A newsletter for retirees of the The Public Education Employee Retirement System of Missouri
Second Quarter 2006
In this issue:
Paying at the Pump Could Be Fuel for
Your Investment Portfolio
What You Should Know Before Working After
Retirement
Board of Trustees Elects Chair, Vice Chair
Tip for Retirees
Has Your Address Recently Changed?
Helpful Information for Seniors on the MO Secretary of State’s Web Site
Facts About PEERS Retirees
RetiResources
Paying at the Pump Could Be Fuel for Your Investment Portfolio
The recent press has been focused on concerns about high gasoline prices
and the impact on consumers and their spending patterns. Specifically,
crude oil rose to $75.35 a barrel on April 21 and the average price of regular
gasoline subsequently jumped to $2.91 a gallon in the United States.
Thus, virtually every consumer has felt the negative affects of higher gas
prices. However, PEERS, as an institutional shareholder of energy stocks
and as an investor in emerging countries that produce energy, has benefited
in terms of strong investment earnings.
The short-term affect of higher
energy prices appears to have
been a boost to investment
returns. For the one-year period
ending April 30, 2006, the PEERS
investment portfolio returned just
over 16%. As we break down
both the good and the bad aspects
of that 16% return, the effects of
rising energy prices can be felt
throughout the portfolio:
• U.S. Stocks (positive): The U.S. stock portion of
the PEERS portfolio has
returned over 21% in the
last 12 months. Approximately
one-tenth of that
U.S. stock portfolio is
invested in energy related
stocks that returned in excess of 45% over that time period.
• International Stocks (positive): The energy ‘impact’ on the
PEERS international stock portfolio was even more pronounced
than in the U.S. as the portfolio returned 39% in the last 12-
month period with energy-related stocks increasing almost 80%.
• Emerging Market Stocks (positive): The emerging market stock portion of
the PEERS portfolio increased just over
56% in the last 12 months. The asset
growth in many emerging countries is
directly related to their ability to produce
commodities.
• Bonds (negative): The inflationary
conditions in the market have been
negative for the PEERS fixed income
investments as the bond portfolio returned
just 1.5% over the last year.
Higher energy prices are comparable to an
additional tax on consumers and are widely
believed to be a drag on overall economic
activity. We do not know how consumer stocks
(for instance) might have performed if consumers
had lower costs related to energy and
more to spend on other items, such as cars or
retail-oriented products. Additionally, higher
energy prices have clearly been to the detriment
of auto stocks, airline stocks and producers of
almost all products that must be transported to
end users. In total, we cannot know whether the
overall stock market would have done better or
worse with lower energy prices. However, we
know that higher energy prices do not create
wealth; instead, they simply redistribute wealth
from consumers and businesses with high transportation
costs to energy-related companies and
others that benefit from high prices. For a number
of years, oil companies plodded along with
modest returns as they were the victims of low
commodity prices. Most recently, oil companies
have been the beneficiaries of high commodity
prices. That is not a particularly good outcome
or a bad outcome – it is just the reality of the
business cycle.
Will the current boom in oil prices be followed
by a severe and long-lasting correction (as occurred
in the 1980’s) or has there been a structural
change in the industry which will lead to
permanently stronger commodity prices? We
believe that the following long-term structural
factors will keep energy prices above historical
averages. For example:
1. Rising global demand: A larger share
of the world’s oil is being consumed by
(Fuel for Your Investment Portfolio, continued from page 1)
rapidly growing Asia and other developing
markets. For instance, China’s oil
imports have been growing at double
digit rates for the last several years.
2. Changing consumer and investor preferences: An increasing amount of the
world’s oil is being used for transportation.
3. Growing oil dependency: The U.S.
is becoming increasingly reliant on
imports to meet its growing demand
for oil. Specifically, over 60% of U.S.
oil consumption is now met through imports
today as compared to 40% in the
early 1980’s.
4. Under-investment in energy infrastructure: U.S. energy companies
have under-invested for decades in
infrastructure, exploration, pipelines
and engineers. The net result has been
increased costs of production.
5. Shrinking spare capacity: In total,
maybe the most important issue is that
the world has likely reached the point
where global demand is surpassing the
world’s ability to supply incremental
oil. This is a result of surging demand
from developing countries and continued
healthy demand from developed
countries.
Today, as with the period from 1964 to 1980,
many outstanding investment opportunities in
capital markets will be related to the distribution
and production of energy and raw materials.
The Systems will capitalize on these opportunities
by continuing to invest in the energy
sector through global stocks and potentially
through direct investments in energy-related
partnerships and infrastructure to provide a
hedge against inflation. As a long-term institutional
investor, PEERS is focused on maintaining
consistent investment returns. While the last
one-year time period has produced strong equity
returns for PEERS (potentially as a partial result
of strong energy prices), the five-year total fund
annual investment return remains below 8.0%.
Thus, we will continue to analyze all investment
opportunities (including energy related investments)
within a total portfolio context to allow
PEERS to continue to maintain a well diversified
and prudent long-term portfolio.
What You Should Know Before Working After Retirement
If you want to work after you retire and avoid any interruptions in your monthly PEERS benefit payments, you need to consider:
• Will I work for a PEERS-covered employer?
• How many hours will I work?
• How much will I earn?
Will I work for a PEERS-covered employer?
If the answer is NO:
There is no impact on your PEERS benefit, regardless of how many hours you work or how much you earn.
If the answer is YES:
There are some rules you must follow in order to continue to receive your retirement benefit payments without interruption. This is true of employment in any position, even those that do not require a teaching certificate, like bus driver, secretary, etc.
The limitations are:
1. You can work up to 550 clock-hours in a school year (July through June), and
2. You can earn up to 50% of the annual compensation payable under your employing district’s salary schedule for the post-retirement position (not the position you held before retirement) given your level of experience and education.
You must notify PEERS if/when you exceed either of these two limits. Contact us at (800) 392-6848 when this occurs.
What is a covered employer?
Covered employers are any that participate in PEERS. Covered employers include:
• Public school districts in Missouri except the St. Louis city and the Kansas City school districts
• Public junior college districts in Mis-souri that have elected to join
• Statewide non-profit educational as-sociations that have elected to join
You can work up to 550 clock-hours in a school year.
Both you and your employer should track your clock-hours worked. However, you are responsible for notifying PEERS when you
reach either the 550-hour or the 50% earnings limit, whichever comes first.
What “hours” count toward the 550-hour per school year limit?
If the work is something that you are expected to do as part of your job, if you are responsible for it as part of your job, or if you are getting paid for it as part of your job, then you should count it toward your 550 hours. There are no hard and fast guidelines in this regard. Therefore, we highly recommend that you discuss with your employer up-front what will be considered working hours. In general, count any hours for which you are compensated and during which your employer requires your attendance. Again, check with your employer.
Example: You take a part-time position post-retirement as a library assistant. You get ½-hour for lunch each day you work. If you have this ½-hour as free time to do as you wish, then it is not “work” time and should not be counted. If, however, you are expected to spend that ½-hour in the library monitoring student activity, then it is considered “work” time and should be counted.
Note to those considering post-retirement work at the college level: If the post-secondary institution at which you are working is a PEERS-covered employer, you must count the number of clock-hours you work, not the number of credit hours you are teaching. Most such employers will be able to tell you how many clock-hours they consider equivalent to one credit hour. If the institution is a not a PEERS-covered employer, no restrictions apply to your post-retirement work there.
You can earn up to 50% of the annual compensation payable under your employing district’s salary schedule for the post-retirement position (not the position you held before retirement) given your level of experience and education.
Unless you are working under the “critical shortage” full-time employment exception (discussed later in this article), you are limited to earning a maximum of 50% of the annual compensation payable under your employing district’s salary schedule for the post-retirement position (not the position you held before retirement) given your level of experience and education.
Example: You return to work after retirement as a library assistant. The annual pay for this position (for someone with your qualifications) is $20,000. You may therefore earn up to $10,000 per school year in this position without impact on your retirement benefit.
You must notify PEERS if/when you exceed either of these two limits.
You should keep track of your clock-hours and your earnings. Remember, you are responsible for notifying PEERS when you reach either the 550-hour or the 50% earnings limit, whichever comes first. Contact us at (800) 392-6848.
What happens if I exceed the 550-hour or 50% earnings limits?
If you work full-time for a PEERS-covered employer post-retirement, OR work part-time and exceed the 550-hour limit, your benefits will be put on hold until your employment ends or a new school year begins.
If you work full-time, you will be required to start a new PEERS membership, and contribu-tions will be withheld from your pay. You will earn service credit for the time worked.
If you work part-time, but exceed the limits, your benefits will be put on hold starting the month you exceed the limits. If your post-re-tirement work qualifies you for membership in PEERS, you will be required to start a new membership, make contributions to PEERS, and will earn service credit for the time worked.
You can withdraw your contributions and interest (account balance for this new membership) once the employment ends. Or, if you earn a year of credit while working after retirement, you will be eligible for a second retirement benefit.
If your post-retirement work results in your benefits being placed on hold, notify us as soon as that employment ends. Your previous retire-ment benefit will be reinstated. Keep in mind that you are not eligible for a retirement benefit payment in any year during which you have earned 1.0 year of credit.
What is the Critical Shortage Full-Time Employment Exception, and can I use it?
If you work full-time for a PEERS-covered employer that has declared a critical shortage of non-certificated employees, you may be employed for up to two years full-time without losing your PEERS benefits.
Effective July 1, 2006, those employees can work in any position except that of superintendent.
A school district can hire up to 10% of the non-certificated staff, not to exceed five individual PEERS retirees, to work under this provision, if the district certifies that certain requirements have been met. Contact PEERS for more infor-mation.
Board of Trustees Elects Chair, Vice Chair
At the April Board meeting, the PSRS/PEERS Board of Trustees elected Phil Wright to serve as chair and Tina Zubeck to serve as vice-chair for a period of one year starting July 1, 2006.
Keep a copy of your Application for Service Retirement with your important papers and let your beneficiaries know where to find it. It also makes sense to discuss the payment option you chose with your beneficiaries. Making sure your survivors know where to find informa-tion on the plan you chose will be helpful to them in the event of your death.
Has Your Address Recently Changed?
Be sure to keep your address on record with PEERS/PEERS current. To report a change of address call
us toll free at 800-392-6848, download the Change of Address form from our Web site, or write to:
PEERS/PEERS of Missouri, PO Box 268, Jefferson City, MO 65102.
Helpful Information for Seniors on the MO Secretary of State’s Web Site
The Missouri Secretary of State’s Web site, http://www.sos.mo.gov, includes “A Senior’s Guide to Avoiding Investment Fraud.” It provides important tips on how to avoid being a victim of con artists and financial planners who engage in abusive practices. The Missouri Secretary of State’s office, through the Securities Division, is responsible for protecting Missouri investors from fraud and for ensuring that firms and individuals that sell securities comply with the securities laws in the state.You may call their toll-free investor hotline at 1-800-721-7996 to report complaints or make inquiries about broker-dealers, agents, investment advisers, investment adviser representatives, or general securities violations.
3,632 PEERS service retirees will be 80 or older in 2006. This group represents 24% of the total number of service retirees (15,357) for PEERS as of February 28, 2006.
15 retirees ...................100 or more (Oldest 103)
110 retirees .................................95-99 years old
464 retirees .................................90-94 years old
3,043 retirees ..............................80-89 years old
The following information pertains only to the 125 retirees who are 95 years of age or more:
Average years of credit ...............................12.2
Most credit ...................................................44.8
Least credit .....................................................5.3
Average years retired ...................................30.8
Most years retired ...........................................39
Fewest years retired ........................................24
Average account balance at retirement .............$1,121.95
Highest balance at retirement .............$4,998.25
Lowest balance at retirement ...................$18.17
Average beginning benefit .......................$36.94
Highest beginning benefit ......................$351.81
Lowest beginning benefit ...........................$1.53
Average current benefit ............................$79.10
Highest current benefit ...........................$753.23
Lowest current benefit ................................$3.29
Average retirement paid to date ........$18,479.40
Highest retirement paid to date .......$174,020.78
Lowest retirement paid to date ...............$946.67
Total retirement benefits paid to date ..............$ 2,309,925.27
The average retiree in this group has drawn benefits equal to 16 times the amount in his or her account at retirement. The average retiree in this group has been re-tired 18.6 years longer than he or she worked.
General Information
Social Security Administration
800-772-1213
www.socialsecurity.gov
Medicare 800-638-6833
www.medicare.gov
Missouri Office of the Attorney General
573-751-3321
www.ago.mo.gov
U.S. Department of Justice - Information on Identity Theft
202-514-7023
www.usdoj.gov/criminal/fraud/idtheft.html
AARP
888-OUR AARP (888-687-2277)
www.aarp.org
FirstGov – U.S. Government Web Portal
www.firstgov.gov
Administration on Aging
202-619-0724
www.aoa.gov
Federal Citizen Information Center
888-8PUEBLO (888-878-3256)
www.pueblo.gsa.gov
U.S. Department of Veterans Affairs
800-827-1000
www.va.gov
Tax Information
Internal Revenue Service
800-829-1040
www.irs.gov
Missouri Department of Revenue
573-751-4450
www.dor.mo.gov
Consumer InformationConsumer Product Safety Commission
800-638-CPSC (800-638-2772)
www.cpsc.gov
Better Business Bureau
703-276-0100
www.bbb.org
Health Care/Medical Information Alzheimer’s Association
800-272-3900
www.alz.org
American Cancer Society
800-ACS-2345 (800-227-2345)
www.cancer.org
American Diabetes Association
800-DIABETES (800-342-2383)
www.diabetes.org
Arthritis Foundation
800-568-4045
www.arthritis.org
Missouri Department of Health and Senior Services
573-751-6400
www.dhss.mo.gov