Comprehensive Annual Financial Report - Minnesota State ...

Actuary’s Certification Letter
December 6, 2012
Board of Trustees
Public Employees Retirement
Association of Minnesota
60 Empire Drive, Suite 200
St. Paul, MN 55103-2088
Members of the Board:
We have prepared and presented to you our annual actuarial valuation of
the General Employees Retirement Fund (GERF), the Public Employees
Police and Fire Fund (PEPFF), the Public Employees Correctional Fund
(PECF), and the Minneapolis Employees Retirement Fund (MERF) as of
June 30, 2012.
In this Comprehensive Annual Financial Report (CAFR), all supporting
schedules in the Actuarial Section and the Schedule of Funding Progress
and the Schedule of Employer Contributions in the Financial Section have
been prepared by PERA based on the information included in reports
on the annual actuarial valuation prepared by Gabriel Roeder Smith &
Company (GRS). The annual actuarial valuation reports are available on
the PERA website.
Valuation Results
The results of the valuations are summarized in the following table. For all
plans except MERF, because the valuation smooths asset returns over five
years, the actuarial value of assets is slightly higher than the fair value of
assets, and the funding ratios on that basis are slightly higher and the deficiencies
are lower than the market value of assets results. The valuation
for MERF is based on the market value of assets.
Accrued Liability Contribution Sufficiency/
Funding Ratio Deficiency (% of Pay)
Actuarial Market Actuarial Market Statutory
Value Value Value Value Amortization
Plan of Assets of Assets of Assets of Assets Date
GERF 73.45% 73.00% -0.96% -1.08% 2031
PEPFF 78.31% 77.97% -7.94% -8.14% 2039
PECF 89.29% 88.99% 0.13% 0.08% 2031
MERF 69.10% 69.10% 288.20% 288.20% 2031
A
ctuarial
Section
A contribution deficiency means
that over the long run, without
further changes or favorable actuarial
experience, the contributions
scheduled to be made to the fund
will not meet the goal of full funding
by the statutory amortization
date. For the PEPFF, there is a very
significant contribution deficiency.
Without changes, the funded status
of PEPFF will deteriorate in the
future and assets will be depleted.
Changes in Actuarial
Assumptions and Methods
The following changes were recognized
this year for all plans:
• The investment return assumption
was changed from 8.5%
to a 5-year select and ultimate
approach with rates of 8.0% for
the period July 1, 2012 to June
30, 2017 and 8.5% thereafter.
• Decrement timing was changed
from beginning of year to midyear
decrement timing.
For the GERF, the following
changes in actuarial assumptions
were recognized:
• The future salary growth rates
were updated to be approximately
25 basis points lower on
average than the previous table.
• Augmentation for privatizations
occurring after 2010 was
reduced.
Public Employees
Retirement Association
of Minnesota
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