Friday Top Five January 24 2014

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Please note that there will be no Friday Top Five next Friday, January 31, 2014.

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

From Huffington Post Politics: California Pension Cutters Bet Against Prosperity

From the piece: "The California Public Employees’ Retirement System (CalPERS) said it rode a 25 percent run-up in stock prices to post a 16.2 percent gain for its 2013 portfolio — its best showing in a decade. For its part, the California State Teachers’ Retirement System (CalSTRS) reported an impressive 19.1 percent return on its 2013 investments, led by a 28 percent return on its stock holdings.

The announcements undoubtedly came as welcome news to the roughly 1.6 million California government workers and 860,000 public school teachers represented by the systems. Ever since the 2008 global financial meltdown, their pensions have been in the crosshairs of fiscal conservatives and anti-public pension activists who wish to see the employees’ traditional defined benefits plans replaced by 401(k)-type packages.

However, the reports couldn’t come at a worse time for San Jose Mayor Chuck Reed..., whose statewide retirement-cutting ballot initiative now finds itself undermined by prosperity."

From the Squared Away Blog: Retirement Delayed to Pay the Mortgage

From the post: "Older Americans who are in debt are choosing to delay their retirement, researchers conclude in a new working paper." The working paper is by the Center for Retirement Research at Boston College.

From Pensions & Investments: Misdirected Impulse to Shift From DB Plans

From the article: "In a Jan. 6 Other Views commentary in Pensions & Investments, Andrew G. Biggs, Josh McGee and Michael Podgursky argue that transition costs shouldn't stand in the way of switching government workers to 401(k)-style or hybrid plans from traditional defined benefit programs. This is like arguing that it's not a hassle to switch to an expensive, unreliable cellphone plan from an inexpensive, reliable one. Why would you even want to?"

Also from Pensions & Investments: Flaws of Adopting Cost Cutting in Switching to DC Plans

This is commentary by Diane Oakley, executive director at the National Institute on Retirement Security (NIRS), citing the experience of the West Virginia Teachers' Retirement System. "Although the environment back in 2008 appeared fertile for a wholesale switch to individual defined contribution accounts from defined benefit pensions, it never happened. That begs the question — why did policymakers stick with their defined benefit plans in the face of financial pressure and the corporate trend away from them?"

From C-SPAN: Diane Oakley on Retirement Savings

In this 4-minute video, the executive director of NIRS, Diane Oakley, talks via telephone about the status of Americans' retirement savings.

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

Refund of Contribution in MSEP2011

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I am currently a full-time employee at Missouri State University. I began in 2013 so I need ten years to become vested in the program. If I don't believe I will be staying for ten years is there any way that I can have the money set aside for retirement for me moved into a private investment account like TIAA-CREF or something along these lines? I'd be more specific, but I'm not entirely certain as I only heard this through a friend. Thank you so much for your time.
Members hired in a benefit eligible position for the first time on or after 1/1/2011 must contribute 4% of their gross pay toward their retirement benefit. These contributions are mandatory for each member. These members have both employee and employer contributions. While actively employed, the employee portion of the contributions accrues interest each year in June based on the prior July balance. Interest will not continue to accrue on your contributions if you terminate employment prior to becoming vested. However, upon termination you may elect to roll over your portion of the contributions to a qualified retirement plan, such as TIAA-CREF. Members of the MSEP2011 can check account balances online by logging into the secure portion of our website.

If you leave employment prior to becoming vested (achieving 10 years of service), you can request a refund of the contributions you paid to the system. You can request that the refund be paid to you directly as a cash payment, or you can roll the funds into an eligible IRA or employer plan.

Refunds will be paid 90 days from the date of termination of employment or the request for refund, whichever is later and will include all contributions you paid to MOSERS. A refund will not be processed  until the "Request for Refund of Contributions Application" is completed and returned to MOSERS. The refund of contributions becomes irrevocable on the day that MOSERS mails or electronically transfers payment.

Please be aware, by receiving a refund you forfeit all your credited service and future rights to receive benefits from the system. If you later become an employee and work continuously for a least one year, the credited service previously forfeited will be restored IF you return to the system the amount previously refunded plus interest at a rate established by the MOSERS board.

For more information, please review our MSEP2011 General Employees' Retirement Handbook:

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I have tracked my estimated lump sum amount for five years of Backdrop for some time now. The lump sum amount has decreased three times since I have begun tracking it. If Backdrop is based on the three highest years of salary, how can this be? 
The BackDROP lump sum payment is equal to 90% of the retirement benefits earned by working beyond normal eligibility, not your salary during your BackDROP period. Several factors go into calculating the distribution amount, including COLAs, service credit, salary, and the temporary benefit under the MSEP2000.

Generally, the longer you work, the higher your benefit and BackDROP. However, there are cases where working longer could decrease your BackDROP lump sum. The reason for the decrease could be due to a number of factors, among them, a lower COLA rate the year you retire as opposed to the previous year, or less or no temporary benefit calculated into the distribution if you are over 62 and are electing the MSEP2000.

The estimate program uses the current year's COLA and projects it for every future year. Tracking the COLA rate from year to year will help you understand the difference in estimates. For example, if you ran an estimate in 2013, the program was projecting the 2013 COLA of 1.655% for all future years. The 2014 COLA is 1.172%, meaning if you ran those same estimates today, the program would project the lower COLA rate for all future years, which could result in a lesser benefit.

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Friday Top Five January 17 2014

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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 NPR: Veterans Groups Speak Out Against Pension Cuts

From All Things Considered on 1-16-13, NPR's Quil Lawrence discusses a cut to military pensions that is in the bipartisan budget deal that has made its way through congress. Includes 2 min 25 seconds of audio.
From the Squared Away Blog: Confidence Key to Retirement Planning

New research finds that confidence may be beneficial in retirement planning, '"conclud(ing) that individuals’ tendency to engage in retirement planning and their self-confidence – how much they think they know – are “significantly and positively correlated with each other.”'
Also from the Squared Away Blog: Parents’ Longevity Sways Plans to Retire

From the post: "The notion that life is short is a valid reason to retire – to travel or enjoy the grandchildren before it’s too late.  And the academic literature clearly shows that the age at which people exit the labor force is related to how long they expect to live.
Building on this research, a new study nails down how we arrive at our personal estimates of our life expectancy and provides new insight into the critical retirement decision."
From the Center for Retirement Research at Boston College: The Miracle of Funding by State and Local Pension Plans

An older (2008), but still relevant, paper on public fund background prepared by the CRR at Boston College.
From the Detroit Free Press: $330M Pledged to Save Pensions, DIA Artwork From Detroit Bankruptcy

From the article: "With the future of Detroit at stake, leaders of national and local foundations gathered on a chilly afternoon in early November in the downtown chambers of U.S. Chief District Judge Gerald Rosen.
Rosen, the federal mediator in the Detroit bankruptcy, led a wide-ranging 3½-hour discussion, during which he floated a novel idea for a grand bargain: Could the foundations pony up hundreds of millions to bolster at-risk city pensions and prevent the Detroit Institute of Arts from having to sell its treasures?
It was a long shot at best. But on Monday it may have paid off big time."
And here are four bonus articles, all dealing with the possible Detroit pension solution:
Also from the Detroit Free Press:
Brian Dickerson: Foundations and Auto Show Spotlight Magnify Pressure on Snyder
And from The Detroit News:
Private Groups Donate $330M as Effort to Preserve DIA Art Builds
DIA-Pension Deal May Turn on Michigan's Role
Foundations Pave Way Out of Bankruptcy
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

Deferred Comp Matching Funds

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I have heard Legislature will be taking a vote to restore our Deferred Compensation Matching Funds.
Rumors abound, especially as the start of the legislative session approaches. If there is a proposal to resume the state contribution to the deferred compensation plan, that provision would be in House Bill 5, which provides funding for the Office of Administration.  We will not know if that funding will be included in House Bill 5 until the appropriations process begins after the Governor’s State of the State address.

You can monitor this and other legislation by visiting the Missouri House of Representatives and Missouri Senate websites.

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Friday Top Five January 10 2014

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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 St. Louis Post-Dispatch: Boeing Workers Give up Pension, but Gain Job Security

From the column by David Nicklaus: "Some workers may even be better off than they were under the old pension scheme, but they, and not the company, will bear the risk of a market crash or an investment mistake."

From the Detroit Free Press: Orr Freezes Pensions for Detroit Workers, Ends Cost-of-Living Adjustments

From the article: "Detroit emergency manager Kevyn Orr quietly issued a freeze on the pensions of city workers as of Dec. 31, meaning no new benefits will be accrued for members of the General Retirement System and pensions will be closed to all new city employees, according to an executive order released by Orr’s office."

From PR Newswire: Are City Fiscal Woes Widespread? Are Pensions The Cause?

From the release: "A new issue brief from the Center for State and Local Government Excellence, Are City Fiscal Woes Widespread? Are Pensions the Cause?, explores the extent to which economic factors, poor fiscal management, and/or high pension costs contribute to the challenges cities with financial problems face."

From the WSJ: No Good Reform Goes Unpunished

From the article: "All of the uproar is over a tweak in benefits for military retirees starting in 2016. The bill reduces the cost of living adjustment (or Cola) for veterans under the age of 62 by one percentage point below inflation. Once military veterans reach 62, they will get the full Cola for the rest of their retirement years."

From Investment News: Desperately Seeking Retirement Advice

From the article: "More American workers are looking for advice about saving for retirement this year than in 2012, but they don't know where to turn, a new survey shows."

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

Can the State of Missouri Access MOSERS Trust Fund?

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I heard indirectly a year or two ago of murmurs from some state legislators about MOSERS' robust condition being inappropriate given the state's financial difficulties. It seemed silly to be concerned with it, but given the fluidity of responses to pension crises in other states, and the talk in national congress about cutting "entitlements" (and including Social Security among these, though it like MOSERS has always been independently funded, I think)...well, is thinking such envy by legislators silly? Does the state have any means of accessing MOSERS funds?
No. The state cannot access MOSERS funds. According to state law, MOSERS assets are held in a trust fund set up for the exclusive purpose of administering the retirement benefit programs for covered state employees.  

You mention the “pension crisis” in other states and it has become common for people to think that all pension systems are in crisis, but that is not the case. The majority of public pension systems are stable and well-funded. In Missouri, the state has, without exception, made all contributions to MOSERS required to adequately finance retirement system benefits as determined by the system’s independent actuary. The FY14 employer contribution represents only 1.13% of the state budget, and the majority of MOSERS funding (66% from FY93-FY13) comes from long-term investment returns. You may be interested in reading more Key Facts that we consider to be guiding principles of prudent system funding.

We monitor all legislation affecting MOSERS and will provide information on our website regarding any legislative matters that may impact the retirement system.  We appreciate your interest.

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State Pensions and Social Security Offsets

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Is it true that my state pension will be offset by my social security income once I start drawing Social Security?
Your MOSERS pension benefit is for life. What you may have heard about is the temporary benefit that is available to members who choose the MSEP2000 plan at retirement. In the MSEP 2000, the temporary benefit is available until a person turns age 62, which happens to coincide with the earliest age Social Security benefits can be drawn. However, the two are technically unrelated. There are many Rumor Central questions about social security that may provide you with more insight, including this one which addresses the federal Windfall Elimination Provision (WEP). Also, information on the Government Pension Offset (GPO) from the Social Security Administration may be helpful.

Please note that these two provisions apply only to people like teachers, police and firefighters in Missouri who do not participate in Social Security, but may have earned enough credits for an social security benefit (the WEP applies), or they may have a spouse in a non-social security job and the spouse’s social security benefits are offset by the GPO.

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Friday Top Five January 3 2014

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Happy New Year!

We at MOSERS wish you a

happy and healthy 2014!

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

From Pension Dialog: Yes, but … Highlights of 2013

Check out this clever poem from our friends at PD highlighting the good and the not so good from a year's worth of pension news.

From the WSJ's MarketWatch: Straight Talk About Detroit, Illinois Pensions

This piece is by Alicia H. Munnell, the director of the Center for Retirement Research at Boston College.

From the Washington Post: Younger Military Veterans are Angered by Budget Cuts to Their Pension Benefits

From the article: “I’m not an angry man, but I was very, very angry,” Preston, 51, said in a telephone interview from his home in Tampa. “This is a pact between the greater population of the United States and the fraction of people who served and sacrificed. If you didn’t want to pay us what you promised us, then you probably shouldn’t have promised it.”

From How the Notion of Retirement for Workers Took Root

"Only in 1889 did German Chancellor Otto von Bismarck introduce modern pensions." Read more of this interesting history in this ABC News piece.

From the St. Louis Post-Dispatch: Retired Ill. Teachers Sue State Over Pension Law

From the article: "A group of retired Illinois teachers and administrators have filed a lawsuit seeking to have a new plan to reduce the state's $100 billion pension shortfall declared unconstitutional."

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