HomeMy WebLinkAboutMissouri State Employees' Retirement System - Public Financial ReportM-SERS
Summary Annual Report to Members • Fiscal Year 20212
Message from the Executive Director
It is my pleasure to present MOSERS’ Summary Annual Report to Members, which provides a brief overview of our financial condition as of June 30, 2021. During fiscal year 2021, the Board and staff worked extensively and collaboratively on solutions to ensure the fiscal sustainability of MOSERS for current and future members. I would like to thank our trustees for their dedication and commitment.
The MOSERS investment portfolio generated a time-weighted return of 26.4%, net of fees, for fiscal year 2021. The total fund returned 1.2% more than would have been expected through passive investing in the benchmarks.
Staff completed the transition from the "Old" portfolio allocation to the "New" portfolio allocation at the end of February 2021 in 26 months, 10 months ahead of schedule. The Old portfolio represented approximately 42% of the total fund at the beginning of the fiscal year. We utilized six one-month advancements of the transition, as permitted by policy, in order to complete the transition in February.
To allow for more predicable and stable contributions rates, MOSERS' funding is based upon the actuarial value of assets, which smooths asset gains and losses over a five-year period. As of June 30, 2021, the MSEP was 59.0% pre-funded and the Judicial Plan was 31.1% pre-funded, based on MOSERS' funding valuation.
The General Assembly authorized and the Governor approved the appropriation of $505 million to MOSERS for fiscal year 2022, which will fully fund the Board-certified employer contribution rate.
The theme of this year’s Summary Annual Report to Members is “Long Story Short…Pensions Have Purpose”. This message highlights important aspects of the System. We know public pensions, like MOSERS, are long-term entities that invest over long time horizons and span many generations of membership. Some of our retired membership are highlighted in this report through the sharing of their “six word stories”. These “stories” describe their thoughts on being a MOSERS retiree or retirement in general. This theme also speaks to MOSERS mission statement to “advance the financial security of its members” and the hallmark of all we do. We know our members rely on their benefits now and far into the future. The MOSERS staff will continue to “roll up our sleeves” and work hard for our members, the Board, and all our stakeholders as we move into fiscal year 2022. It is our honor to work for this great state and its citizens.
Respectfully submitted,
Ronda StegmannExecutive Director
This Summary Annual Report to Members is derived from the information contained in MOSERS’ Annual Comprehensive Financial Report
(ACFR) but does not include all funds administered by MOSERS or certain other information required for conformity with Generally Accepted Accounting Principles (GAAP). MOSERS’ financial statements are produced in conformity with GAAP. View the annual report on our website at www.mosers.org. To request an alternative format, please contact MOSERS at (573) 632-6100 or (800) 827-1063. MOSERS is an equal opportunity employer.
Ronda Stegmann Executive Director
Summary Annual Report to Members • Fiscal Year 2021 3
Message From the Board Chairwoman
Dear Members:
On behalf of the MOSERS Board of Trustees, I am pleased to present the MOSERS Annual
Comprehensive Financial Report for the fiscal year ended June 30, 2021. This report is one of MOSERS’ finest examples of collaboration and an organization-wide team effort.
During the year ended June 30, 2021, the Board of Trustees continued its work on behalf of the MOSERS membership. While the global pandemic required MOSERS to modify the way we conduct business, our Board and staff members continued to work on key initiatives over the last fiscal year, some of which included:
•comprehensive review and adoption of MOSERS' Board Rules;
•completing the transition of the Board-adopted investment portfolio while generating a returnof 26.4%, net of fees; and
•maintaining robust communication with our membership during the ever-changing landscapeof fiscal year 2021.
MOSERS was very fortunate to have Board continuity, with minimal turnover, during fiscal year 2021. The MOSERS Board received two new Senate-appointed members when both Senate-appointed members of the Board left the legislature due to term limits. I would like to thank Senator Wallingford and Senator Walsh for their dedicated service as a MOSERS Board Trustee. We welcomed Senator Rizzo and Senator Wieland to the MOSERS Board in 2021. Their participation and perspectives have already added to the Board’s robust discussions and decision-making process.
During my tenure as Board chairwoman, I have witnessed the substantial amount of time and service our trustees have dedicated to MOSERS. I am proud to lead this fine group of fiduciaries in acting in the best interest of our members. As a state employee elected to the MOSERS Board by our active membership, I understand the value of a future MOSERS pension benefit and the role this benefit has in the employers’ recruitment and retention efforts. Total compensation is more than just the dollars received in a paycheck. The ongoing monthly contributions from the MOSERS-covered employers represent a significant financial commitment to our members, their families, their communities, and ultimately the citizens we serve. As we look to fiscal year 2022, the Board in conjunction with staff, will continue to further our core mission of advancing the financial security of our members.
I wish to express my appreciation to you, our members, for your commitment and service to this great state and its citizens. I am honored to serve as one of your representatives on the MOSERS Board.
If you ever have any questions, please contact us at MOSERS, P.O. Box 209, Jefferson City, MO 65102, call us at (800)827-1063, or visit our website at www.mosers.org.
Sincerely,
Crystal Wessing, ChairwomanBoard of Trustees
Crystal WessingBoard Chairwoman
MISSION
MOSERS exists to advance thefinancial security of its members.
VISION
We endeavor to:
Exceed customer expectations
Educate stakeholders
Ensure sound investment practices
Encourage responsible funding of the plan through a commitment to Excellence. Always.
VALUES
Quality • Respect • IntegrityOpenness • Accountability
Summary Annual Report to Members • Fiscal Year 20214
Financial Highlights
Summary Comparative Statements of Fiduciary Net Position(Fiscal Year Ended June 30, 2021)
Year EndedJune 30, 2021
Year EndedJune 30, 2020(as adjusted)*AssetsAdministrative operating cash and equivalents 7,386,658 9,801,690
Receivables 750,600,068 396,473,141
Investments 12,850,390,046 11,463,190,890Capital assets, net of accumulated depreciation 11,070,763 7,530,526
Other assets 0 17,717
Total assets 13,619,447,535 11,877,013,964
Deferred outflow of resources 917,071 899,535
Liabilities
Administrative and other payables 6,903,186 11,021,679
Investment related payables and obligations 3,869,974,406 3,777,012,632
MOSERS investment portfolio liability (MIP)3,953,169 3,481,031
Net OPEB liability 7,682,560 7,695,160
Total liabilities 3,888,513,321 3,799,210,502
Deferred inflow of resources 718,655 465,011
Net positions restricted for pensions $ 9,731,132,630 $ 8,078,237,986
* Prior year comparative amounts have been adjusted to conform to the current year presentation due to the adoption of Governmental Standards Board Statement No. 84.
Summary Comparative Statements of Changes in Fiduciary Net Position(Fiscal Year Ended June 30, 2021)
Year EndedJune 30, 2021
Year EndedJune 30, 2020(as adjusted)AdditionsContributions and premiums*$ 577,738,031 $ 549,163,044
Net investment income 2,077,042,662 408,563,551
Miscellaneous income 560,195 618,027
Total additions 2,655,340,888 958,344,622
Deductions
Benefit payments 953,049,815 904,429,822
Premium disbursements 31,597,820 32,549,567
Service transfers and refunds 8,425,724 9,041,675
Administrative expenses 9,372,885 8,952,734
Total deductions 1,002,446,244 954,973,798
Net increase (decrease)1,652,894,644 3,370,824
Net position beginning of year 8,078,237,986 8,074,867,162
Net positions restricted for pensions $ 9,731,132,630 $ 8,078,237,986
* Includes employee and employer contributions, purchases of service credit, and service transfers.
Net Position The Summary Comparative Statements of Fiduciary Net Position reports the pension plan’s financial position as of the end of the fiscal year.
The Summary Comparative Statements of Changes in Fiduciary Net Position reports MOSERS' contributions, benefit expenses, investment income and expenses.
$2.1 BillionInvestment Income
$502 MillionEmployer Contributions
$39 MillionEmployee Contributions
$953 MillionBenefit Payments
$1,195Average Monthly Benefit Amount forFY21 MSEP Retirees
52,830Retirees & Beneficiaries
$9.7 BillionNet Trust Fund AssetsFi
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•MOSERS provides a modestbenefit to those who servedthe public during theirworking years to help meettheir basic needs.
•Our neighbors, friends, andfamily spend their pensionbenefits in our communities.Nearly 90% of retirees andtheir dependents remainin Missouri, spendingretirement dollars onhousing, goods, andservices. Each $1 paidin benefits has $1.50 ineconomic impact.*
•Retirees had more than$17.2 million in state taxesand $69.7 million in federaltaxes withheld from theirbenefit payments in fiscalyear 2021.
$
* National Institute on Retirement Security, Pensionomics 2021
Summary Annual Report to Members • Fiscal Year 2021 5
21 Alaska 23 Hawaii 1 Army Post Office1 Argentina2 Australia1 Brazil 12 Canada1 Costa Rica
June 30, 2021 MSEP*Judicial Plan**
Active MembersAverage age 45.9 55.5Average years of service 11.0 10.8Average annual salary $45,809 $150,793
Retired Members & BeneficiariesAverage age 71.1 76.8Average annual benefit $16,117 $69,697
Member Data
Years Credited Service Average Monthly Benefit Average Final Average Salary Number of Retirees
<5 $ 526 $ 5,705 9 5-10 353 2,763 481
11-15 624 3,054 456
16-20 966 3,337 390
21-25 1,420 3,798 568
26-30 1,952 4,257 464
31+2,554 4,651 207
All Members*1,195 3,561 2,575
* Includes MSEP, MSEP 2011, and MSEP 2000 members, but does not include Judicial Plan and Judicial Plan 2011 members.
Members Retired During Fiscal Year 2021
1 Czech Republic1 Ecuador1 Germany 1 Guam1 Hong Kong1 India
2 Ireland1 Israel 3 Italy1 Latvia1 Mexico 1 Marshall Islands1 Northern Mariana Islands
3 Puerto Rico 1 Philippines 1 Spain 2 Sweden 2 Thailand 1 The Netherlands5 United Kingdom5 Virgin Islands
Membership
* Includes MSEP, MSEP 2011, and MSEP 2000 members.** Includes Judicial Plan and Judicial Plan 2011 members.
Benefit Recipients by Location
Summary Annual Report to Members • Fiscal Year 20216
Total Fund Actual Return vs. Benchmark Return(As a Percentage of the Total Fund)
Actual Policy*
26.4
11.5
9.1 7.3
25.2
9.4
6.9 6.6
0%
5%
10%
15%
20%
25%
30%
20 Year15 Year10 Year5 Year3 Year1 Year
6.0 6.9 6.2 7.2
Investments
Investment Growth It takes a long time to grow defined benefit pension assets. MOSERS' first investment transaction occurred in 1957, when a single outside advisor placed $100,000 in a 90-day Treasury Bill on behalf of participants. It took nearly 30 years for the System’s investments to reach the $1 billion mark. As reflected in the graph (top right), the investment portfolio, as of June 30, 2021, was $9.7 billion.
Fund Allocation & RiskMarket volatility is what investors traditionally consider to be the risk of investing. To protect against this risk, our investment portfolio is diversified across numerous asset classes and investment strategies.
The percentage of the total investment portfolio by specific asset class as of June 30, 2021, is reflected in the graphs (middle right). The asset allocation is built on the belief that diversification is critical in achieving consistent, long-term risk-adjusted investment returns.
Investment Performance vs. Benchmark Return The policy benchmark provides a point of comparison when assessing the investment performance of the total fund. By comparing the policy benchmark return to the total fund return, we can determine how the MOSERS investment team performed on a comparative basis over a given time period. Value is added when the total fund return exceeds the policy benchmark. The policy benchmark also provides guidance for staff as well as other stakeholders of the fund through establishment of concrete investment goals. Additionally, the policy benchmark establishes the Board’s long-term view regarding investments, which puts into perspective any reaction, or over-reaction, to short-term market conditions. Returns for the total fund verses these benchmarks are displayed in the corresponding graph (lower right).
Total Fund Growth (Billions)
$0
$2
$4
$6
$8
$10
2021201020001990198019701957
*As of June 30, 2021, the total fund policy benchmark was comprised of the following components: 45% total growth policy, 35% total income policy, 40% total inflation hedgepolicy and 20% total absolute return policy. Policy asset allocations total 140% of the total portfolio value because the portfolio is leveraged by 40%
All policy return components are adjusted for financing cost associated with the program.
Total Fund Allocation | Policy vs. Actual by Sub-Asset Class (As a Percentage of the Total Fund)
Actual Policy
45.1
31.9
39.9
19.3
45.0
35.0
40.0
20.0
0%
10%
20%
30%
40%
50%
Absolute ReturnInflation HedgeIncomeGrowth
Summary Annual Report to Members • Fiscal Year 2021 7
Funded StatusIn order to help ensure your benefits are properly funded, MOSERS contracts with an outside actuarial firm to perform an annual actuarial valuation which determines the funded status of the plans at year end and the contribution rates needed to adequately fund the System in the future. The percentages shown in the bar chart indicate the extent to which the System was funded as of a given year end.
Employers contribute the actuarially determined contribution that, when combined with current assets and expected future investment returns, will be sufficient to meet the current and future assumed financial obligations of the System.
Through a history of reasonable benefit levels, mandatory participation, actuarially determined employer contributions, and professionally managed investments, MOSERS benefits continue to be secure.
Plan Revenue
MOSERS is an advance-funded retirement
system. Unlike “pay-as-you-go” plans,
employer and employee contributions plus
investment earnings are accumulated and
professionally managed during employees’
careers, and paid out over their retirement
years. Over the long-term, the largest
contributor to accumulated plan assets is
investment earnings, which accounts for 61%
of the assets in the MOSERS Trust Fund.
MSEP Retirement Funding
$0
$3
$6
$9
$12
$15 Accrued Liabilities
Valuation Assets
2021202020192018201720162015201420132012
Bi
l
l
i
o
n
s
Percent Funded
MSEP Actuarial Valuation of Assets vs. Pension Liabilities
73.2%72.7%75.1%75.0%69.6%67.5%64.9%62.9% 61.1% 59.0%
Pension reform in 2010, known as MSEP 2011, works to stabilize plan funding, retains the defined benefit (DB) structure, and provides sustainability for future generations. As of June 30, 2021, a total of 52.2% of active employees are in the MSEP 2011.
InvestmentReturn
61%
EmployerContributions
2%Employee
Contributions
37%
Active State Employees by Plan
MSEP 2000MSEP MSEP 2011
0
5,000
10,000
15,000
20,000
25,000
20212020201920182017
A few key components used to calculate the employer contribution rate and the plan's funded ratio are the assumed rate of return on investments and the adoption of mortality tables relative to members’ life expectancy. Both of these inputs are set using realistic expectations in order to appropriately fund the plan over time.
During the last experience study, the Board approved updated mortality tables in recognition of longer life expectancy. This action, along with other recommendations adopted from the experience study, increased the fiscal year 2023 employer contribution rate by approximately 1.9% of payroll.
Additionally, the Board has systematically reduced the MOSERS investment return assumption from 7.5% in 2017 to the current assumption of 6.95% in 2020. This movement was in recognition of lower capital market expectations. This calculated reduction in the investment return assumption has resulted in an increased employer contribution rate and lower funded ratio for the MSEP.
The prudent actions mentioned above, while increasing the employer contribution rate and decreasing in the plan's funded ratio in the near-term, will work to ensure the long-term sustainability of MOSERS.
Summary Annual Report to Members • Fiscal Year 20218
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 MOSERS for its Popular Annual Financial Report for fiscal year 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, whose contents 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 one year only. MOSERS has received this award for 26 consecutive years (fiscal years ended 1995 through 2020). We believe our current report continues conform to the Popular Financial Reporting requirements, and we are submitting it to the GFOA
to determine its eligibility for another Award.
Awards
Board of Trusteesas of June 30, 2021
•Crystal Wessing - Chairwoman
•Gary Metzger - Vice Chair
•Representative Rusty Black
•Gary Findlay
•Treasurer Scott Fitzpatrick
•Jenny Jacobs
•Joe Keifer
•Senator John Rizzo
•Commissioner Sarah Steelman
•Senator Paul Wieland
•Representative John Wiemann
Visit us online at www.mosers.org or email us at mosers@mosers.org
In an effort to provide information more quickly about actions taken by the MOSERS Board of Trustees, look for "A Moment with MOSERS" video updates in your email or online.
Benefit counselors are a valuable source for information regarding your benefits. Call to speak with a benefit counselor or to make an appointment.
Want to Know More?
Office HoursMonday - Friday8:00 a.m. - 12:00 p.m.1:00 p.m. - 4:30 p.m.
Phone (573) 632-6100(800) 827-1063
Executive Staff
•Ronda StegmannExecutive Director
•Lori WoratzeckDeputy Executive Director – OperationsChief Financial Officer
•Shannon DavidsonDeputy Executive Director – InvestmentsChief Investment Officer
Mailing AddressPO Box 209 Jefferson City, MO 65102-0209
Visit us at 907 Wildwood Drive