Comprehensive Annual Financial Report - Minnesota State ...

Notes
36
(Continued)
Actuarial
valuations are
performed annually
using the entry
age normal actuarial
cost method.
Contributions are
made as a level percentage
of projected
payroll, and are
specified in statute
as fixed percentages.
Public Employees
Retirement Association
of Minnesota
considered a long-term liability. The total
increased by $12,985 during fiscal year
2012.
10. Securities Lending
PERA does not own specific securities,
but instead owns shares in pooled funds
invested by the State Board of Investments
(SBI). The SBI is authorized to enter into
securities lending transactions in accordance
with Minnesota Statutes, Chapter
356A.06, subd. 7 and has, via a Securities
Lending Authorization Agreement,
authorized State Street Bank and Trust
Company to lend its securities to brokerdealers
and banks pursuant to a form of
loan agreement.
During the fiscal year, State Street lent,
at the direction of the SBI, certain securities
held by State Street as custodian and
received cash (both United States and
foreign currency), securities issued or
guaranteed by the United States government,
sovereign debt of foreign countries,
and irrevocable bank letters of credit as
collateral. State Street did not have the
ability to pledge or sell collateral securities
absent a borrower default. Borrowers
were required to deliver collateral for
each loan equal to at least 100% of the
market value of the loaned securities.
Pursuant to the Securities Lending
Authorization Agreement, State Street
had an obligation to indemnify the SBI
in the event of default by a borrower.
There were no failures by any borrower
to return loaned securities or pay distributions
thereon during the fiscal year
that resulted in a declaration or notice of
default of the borrower.
Fig.8 Schedule of Funding Progress (in thousands)
During the fiscal year, the SBI and the borrowers
maintained the right to terminate securities
lending transactions upon notice. The cash
collateral received on each loan was invested,
together with the cash collateral of other
qualified tax-exempt plan lenders, in a collective
investment pool. As of June 30, 2012, the
investment pool had an average duration of
3.87 days and an average weighted final maturity
of 26.04 days for USD collateral. Because
the loans were terminable at will their duration
did not generally match the duration of
the investments made with cash collateral. On
June 30, 2012 SBI had no credit risk exposure
to borrowers. The market value of the
collateral held and the fair value of securities
on loan from the SBI as of June 30, 2012 was
$3,094,514,469 and $3,004,180,494 respectively.
Cash collateral of $1,859,656,735 is reported
on the Statement of Plan Net Assets as an
asset. Liabilities resulting from these securities
lending transactions are also reported on the
Statement of Plan Net Assets.
11. Funded Status
The funded status of each defined benefit plan
as of June 30, 2012, the most recent actuarial
valuation date, is shown in Figure 8. The
Schedule of Funding Progress, presented as
required supplementary information (RSI) following
the notes to the financial statements,
presents multiyear trend information about
whether the actuarial values of plan assets are
increasing or decreasing over time relative to
the actuarial accrued liabilities of promised
benefits.
12. Actuarial Methods and Assumptions
Actuarial valuations are performed annually
using the entry age normal actuarial cost method.
Contributions are made as a level percent-
UAAL as a
Percentage of
Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Ratio Covered Coverd Payroll
Plan Valuation Date of Assets (a) Liability (AAL)(b) (UAAL) (b-a) (a/b) Payroll (c) [ (b-a)/c ]
GERF 06/30/2012 $13,661,682 $18,598,897 $4,937,215 73.5% $5,142,592 96.0%
PEPFF 06/30/2012 5,797,868 7,403,295 1,605,427 78.3% 794,417 202.1%
PECF 06/30/2012 306,454 343,199 36,745 89.3% 164,340 22.4%
MERF 06/30/2012 842,811 1,219,735 376,924 69.1% 5,785 6,515.5%