Comprehensive Annual Financial Report - Minnesota State ...

Discussion
and Analysis
20
Public Employees
Retirement Association
of Minnesota
(Continued)
Overall Financial Position
The financial position of a public pension plan is
not so much determined by what is found on the face
of the financials, but by looking at trends in the funding
ratio and contribution sufficiency or deficiency.
The actuarial value of assets increased by $206
million in FY12 to $13.7 billion, which is slightly
higher than the fair value of assets. The funding ratio
declined slightly, from 75.2% in FY11 to 73.5% in
FY12.
For the past several years, contribution rates have
not been sufficient for the GERF to become fully
funded by its target date of 2031. As part of a financial
package passed by the legislature in 2010, contribution
rates for employers and employees were each
increased 0.25% effective January 1, 2011. Assumption
changes passed by the legislature in 2012, however,
increased the unfunded actuarial accrued liability by
over $240 million. Contributions are now deficient by
0.96% of pay to reach fully funded status by 2031.
Public Employees Police & Fire Fund
Total assets as of June 30, 2012 were $6.3 billion
in the Public Employees Police and Fire Fund,
an increase of $617 million, or 11 percent from the
prior year. The increase is due to the merger of four
Changes in Net Assets—Defined Benefit Plans (dollars in thousands)
relief associations into the PEPFF plus a larger amount
of securities lending collateral on the books at year end.
Total liabilities as of June 30, 2012 were $532 million, an
increase of $161 million due to the larger securities lending
collateral.
Total net assets, the difference between total assets
and total liabilities, increased $455 million or roughly 8.5
percent from the prior year to an ending balance of $5.8
billion.
Additions to Plan Net Assets
Legislation passed in 2011 and 2012 merged the
Minneapolis Police, Minneapolis Fire, Virginia Fire and
Fairmont Police relief associations into the PEPFF in fiscal
year 2012. Assets of $488 million were transferred
into the plan. Employer and employee contributions
increased $15 million in FY12, largely due to the additional
active members from Minneapolis and salary
increases across the board. Net investment income in
FY12 totaled $157 million, due to a 2.4 percent investment
return.
Deductions from Plan Net Assets
Retirement benefits to members and beneficiaries
made up over 99 percent of the plan’s total deductions.
The amount of benefits paid increased 13 percent in
FY12 to $386 million. The increase in benefits resulted
from an increase in the number of benefit recipients (as a
result of the four mergers) plus a one percent cost of living
increase for most retirees effective January 1, 2012.
Overall Financial Position
The Police and Fire Plan was 78.3% funded as of June
30, 2012. The funding ratio has been falling steadily for
the past thirteen years. Despite plan provision changes
GERF PEPFF PECF
Additions
2012 2011 2012 2011 2012 2011
Employer Contributions $ 368,037 $ 357,596 $ 121,891 $ 109,604 $ 14,320 $ 14,289
Member Contributions 321,412 311,115 76,264 73,702 9,581 9,624
Investment Income (Loss) 320,417 2,607,568 156,926 1,024,981 7,846 50,343
State & Other Contributions 564 435 488,521 1 0 0
Total Additions
Deductions
$1,010,430 $3,276,714 $843,602 $1,208,288 $31,747 $74,256
Retirement Benefits $ 1,000,644 $ 950,708 $ 386,208 $ 342,219 $ 4,809 $ 4,026
Refunds of Contributions 39,105 38,218 1,524 2,012 1,332 1,338
Administrative Expenses 9,650 9,748 855 762 229 229
Other 0 0 0 0 0 0
Total Dedutions $1,049,399 $ 998,674 $388,587 $ 344,993 $6,370 $ 5,593
Increase in Net Assets $ (38,969 $2,278,040 $455,015 $ 863,295 $25,377 $68,663