs such as the State of Missouri Deferred Compensation Plan can make up the difference. MOSERS retirees receive a retirement benefit based on a formula which uses the  member’s final average pay, years of service and a multiplier of 1.7%. The average monthly benefit payable to new state retirees (as of July 30, 2012), is $1,168 per month or $14,016 per year. The average age at retirement is 60.8 years.

Pension Benefits Serve as a Stimulus for State Economy. The annual pension benefits paid to state retirees provide a steady, continuous and significant stimulus to Missouri’s state and local economies. Nearly 90% of state retirees remain in the state after retirement. More than $600 million annually flows into households of over 33,000 retirees and beneficiaries who buy goods and services in this state. Print Friendly and PDF

Social Security and the Temporary Benefit

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There is a federal plan proposed by one candidate that would change social security eligible for individuals under age 55. For those of us 54 yrs old who have paid in social security our entire careers, will our MOSERS retirement continue the extra payment past age 62 if we are no longer eligible for social security at 62?
Current law provides that members who retire under MSEP 2000 under the Rule of 80, and MSEP 2011 under the Rule of 90, receive  a benefit for life plus a temporary benefit payable to age 62. The temporary benefit isn’t technically connected to Social Security eligibility, although it was designed to provide a financial bridge  from the time the member retires until reaching eligibility for social security benefits. In order for the temporary benefit to be payable beyond age 62, current law would have to be changed.

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Pension Funding/Contribution Rate

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If the pension funding is sound why is the state allocating millions of dollars to cover the shortfall. Is this a sign of things to come?
The reason for the state’s contribution rate increase and why it’s requiring more money in the FY14 budget is primarily due to changes in assumptions used by the actuaries and financial market losses which stemmed from the global credit crisis of  the last half of 2008 and early 2009.  In dealing with investment gains and losses, the actuaries use a five-year smoothing method systematically manage the volatility of the investment returns, and some of the market losses from the credit crisis are still in the calculation that determines the state’s contribution rate for MOSERS. Significantly impacting the rate was investment return losses from FY09 recognized this year.  In FY09, the global stock markets experienced losses of more than 30 percent. MOSERS’ investment return for that same period was negative 19 percent.

The most significant change in actuarial assumptions was related to demographic changes, specifically the number of retirements we’re experiencing compared to what we thought would happen, as well as increases in life expectancies of retirees.

Unlike some states where pension plans are in trouble, the state of Missouri has consistently done the right thing by fully funding the contribution rate certified by the board of trustees. While the added expense is always difficult, the fact that the state of Missouri has always funded MOSERS as required is a very good thing and it is why the retirement system remains sound and the promised benefits remain secure.
Legislation effective in January 2011 will also lower the contribution rate over the long term because of changes in the eligibility age for retirement benefits. This pension reform will, over time, decrease the cost to fund the retirement system. For more information, see our key facts regarding funding of MOSERS.

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Can Purchase of Military Time Be Used For BackDROP?

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I will be retiring in a few months and I have heard I can buy my military time and use that for my BackDROP? I am retiring under the Rule of 80 with no backdrop time worked.
In order for us to calculate the cost of purchasing service, we first must have the "Application to Purchase Active Duty Military Service" completed and submitted with your DD214 or other military discharge paperwork. The application is on our website.

Once we receive the completed application, we can determine if your service is eligible for purchase, and if so, the cost of purchasing. In addition to this calculation, you will also receive an estimation of your retirement benefit with and without service, a brochure on tax free rollovers, and an election to purchase the service.

Any eligible purchases must be applied for and paid in full prior to applying for retirement. You are correct that eligible military service may be used to make you eligible for BackDROP.


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Change to Rule of 80?

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I have heard rumors of possible change in the 80 and out rule to be possibly 75 and out? Is this being considered?
Rumors abound, especially as the start of the legislative session approaches. Thanks for your email. The 2013 legislative session begins in January. We know of no proposals to change the “Rule of 80,” (or the “Rule of 90” for those in the MSEP 2011 plan).  We encourage you to monitor legislation as it is introduced and moves through the legislative process by visiting the Missouri House of Representatives
and Missouri Senate websites.

Also, see this Rumor Central response from May of 2011, addressing the same topic.


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Friday Top Five Oct 26 2012

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The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From the National Institute on Retirement Security (NIRS): A Letter to the Editor of The Washington Post

The letter to the editor, written by NIRS Executive Director Diane Oakley, says a recent opinion piece in The Washington Post misinforms readers about pension funding costs.

From Forbes: What's Really Jeopardizing Your Retirement?

This article focuses on the three critical elements of Senate Resolution 555, which created National Save For Retirement Week (Oct 22 - 26, 2012):

1.  Making employees more aware of how critical it is to save now for their financial future
2.  Promoting the benefits of getting started saving for retirement today
3.  Encouraging employees to take full advantage of their employer-sponsored plans by increasing their contributions

From Bloomberg: Pension Funding Scare Won’t Frighten All States

In this opinion piece, Peter Orszag, former director of the federal Office of Management and Budget under President Obama, discusses his take on public pension funding issues in the aftermath of the of the financial crisis, and highlights Alicia Munnell's (director of the Center for Retirement Research at Boston College) new book, “State and Local Pensions: What Now?

From The New York Times 'Bucks' Blog: Many in Middle Class ‘Guess’ on Retirement Needs

From the post: "Have you done detailed calculations of your financial needs in retirement, or are you, too, playing the guessing game?" Good question.

From The Wall Street Journal: How Much Is Social Security Worth?

When estimating your retirement income, don't forget to include Social Security if it applies to you.

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS. Print Friendly and PDF

The Pension Factor Web Series - Part 3

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This infographic using pension factor data from NIRS depicts how defined benefit income shrinks gender and racial gaps in rates of poverty. Print Friendly and PDF

GASB's Pension Accounting Standards: Déjà Vu All Over Again

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This long, yet informative post, is probably more for the accounting-inclined among our readers. That said, this column, written by Gary Findlay, executive director of MOSERS, and published in Pensions & Investments online on 10/22/12, provides a history of the Governmental Accounting Standards Board's (GASB) expectations with regard to pension accounting. If you're interested in this kind of thing, I encourage you to read on and create a free account at www.pionline.com so you can have full access to their online articles.  ~Krista

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The path to where we are today regarding generally accepted accounting principles for public pension plans, with the advent of the Governmental Accounting Standards Board (GASB) in between, is probably worth tracing if for no other reason than to be sure the history is not lost.

To get to the starting point, it is necessary to go back to Labor Day 1974 – that was the day President Ford signed the Employee Retirement Income Security Act into law. One seemingly innocuous provision in that voluminous document called ERISA reads as follows:

"… the administrator of an employee benefit plan shall engage, on behalf of all plan participants, an independent qualified public accountant … to form an opinion as to whether the financial statements and schedules required to be included in the annual reports . . . are presented fairly in conformity with generally accepted accounting principles (GAAP). . . .”

So, what's the problem? On the public plan side, ERISA generally did not apply but, even if it had, governmental plans had been preparing GAAP-based financial statements for years following the pronouncements of the now-defunct National Council on Governmental Accounting (NCGA). The problem was on the private sector plan side. Surprisingly enough, there was no document that could be referenced to determine what constituted GAAP for a private sector employee benefit plan.

Naturally, that void generated a flurry of activity in Stamford, Conn. (then the home of the Financial Accounting Standards Board - FASB) to position private sector plan administrators to prepare plan financial statements in accordance with GAAP. Of course, this was of no concern to those on the public plan side since FASB statements did not apply to governments. The absence of concern on the public plan side vanished quickly when the FASB issued the exposure draft for what eventually became Statement of Financial Accounting Standards No. 35, Accounting and Reporting by Defined Benefit Pension Plans. The exposure draft and final statement, issued in March 1980, included the following provision in the introduction:

“This Statement applies to an ongoing plan that provides pension benefits for the employees of one or more employers, including state and local governments . . . .”

The turf issue notwithstanding, this standard was viewed as being seriously flawed for assessing an “ongoing plan” regardless of whether it was in the public sector or private sector. The most critical shortcoming was the stipulation that future salary increases were not to be considered in determining what most people would think of as the liability side of the equation. (As an aside, the FASB standard also required that assets be reported at “fair value” which was generally market value.)

By the time this standard was issued, the public plans covering most governmental employees were being funded on an actuarial basis that gave recognition to the future salaries on which benefits would be based rather than the salaries at the valuation date and they had accumulated assets accordingly. While there were certain fine point distinctions, the FASB standard effectively called for presentation of a plan termination obligation for a plan that was being called “ongoing.” As you can imagine, plans that had been reporting unfunded liabilities were suddenly going to have the erroneous appearance of being over funded. At the time it was believed that this erroneous appearance would lead to unwarranted reductions in contributions or increases in benefits or a combination of the two.

This confusion was well documented by a publication of the Government Finance Officers Association (GFOA), which at the time was called the Municipal Finance Officers Association MFOA). In their May 1980 “Guidelines for the Preparation of a Public Employee Retirement System Comprehensive Annual Financial Report,” two sets of illustrative financial statements were included – one based on the long-standing NCGA standard and another based on the new FASB standard.

The FASB encroachment on NCGA turf led to a flurry of activity in Chicago (the home of the NCGA and the MFOA). While GAAP for governmental plans had been established by application of NCGA standards and practices, there was no single document that could be referenced for public-sector defined benefit pension plans. In December 1981, the NCGA issued Interpretation 4, Accounting and Financial Reporting for Public Employee Retirement Systems and Pension Trust Funds. Interpretation 4 called for including salary projections in determining the pension benefit obligation. In addition, under Interpretation 4, equity securities were to be reported at the lower of cost or market and debt securities were to be reported at amortized cost. Now we had conflicting standards. There is an interesting footnote to the “lower of cost or market” standard. It resulted in a cottage industry of brokers who, for a modest fee per transaction, would sell and instantly repurchase equity securities that had market values above cost as a means of marking them up to market on the last day of a plan's fiscal year – if equity markets were generally up, it was possible to achieve a specific return target by selling and repurchasing just what was needed to generate the gains needed to hit the return objective. (You can't make up stuff like this.)

The pension activity at the NCGA continued at a rapid pace. For example, in November 1982 an exposure draft was issued and five months later was finalized as Statement No. 6, “Pension Accounting and Financial Reporting: Public Employee Retirement Systems and State and Local Government Employers.” (The FASB had yet to address employer accounting but the NCGA now had both the plan and employer bases covered.)

It's also worth mentioning that those arguing for a different standard for governments had what they thought of as support from an unlikely source – specifically, the three board members of the seven-member FASB who dissented to Statement 35. FASB commentary included the following regarding their dissent to the statement:

“ … it improperly includes what they consider to be actuarial statements within the financial statements rather than as supplementary information outside the financial statements and provides detailed reporting beyond usefulness to plan participants. They share an overriding concern that, taken as a whole, these provisions invite comparison of items that do not possess enough common properties to be directly comparable and lend an unjustified aura of reliability to estimates of the future.”

The two and one-half page dissent statement from those three people was not exactly a raging endorsement of the work of the seven-member FASB.

The conflicting standards led to considerable back-and-forth negotiations between representatives of FASB and NCGA, with the end result being that early in 1982 both bodies suspended application of their statements to governmental pension plans. This action took governments from the unenviable position of having too much GAAP to the untenable position of having no GAAP for their pension plans.

While there had been discussions of the possible establishment of a full-time standard setting body to replace the part-time work of NCGA, the conflicts related to pension accounting resulted in a much greater sense of urgency. The Financial Accounting Foundation established GASB to serve that purpose. The GASB website includes the following in the description of the organization:

“Established in 1984 by agreement of the Financial Accounting Foundation and 10 national associations of state and local government officials, GASB is recognized by governments, the accounting industry, and the capital markets as the official source of generally accepted accounting principles (GAAP) for state and local governments.”

As you might guess, GASB's initial agenda included a pension project which resulted in the November 1986 release of GASB Statement No. 5, “Disclosure of Pension Information by Public Employee Retirement Systems and State and Local Government Employers.”

GASB Statement No. 5 could basically have been called “NCGA Statement No. 6 Redux.” To keep from deviating too much from FASB Statement No. 35, GASB added salary projections to the unit credit actuarial cost method called for by FASB, resulting in the projected unit credit actuarial cost method being used in determining public plan benefit obligations for financial statement disclosure purposes. On the plus side, this kept public plans from grossly understating their going-concern benefit obligations. On the negative side, most plans still had to deal with two sets of obligation numbers since most were determining required contributions using the entry age actuarial cost method. (A number of plans actually switched from the entry age to the projected unit credit actuarial cost method for funding purposes just to eliminate the confusion that ensued from concurrently having alternative benefit obligation numbers.)

Important in GASB Statement No. 5 is the title's reference to “disclosure of” rather than “accounting and financial reporting for” pension activity, meaning that there was still a lack of comprehensive GAAP guidance. Consequently, the issue remained on GASB's agenda.

The next key step on the path came in November 1994 when GASB released Statement No. 25, “Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans” and Statement No. 27, “Accounting for Pensions by State and Local Governmental Employers.” Those statements have established GAAP for public plans and governmental employers since that time, except as modified by GASB Statement No. 50 that will be addressed later. Noteworthy points from Statements 25 and 27 include:
  • The employer's expense for pensions was equal to the annual required contribution (ARC) as determined by the actuary using the actuarial funding method and assumptions in use for funding purposes.

  • If the employer's actual contributions were different than the ARC, the accumulated difference plus interest was reported as the Net Pension Obligation in the employer's financial statements.

  • Actuarial trend information was reported as Required Supplementary Information (RSI) to the financial statements, including note disclosures to the RSI. This permitted auditors to opine on employer and plan financial statements without having to express an opinion on the work of the actuary that was presented as RSI.

  • Confusion that had existed because of differences between actuarial information used for funding versus financial reporting was eliminated.

Statements 25 and 27 were amended in a material way in May 2007, with the release of GASB Statement No. 50, which:
  • Required that the most recent year's actuarial information from the RSI be included in the notes to the basic financial statements, meaning auditors had to enlist the services of actuaries for assistance in opining on the financial statements. (Ca-Ching.)

  • Required that plans using the aggregate actuarial funding method develop financial disclosures using the entry age actuarial funding method. The reason for this was that under the aggregate method the accrued liability is equal to the plan's assets resulting in a plan always appearing to be 100% funded regardless of the size of the assets held. Interestingly enough, they still permitted the use of the entry age method with frozen initial liability without additional disclosures, even though, as a practical matter, that method would ultimately produce the same result as the aggregate method. (To be generous, one might assume this was an oversight but, if skeptical, one might look at which, among a small number of plans, were using the frozen initial liability method.)

Further activity related to a perceived need for changes to the GASB pension statements came to fruition on June 25, 2012, when GASB announced adoption of Statement No. 67, “Financial Reporting for Pension Plans” and Statement No. 68, “Accounting and Financial Reporting for Pensions.” The announcement indicated that the statements would first be available in August 2012, which has caused some people to wonder if they were adopted before actually having been written.

Those desiring information regarding what these statements do will find that there is no shortage of information available on the internet. Simply Google “GASB Pension” and more references will be found than most would be interested in attempting to read. The protracted exercise leading up to the final vote by GASB on these new statements had the trappings of due process but many interested outsiders involved in the effort wondered if it was simply an exercise in providing the illusion of due process for decisions that had already been made.

While it will take quite some time to sort out all the nuances, there seems to be general agreement that the most significant impact of these new statements will come from the segregation of methods and assumptions used in determining actuarial accrued liabilities and required contributions from the methods and assumptions used in determining liabilities and expenses reported in the employer's financial statements.

As was learned many years ago, distinctions of that type are problematic. Adding to the anticipated confusion will be the fact that the method developed for financial reporting is sufficiently arcane, including newly introduced terminology, that very few people will understand the substance of the distinctions between the funding and reporting numbers. However, what is almost a certainty is that those who have various agendas regarding public sector defined benefit pension plans will selectively use the information that will be most likely to further their cause, whatever that cause may happen to be.

It would not be accurate to suggest that there was no agreement among the various interests in the final product of GASB pension project. Regardless of what they thought should be done, all seem to be disappointed to some degree or other.

Perhaps this can all be best summarized with a couple of Yogiisms:

"It's deja vu all over again."

"It ain't over till it's over.”

While not a Yogiism, there is a question that may merit consideration. If generally accepted accounting principles are not generally accepted why are they called generally accepted?

Stay tuned for some very interesting Management Discussion & Analysis in public retirement system financial disclosures. (Don't be surprised if you are strongly encouraged to disregard all information in financial statements regarding public sector defined benefit plans if you are truly interested in gaining an understanding of the financial condition and financial position of said plans.)

Gary Findlay is the executive director of MOSERS.

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Follow the Money

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This opinion piece by MOSERS Executive Director Gary Findlay was published today in PlanSponsor.com magazine. It is reprinted here in its entirety.

October 22, 2012 (PLANSPONSOR.com) - Suspected witches were burned in Salem. Japanese-Americans were interned because of their heritage. Alleged communists were denigrated at congressional hearings. African-Americans were refused equal treatment with and by whites. Conscripted military personnel were spit on for their participation in an unpopular war.

These examples only scratch the surface on the long list of groups that have, in the past, been targeted for abuse and public ridicule – incidents that we can now look back on and wonder, “What were people thinking at the time?”

Will future generations look back on what is happening presently and ask that same question?  They probably will and a group they will likely be discussing will be state and local government employees.  “Public servants” seem to be the target du jour and their defined benefit pension plans are being characterized as being the root of all evil that will lead to the end of western civilization as we know it.  Why them and why now?  After all, don’t we also have a debt crisis, a health care crisis, a social security crisis, a Medicare crisis, an energy crisis, an education crisis, a retirement income security crisis and an obesity crisis, just to name a few. So, why have government employees and their pension plans moved to the top of the crisis list and been subjected to such heavy doses of criticism?

I think there are a number of reasons:
  1. The first is that the other current crises cannot be identified with a select group (other than perhaps policy makers at the federal level but they are sufficiently diverse that it is difficult to pinpoint a specific contingent). If you are going to trash something you need a group to blame. State and local government employees just happen to be handy.

  2. For years there have been sporadic initiatives to replace defined benefit pension plans with defined contribution plans, but why?  I can offer three trillion reasons – the dollars held in trust by public sector defined benefit plans.  Those responsible for the investment of these assets have done a reasonably good job of keeping management fees down.  If shifted to individual accounts it will be much easier for service providers to increase their fees.  In 2000 there was a major push in Florida to give plan participants the option to participate in an individual account defined contribution plan.  According to an article in the May 5, 2000, edition of the Wall Street Journal, the financial services industry had between 50 and 75 lobbyists lined up Gucci to Gucci prowling the halls of government making their case for the defined contribution option. Does anyone think they were doing this in the interest of the plan participants?

  3. In the same Wall Street Journal article mentioned, a representative of the American Legislative Exchange Council was quoted as having said the following about public employees: “They see their friends in the private sector doing well in their 401(k)s, and they want the same opportunity.”  That was then but the tides have shifted substantially since the turn of the century.  Now we are hearing that private sector employees have seen their 401(k) balances decimated by the bursting of the tech bubble and the great recession.  Accordingly, public sector employees should be stripped of their defined benefit plans so they can be just as financially ill prepared for retirement as are their private sector counterparts.   Face it – when a private sector employee retires, the employer typically prefers having no further obligation for that employee.  If the retiree runs out of money, it’s not the employer’s problem – it’s the government’s problem.  We have many rules and regulations that prohibit pollution of the physical environment. It’s interesting that corporate pollution of the financial environment has not been addressed in this area.

  4. Public retirement plans need to take some responsibility for the private sector migration to defined contribution plans.  In their capacity as shareholders, they expect the companies in which they invest to perform.  One way to increase earnings is to reduce costs and one way to reduce costs is to reduce benefits for employees, particularly when unemployment is high and the employer is not at risk of employees leaving.  When the employees leave service, the fact that the employees have no retirement income associated with their service with that employer is not the employer’s problem, at least not immediately.  Again, let the government take care of the problem (which under this logic is in part is a problem of governments’ making).

For those who are financially or philosophically interested in facilitating the demise of public sector defined benefit plans, the credit crisis of 2008 was made to order. It was a crisis that was just too good to pass up.  While there have always been isolated cases, the volume of anti-defined benefit plan literature that has been generated since 2008 has been staggering.  A good deal of it has been long on hype and short on substance.  The claims being made obviously do not have to be supported by facts and the marching orders seem to be “the more outrageous the better.”  All that is needed is a credible name behind it such as a prestigious university or a think tank with broad name recognition.

So who is paying for all of this “research?”  That’s the three trillion-dollar question and it will probably remain unanswered.  It seems that the strongest proponents of “transparency” are not real good about practicing it.  Could it be that revealing the funding sources would call their objectivity and the veracity of their conclusions into question?  Being able to follow the money can be quite enlightening but I’m not counting on being enlightened on this matter.

Gary Findlay, Executive Director, Missouri State Employees’ Retirement System (MOSERS).     

Mr. Findlay is executive director of the Missouri State Employees' Retirement System (MOSERS), a position he has held since 1994. Prior to that, he spent 16 years as an administration and benefit consultant with Gabriel, Roeder, Smith & Company, a national actuarial and benefits consulting firm that specializes in serving the needs of public employee benefit plans. He was CEO of that firm from 1986 until he joined MOSERS.  

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Friday Top Five Oct 19 2012

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The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From AARP: 5-Steps to Get You Ready For Retirement

AARP's retirement resources include this interactive website. The five steps include 1) Setting your goals, 2) Factoring in your benefits, 3) Assessing your financing, 4) Creating a budget, and 5) Next steps. This website is extremely easy to navigate, and in each section you'll find quizzes, webinars, articles and tools to help you think about each piece separately, as well as how each piece fits into the larger goal of getting ready for retirement.

From The Ohio Public Employees' Retirement System (OPERS): OPERS Offers Guides for Pension, Health Care Rules

In our Sept. 21, 2012 FTF post, we linked to an article on Cleveland.com that explained recent passage by the Ohio legislature of a package of pension reform legislation that impacts all five of Ohio's public pension systems. On Oct. 4, OPERS posted about this on their blog, directing readers to their website, where they have issued comprehensive guides to the pension and health care changes.

From The WISER website: GAO Releases A New Report On Older Women And Retirement Security

"As highlighted in the report, the GAO found that within the last decade, women 65 and over had consistently less retirement income on average and had higher rates of poverty when compared to men. The report concluded that one reason for this is that women in this age bracket have over the last decade had a median income of approximately 25% less than that of men." You can access the full report from this link, and also read WISER's testimony at the Senate Special Committee on Aging's hearing on “Enhancing Women’s Retirement Security.”

From USA Today: Editorial: California Pension Plan is a Bad Trend

We referred to the new legislation enacted in California (called the California Secure Choice Retirement Savings Program) in our 9-28-12 FTF. According to the editorial board of USA Today, "though encouraging people to save for the elder years is a noble cause, getting states into the business of running another kind of retirement fund, when they have done such a poor job with their existing ones, is a bad idea."

Also From USA Today: AARP Response to Editorial: A Big Step Toward Retirement Security

AARP disagrees with the position of the USA Today editorial board, and says "a new program emerging in California shows great promise in addressing those problems. It stands to help more than 6 million Californians who don't have a retirement plan at work, providing a means to supplement their Social Security at no cost to taxpayers."

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS. Print Friendly and PDF

Friday Top Five Oct 12 2012

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The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From The Best Life Blog: How Family Ties Shape Retirement Success

From the post: "One factor that contributes to large differences in retirement planning and needs is a person's family situation. MetLife's Mature Market Institute, in partnership with the Society of Actuaries, recently studied how retirements are shaped by different family structures."

From Pension Dialog: Easy Prey for Tough Issues

Big Bird became a political football during last week's first presidential debate. In this post, PD likens public pensions to the plight of the Corporation for Public Broadcasting (CPB) in that both make up a relatively minor portion of a larger, overall budget, and that their worth (both public pensions as well as CPB) have been proven time and again. However, from the post, "Big Bird is not a drain, but last night [Oct. 3, 2012] he became a symbol of blame, and that’s a challenging role to be in, as any public employee can tell you."

From The Pension Rights Center: Retirement Security Funds

In an effort to inform the debate over retirement income security for everyone, the Pension Rights Center, founded in 1976 and "committed to protecting and promoting the retirement security of American workers, retirees, and their families," is proposing Retirement Security Funds, "a new private retirement plan structure to supplement Social Security." Click on the link above for a brief summary, or read the full summary here.

From The Center for Retirement Research: Are Aging Baby Boomers Squeezing Young Workers Out of Jobs?

According to the brief's findings, "this horse has been beaten to death. An exhaustive search found no evidence to support the lump of labor theory in the United States. In fact, the evidence suggests that greater employment of older persons leads to better outcomes for the young – reduced unemployment, increased employment, and a higher wage. The patterns are consistent for both men and women and for groups with different levels of education."

From The Congressional Budget Office (CBO): The 2012 Long-Term Projections for Social Security: Additional Information

This is an update to the CBO's June report on the long-term budget outlook. This publication, included here as a slideshare document, updates projections for Social Security. From the summary: "The resources dedicated to financing the program over the next 75 years fall short of the benefits that will be owed to beneficiaries by 1.95 percent of taxable payroll—up from 1.58 percent a year ago. That means, for example, that if the Social Security payroll tax rate was increased immediately and permanently by 1.95 percentage points—from the current rate of 12.40 percent to 14.35 percent—or if scheduled benefits were reduced by an equivalent amount, then the trust funds' projected balance at the end of 2086 would equal projected outlays for 2087."


According to the report, the breakdown of the 56 million people currently receiving Social Security benefits , the single largest program of the federal government, is as follows:

  • 70% are retired workers or their spouses and children

  • 11% are survivors of deceased workers

  • 19% are disabled workers or their spouses and children

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS. Print Friendly and PDF

The Pension Factor Web Series - Part 2

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This infographic using pension factor data from NIRS depicts how defined benefit income saved taxpayers billions of dollars in public assistance costs, as well as impacted the number of fewer households (1.22 million) that relied on public assistance in 2010 because of defined benefit income. Print Friendly and PDF

Is BackDROP Being Taken Away?

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I have heard rumors from the CWA union representative and also from a State legislator that the back drop option was going to be taken away from us, and for people that can retire had better do so before this happens. Is there any truth to this rumor, is the Governor or legislators thinking about doing this and how would it effect people that are about ready to retire or have started working on their backdrop and was counting on that money to pay for health insurance or pay off bills etc. This would be very a severe blow for many of us that have worked all this time with the hope of using this option. Thanks for any news that you can shed on this subject.
BackDROP remains unchanged for members who are members of either the MSEP or the MSEP2000 plan. For members in the MSEP2011 plan, who were hired for the first time in a benefit eligible position on or after January 1, 2011, BackDROP is no longer an option at retirement. You can see a summary of benefits chart for each of the three plans at this link.

Any change to the BackDROP would require a change in the law. The 2013 legislative session begins in January 2013 and the earliest legislators can file bills to make these kinds of changes is December. We encourage you to monitor legislation as it is introduced and moves through the legislative process by visiting the Missouri House of Representatives and Missouri Senate websites.

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2012 Retiree COLAs

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What will the COLA rate be this year?
The cost of living adjustment (COLA) rates were announced in January, 2012, and can be found on our website. The COLA for MSEP retirees hired prior to 8/28/97 who have not met their COLA cap is 4.00%. The COLA for MSEP retirees hired on or after 8/28/97; MSEP retirees who have met their COLA cap; MSEP 2000 retirees is 2.526%.

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Retirement Incentive and a BackDROP payout question (unrelated)

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If HB1139 gets picked up in January 2013 legislative session and is passed, will it retroactively include people who have retired within those 1-1-13 to 3-31-13 dates?  Also, when you select your backdrop lump sum payout, do they require the 20% taxes or can you request less than 20%?
The 2013 legislative session begins in January 2013. There have been no formal bills filed on a retirement incentive at this time. We encourage you to monitor legislation as it is introduced and moves through the legislative process by visiting the Missouri House of Representatives and Missouri Senate websites.

Regarding your BackDROP question, if you elect the cash option, the distribution will be paid directly to you, and MOSERS is required to withhold 20% of the payment and send it to the IRS as income tax withholding. You can read more about this and other BackDROP payment methods on our website.

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BackDROP and part-time employment

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Need to know how BackDROP accrues if you go part-time after your 4th year of BackDROP.
BackDROP is available for members who work at least two years beyond their normal retirement date in a benefit eligibly position. As long as your position is still a benefit eligible position covered by MOSERS, your BackDROP will not be affected. 
For more information regarding the BackDROP, please view our BackDROP for General State Employees brochurePrint Friendly and PDF

Friday Top Five Oct 5 2012

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The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From The Columbia Daily Tribune: State pensions: Is Missouri Looking Ahead?

A favorable column by Hank Waters, III, who says "MOSERS has been a well-run program and no small contributor to Missouri's good credit rating." Thanks Hank!

From Pension Rights Center: NFL Sacks Referees’ Retirement Security

From the article: "A key issue in the stalemate was one that many who work in corporate America face today: whether employees – in this case, the referees – would have guaranteed income at retirement or whether their retirement security would be largely dependent on the ups and downs of the stock market."

  • Be sure to also read Deadspin editor Tommy Craggs's piece on Slate.com, who argues that "the lockout was part of an ideological fight…over what it means to be a worker or an employer.”

From Kiplinger: The Rules of Retirement for Women

This is a great article on issues of retirement that matter for women. Interestingly, it says "it’s unlikely these days that you will find a job with a pension plan that guarantees a stream of income in retirement." If you're a member of MOSERS, once vested, your retirement plan does provide you with a guaranteed stream of income in retirement. Know your benefits. If you're a MOSERS member, start here by determining which Plan you're in.

From PensionDialog: Claiming a Pension Crisis

An alternative to the "public pensions are in crisis" argument that we hear so much of these days, PD suggests in this post that problems experienced by public pensions are due in most part to a weakened economy and less revenue at the state and local level, are state-specific, and are not systemic in nature. It goes on to suggest that the real crisis lies outside the public arena, with so many people in the private sector without access to a defined benefit pension plan.

From The Huffington Post: WHY IT MATTERS: Social Security

Where the presidential candidates stand on the issue of Social Security is clear. This article on HuffPo suggests that the looming insolvency of the Social Security program can be fixed, but it will take "modest yet politically difficult changes."

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS. Print Friendly and PDF

Decisions, Decisions!

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From April to September, 2012, MOSERS featured Managing Retiring Decisions, an 11-part series from the Society of Actuaries.

There is a lot to think about regarding retirement – when to retire, when to apply for social security, special considerations for women, how to handle estate planning, finding trustworthy financial advice and more. MOSERS is pleased to be able to provide easy access to this solid information from retirement professionals that can help you make good decisions about this important time in your life. You’ve earned it – make the most of it!

Part 1: Big Question: When Should I Retire?

Part 2: When Retirement Comes Too Soon

Part 3: Women Take the Wheel: Destination Retirement

Part 4: Deciding When to Claim Social Security

Part 5: Designing a Monthly Paycheck for Retirement

Part 6: Treating Asset Allocation Like a Road Map

Part 7: Securing Health Insurance for the Retirement Journey

Part 8: Taking the Long-Term Care Journey

Part 9: Where to Live in Retirement

Part 10: Estate Planning: Preparing for End of Life

Part 11: Finding Trustworthy Financial Advice for Retirement and Avoiding Pitfalls

©2012 Society of Actuaries, Schaumburg, Illinois. Posted on our website with Permission.

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