HomeMy WebLinkAboutPublic Employees Retirement Association of Minnesota - Public Financial ReportPERA’s pension contributions from employees and employers are invested in
the Combined Funds. Since these assets normally accumulate for 30 to 40
years, the State Board of Investment’s (SBI) objective is to take advantage
of the long investment time horizon offered by equities and alternative as-
sets in order to meets its actuarial return target and ensure sufficient funds
are available to finance promised benefits at the time of retirement.
The long-term objective of the Combined Funds are:
- Provide returns that are 3 to 5 percentage points greater than
inflation over the latest 20-year period; and
- Outperform a composite market index weighted in a manner
that reflects the actual asset mix of the Combined Funds
over the latest 10-year period.
SBI’s asset allocation policy is consistent with these objectives.
Dear members and stakeholders:
I am pleased to present the Popular Annual Financial Report
(PAFR), a summary of the key measurements of our plans.
The PAFR is based on information contained in PERA’s An-
nual Comprehensive Financial Report (ACFR). The ACFR is
available at https://mnpera.org/financial/annual-comprehen-
sive-financial-report/
The pandemic continues to be a world-wide concern, as it
was last year. However, from a strictly financial perspective,
there is good news to report for fiscal year (FY) 2021.The
most important aspect of PERA’s story in FY2021 is invest-
ment income. PERA’s investments earned a rate of return
greater than 30 percent. The financial condition of PERA’s
plans improved from this strong investment returns.
Not only did the robust investment increase funded levels in
all plans, but PERA realized this return at a particularly oppor-
tune time. PERA’s actuaries determine a reasonable rate of
return on PERA’s investment portfolio. PERA uses this rate
of return as the discount rate for estimating the present value
of future benefit payments or the total pension liability. Other
things being equal, if the return/discount rate goes down, the
estimated liability goes up. Last year, PERA used the statu-
tory estimated rate of return of 7.5 percent to estimate the to-
tal pension liability. This year, the actuaries’ analysis showed
that a rate between 5.71 percent and 6.61 percent would be
more appropriate. PERA’s management decided to use a 6.5
percent return/discount rate for financial reporting purposes
to give a fairer estimate of our financial condition. Manage-
ment’s choice to value the liability using a lower discount rate
increased the estimated total pension liability for our plans.
FY2021’s strong investment earnings more than offset nega-
tive net cash flow and the increased total pension liability from
adopting a lower discount rate for financial reporting. This re-
sulted in increased funded status for all plans.
The General Retirement Employees and Police and Fire
Plans are now funded at their highest level in 20 years (87
percent and 93.7 percent respectively). The Correctional Plan
is funded at the highest level in its history at 101.6 percent.
PERA is in a strong financial position at year end. We realize
we may face future challenges and we will continuously re-
spond to emerging financial and social conditions to ensure
that are plans are sustainable, now and in the future.
Sincerely,
Doug Anderson
Executive Director Public Employees Retirement Association
Pension Trust Funds of the State of Minnesota
60 Empire Drive, Suite 200 | St. Paul, MN 55103
1-800-652-9026 | 651-296-7460 | mnpera.org
Fund Performance by Asset Class
Rates of Return (Annualized)
* Percentages are net of all management fees.
This Popular Annual Financial Report (PAFR) is derived
from the information contained in PERA’s Annual Compre-
hensive Financial Report (ACFR) , but does not include all
funds administered by PERA or certain other information
required to be presented in accordance with Generally Ac-
cepted Accounting Principles. Unlike the ACFR, this report
does not include information about PERA’s Defined Contri-
bution Fund or Statewide Volunteer Firefighter Fund. The
PAFR presents the Financial Net Position to Total Pension
Liability rather than the actuarial funding as required by ac-
counting standards. Also, the PAFR does not include foot-
notes which can be found in the more comprehensive re-
port. For a copy of PERA’s ACFR, visit https://mnpera.org/
financial/annual-comprehensive-financial-report/
About the Popular Annual Financial Report (PAFR)
Popular Annual
Financial Report
For Fiscal Year Ended June 30, 2021
90 YEARS STRONG
A Look to Our Past; A Plan for Our Future
PERA's mission is to administer and promote sustainable retirement plans and provide services that our members value.
PERA's vision: PERA will be a recognized leader in efficient and excellent service delivery and plan management.
About the Combined Fund and Asset Allocation
PENSION TRUST FUNDS OF THE STATE OF MINNESOTA
For more investment information and to view SBI’s Annual Report, visit http://mn.gov/sbi/
A Message from the Executive Director
Public Equity50.0%
Fixed Income
24.3%
Private Markets
25.7%
Asset Allocation
Public Equity
Actual 42.4%15.8%16.0%12.3%8.2%
Benchmark 41.6%15.6%15.6%N/A N/A
Fixed Income
Actual (1.3%)6.8%4.3%4.3%5.1%
Benchmark (2.8%)6.2%N/A N/A N/A
Private Markets
Actual 37.8%14.0%15.3%12.3%12.6%
Benchmark N/A N/A N/A N/A N/A
FY2021 3-Year 5-Year 10-Year 20-Year
Public Equity50.0%
Fixed Income
24.3%
Private Markets25.7%
Asset Allocation
2021 Contribution Rates (percentages applied to pensionable wages)PERA Membership—Defined Benefit Plans
General Employees Police & Fire Correctional Total
Retirees and beneficiaries receiving benefits 112,232 11,656 1,572 125,460
Vested and non-vested terminated employees not yet receiving benefits 147,100 2,725 6,032 155,857
Current, active vested and non-vested employees 149,281 11,705 3,788 164,774
Total 408,613 26,086 11,392 442,899
Changes in Fiduciary Net Position— Defined Benefit Plans (in millions)
General Fund Police & Fire Correctional
Jan. 1, 2020 Member 6.50%11.80%5.93%
Employer 7.50%17.70%8.75%
Effective Date Contributor
Condensed Financial Statements
Fiduciary Net Position— Defined Benefit Plans (in millions)
Public Employees Retirement Association (PERA)
Giving Back to Minnesota
Annual benefits paid to Minnesota residents out of total payments
89 percent of benefit
payments* are made to
Minnesota residents. Out
of $2.3 billion in benefit
payments, $2.1 billion stay
in Minnesota.
$2.1 billion $2.3 billionOUT OF
Financial Net Position to Total Pension Liability
(FY2017 - FY2021)
General Plan | Police & Fire | Correctional Plan
What the numbers meanFunded status measures the dollars a pension fund has received and invested, compared to the pension payments it needs to make. To measure a plan’s funded ratio, the value of assets in a pension fund is divided by the value of promised lifetime benefits. When a pension plan has 100 percent of the money it needs to pay its promised pensions, it is fully funded.
The Statement of Fiduciary Net Postion measures the
resources PERA has available to pay pension benefits
less liabilities owed by PERA to people and businesses
other than members. However, the statement does not
include the actuarially estimated pension liability owed to
plan members.
The Statement of Changes in Fiduciary Net Position
reports the changes to PERA’s net position that happened
during the year.
Government Finance Officers Association is pleased to
announce that Public Employees Retirement Asso-
ciation of Minnesota has received GFOA’s Award for
Outstanding Achievement in Popular Annual Financial
Reporting (PAFR award).
The award represents a significant achievement by the
entity. In order to be eligible for the PAFR award, a
government must also submit its comprehensive annu-
al financial report to GFOA’s Certificate of
Achievement for Excellent in Financial Reporting Pro-
gram and receive the Certificate for the current fiscal
year. Each eligible report is reviewed by judges who
evaluate the report based on the following categories:
reader appeal, understandability, distribution methods,
creativity and other elements.
Award winning PAFR
HIGHLIGHTS:Combined Fiduciary Net Position increased by about $8.6 billion (26.6 percent) from $32.4 billion at FY2020 to about $41 billion at FY2021.
Combined Total Pension Liability increased about $6.4 billion from $39.7 billion at FY2020 to about $46.1 billion at FY2021 (Note: $5.2 billion of the liability change was from adopting a lower rate of return/discrount rate for reporting FY2021 finances).
Net Pension Liability is the Total Pension Lia-bility less Fiduciary Net Position. PERA’s Net Penson Liability decreased by about $2.2 billion from $7.3 billion at FY2020 to about $5.1 billion at FY2021.
About the Financial Statements
Contribution rates
did not change
between FY2020
and FY2021. The
Minnesota State
legislature set
contribution rates.
Assets General Employees Police & Fire Correctional FY2021 Combined Total
FY2020 Combined Total
FY2019 Combined Total
Cash & Receivables $481 $194 $17 $692 $1,445 $966
Investments 28,112 11,211 1,019 40,342 30,957 31,076
Securities Lending Collateral 1,822 726 66 2,614 2,276 2,380
Capital Assets & Other 6 0 0 6 6 6
Total Assets 30,421 12,131 1,102 43,654 34,684 34,428
Liabilities
Accounts Payable 8 7 1 16 12 13
Accrued Compensated Absences 1 0 0 1 1 1
Securities Lending Collateral 1,822 726 66 2,614 2,276 2,380
Bonds Payable 2 0 0 2 3 4
Total Liabilities 1,833 733 67 2,633 2,292 2,398
Total Net Position $28,588 $11,398 $1,035 $41,021 $32,392 $32,030
Additions General Employees Police & Fire Correctional FY2021 Combined Total
FY2020 Combined Total
FY2019 Combined Total
Employer Contributions $525 $201 $19 $745 $722 $709
State Contributions 439 129 13 581 572 548
Member Contributions 16 18 0 34 29 29
Investment Income (Loss)6,713 2,673 238 9,624 1,333 2,208
Total Additions 7,693 3,021 271 10,984 2,656 3,494
Deductions
Retirement Benefits 1,666 593 20 2,279 2,189 2,099
Refunds of Contributions 58 3 2 63 91 71
Administrative Expenses 13 1 1 15 14 15
Total Deductions 1,737 597 23 2,357 2,294 2,185
Increase (Decrease) in Net Position $5,956 $2,424 $248 $8,627 $362 $1,309
For more information, please see PERA’s ACFR
available at mnpera.org
2021 Popular Annual Financial Report | mnpera.org
*Estimate based on June 2021 payments
65%
70%
75%
80%
85%
90%
95%
100%
105%
2017 2018
2019
2020
2021
75.9%80.2%87.0%
85.4%89.3%93.7%
67.9%
98.7%101.6%
FISCAL YEAR
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