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HomeMy WebLinkAboutPublic Employees' Retirement System of Mississippi - Public Financial Reportworkers, and all the public servants POPULAR ANNUAL FINANCIAL REPORT For the Fiscal Year Ending June 30, 2021 A Letter from Executive Director H. Ray Higgins,Jr. December 21, 2021 Dear Members and Retirees: I am pleased to present the 2021 Popular Annual Financial Report (PAFR) of the Public Employees’ Retirement System of Mississippi (PERS or the System). We take our role to heart as a fiduciary for this System and remain vigilant and resourceful in honoring the commitment to our membership. I join with the PERS team as we dedicate ourselves to serving our teachers, law enforcement officers, healthcare workers, and all the public servants who make up the membership of our System. This report is a summary of our services, organization, financial results, investments, and certain note disclosures, which are reported in detail in the PERS Annual Comprehensive Financial Report (ACFR) for 2021. The ACFR is prepared and presented in conformity with generally accepted accounting principles. Detailed information about the System can be found in the ACFR located at www.pers.ms.gov.financial reports. For questions concerning any of the information presented in this report, contact PERS,429 Mississippi Street,Jackson, Mississippi 39201-1005 or visit us online. Fiscal Year 2021 Highlights Investments as of June 30 $35.3 billion Investment Rate of Return 32.71 percent Total System Membership 346,025 Members receiving benefits 114,662 Annual Retirement Benefit Payroll $3.1 billion Table of Contents Membership Page 2 Financial Page 4 Funding Page 6 Investments Page 7 Resources Page 8 The System is administered by a ten-member Board of Trustees (Board) that includes the state Treasurer; one gubernatorial appointee who is a member of PERS; two state employees; two PERS retirees; and one representative each from public schools and community colleges, state universities, municipalities, and counties. Except for the state Treasurer and the gubernatorial appointee, all members are elected to staggered six-year terms by the constituents they represent. The System administers four defined benefit retirement plans that guarantee, through plan provisions, a specific retirement benefit to qualified employees upon retirement. These plans are the Public Employees’Retirement System of Mississippi (PERS), the Mississippi Highway Safety Patrol Retirement System (MHSPRS),the Supplemental Legislative Retirement Plan (SLRP), and the Municipal Retirement Systems (MRS). Membership in the System is a condition of covered public employment in Mississippi. PERS serves members from state and local government, public schools,community and junior colleges,universities, and other governmental units across the state. Sworn officers of the highway patrol are members of the MHSPRS plan. SLRP is a supplemental plan to the provisions of PERS for members of the state Legislature.MRS is a combination of two general municipal employee plans and 17 fire and police disability and relief systems. The MRS plan is closed and has no remaining active members. The total number of active members in the System has declined over the past 5 years from 153,032 in fiscal year 2017 to a current year count of 146,324 with a total of 874 participating employers.Currently, an estimated 18,228 active members of PERS, MHSPRS, and SLRP are eligible for retirement. The System seeks innovative ways to serve its members and strives to provide quality assistance to each member and employer. A combination of advances in technology,staff training,and improved vehicles of communication enables the System to assure that its participants are well informed and well served. We are proud to help provide retirement security for our retirees. Since 2017, the total number of retired members has increased from 104,945 to 114,662, with a current annual retirement benefit payroll of $3.1 billion.The charts on page 3 illustrate active members, retirees and beneficiaries, and inactive members participating in the plans. 2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 -Page 2 MEMBERSHIP Active Members by Employer Community/Junior Colleges 4% Counties 10% Other Political Subdivisions 5% Municipalities 11% State Universities 11% State Agencies 18% Public Schools 41% Summary of Participating Members Fiscal Years Ending June 30 Page 3 -2021 Popular AnnualFinancial Report -For the FiscalYear ending June 30, 2021 SLRP Members 2017 2018 2019 2020 2021 Active 174 174 170 171 173 Retirees/Beneficiaries 205 207 215 235 233 Inactive Members 56 55 54 62 62 Total 435 436 439 468 468 Active Retired PERS 145,673 99.55%112,158 97.82% MHSPRS 478 0.33%761 0.66% SLRP 173 0.12%233 0.20% MRS --%1,510 1.32% Total 146,324 100.00%114,662 100.00% MRS Members 2017 2018 2019 2020 2021 Active Members 6 4 2 -- Retirees/Beneficiaries 1,754 1,694 1,644 1,592 1,510 Inactive Members ----- Total 1,760 1,698 1,646 1,592 1,510 MHSPRS Members 2017 2018 2019 2020 2021 Active Members 470 511 522 511 478 Retirees/Beneficiaries 726 725 734 740 761 Inactive Members 59 55 61 72 64 Total 1,255 1,291 1,317 1,323 1,303 PERS Members 2017 2018 2019 2020 2021 Active Members 152,382 150,687 150,651 149,855 145,673 Retirees/Beneficiaries 102,260 104,973 107,844 109,881 112,158 Inactive Members 66,852 69,341 74,017 78,647 84,913 Total 321,494 325,001 332,512 338,383 342,744 102,260 104,973 107,844 109,881 112,158 2017 2018 2019 2020 2021 726 725 734 740 761 2017 2018 2019 2020 2021 205 207 215 235 233 2017 2018 2019 2020 2021 1,754 1,694 1,644 1,592 1,510 2017 2018 2019 2020 2021 Retiree Growth by Plan Fiscal Years Ending June 30 Members by Plan Total System Net Position FiscalYears Ending June 30 (in billions) 2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 -Page 4 The primary sources of additions to net position are employer contributions, member contributions, and net investment income. Employer contributions totaled $1.2 billion for fiscal year 2021, a decrease of $4.3 million from the prior year.Member contributions totaled $597.5 million. Contributions are a direct result of contribution rates and covered payroll of active members. The System posted net investment income of $8.9 billion for 2021, compared to $872.9 million for 2020. The increase in the investment rate of return from 3.35 percent in 2020 to 32.71 percent for fiscal year 2021 and the related increase in investment income, was a result of the continued rebound of equity markets and the reopening of worldwide economies from the pandemic. FINANCIAL Net position restricted for pension benefits results from the excess of the System’s total assets over total liabilities. Net position represents assets accumulated to pay the present and future benefits of members and retirees. Net position of the defined benefit pension plans for 2021 totaled $35.9 billion,while 2020 net position totaled $28.3 billion. Investments, at 96 percent of total assets, make up the largest portion of net position restricted for pension benefits. Governmental accounting standards require presentation of the net pension liability of the employers for benefits provided through the PERS, MHSPRS, and SLRP plans. The net pension liability is an accounting measure of the actuarially determined long-term pension liability less the System’s current net position. The System’s expenses, or deductions from net position, include benefit payments, refunds of contributions to former members, and the cost of administering the System. As shown on page 5, the majority of 2021 expenses were benefit payments, which totaled $3.1 billion, an increase of $118.1 million from 2020 due primarily to an increase in benefit recipients.Contribution refunds are available to members who terminate employment from all covered employers and who are not eligible to receive monthly benefits. The amount of contribution refunds were $101.1 million for fiscal year 2021, compared to $104.9 million for fiscal year 2020. The cost to administer the System for fiscal year 2021 was $16.3 million, a decrease of $4.1 million. Expenses for administration of the System are funded from the trust. $27.1 $28.3 $28.7 $28.3 $35.9 $25 $30 $35 $40 2017 2018 2019 2020 2021 Net Pension Liability for Employers (in thousands) PERS MHSPRS SLRP Total Pension Liability $49,997,034 $576,150 $23,273 Less: Net Position 35,216,597 463,984 22,951 Net Pension Liability $14,780,437 $112,166 $322 Page 5 -2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 2021 2020 2019 Employer Contributions $1,204,753 $1,209,075 $1,075,122 Member Contributions 597,499 597,354 583,510 Investment Income 8,897,644 872,882 1,734,049 Other 6 22 38 Total $10,699,902 $2,679,333 $3,392,719 Revenues -Fiscal Years Ending June 30 (in thousands) Expenses -Fiscal Years Ending June 30 (in thousands) Fi s c a l Y e a r 2 0 2 1 $8.9 billion Investment Income $1.2 Billion Employer Contributions $597.5 Million Employee Contributions $3.1 Billion Benefit Payments $35.9 Billion Net Trust Fund Assets Fi s c a l Y e a r 2 0 2 1 •The System provides benefits to retired members who served the public during their career. The average annual PERS benefit including the Cost-of-Living Adjustment is $25,638. •Approximately 92 percent of the benefits paid by the System remain in the state supporting the local economy. 2021 2020 2019 Benefits $3,065,632 $2,947,555 $2,816,445 Refunds 101,116 104,919 108,058 Administrative 16,322 20,426 22,222 Total $3,183,070 $3,072,900 $2,946,725 System Financial Highlights Economic Impact 96.31% 3.18%0.51% 11.26% 5.58% 83.15% 0.01% 2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 -Page 6 Actuarial valuations are performed annually to determine the actuarial accrued liability, the actuarial value of assets, and funding progress. Valuations for all defined benefit plans administered by the System are based on information as of June 30, 2020 and rolled forward to the June 30, 2021 measurement date using certain actuarial techniques. Future benefit payments owed to current and future retirees and beneficiaries are actuarially determined and referred to as the actuarial accrued liability. The actuarial value of assets represents funds accumulated by the System to meet these future benefit payments. The funded ratio represents the amount of the System’s actuarial accrued liability that is covered by the actuarial value of assets,expressed as a percentage. The difference between the actuarial accrued liability and the actuarial value of assets is referred to as the unfunded actuarial accrued liability. The unfunded actuarial accrued liability amortization period is the number of years it would take to fully fund the System’s projected benefit obligation based on current contribution rates and assumptions.Current amortization periods are 37.1 years for PERS, 21.7 years for MHSPRS, 27.7 years for SLRP, and 14.0 years for MRS. Variations from year to year are primarily due to changes in the individual plan’s actuarial assumptions and differences in assumed and actual results. System investments are diversified to help mitigate the effects of a volatile financial market, and investment returns are smoothed over a five-year period. Employer contribution rates for the past five years are shown in the chart to the left.Employee contributions remain constant at 9.0 percent for PERS,7.25 percent for MHSPRS, and 3.0 percent for SLRP.Contribution rates for the 19 plans in MRS are established at the individual plan level based on actuarial analysis of plan retirement obligations, funding levels, and other data. Employer Contribution Percentage Rates Fiscal Year 2017 2018 2019 2020 2021 PERS 15.75 15.75 15.75 17.40 17.40 MHSPRS 37.00 37.00 49.08 49.08 49.08 SLRP 7.40 7.40 7.40 7.40 7.40 FUNDING Percentage of actuarial accrued liability covered by actuarial value of assets (funded ratio) 60.0%61.1%61.8%60.9%60.5% 65.8%68.1%66.8%66.9%66.5% 48.1%49.0%50.3%49.9%49.1% 77.4%78.8%80.4%80.4%78.7% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 2016 2017 2018 2019 2020 PERS MHSPRS MRS SLRP Page 7 -2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 The System manages investments with prudent care, constant attention, specialized expertise, and a concern for the financial security of its membership. By maintaining a broadly diversified portfolio designed to minimize risk and maximize return over the long term, the System’s investment program is designed to help provide funding for current and future pension obligations. INVESTMENTS Total Investments:Past 10 Fiscal Years (in thousands) *Public funds >$10 billion Actual Asset Allocation Target Asset Allocation Equity Securities 61.3%61.0% Debt Securities 18.6%20.0% Real Estate 8.8%10.0% Private Equity 10.1%8.0% Cash & Equivalents 1.2%1.0% $35,265,335 $27,956,585 $28,226,443 $28,280,303 $26,592,048 $23,938,414 $24,735,121 $24,600,195 $21,947,427 $19,578,388 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 As of June 30, 2021, investments were $35.3 billion, an increase of $7.3 billion from fiscal year end 2020. Net investment income was $8.9 billion, compared to $872.9 million for fiscal year 2020. One of the most critical decisions made by the System is that of the long-term asset allocation policy for the investment portfolio. The System’s asset allocation decisions consider a number of factors, including a projection of future liabilities, expected market risk and return for various asset classes, and the System’s statutory investment restrictions as set forth in Miss. Code Ann 25.11.121 (1972, as amended). At year end, 34 investment firms were managing 62 portfolios for defined benefit pension plans. Portfolio performance is carefully monitored by the Board of Trustees with the assistance of an investment management consulting firm, the System’s Chief Investment Officer, and staff. The System experienced a 32.71 percent gross investment return this year. The System operates on a long-term investment strategy and over the last three-, five-, and ten-year periods our portfolio continues to outperform the benchmark and our peers, culminating in a thirty-year gross investment return of 8.74 percent. System Rates of Return Compared to the Policy Benchmark and Peers Total System Rates of Return Fiscal Years Ending June 30 Current 3-Year 5-Year 10-Year System Return Policy Benchmark Peer Median* 0% 10% 20% 30% 40% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 System Rate of Return Actuarial Assumed Rate of Return* *The actuarial assumed rate of return was reduced from 8.00% to 7.75% in 2016 and to 7.55% in 2021. 2021 PopularAnnual Financial Report -For the Fiscal Year ending June 30, 2021 -Page 8 Award-Winning Report The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to PERS for its Popular Annual Financial Report for the fiscal year that ended June 30, 2020. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a popular annual financial report with contents that conform to program standards of creativity, presentation, understandability, and reader appeal. An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of only one year. PERS has received a Popular Award for the last 18 consecutive fiscal years. We believe the current report continues to conform to the Popular Annual Financial Reporting requirements and we are submitting it to GFOA. . RESOURCES Member handbooks and guides include information about PERS, its administered programs, retirement benefits, retirement options, and important contact information. Handbooks and guides are available by request or from www.pers.ms.gov. PERS eUpdates are brief, timely e-mailed news alerts that include information about legislative, regulatory, retirement plan changes, leadership updates, and more. Anyone interested may sign up online to receive news tailored just for them and delivered directly to their e-mail inbox. Website and Call Center Our website, www.pers.ms.gov,provides an array of information and services to members, retirees, and the public. PERS’Customer Service Center analysts assist callers with questions and concerns in a prompt, courteous manner.The center,800-444-7377 or 601-359-3589, is open from 8 a.m.to 5 p.m.every weekday with the exception of state holidays. Educational Opportunities PERS offers both virtual and in-person educational opportunities. Pre-Retirement Full Day Seminars are held throughout the state to assist members with retirement planning.Topics include Social Security, Mississippi Deferred Compensation (MDC),and PERS.Schedules and registration are available online. Small group Focus Sessions assist members with retirement planning by providing each individual with an estimate of benefits and detailed information on retirement options. Schedules and registration are available online. Hosted by employers, PERS on the Move presentations are held during or after office hours to provide members with information regarding PERS and MDC. Visit us online to request a seminar. Annual agency training seminars provide information to personnel responsible for benefits administration and reporting. Schedules, topics, and registration are posted online. Printed Materials Active and inactive members are mailed annual statements with account balances, years of service, and designated beneficiaries. Unaudited estimates of benefits are included if the member is within four years of retirement eligibility.