Comprehensive Annual Financial Report - Minnesota State ...

Letter of Transmittal
(Continued)
An important measure of the health of a retirement
system is the level of funding. The better the level
of funding is, the larger the ratio of assets to accrued
liabilities and the greater the level of investment income
potential. Also, a better level of funding gives participants
a higher degree of assurance that their pensions
are secure. A pension plan is fully funded when it has
present and projected assets sufficient to cover the
liabilities for present and future annuities, benefits and
refunds and the projected cost of fund administration.
The Association’s progress toward meeting the
full funding objective is displayed on the Schedule of
Funding Progress on page 32. This report shows the
funding levels using the entry age normal actuarial
cost method, and reflects various changes in actuarial
assumptions. At the end of fiscal year 2012, the ratio of
assets to liabilities of the PERF was 73.5 percent. For the
PEPFF and the PECF, the ratios were 78.3 percent and
89.3 percent, respectively. The funded ratio of the MERF
was 69.1 percent.
Major Initiatives
PERA’s staff worked on several large-scale projects
during the year. Due to various efficiencies built in to
our underlying systems over the past few years, we were
able to keep up with an increasing work load while
developing and implementing these new initiatives without
needing to increase staff size.
Legislation was passed in 2011 that merged the
Minneapolis Police Relief Association and Minneapolis
Fire Relief Association into PERA’s Police & Fire Fund
effective December 30, 2011. The merger included 26
active members and 1,302 benefit recipients. Legislation
was passed in 2012 that merged the Virginia Fire Relief
Association and the Fairmont Police Relief Association
into PERA’s Police & Fire Fund effective June 29, 2012.
Each of those associations had 13 benefit recipients, and
neither had any active members.
In fiscal year 2012, seventeen fire departments joined
the Statewide Volunteer Firefighter (SVF) Retirement
Plan, which more than doubled the membership in that
plan. The SVF was created in 2010, so is a very new
plan with about 750 members from 35 different fire
departments.
Public Employees
Retirement Association
of Minnesota
We worked closely with the other two statewide
public pension plans, our actuaries and the State
Board of Investment to develop legislation that would
lower our assumed rate of return on investments
from 8.5 percent to 8.0 percent for the next five years.
During those five years we will monitor actual returns
to determine if we should seek further legislation to
keep the return assumption below 8.5 percent.
PERA’s staff continued to work toward our vision
of making pension information available to members
24 hours a day/7 days a week. In fiscal year 2012, we
expanded the number of members who could create
their own benefit estimates online. Over 100,000
members have now registered to use My PERA, our
online tool. Members prepared over 105,000 benefit
estimates themselves using My PERA in FY12.
We will continue to enhance our suite of on-line
tools available to members and employers. Our focus
is continuous improvement to our systems and services
so that we can accommodate the needs of all
stakeholders and constituencies of PERA.
Professional Services
Actuarial consulting services during the fiscal
year were provided by Mercer. The State’s Attorney
General continued to provide PERA with legal counsel.
The State’s Department of Health provided medical
services used for determining disability benefits.
The State Board of Investment continued to manage
and invest the assets of PERA’s funds, and the State’s
Legislative Auditor provided professional financial
auditing services.
Membership Report
This report is complemented by an annual
financial newsletter that discloses, in summary form,
the contents of this report. This financial newsletter
is mailed in January of each year to all PERA members,
including active and deferred members and benefit
recipients. In addition, this report is reproduced, in
its entirety, on PERA’s website, www.mnpera.org.