2 Michigan pension funds still offer bonuses to some
By Paul Egan
Detroit Free Press Lansing Bureau
April 27, 2014
LANSING — The 13th check,
a bonus pension payment that drained nearly $1 billion from the City of
Detroit’s General Retirement System over 22 years, has been cited during
bankruptcy proceedings as a significant factor in the underfunding of
the city’s pension plan for civilian employees.
But the 13th check, also
blamed in part for problems with the Wayne County Employees’ Retirement
System, isn’t just a Detroit phenomenon.
Two State of Michigan
pension funds — one for retired state employees and one for retired
teachers — distributed nearly $900 million through 13th checks between
1982 and 2002, records show. About $641.4 million was paid from the
Michigan Public School Employees Retirement System and about $238.5
million from the Michigan State Employees Retirement System.
State laws that provide
for — and in certain circumstances require — payment of the 13th check
remain on the books.
Michigan’s Office of
Retirement Services has not paid such a bonus to state government
retirees since 2001 or to school retirees since 2002 and “does not
expect to issue a 13th check in the foreseeable future,” said Kurt
Weiss, a spokesman for the state’s Department of Technology, Management
However, “there are no
active plans right now to amend or repeal the legislation” providing for
the 13th checks, Weiss told the Free Press.
That’s a mistake, even if
relatively few retirees are eligible to receive the checks if and when
they are issued, said Steve Harry of Lansing, a former employee of the
Office of Retirement Systems who writes a
blog about public policy issues and has researched the
“It’s a crazy idea:
Pensioners get a bonus when a strong stock market results in big gains
for the pension fund, but they don’t suffer when stocks are down,” Harry
said. “It is a great deal for them — not so great for the taxpayers who
are forced to make up the difference when those pension funds are
The state “should make it
clear that there’s nothing like that any more — at all.”
Only state employees who
retired before Oct. 1, 1987, are eligible for a 13th check. Bob Kopasz,
chairman of the Michigan State Employee Retirees Association Council,
estimates fewer than 500 of the more than 57,000 state employee retirees
would be able to collect the checks.
Beyond that, the state law
that sets out when the state must pay a 13th check and how to calculate
the amount is anything but clear. One reading of the law — the way Harry
reads it — would require such a payout any year returns on the pension
fund exceed 8%.
The state takes the
position that such payments are required only when returns exceed 8%
over the life of the fund, which dates to the 1940s, said Lauren Leeds,
a DTMB spokeswoman.
It’s possible — though
highly unlikely — the next 13th checks could be paid in 2018, Leeds
Kopasz said the state used
to issue the bonus checks based on annual returns, but in the late 1990s
began using a leveling calculation that considered the rate of return
over longer time periods.
The law never changed, but
the state’s interpretation of it did, Kopasz said.
Stephen Crippen, an Office
of Retirement Systems official, said he can’t speak for what happened
before he joined the office in the late 1990s, but he uses calculations
that offset years of investment gains with years of investment losses
before authorizing a 13th check.
Annual returns exceeded 8%
in 12 of the 17 years from 1997 through 2013.
“Most of the people who
got the 13th check for years think the retirement system is just playing
games with them,” Kopasz said.
Bruce Andrews, who retired
in 1984 after more than 34 years with the Department of Natural
Resources and now lives near Escanaba, is among those eligible for the
He used to be involved in
the retirees association and remembers when the checks were sometimes in
the thousands of dollars, even exceeding a retiree’s annual pension
amount in at least one instance.
“We used to really look
forward to that,” said Andrews, who noted annual cost-of-living
adjustments are capped at $300.
Though 13th check payments
at certain times may have been higher than necessary, “I think it was a
fair way to adjust it for inflation,” said Andrews, who receives a
pension of about $22,000 a year.
Kopasz said he understands
critics who say issuing the bonus checks is financially unsound, but
overall, “I don’t think the 13th check had that big of an impact,” he
said. “There were some years where there was a 13th check, and others
where there was not.”