Pension/Health



Pension Fund Update (September 2021) 

The following is a Pension Fund update from Tom Klusman retiree Pension Board representative presented to our members at our September 8th membership meeting.  Although a bit lengthy, it will inform you of everything you need to know about the status of our Pension Fund- the “lifeblood” of our retirement!

Pension Fund Update – Fall, 2021

by Tom Klusman, Retiree-elected Board Trustee

First off, I would like to thank the MRPA Board for inviting me to speak to the membership at the 1st post-summer meeting of 2021.  It is always great to see the faces of our retired MPD brothers and sisters.  For those of you that couldn’t make it, below is what we talked about.

I let everyone know that I will be remaining in our fund’s retiree-elected ERS Board seat for a 3rd term.  You may recall that we all received an election notice with our July pension stubs stating that an election would be held on November 5, 2021 for a 4 yr term; 2022-2025.  I am honored to report that I was the only retiree to submit nomination papers and therefore there will be no need for an election, and I will continue my service as the retiree-elected Trustee.  As I’ve said in the past, I take this responsibility very, very seriously.  As a reminder, I have been in this seat since January 2014.  I believe that the lack of challengers this cycle is indicative of the wonderful partnerships and cooperation that the retiree groups and I share.  Never before have the Boards of the 3 Milwaukee Retiree Associations and their pension board rep been so closely and consistently in communication.  We share information and viewpoints regularly for the benefit of all retirees.  Please know that your voices are heard by me and from me to the rest of the ERS Board and staff.  So, with that, please prepare to hear more from me in the upcoming years.

CURRENT STATUS

The most recent Valuation Report available as of this writing is YTD as of the first week of September 2021.   As of now, our fund’s total value stands at just $9 million short of $6.1 billion.   We have maintained a $6 billion plus balance for a few months now.  This provides us the swag to (cautiously) parade around saying we a $6 billion fund.  Now, although that is much nicer than recent years when we were in the $5 billion fund club, we should always stay humble and remember where we need to be in order to meet all of the obligations of the fund (the full pensions of our current retirees, the future pensions of today’s active employees, and the costs to administer the fund).  At the start of 2021 (about 9 months ago), our Actuary pegged that number at $6.7 billion.   So, we still are about $700 million short of where we need to be.  While this is not the best situation, it has improved from recent years and truth be told; improving is much better than failing.

Our investment portfolio (managed by our wonderful investment team, led by our Chief Investment Officer David Silber) is, has been, and always will be, our best friend.  YTD they have achieved a 13.9% return on investments, which has brough us $768 million in Capital Market Gain. 

Outgoing monies YTD are at $305.7 million, with $285.5 million of that being the eight so so-far monthly retiree payrolls.  The rest is the costs to run the fund and GPS payments.  

On the incoming / contributions side, we have received $97.8 million YTD in employee & employer contributions. 

That said, here is where I ask you to look back on the numbers I just cited and consider them seriously.  $97 million coming in, $305 million + going out, and in the background active employees earning future pensions (like we once were).  The only way to make this work is by our investment portfolio returning capital to meet our needs.  But, we still cannot forget the fuel that a successful investment portfolio so desperately needs; funding.  How can we grow a hardy garden without seeds?  The employers and employees contribute to our fund, our crack investment team diversifies our assets, we hire talented managers to invest, and (hopefully) those seeds/our assets grow to meet the $450 million a year outlay our fund requires.

With that, the rest of this article will focus on contributions.  You likely have heard much hullaballoo about the employer’s contributions increasing soon, and believe me, that ain’t over yet.

UPDATE ON SYSTEM FUNDING DEVELOPMENTS

As a super-condensed re-cap, you hopefully recall that in 2017 our ERS Board re-set our actuarial assumptions, as is done every 5 years, and will be done again next year (2022).  Those assumptions are then used by our actuary to calculate our funded status and contribution requirements.  At that time (in 2017) our Board voted for an out-of-the-mainstream high assumed rate of return (which I voted against).  Then, using that number, our actuary set the employer contribution in 2018 for the ensuing 5-year period, as is done under a ‘Stable Employer Contribution’ funding policy adopted by our Board and City Council back in 2012 (before my time).   Then, in 2019 the ERS Board hired a new actuarial firm and that firm advised the Board to seriously consider the 2017 ‘out-of-the-mainstream’ assumed rate of return for a more reasonable one.  The ERS Board took that advice and implemented a new, more mainstream rate (which I voted for).  Then, also in 2019, the ERS’ actuary advised that our fund’s actuarial accrued liability had changed dramatically when calculated at the more mainstream rate and would therefore require a much higher employer contribution.  However, as mentioned earlier, we were locked in to the 5 yr ‘Stable Employer Contribution’ under the 2013 funding policy.  So, it has been known since 2019 that a large increase is coming for 2023.  What that number will be is yet to be seen, but it will be much larger that the current amounts.  Please note here that as I mentioned so many times before, the employers were free to contribute, set aside, or ramp up contributions since 2019 when this situation was made clear to them, and were advised to do just that in each year’s annual valuation, and that such action(s) would have helped soften the 2023 number, but none did.  So what action did they take?  You may recall that I wrote in my Spring MRPA Post on this very topic:

 “These realities are only rivaled by what we haven’t seen; Not a single plan on how the City is going to pay what it owes the fund come 2023.  Not a single additional payment leading up to 2023 as recommended repeatedly by the actuary.  No budgetary ramp-up or meaningful set-aside toward the 2023 contribution projection.  Not a single task force, panel of experts, outside accountants, economist team or work group assembled to look into finding a way to ‘model’ their budgeting in order to make the full required payment to fund the ERS.  We only see them looking for ways and ‘models’ to not pay.   This is the grim reality.”

Well, I am happy to report that a short time after this was printed, Mayor Barrett moved to create a ‘Pension Funding Task Force’ which began meeting this summer.  They are not finished yet, but when they are, we will surely update you.

You may also recall from my Spring 2021 MRPA article, I promised to report back to you on City Council file #200668.  That file, approved by the Council on December 15th, 2020 directed the City’s lobbyist to seek legislation in Madison to allow the City to pay less than the actuarially determined amount necessary to fund our system.  We called attention to this bad policy move and on May 25th, 2021 the Council approved file #210076 which was sponsored by Alderman Nik Kovac, who also serves on our ERS Board.  File #210076 rescinded the bad directive of file #200668.  So, with that, we all can breathe a great sigh of relief!   

So, as we can see here, things are looking up.  When we work together, call attention and dialogue to things we see that are not in our fund’s best interests, and we work together to get things on track, we can succeed!  We will keep working hard at this for all our fellow retirees and future retirees.  I do look forward to seeing you all again soon and discussing these things in person. 

Sincerely,

-Tom Klusman


IRS warns some retirees at risk of tax penalty: What to know

The IRS has a new warning for retirees, and while it’s not about a scam it could end up costing older taxpayers more money than they expect to pay.
The agency issued a statement urging Americans to check the amount being withheld from retirement accounts and monthly pension or annuity checks, as soon as possible, in order to avoid a penalty next year.
Since the year is almost over, the IRS said those who discover they have been paying too little, might need to make a quarterly estimated or additional tax payment directly to the agency.
The Tax Cuts and Jobs Act, which enacted a slew of changes to the U.S. tax code, altered the way dues are calculated by the IRS. As such, some retirees are at risk of having too little withheld from regular payments.
Overall, more taxpayers than normal are at risk of having to pay the agency next April.
According to a simulation conducted by the Government Accountability Office (GAO) in August, which reviewed the revised federal tax withholding tables for 2018 implemented by the IRS and the Treasury Department, 21 percent of workers are at risk of having their taxes underwithheld – 3 million more than projections based on the old tax code.
Only 6 percent of taxpayers are expected to have wages accurately withheld, while 73 percent are likely to have their taxes overwithheld. The former is three percentage points less than a simulation conducted using the same withholding structure and the old tax code. Accurate withholding was assumed to be within $100 of what is truly owed.
This year, employers are using W-4 forms already on file to calculate withholding amounts, which has posed problems for taxpayers because the sweeping tax reform changes address everything from personal exemptions to the standard deduction. The Tax Cuts and Jobs Act gave the Treasury Department authority to determine the withholding allowance structure because the old method was no longer suitable, and there was not enough time to issue a new W-4.
When asked in February about how many errors the Treasury has seen so far this year, Treasury Secretary Steven Mnuchin declined to comment directly, instead urging taxpayers to use the IRS withholding calculator.
Employees can update their withholding amounts and the administration has encouraged them to use the tax calculator, available on the IRS website. Retirees can also use the tool, entering their pension like income from a job. They can also consult a financial adviser.
For Social Security tax payments, the IRS says individuals can ask the Social Security Administration to withhold taxes at specified rates ranging from 7 percent to 22 percent. Changes can be made online.
Changes to IRA withholding amounts can also typically be made online.
The Trump administration released a proposal for the new 1040 tax document, or the U.S. individual income tax return, in June. It is expected to release a new W-4 form later this year.


MEDICARE ENTITLEMENT AND ELIGIBILITY

(Click on the following link)  Medicare entitlement and elig – 2021


HOW TO EARN SOCIAL SECURITY CREDITS

(Click on the following link)   How You Earn Credits 2020 467510 Rev 1.2020

 


TAX DEDUCTION FOR RETIRED PUBLIC SAFETY OFFICERS

By President Wray Young

The Pension Protection Act, which was signed into law in August of 2006, allows retired public safety officers to exclude from income distributions made from their eligible retirement plan that are used to pay the premiums for health insurance.  This also includes the MetLife Dental & Vision plans negotiated for Milwaukee retiree firefighters and police.  The distribution must be made directly from the pension plan to the insurance provider.  You can exclude from income the smaller of the amount of the insurance premiums up to a maximum of $3,000 but the amount excluded cannot be used to claim a medical expense deduction. The MRPA is not qualified to give you tax advice so please direct any questions you might have regarding this benefit to your tax preparer or the IRS which, in turn, might refer you to IRS Publication 575.


 

Government Pension Offset & Windfall Elimination Provisions Will Reduce your Social Security Benefits – Wray Young

Kerry Leist, VP/Operations for NATIONAL BENEFIT CONSULTANTS, INC. passes along the following: There is important information regarding the Government Pension Offset & Windfall Elimination Provisions that will reduce your social security benefits and those of your surviving spouse if you should die before her/him.
Click to view:

 

Medicare Info

Kerry Leist, VP/Operations for NATIONAL BENEFIT CONSULTANTS, INC. passes along the following important information regarding Medicare eligibility. There are populations of protective services and a few others that lack 40 quarters. Some of those think they do not ‘qualify ‘ for Medicare. If entitlement is not at 40 credits it will costs those folks more for Medicare unless they qualify on a spouse’s record.  Credits can be obtained through qualified employment or on a self-employment basis. Click on the following link to see more information on Medicare costs and benefits

If you have any questions concerning the attached Medicare information, please contact Kerry Leist at 262-327-4370


 

Police Relief Association (PRA) – By:  Shannon M. Seymer-Tabaska

The Police Relief Association is a non-profit organization (501c3) whose PRA Board is elected by the membership, to include the Milwaukee Police Department Retirees Association (MPRA), the Milwaukee Police Association (MPA), and the Milwaukee Police Supervisor’s Organization (MPSO).   The current PRA Board members include: President:  Branko Stojsavljevic, Vice President: Vacant, Treasurer:  Shannon M. Seymer-Tabaska, Secretary:  Dena Klemstein, Directors:  Patrick Doyle (retired member), David Feldmeier, and Eric Pfeiffer.  In addition, the PRA Board has City Attorney Office representation under City Attorney Patrick McClain. 

To be an active member of the PRA, one must be a sworn active law enforcement officer and/or a retiree who pays monthly dues of $2.08 into the PRA fund, which includes those members approved for a duty and/or ordinary disability.  If a MPD member did not leave in good standing (i.e. termination and/or resigned) his/her PRA benefit ceases. 

At retirement, active law enforcement members have the option to “opt out” of the PRA, but the PRA Board discourages this option as the majority of members lose a $9000.00 benefit that their beneficiary is entitled to at time of death.  Once the latter “opt out” election is made, a member can’t re-enroll in the PRA.  In addition, in 1998, there was a member election regarding the $9000.00 benefit amount wherein members elected to increase their dues to receive the $9000.00 benefit, but if a member did not make the election, their entitlement is $8000.00.  There are also a few older retirees who only pay $1.25 per month into the PRA fund, so their benefit is reduced as well.

As an active member of the PRA, it is pertinent that any life change (i.e. marriage, birth/death, re-location, etc…) that result in beneficiary, address and/or phone changes, the PRA is provided the updated information. Updated information can be provided on a beneficiary form that can be found on the PRA website:  http://www.pra-milwaukee.com/

and/or the member can contact us at (414) 649-8373 to request a form be emailed and/or mailed.     

To claim a death benefit for a PRA member, the designee at death (i.e. spouse, surviving children) must contact the PRA at phone number (414)649-8373 to verify the member was active and in good standing and must provide a death certificate for the decedent.  Members should be aware that the PRA Board members time is voluntary, thus, we do not have a full-time staffed office and will make a good faith effort to respond as soon as possible.

Currently, the PRA Fund is at 8.5 million dollars and it is the PRA Board’s fiduciary responsibility to ensure money collected from members and through donations (i.e. Combined Giving and/or private donors) is invested for fund growth and we all thank you for allowing us to serve the membership as your PRA Board.

                                                        Branko, Shannon, Dena, Pat, David, and Eric


From Greg Thiele

As many of you know, I have had hearing aids for about 15 years. I had to pay out of pocket each time I needed new ones. Today I was at the Avada office in Wisconsin Rapids for my annual test, which is always free. While talking to my audiologist was I was informed that United Health Insurance is now covering portions of hearing aids. He thought that Humana also might be covering some of the cost. While at the office his receptionist contacted United Health and Avada’s corporate offices. I need new hearing aids. The cost is around $5000. United Health informed the receptionist that my out of pocket cost is around $800. They pay the rest. The portion they cover also has to do with how much is left on your deductible. I  for one never knew that United health was covering any of this. From what they told me, United Health will cover up to around $5000. I was also informed that Avada was bought out by a large company that now owns almost 95% of all hearing aid companies in the world. This company put pressure on many of the insurance companies to start to cover the cost. This company also lowered the cost of hearing aids to make them more affordable. The hearing aids that I am getting for $5000 were almost $9000 last year.   I hope this information helps some of you in the future.   Greg