Comprehensive Annual Financial Report - Minnesota State ...

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Retirement System Plan Summary Note: * A listing of employers participating in PERA can be found in the Statistical Section of this report. Public Employees Retirement Association of Minnesota ** PERA's Basic Plan was closed to new membership in 1968 with the creation of the Coordinated Plan. At that time, Basic members had the option of remaining in that plan or transferring to the new Coordinated Plan. Today, fewer than 12 Basic members remain active public employees. Because of the small number in this sub-group of the General Fund, the remainder of the plan summary will only address the Coordinated Plan and the Minneapolis Employees Retirement Fund Division of the General Fund. 12 Public Employees Retirement Association of Minnesota Purpose Established by the Minnesota Legislature in 1931, the Public Employees Retirement Association (PERA) of Minnesota administers pension funds that serve approximately 284,000 county, school and local public employees, benefit recipients, their survivors, and dependents. Funds administered by the Association provide a variety of retirement pensions, and survivor and disability benefits. In the case of the Coordinated and Correctional plans, these benefits are in addition to those provided by Social Security. PERA’s Board of Trustees is responsible for administering these funds in accordance with statutes passed by the Minnesota Legislature and has a fiduciary obligation to PERA's members, their governmental employers, the state, and its taxpayers. Administration PERA’s Board of Trustees is composed of 11 members. The State Auditor is a member by statute. Five trustees are appointed by the Governor. Serving four-year terms, these five trustees represent cities, counties, school boards, retired annuitants, and the general public, respectively. The remaining five board members are elected by the PERA membership at large to serve four-year terms. Three trustees represent the general active membership, one represents Police and Fire Fund members, and one represents annuitants and benefit recipients. The latest trustee election was in January 2011. The board appoints an executive director to serve as chief administrative officer of PERA. With approval of the board, the director develops the annual administrative budget, determines staffing requirements, contracts for actuarial and other services, and directs the day-to-day operations of the Association. The director also serves as a member of the State Investment Advisory Council, which advises the Minnesota State Board of Investment on the management and investment of public pension funds and other assets. Multi-Employer Participation Approximately 2,100 separate units of government in Minnesota participate in the PERA-administered retirement system. These units include counties, cities, townships, and school districts*. Employee Membership PERA has approximately 160,000 active members. With certain statutory exceptions, an employee performing personal services for a governmental employer whose salary is paid, in whole or in part, from revenues derived from taxation, fees, assessments, or other sources, is a member of PERA. Plan participation is dependent on the occupation of the member. Funds PERA administers six separate funds. Each has specific membership, contribution, benefit, and pension provisions. The General Employees Retirement Fund encompasses two retirement plans — the PERA Coordinated Plan and the PERA Basic plan, as well as a separate division for the Minneapolis Employees Retirement Fund (MERF). The Coordinated Plan, created in 1968, provides retirement and other benefits in addition to those supplied by Social Security. Established in 1931, the Basic Plan was PERA’s original retirement plan and is not coordinated with the federal program.** MERF was made part of the General Fund in June 2010. A traditional defined benefit plan, MERF is not coordinated with Social Security and was closed to new membership in 1979. It encompasses employees of the City of Minneapolis, nonteaching personnel at Minneapolis schools and some employees of the Minnesota State Colleges and Universities and the Metropolitan Airports Commission. Because its funding includes annual state subsidies and is required to remain selfsustaining, it is accounted for separately in this report.
The Public Employees Police and Fire Fund was created in 1959 for police officers and firefighters not covered by a local relief association. It also encompasses all paid Minnesota police officers and firefighters hired since 1980. The Local Government Correctional Service Retirement Fund was established in 1999 for correctional officers serving in county and regional adult and juvenile corrections facilities. Participants must be responsible for the security, custody and control of the facilities and their inmates. Also administered by PERA is the Public Employees Defined Contribution Plan (DCP). Created in 1987 to provide a retirement plan for personnel employed by public ambulance services, the plan has since been expanded to include physicians, city managers, and locally-elected public officials, except for county sheriffs.* The Statewide Volunteer Firefighter Retirement Plan (SVFRP) was added to PERA's list of plans in January 2010. It is a lump-sum defined benefit plan open to any municipal volunteer fire department in the state. The municipality determines the level of benefits offered. Funding is provided through Minnesota State Fire Aid and, if required, additional municipal contributions. As of January 1, 2010, 36 volunteer fire departments have joined the plan. Contributions The table below shows contribution rates for employees and employers under the various plans administered by PERA as of June 30, 2012. Rates are applied to total salary and are set by statute. Fund Employee Employer Contribution Contribution General Employees Retirement Fund Coordinated 6.25% 7.25% MERF 9.75% 12.43%** Public Employees Police & Fire Fund Local Government 9.60% 14.40% Correctional Fund Defined Contribution 5.83% 8.75% Plan 5.00% 5.00%*** Credited Service and Salary Members of PERA’s defined benefit plans receive one service credit for each month for which they are paid. Individuals may earn a maximum of 12 service credits per year. Salary used in retirement and disability benefit calculations is the average monthly salary over an individual’s highest-paid 60 consecutive months of public service, or all months of service if less than 60 (high-five salary). Members hired prior to July 1, 2010 are vested for retirement benefits after 36 months of public service. The vesting requirement for individuals hired after June 30, 2010, is 60 months. Members of the Statewide Volunteer Firefighters Retirement Plan are vested after five years of credited service, while all active members of MERF exceeded that plan's 10 year vesting requirement years ago. Since the Defined Contribution Plan consists of individual accounts paying a lumpsum benefit, there are no vesting requirements for member or employer contributions and earnings. Retirement Benefits Eligibility and Annuity Formulas Coordinated Members Two methods are used to compute benefits for Coordinated Plan members—a step-rate benefit accrual formula (Method 1) and a level accrual formula (Method 2). Members hired prior to July 1, 1989 receive the higher of the two calculated amounts. Only Method 2 is used for members hired after June 30, 1989. Method 1: Coordinated members accrue 1.2 percent of the high-five salary for each of the first 10 years of public employment, and 1.7 percent of that average salary for each successive year. Using this calculation, members are eligible for a full (unreduced) retirement annuity if: They are age 65 or over with at least one year of public service; or Their age plus years of public service equal 90 (Rule of 90). A reduced retirement annuity is payable as early as age 55 with three or more years Introductory Section Note: * Officials first elected to a governing body, such as a city council or county board after June 30,2002, may only participate in PERA’s Defined Contribution Plan. Previously, such officials could elect Coordinated Plan participation as an alternative to the DCP. ** In addition to the base employer contribution, MERF employers share the responsibility of meeting the fund's unfunded liability with the State of Minnesota. *** This is the rate established for elected public officials and physicians. For ambulance service personnel, participation in the program and contributions made for employees are at the discretion of employers. Salaried employees may match this contribution. City managers may participate in the DCP as an alternative to Coordinated Plan membership. Public Employees Retirement Association of Minnesota 13
Page 1 and 2: Pink Lady Slipper, Minnesota State
Page 3 and 4: Board of Trustees Don Rambow — Bo
Page 5 and 6: Achievement Awards President's Repo
Page 7 and 8: Achievement Awards GFOA The Governm
Page 9 and 10: December 27, 2012 Board of Trustees
Page 11 and 12: Economic Conditions and Outlook Alt
Page 13 and 14: National Recognition PERA has an ou
Page 15: Ross E. Arneson General Membership
Page 19 and 20: Pre-Age 62 Increase — This pensio
Page 21 and 22: Legislative Auditor’s Report Mana
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Page 25 and 26: Financial Highlights å PERA’s Ne
Page 27 and 28: made in 2010 and contribution rate
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Page 31 and 32: Statewide Public Employees Agency F
Page 33 and 34: Financial Section Minneapolis Emplo
Page 35 and 36: facilities. Elected officials and a
Page 37 and 38: are recognized as revenues when due
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Page 43 and 44: age of pay, and are specified in st
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Page 49 and 50: Source of Expenses Schedule of Inve
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Other Assumptions Separation GERF u
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General Employees Retirement Fund A
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Public Employees Correctional Fund
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Public Employees Correctional Fund
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Introduction Schedule of Changes in
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Introduction December 14, 2012 Publ
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Statistical Section 2007 2008 2009
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Fire Department Statistical Section
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Statistical Section Schedule of New
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General Employees Retirement Fund S
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Schedule of Benefit Recipients by T
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Top 10 States by PERA Annuitant Pop
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General Employees Retirement Fund P
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ISANTI ISLE IVANHOE JACKSON JANESVI
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DEER CREEK DEER PARK DEER RIVER DEE
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PIERZ PIKE PIKE BAY PIKE CREEK PILL
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BROOKLYN CENTER ISD-286 BROOTEN ISD
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VILLARD ISD-615 VIRGINIA ISD-706 WA
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CROW WING COUNTY SWCD CURRIE DUVRAY
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2012 Comprehensive Financial Report
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