Board candidates file for January election

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1 The Autumn 2006 Newsletter of the Public Employees Retirement Association of Minnesota Assets over $15.2 billion Active membership over 151,000 Election 2007 Three candidates will compete for the retiree/disabilitant seat on the PERA board, and seven for the Coordinated/Basic member positions. 11 on PERA ballot Board candidates file for January election PERA members will choose from a slate of 11 candidates when they cast their ballots for five board positions next January. The Association s five elected trustees serve four-year terms. Thomas Marshall, a fire captain with the Duluth Fire Department, will run unopposed for the Police and Fire Fund seat on the board. Marshall was first elected to the board in Gary Norstrem, PERA s current retiree/disabilitant trustee, will not seek reelection. Norstrem first joined the board in 1985 as a governor s appointee, serving in that post until He then rejoined the board in 1995 as the retiree representative and was reelected to that position for three consecutive terms. Seeking Norstrem s seat on the board are William Gillespie, a retired St. Paul police officer and the current executive director of the Minnesota Police and Peace Officers Association; Eli Miletich, former police chief of Duluth; and Louise Olson, a retired cook/manager in the St. Cloud School District and leader of the Service Employees International Union Senior Organization. (Continued on page 4) MY PERA does much more than just duplicate the PBS. This Issue: New field office opens soon Pg Post Fund increase Pg. 4 Your info is just a few clicks away Approximately 15,000 PERA members are now taking advantage of the convenience of viewing their PERA data and estimates any time they wish with MY PERA. The on-line service at became available this past January. The service is designed to do much more than duplicate the Personal Benefit Statement members receive every February. In addition to updating this information every time PERA receives new data from a member's employer, it also incorporates a calculator that provides an up-to-date benefit estimate for any date the member chooses. According to Allen Eldridge, PERA's manager of Pension Services, future plans call for MY PERA to provide benefit recipients with access to a statement of their payment history, including benefit amounts and tax withholding. This will make the service just as valuable to retirees as it is to active members today.

2 P Autumn 2006 resident s Message Steven L. Devich Board Directory PERA s trustees invite you to notify them personally of any concerns you have regarding your retirement association. Steven L. Devich Board President General Membership Representative City of Richfield 6700 Portland Ave. S. Richfield, MN (612) Dennis Hegberg Board Vice President Counties Representative Washington County Gov t Center st Street N., P.O. Box 6 Stillwater MN (651) Patricia Anderson State Auditor 525 Park Street, Suite 400 St. Paul, MN (651) Ross E. Arneson General Membership Representative 410 S. 5th St. PO Box 3129 Mankato, MN (507) Marcia Farinacci Annuitant Representative 1466 North Grotto St. Paul, MN (651) Kathryn A. Green School Board Representative 401-3rd Ave NW Austin, MN (507) Dawn M. Hulmer General Membership Representative City of Duluth Treasurer s Office Duluth City Hall, Room 105 Duluth, MN (218) Richard L. Jacobsen Public Representative Parkwood Drive Burnsville, MN (952) Thomas L. Marshall Police & Fire Representative st. Avenue S. Duluth, MN (218) Gary R. Norstrem Retiree/Disabilitant Membership Representative 5619 Portland Ave. White Bear Lake, MN (651) Don Rambow Cities Representative City of White Bear Lake 4701 Highway 61 White Bear Lake, MN (651) You may be doing better than you think $ 1 million...$1.5 million... $2 million. To listen to some financial advisors, it would seem you need to be related to Bill Gates or own a controlling interest in ExxonMobil to even consider retirement today. Not true. What many of these advisors fail to consider (often intentionally) is what you may have going for you already namely your PERA pension and Social Security. After all, it doesn t hurt their bottom line if they can instill a feeling of fear and helplessness in you that sends you running to them for help. It s no secret that we, as Americans, are terrible savers. The national savings rate last year was actually a negative number. Still, the vast majority of us are putting something away for retirement, even if it is mandatory. In our case, it's our payroll deductions for Social Security (except for P&F members) and our pensions. It s a start, and actually a pretty good one. How good? Visit MY PERA on line or pull out your last Personal Benefit Statement (PBS) from PERA and your last benefit estimate from Social Security. This year PERA started something new with the PBS an estimate of the present value of your pension and the estimated lifetime payout. Now, these numbers aren t exact. They have to factor in average life expectancies and future investment earnings. However, they give you an appreciation of how valuable that PERA pension can be. It s like discovering you have thousands of dollars tucked away you never knew you had. The same is true with Social Security. Sure, that monthly benefit may look small compared to your pres- PERA is an Equal Opportunity Employer NICE MIX ent earnings, but over the years it will add up. Here s a quick way to see where you stand. Your PBS, or an estimate on MY PERA on line at shows you the percentage of your average salary that will be replaced by your PERA pension at a given retirement age. Let s say it s 40 percent. Now, take your Social Security estimated monthly benefit at the same age and compare it to your current salary. For our example, let s say it represents 35 percent. That means at that age your Social Security check and PERA benefit together would be replacing 75 percent of your salary. Not enough? Well, that s where your other personal savings will come into the picture. Of course, that s financial planning taken to its simplest level. Yet it illustrates how valuable your PERA pension and Social Security are in making retirement a reality. Steven L. Devich President, PERA Board of Trustees The is published as a service to members of the Public Employees Retirement Association. Toll Free , or (651) , Between 8:00 a.m. and 4:30 p.m. Fax Number (651) Internet Mary Most Vanek Executive Director (651) This document is available in alternative formats to individuals with disabilities by calling or through the Minnesota Relay Service at

3 The 3 Pension Protection Act has little impact on PERA While garnering a lot of national publicity, the Pension Protection Act of 2006 that President Bush signed August 17 will have minimal impact on PERA. In fact, the only direct influence it will have on the Association is an administrative one we will have to make provisions so certain disabled members and retirees can direct some of their benefits toward the payment of health and longterm care insurance premiums if they so choose. That provision of the law deals specifically with public safety officials who leave public service due to a disability, or retire at full retirement age. Beginning in January 2007, they can have PERA direct a portion of their monthly benefit to pay the insurance premiums, with up to $3,000 of the payments tax free. Indirect impacts Although they do not affect PERA directly, several other provisions of the new law could have a significant influence on the ability of our members to adequately prepare for retirement. One is that the maximum contribution limits for deferred compensation (457) plans and 403(b) plans, as well as 401(k) retirement plans, will remain at the higher levels established five years ago under the Economic Growth and Tax Relief Reconciliation Act. Tax incentives for lower- and middle-income individuals who put something aside for retirement were also made permanent. Long-term, however, the law s biggest impact may be its more liberal view of automatic plan enrollment, default investment options and the investment advice that can now be offered to participants in defined contribution plans. These are welcome additions for any plan public or private. Troubled waters Troubling many in the industry, however, are provisions of the law dealing with private company pension plans. In most cases, companies with underfunded pension plans will have seven years to bring their programs to 100 percent funding. While that should be a relief to participants in such plans, the fear is that the time requirement and more demanding interpretation of what constitutes full funding may encourage more companies to shelve or freeze their pension plans in favor of the easier accounting and lower liability offered by 401(k)s. While we agree full funding of private company pension plans is vital for the long-term security of those workers and the Pension Benefit Guarantee Corporation, there is little incentive in the law to encourage companies to continue their pension plans, said Mary Vanek, PERA s executive director. We are seeing 401(k) plans taking on more of the attributes of traditional pension plans, such as automatic enrollment, but they will never give participants the security offered by a traditional pension program. Vanek said her fear is the continued decline of pension plans in the private sector will encourage critics of public pension programs to push even harder for replacement of those plans with 401(k)-type retirement programs. It makes it an easier sell to the general public where we are seeing more and more pension envy, said Vanek. Often lost is the fact that the private and public sectors operate with different purposes and objectives. What may currently be best for one may not be a good fit for the other. PERA will share the Mankato office with MSRS and TRA. Duluth St. Paul Mankato Association will open second satellite office Mankato will become home to PERA s second field office sometime this fall. The Board of Trustees approved the expansion during the regular board meeting in June. While we haven t set a firm date yet, we hope to be in full operation by January," said Allen Eldridge, Manager of PERA s Pension Services Division. PERA opened its first satellite office in Duluth two years ago. The Mankato office demonstrates our commitment to making our services as convenient as possible for our members, noted Mary Most Vanek, PERA s executive director. Like Duluth, Mankato and the surrounding area support a large population of PERA members and retirees and was always a busy stop for our counselors as they crossed the state. PERA will share the Mankato office with representatives from the Minnesota State Retirement System (MSRS) and Teachers Retirement Association. It is located at 12 Civic Center Plaza, Suite 1645, in Downtown Mankato just across from the Civic Center itself. PERA will announce the exact opening date on line at

4 4 January Election (Continued from page 1) Seven candidates are vying for the three Coordinated/Basic seats on PERA s board. Ross Arneson, Blue Earth County Attorney; Steven Devich, Richfield City Manager; and Dawn Hulmer, an administrative finance specialist with the Duluth Treasurer s Office, are all seeking to retain their seats. Also seeking election are Larry Bodnar, a head custodian with the Elk River School District; Bill Hoffman, a program coordinator with the Washington County Sheriff s office; Gary Lavelle, a janitor-engineer in charge of grade school and a trustee on the board of Local #63 of the Service Employees International Union; and Melvin Ruppert, the county administrator for Nobles County. Ballot packets, which include candidate biographical information, will be mailed during the first week in January Returned ballots must be postmarked by January 31. While PERA members elect five of our trustees, the other six seats on the board are occupied by the State Auditor (or a representative of that office), and five appointees of the Governor. All five elected seats on the board are determined by general ballot. That means all voters will have the opportunity to cast ballots for all the open seats. PERA pension increase set at 2.5 percent for 2007 PERA s retirees and other benefit recipients will receive a 2.5 percent increase in their benefit payments next January. (This increase is prorated for those who will have received benefits for less than 18 months as of next January.) In comparison, Social Security benefits will increase by 3.3 percent in This will be the fifth consecutive year the increase is based solely on the inflation component of the benefit increase formula. While inflation, as measured by the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W), increased by 4.47 percent during PERA s last fiscal year, the benefit increase formula caps any inflation-based increase at the 2.5 percent mark. PERA s fiscal year runs from July 1 to the following June 30. Next year s benefit increase is measured as of June 30, 2006, but is not awarded until January 1, Meanwhile, Social Security uses the same inflation index, but the measurement is taken on September 30. This year that figure was 3.3 percent and will represent that agency's benefit increases for Although the Post Retirement Investment Fund benefit increase formula also has an investment-based component, it will not come into play in This is because of the funding deficit the Post Fund must first overcome before any increase can exceed the inflation-based guarantee. The Post Fund showed solid investment gains in Fiscal year 2006, posting a 12 percent return, well above its assumed earnings of 8.5 percent. However, it will take many years of such performance before the Post Fund has fully recovered from the $4.7 billion deficit that developed in the early part of this decade. Need a Speaker? Are you planning an employee orientation, staff development session, retirement program or benefit fair? Consider including PERA. Representatives from the Pension Services Education Division can provide your program participants with valuable information about their PERA pension and other Association benefits. To schedule a PERA educational program or an information booth, please call Carol Mladek at (651) or John Paulson at (651) ; or carol.mladek@state.mn.us or john.paulson@state.mn.us. The Post Fund and Social Security both use the Consumer Price Index in determining benefit increases, but the measurements are made three months apart.

5 Autumn 2006 The 5 PERA Workshops Dollars & Sense PERA (St. Paul) January 20 9 a.m. - 4:30 p.m. Preretirement PERA (St. Paul) January 6 9 a.m. - 4:30 p.m. Mankato January 26 9 a.m. - 4:30 p.m. Program schedules for 2007 will be mailed in early January. Of course, they will also be posted on There's still time A few PERA workshops remain open You still have the opportunity to register for one of the Association s educational programs in early Space remains available at two of our Preretirement Workshops and one Dollars & Sense Seminar. These sixhour programs are designed to provide members with valuable financial- and life-planning information that goes far beyond just your PERA benefits. Dollars & Sense Seminars Designed for members in the middle of their careers, our Dollars & Sense programs try to balance planning for retirement with all the other financial demands you face each day. While PERA and Social Security are examined, it is done with as much attention to benefits available to you today as your future pension. The heavy emphasis is on proper financial- and life-planning decisions that will assist you in striking a proper balance between today and tomorrow. Estate planning is also addressed in these programs. While geared for members between 25 and 45, younger members are also invited to attend. Preretirement Workshops The emphasis of our Preretirement Workshops is on gaining the knowledge necessary to achieve a satisfying retirement. You will gain a better understanding of your PERA benefits and the steps necessary when you apply for a pension. You'll also learn more about Social Security and Medicare benefits, health insurance options, financial and estate planning issues, and many of the life changes associated with retirement. Preretirement Workshops are designed for members within five years of retirement. Classes are scheduled at the locations listed to the left. To register for either program, call PERA at or (651) Or, you can register on line at A full schedule of programs for 2007 will be mailed in early January. PERA provides beneficiary information on the annual Personal Benefit Statement and on line through MY PERA. Need to change your account beneficiary? Has your life changed recently? Marriage, death, divorce they can all be reasons to update your beneficiary designation with PERA. Don t know who your beneficiary is? PERA provides this information on your Personal Benefit Statement (PBS) every February. You can also check it at any time online with MY PERA at You will also find a change form on line that you can download if you wish to change your beneficiary. It is located in Forms and Publications under the Members tab. You can use the same form to notify PERA of a change in your address. It is important to understand that any balance in your account at PERA is only payable to your beneficiary if no pension or survivor benefits are due your spouse, dependent children, or a designated survivor (once benefit payments begin). You may choose more than one beneficiary and designate how any balance in your account is to be divided. Serving Minnesota's Public Employees for Years 75

6 Public Employees Retirement Association of Minnesota 60 Empire Drive, Suite 200, St. Paul MN ADDRESS SERVICE REQUESTED PRSRT STD U.S. Postage PAID St. Paul, MN Permit 171 Autumn 2006 The 6 MY PERA Safe Secure Up to date There when you want it