Transcript Slide 1

Introduction to Statewide
Retirement Funds
Howard Bicker, Executive Director, SBI
Dave Bergstrom - Executive Director, MSRS
Mary Most Vanek - Executive Director, PERA
Laurie Fiori Hacking - Executive Director, TRA
January 18, 2011


Invest assets of the
Pension Funds and other
State Funds
Board is defined in
Article XI of Minnesota
Constitution:
◦
◦
◦
◦
Governor
State Auditor
Attorney General
Secretary of State

Assisted by 17 member
Investment Advisory
Council (IAC)
◦ 10 experienced investment
professionals
◦ Executive Directors of
statewide retirement plans
◦ Commissioner of MMB
◦ Three Governor
Appointees
2
3
SBI Returns – for periods ending
6/30/2010
15.20%
15%
10%
9.00%
5%
3.40%
9.70%
8.5%
Actuarial Required
Return
2.90%
0%
2010
2009
2008
5 Yr
10 Yr
25 Yr
-5%
Since
1980
-5.0%
-10%
-15%
-20%
-18.80%
July – Dec 2010 return = 16% +
4
Pensions are a shared responsibility.
Every dollar paid to retirees comes from three sources
67¢
18¢
Investment
Earnings Employers
15¢
Employees
Sources of MN public pension fund revenue, 1991-2010
5


Covers state employees, University of Minnesota (nonfaculty), Metropolitan Council, MNSCU and others
Governed by an eleven-member board
◦
◦
◦
◦
◦
◦

Four elected General and/or Unclassified Plan members
Three Governor appointees
An elected State Patrol member
An elected Correctional Plan member
An elected retiree
One appointee representing the Amalgamated Transit Union
Total net assets of all MSRS administered plans totaled $13
billion on June 30, 2010
◦ $9.1 billion in mandatory retirement plans
◦ $3.9 billion in supplemental/voluntary plans
6
Retirement Plan
Assets
(6/30/2010)
Active
Participants
Benefit
Recipients
Deferred, Vested
Participants
48,494
28,435
15,388
General Plan
$7.7 billion
Correctional Plan
$525 million
4,268
1,859
993
State Patrol Plan
$489 million
848
924
39
Judges Plan
$126 million
312
291
18
Legislators
$26 million
47
359
88
Elective State
Officers Plan
$0
0
15
1
Unclassified
$253 million
1,430
0
1,844
(Defined Contribution)
Voluntary and/or Supplemental Plans
Assets (6/30/2010)
Active Participants
Minnesota Deferred Compensation
Plan (MNDCP)
$3.5 billion
79,822
Health Care Savings Plan (HCSP)
$317 million
63,189
Hennepin County Supplemental Plan
$109 million
1,900
7
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Current rate: 5% employee/5% employer
8
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Current rate: 8.6% employee/12.1% employer
9
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Current rate: 10.4% employee/15.6% employer*
* Not covered by Social Security
10
General Plan
Correctional Plan
State Patrol Plan
Post Retirement
Increase
Future increases of 2% until a
funding ratio of 90% is reached
Deferred
Augmentation
2% for future years beginning January 2012
Contribution Rate
Increases
None
Vesting
Five years
Hired after 7/1/2010
Phased in from
five to ten years
of service
Future increases
of 1.5% until
funding ratio 90%
2% employee
3% employer
(7/1/2011)
Five years
Refund Interest
Lowered from 6 percent to 4 percent beginning
7/1/2011
Reduction in
Unfunded Liabilities*
$650 million
$45 million
$62 million
* Source: Mercer FY2010 Actuarial Evaluation
11


Covers City, County & Non-teaching School District
employees
Governed by an eleven-member Board of Trustees
◦ Five elected by the PERA membership
 Three General Plan members
 One Police & Fire
 One Retiree
◦ Five Governor appointees representing cities, counties, schools boards,
retirees, and the general public, respectively
◦ The State Auditor

Total net assets of all PERA administered plans totaled
$16.9 billion on June 30, 2010
12
Retirement Plan
Assets
(6/30/2010)
Active
Participants
Benefit
Recipients
Deferred, Vested
Participants
General Plan
$11.3 billion
140,389
68,474
45,151
Police & Fire
$4.4 billion
11,002
7,541
1,315
Correctional
$211 million
3,521
441
1,895
Defined
Contribution Plan
$32 million
7,227
N/A
N/A
Minneapolis
Employees
Retirement Fund
(MERF)
$844 million
143
4,343
102
Also, administrators of the
Statewide Volunteer Firefighter Retirement Plan
13
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Current rate: 6.25% employee/7.25% employer
14
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Current rate: 9.6% employee/14.4% employer*
* Not covered by Social Security
15
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Correctional Plan Contribution Rate History
Established in 1999, the Correctional Plan has maintained a
level contribution rate; 5.83% employee & 8.75% employer
16
General Plan
Police & Fire
Correctional
Increases of 1% for
2011 & 2012; then
CPI up to 1.5%
until funding ratio
of 90%
Future
increases of 1%
until funding
ratio of 90%
Post Retirement
Increase
Future increases
of 1% until
funding ratio of
90%
Deferred
Augmentation
1% for future years beginning January 2012
Contribution Rate
Increases
0.25% employee
0.25% employer
0.2% employee
0.3% employer
None
Vesting
Hired after
7/1/2010
Five years
Refund Interest
Lowered from 6 percent to 4 percent beginning 7/1/2011
Reduction in
Unfunded
Liabilities*
$2.8 billion
*Source: Mercer FY2010 Actuarial Valuation
Phased in from five to ten years of
service; fully vested at ten years
$625 million
$15 million
17


Covers all K-12 public school
teachers & administrators, charter
schools, some State Universities &
Community College faculty
Governed by an eight-member
Board of Trustees
Assets
Active Members
77,356
◦ Four elected by active members
◦ An elected retiree member
◦ Three statutory appointments
made by the:
Benefit
Recipients
51,853
Deferred, Vested
Members
12,756
 Commissioner of Minnesota
Management & Budget;
 Commissioner of Education; and
 the Minnesota School Boards
Association
Plan Information
6/30/2010
$14.9 billion
18
Funding on Actuarial Value
Funding on Market Value
Year
2007
2008
2009
2010
Year
2007
2008
2009
2010
Return
18.3%
-5%
-18.8%
15.2%
Return
18.3%
-5%
-18.8%
15.2%
Teachers Retirement Contribution Rate History
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Current rate: 5.5% employee/5.5% employer
Employee
Employer
19
Post Retirement Increase
No increases in 2011 & 2012; future
increases of 2% until funding ratio of
90%
Deferred Augmentation
2% for future years beginning July
2012
Contribution Rate
Increases
2% employee & 2% employer phased in
over four years beginning 7/1/2011
Vesting
No change; three years
Refund Interest
Lowered from 6 percent to 4 percent
beginning 7/1/2011
Reduction in Unfunded
Liabilities*
$1.75 billion
*Source: Mercer FY2010 Actuarial Valuation
20
Change Made in 2010
State
Increased Contributions
for Employees
Colorado, Mississippi, Vermont, Missouri*,
Louisiana, Iowa, Wyoming
Increased Contribution for
Employers
California, Florida, New Jersey
Changes to Cost of Living
Adjustments
Colorado, Illinois*, Maryland, Michigan*,
Rhode Island, South Dakota, Virginia*
Plan Design Changes
(existing plan)
Arizona*,California*,Colorado, Illinois*,
Missouri*, Louisiana*, New Jersey,
Vermont, Iowa*, Mississippi*
New Hybrid Plan added
Michigan*, Utah*
Reduction in Investment
Return Assumption
Colorado, Pennsylvania, Virginia, New
York, Indiana, District of Columbia, Illinois
Benefit Studies
Connecticut, Puerto Rico, Virginia
* Only impacts new employees or those who are not vested
21
Unlike other states, MN public pensions have:
Disciplined funding – correct problems as they occur with
positive effect on state’s bond rating
Modest benefits – public employer contributions represent
only 1.6% of total MN state & local government spending,
compared to 2.9% of spending of other states
Proactive benefit reforms -- Post Fund eliminated, age 66
retirement age (passed in 1989), Rule of 90 eliminated
Employee contributes half the cost (except public safety)
 2010 Pension Reform Bill – bold corrective action that is
working
22
 Legal
challenge
• Class action suit filed by retirees claiming contract
right to annual increases - hearing in March
 Benefit Design Study (2010 Legislative directive)
• System directors analyzing DB, DC and alternative
designs, report due June 1, 2011
• Public stakeholder meetings held in September, next
meeting scheduled for February 1
• Actuarial analysis is in process
• Draft circulated late March, early April for comment
23
Please contact us:
MSRS
[email protected]
651-284-7888
PERA
[email protected]
651-296-8358
TRA
[email protected]
651- 296-6523
24