Download - January 18, 2011
January 18, 2011
Howard Bicker, Executive Director, SBIDave Bergstrom - Executive Director, MSRSMary Most Vanek - Executive Director, PERA
Laurie Fiori Hacking - Executive Director, TRA
Introduction to Statewide Retirement Funds
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State Board of Investment (SBI)
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
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Target Investment Allocation
15.20%
-18.80%
-5.0%
3.40% 2.90%
9.00%9.70%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2010 2009 2008 5 Yr 10 Yr 25 Yr Since 1980
4
Short and Long-Term Net Investment Returns
SBI Returns – for periods ending 6/30/2010
8.5%Actuarial
Required Return
July – Dec 2010 return = 16% +
Investment Returns Fund Most of Pensions
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67¢Investment
Earnings
Pensions are a shared responsibility.Every dollar paid to retirees comes from three sources
18¢Employers
15¢Employees
Sources of MN public pension fund revenue, 1991-2010
Covers state employees, University of Minnesota (non-faculty), 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
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Minnesota State Retirement System
Retirement Plan
Assets(6/30/2010)
Active Participant
s
Benefit Recipients
Deferred, Vested
ParticipantsGeneral Plan $7.7 billion 48,494 28,435 15,388Correctional Plan $525 million 4,268 1,859 993State Patrol Plan $489 million 848 924 39Judges Plan $126 million 312 291 18Legislators $26 million 47 359 88Elective State Officers Plan
$0 0 15 1
Unclassified (Defined Contribution)
$253 million 1,430 0 1,844
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MSRS Plans
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 63,189Hennepin County Supplemental Plan $109 million 1,900
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MSRS General Plan Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Current rate: 5% employee/5% employer
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MSRS Correctional Plan Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Current rate: 8.6% employee/12.1% employer
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MSRS State Patrol Plan Funding History
Funding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Current rate: 10.4% employee/15.6% employer*
* Not covered by Social Security
General Plan Correctional Plan
State Patrol Plan
Post Retirement Increase
Future increases of 2% until a funding ratio of 90% is reached
Future increases of 1.5% until funding ratio 90%
Deferred Augmentation
2% for future years beginning January 2012
Contribution Rate Increases
None 2% employee3% employer (7/1/2011)
Vesting Hired after 7/1/2010
Five years Phased in from five to ten years of service
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
MSRS 2010 Benefit Reforms
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
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Public Employee Retirement Association
Retirement Plan Assets(6/30/2010
)
Active Participant
s
Benefit Recipients
Deferred, Vested
ParticipantsGeneral 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
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PERA Plans
Also, administrators of the Statewide Volunteer Firefighter Retirement Plan
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PERA General Plan Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Current rate: 6.25% employee/7.25% employer
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PERA Police & Fire Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Current rate: 9.6% employee/14.4% employer*
* Not covered by Social Security
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PERA Correctional Plan Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
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
General Plan Police & Fire CorrectionalPost Retirement Increase
Future increases of 1% until funding ratio of 90%
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%
Deferred Augmentation
1% for future years beginning January 2012
Contribution Rate Increases
0.25% employee 0.25% employer
0.2% employee0.3% employer
None
Vesting Hired after 7/1/2010
Five years Phased in from five to ten years of service; fully vested at ten years
Refund Interest Lowered from 6 percent to 4 percent beginning 7/1/2011Reduction in Unfunded Liabilities*
$2.8 billion $625 million $15 million
*Source: Mercer FY2010 Actuarial Valuation17
PERA 2010 Benefit Reforms
Covers all K-12 public school teachers & administrators, charter schools, some State Universities & Community College faculty
Governed by an eight-member Board of Trustees◦ Four elected by active members◦ An elected retiree member◦ Three statutory appointments
made by the: Commissioner of Minnesota
Management & Budget; Commissioner of Education; and the Minnesota School Boards
Association
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Teachers Retirement Association Plan Information
6/30/2010Assets $14.9 billion
Active Members 77,356
Benefit Recipients
51,853
Deferred, Vested Members
12,756
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TRA Funding HistoryFunding on Market ValueFunding on Actuarial Value
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
Year 2007 2008 2009 2010
Return 18.3% -5% -18.8% 15.2%
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%
10.00%
Teachers Retirement Contribution Rate History
Employee Employer
Current rate: 5.5% employee/5.5% employer
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 yearsRefund Interest Lowered from 6 percent to 4 percent
beginning 7/1/2011
Reduction in Unfunded Liabilities*
$1.75 billion
*Source: Mercer FY2010 Actuarial Valuation
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TRA 2010 Benefit Reforms
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
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What happened in other states?
Unlike other states, MN public pensions have:Disciplined funding – correct problems as they occur with
positive effect on state’s bond ratingModest 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
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MN Pensions More Conservative than Other States
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
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Other Updates
Please contact us:
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Questions
651-284-7888
651-296-8358
651- 296-6523