Comprehensive Annual Financial Report - Minnesota State ...
Comprehensive Annual Financial Report - Minnesota State ... Comprehensive Annual Financial Report - Minnesota State ...
President’s Report December 28, 2012 Public Employees Retirement Association of Minnesota Public Employees Retirement Association of Minnesota 60 Empire Drive, Suite 200 Saint Paul, Minnesota 55103-2088 Member Information Services: 651-296-7460 or 1-800-652-9026 Employer Response Lines: 651-296-3636 or 1-888-892-7372 PERA Fax Number: 651-297-2547 PERA Website: www.mnpera.org Dear Members, Annuitants, Beneficiaries and Governmental Employers: This 81st annual financial report of the Public Employees Retirement Association (PERA) discloses financial, actuarial, and other related information about PERA and the funds it administers. On June 30, 2012, PERA’s net assets available for benefits at fair value exceeded $20.5 billion, an increase of $378 million from a year ago. Fiscal year 2012 was another busy year for PERA. On December 30, 2011 the Minneapolis Police Relief Association and the Minneapolis Fire Relief Association were merged into PERA’s Police & Fire Plan. While just 26 active members were included in that group, over 1,300 benefit recipients were added to the Police & Fire Plan. On June 29, 2012 the Virginia Fire Relief Association and Fairmont Police Relief Association were also merged into PERA’s Police & Fire Plan. Each group had 13 benefit recipients. The Minneapolis and Virginia plans were underfunded, so those cities will make future amortization payments to the Police & Fire Plan to pay off their unfunded liabilities. PERA’s Statewide Volunteer Firefighter Retirement Plan is in its third year of existence. In 2012 it doubled in size by adding 17 new fire departments and 382 firefighters. The plan now has almost $7 million in assets and 750 members from 35 fire departments. Interest in the statewide plan continues to grow as word spreads about the new plan. The total rate of return for PERA’s investment assets was 2.4 percent, net of fees, for the 12 months ended June 30, 2012. For the past 10 years, PERA’s investments exceeded the composite market return benchmark with an annualized return of 7.0 percent. Over the past 20 years, PERA’s investments have returned 8.2% net of fees, 5.7 percentage points above CPI, despite two significant recessions during that period. While three of our four large defined benefit plans are in pretty good shape (thanks to legislative changes made in 2010), contribution rates in PERA’s Police & Fire Plan are eight percent deficient to get that plan fully funded by the year 2038. In 2012 we Don Rambow Board President began working with Police & Fire representatives to develop a list of recommended changes in order to shore up that plan, and expect to have legislation ready for the 2013 legislative session. As always, our commitment as trustees of the association is the preservation and safety of the assets of PERA’s funds, and the protection and furtherance of the interests of our members, annuitants, and beneficiaries. I believe our efforts over the past year have amply illustrated this continuing dedication as fiduciaries of the public employee retirement funds. Don Rambow President PERA Board of Trustees
December 27, 2012 Board of Trustees Public Employees Retirement Association of Minnesota 60 Empire Drive, Suite 200 St. Paul, Minnesota 55103 Public Employees Retirement Association of Minnesota 60 Empire Drive, Suite 200 Saint Paul, Minnesota 55103-2088 Member Information Services: 651-296-7460 or 1-800-652-9026 Employer Response Lines: 651-296-3636 or 1-888-892-7372 PERA Fax Number: 651-297-2547 PERA Website: www.mnpera.org Letter of Transmittal Dear Trustee: We are pleased to present this Comprehensive Annual Financial Report of the Public Employees Retirement Association (PERA) for the fiscal year ended June 30, 2012—our 81st year of operation. The information contained in this report is accurate in all material respects and is intended to present fairly the financial status and results of operations of the association. Responsibility for the contents of this report, including the financial statements, rests solely with the management of the association. This transmittal letter is designed to complement Management’s Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A begins on page 18 in the Financial Section of this report. Plan Overview PERA was established in 1931 by the Minnesota legislature. For financial reporting purposes, PERA is considered a pension trust fund of the State of Minnesota. The State reports our assets in the State’s annual report as pension trust fund assets. The Plan is funded on an actuarial reserve basis, with money being set aside for benefits while the benefits are being earned and before they are paid. PERA serves over 2,000 separate local governmental entities. These participating employers include cities, counties, townships, and school districts located throughout the State. On June 30, 2012, PERA’s membership included 153,735 current, active employees and 89,603 benefit recipients in the four multi-employer defined benefit plans, and another 7,435 members with money in the defined contribution plan. The four defined benefit plans include 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). Accounting Systems and Reports Financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and reporting guidelines set forth by the Introductory Section Public Employees Retirement Association of Minnesota
- 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: Achievement Awards GFOA The Governm
- Page 11 and 12: Economic Conditions and Outlook Alt
- Page 13 and 14: National Recognition PERA has an ou
- Page 15 and 16: Ross E. Arneson General Membership
- Page 17 and 18: The Public Employees Police and Fir
- Page 19 and 20: Pre-Age 62 Increase — This pensio
- Page 21 and 22: Legislative Auditor’s Report Mana
- Page 23 and 24: Legislative Auditor’s Report O L
- Page 25 and 26: Financial Highlights å PERA’s Ne
- Page 27 and 28: made in 2010 and contribution rate
- Page 29 and 30: This page left blank intentionally.
- 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
- Page 39 and 40: å The aggregate value of these obl
- Page 41 and 42: of the value protected by the wrap
- Page 43 and 44: age of pay, and are specified in st
- Page 45 and 46: Employer pension contributions for
- Page 47 and 48: Schedule of Employer Contributions
- Page 49 and 50: Source of Expenses Schedule of Inve
- Page 51 and 52: Investment Report Investment Result
- Page 53 and 54: Investment Report MINNESOTA STATE B
- Page 55 and 56: 25% 20% 15% 10% 5% 0% -5% -10% -15%
- Page 57 and 58: Investment Summary at Fair Value Fo
President’s <strong>Report</strong><br />
December 28, 2012<br />
Public Employees<br />
Retirement Association<br />
of <strong>Minnesota</strong><br />
Public Employees Retirement Association of <strong>Minnesota</strong><br />
60 Empire Drive, Suite 200<br />
Saint Paul, <strong>Minnesota</strong> 55103-2088<br />
Member Information Services: 651-296-7460 or 1-800-652-9026<br />
Employer Response Lines: 651-296-3636 or 1-888-892-7372<br />
PERA Fax Number: 651-297-2547<br />
PERA Website: www.mnpera.org<br />
Dear Members, Annuitants, Beneficiaries<br />
and Governmental Employers:<br />
This 81st annual financial report of the Public Employees Retirement<br />
Association (PERA) discloses financial, actuarial, and other related information<br />
about PERA and the funds it administers. On June 30, 2012,<br />
PERA’s net assets available for benefits at fair value exceeded $20.5 billion,<br />
an increase of $378 million from a year ago.<br />
Fiscal year 2012 was another busy year for PERA. On December 30,<br />
2011 the Minneapolis Police Relief Association and the Minneapolis Fire<br />
Relief Association were merged into PERA’s Police & Fire Plan. While just<br />
26 active members were included in that group, over 1,300 benefit recipients<br />
were added to the Police & Fire Plan. On June 29, 2012 the Virginia<br />
Fire Relief Association and Fairmont Police Relief Association were also<br />
merged into PERA’s Police & Fire Plan. Each group had 13 benefit recipients.<br />
The Minneapolis and Virginia plans were underfunded, so those<br />
cities will make future amortization payments to the Police & Fire Plan to<br />
pay off their unfunded liabilities.<br />
PERA’s <strong>State</strong>wide Volunteer Firefighter Retirement Plan is in its third<br />
year of existence. In 2012 it doubled in size by adding 17 new fire<br />
departments and 382 firefighters. The plan now has almost $7 million in<br />
assets and 750 members from 35 fire departments. Interest in the statewide<br />
plan continues to grow as word spreads about the new plan.<br />
The total rate of return for PERA’s investment assets was 2.4 percent,<br />
net of fees, for the 12 months ended June 30, 2012. For the past 10<br />
years, PERA’s investments exceeded the composite market return benchmark<br />
with an annualized return of 7.0 percent. Over the past 20 years,<br />
PERA’s investments have returned 8.2% net of fees, 5.7 percentage points<br />
above CPI, despite two significant recessions during that period.<br />
While three of our four large defined benefit plans are in pretty good<br />
shape (thanks to legislative changes made in 2010), contribution rates<br />
in PERA’s Police & Fire Plan are eight percent deficient to get<br />
that plan fully funded by the year 2038. In 2012 we<br />
Don Rambow<br />
Board President<br />
began working with<br />
Police & Fire representatives<br />
to develop<br />
a list of recommended<br />
changes in order to<br />
shore up that plan,<br />
and expect to have<br />
legislation ready for<br />
the 2013 legislative<br />
session.<br />
As always, our commitment<br />
as trustees of<br />
the association is the<br />
preservation and safety<br />
of the assets of PERA’s<br />
funds, and the protection<br />
and furtherance<br />
of the interests of our<br />
members, annuitants,<br />
and beneficiaries. I<br />
believe our efforts<br />
over the past year have<br />
amply illustrated this<br />
continuing dedication<br />
as fiduciaries of<br />
the public employee<br />
retirement funds.<br />
Don Rambow<br />
President<br />
PERA Board of Trustees
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