Comprehensive Annual Financial Report - Minnesota State ...

Discussion
and Analysis
22
Public Employees
Retirement Association
of Minnesota
(Continued)
to plan provisions and contribution rate increases to
shore up that fund. Future cost of living increases will
be limited to 1% per year until the plan is 90% funded.
State contributions were increased $15 million per
year, phased in over the next four years. Employer
contributions were also increased by roughly $25 million
per year beginning in 2012. The amortization
period was extended from 2020 to 2031. These measures
have improved the funding ratio of the fund,
from 65.6% funded at the end of FY10, when it was
consolidated into PERA, to 69.1% funded at the end of
FY12.
Statewide Volunteer Firefighter Retirement Fund
The Statewide Volunteer Firefighter Retirement
Plan is a new agent lump-sum defined benefit plan
that began January 1, 2010 with 6 fire departments
and 129 volunteer firefighters. An additional 12 fire
departments joined the plan in FY11 and transferred
$2,450,000 in assets. In FY12, 17 more fire departments
joined the plan and transferred $3 million in
assets. Total assets increased from $3.8 million in FY11
to $7.5 million in FY12 due to the transfer in assets
plus a larger securities lending collateral amount on
the books at year end. Total liabilities increased $436
thousand because of that collateral.
In its second full year, the plan received $118,000
in contributions from employers and $153,000, mostly
from fire state aid, from the State of Minnesota. Net
investment income totaled $254,000. Benefits paid
totaled $273,000. That amount is twice as much as
was paid out in FY11, largely because the plan now has
twice as many members. The plan is funded through
fire state aid from the State of Minnesota, investment
returns, and annual employer contributions (if they are
needed to keep each fire department’s account 100%
funded). Net assets increased 94 percent from FY11 to
$6.8 million, largely due to the additional fire departments
that joined during the year.
Agency Summary
The worst financial crisis in decades had a negative
effect on our investment returns in FY08 and FY09,
resulting in fairly large losses in our asset base. In order
to help shore up the plans, legislation passed in 2010
adjusted many of PERA’s plan provisions and increased
contributions in three of the four multi-employer
defined benefit plans. Investment returns in FY10 and
FY11 were very positive, but returns in FY12 were only
2.4 percent, below our assumed earnings assumption
of 8.5 percent. PERA’s earnings assumption will be lowered
to 8.0 percent for the next five years in accordance
with statute, which increased the unfunded liability this
year. Contribution rates are still sufficient to get the
PECF and the MERF fully funded as required by law.
Contribution rates are slightly deficient in the GERF, and
quite a bit deficient in the PEPFF. We will continue to
work with police and fire fund members and employers
to shore up that fund.
This financial report is designed to provide a general
overview of PERA’s finances and to demonstrate
its accountability with the assets it holds in trust.
Questions concerning any of the information provided
in this report or requests for additional financial information
should be addressed to PERA at 60 Empire
Drive, Suite 200 in St. Paul, Minnesota 55103-2088.