Annual Report 2010 | Public Employee Retirement Administration Commission Annual 2010 Report

ANNUAL REPORT 2010 REPORT ANNUAL | PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION COMMISSION COMMISSION RETIREMENT ADMINISTRATION PUBLIC EMPLOYEE ANNUAL 2010 REPORT Commonwealth of Massachusetts | Public Employee Retirement Administration Commission Commonwealth of Massachusetts Public Employee Retirement Administration Commission Five Middlesex Avenue, Suite 304 | Somerville, MA 02145 Phone 617 666 4446 Fax 617 628 4002 TTY 617 591 8917 Web www.mass.gov/perac Annual Report 2010 CONTENTS • Commission Members ii • Falmouth 42 • North Attleboro 83 • Dedication to A. Joseph DeNucci iv • Fitchburg 43 • Northampton 84 • Mission Statement 1 • Framingham 44 • Northbridge 85 • Letter from the Chairman 2 • Franklin Regional 45 • Norwood 86 • Letter from the Executive Director 3 • Gardner 46 • Peabody 87 • Market Shaping Events 6 • Gloucester 47 • PRIM 118 • 2010 Financial Market & • Greater Lawrence 48 • Pittsfield 88 Board Performance Review 8 • Greenfield 49 • Plymouth 89 • Introduction to the Board Profiles 11 • Hampden County Regional 50 • Plymouth County 90 • Composite Investment Profile 12 • Hampshire County 51 • Quincy 91 • Haverhill 52 • Reading 92 Board Profiles • Hingham 53 • Revere 93 • Adams 13 • Holyoke 54 • Salem 94 • Amesbury 14 • Hull 55 • Saugus 95 • Andover 15 • Lawrence 56 • Shrewsbury 96 • Arlington 16 • Leominster 57 • Somerville 97 • Athol 17 • Lexington 58 • Southbridge 98 • Attleboro 18 • Lowell 59 • Springfield 99 • Barnstable County 19 • Lynn 60 • State 100 • Belmont 20 • MHFA 61 • State Teachers 101 • Berkshire County 21 • MWRA 62 • Stoneham 102 • Beverly 22 • Malden 63 • Swampscott 103 • Blue Hills Regional 23 • Marblehead 64 • Taunton 104 • Boston 24 • Marlborough 65 • Wakefield 105 • Braintree 25 • Massport 66 • Waltham 106 • Bristol County 26 • Maynard 67 • Watertown 107 • Brockton 27 • Medford 68 • Webster 108 • Brookline 28 • Melrose 69 • Wellesley 109 • Cambridge 29 • Methuen 70 • West Springfield 110 • Chelsea 30 • Middlesex County 71 • Westfield 111 • Chicopee 31 • Milford 72 • Weymouth 112 • Clinton 32 • Milton 73 • Winchester 113 • Concord 33 • Minuteman Regional 74 • Winthrop 114 • Danvers 34 • Montague 75 • Woburn 115 • Dedham 35 • Natick 76 • Worcester 116 • Dukes County 36 • Needham 77 • Worcester Regional 117 • Easthampton 37 • New Bedford 78 • Essex Regional 38 • Newburyport 79 • Disability Retirement Statistics 119 • Everett 39 • Newton 80 • Investment Vendors 122 • Fairhaven 40 • Norfolk County 81 • PERAC Staff 140 • Fall River 41 • North Adams 82 PERAC ANNUAL REPORT 2010 | i The Honorable Domenic J. F. Russo The Honorable Suzanne M. Bump Chairman Auditor of the Commonwealth Vice Chairman Gregory R. Mennis Robert B. McCarthy Assistant Secretary, Finance and Infrastructure President of the Professional Fire Fighters Executive Office of Administration & Finance of Massachusetts ii | PERAC ANNUAL REPORT 2010 Commission Members James M. Machado Sergeant, Fall River Police Department The Honorable Paul V. Doane Donald R. Marquis Investment Professional Former Town Manager, Arlington PERAC ANNUAL REPORT 2010 | iii Dedication A. JOSEPH DENUCCI This Report is dedicated to former Auditor and PERAC Vice Chairman A. Joseph DeNucci. For 34 years Auditor DeNucci served the people of Massachusetts in various capacities. His personal decency and treatment of people as individuals, not merely faces in the crowd, has made him stand out among his peers. Auditor DeNucci’s leadership in the formation and the subsequent activities of PERAC helped preserve the public pension system for retirees, employees and taxpayers at a time when the basic premises of that system have been under relentless attack. His successor, Auditor Suzanne Bump, spoke for many when she said, “Joe DeNucci has much to be proud of from his long career in public service. Law enforcement and state agencies have embraced the findings and recommendations from thousands of his audits, resulting in better oversight of public programs, the prosecution of numerous criminals and the recovery of millions of dollars in public money. I wish him well and look forward to building on what he has accomplished.” His compassion for those in need and his drive and determination to make a difference in the lives of those less fortunate than himself have been the trademarks of Joseph DeNucci. We at PERAC will miss his steady leadership, his commitment to integrity and his dedication to the working people of the Commonwealth. iv | PERAC ANNUAL REPORT 2010 MISSION STATEMENT The Public Employee Retirement Administration Commission (PERAC) was created for and is dedicated to the oversight, guidance, monitoring, and regulation of the Massachusetts Public Dedication Pension Systems. The professional, prudent, and efficient administration of these systems is the public trust of PERAC and each of the 105 public pension systems for the mutual benefit A. JOSEPH DENUCCI of the public employees, public employers, and citizens of Massachusetts. The stewardship of the Trust Funds for the sole purpose of providing the benefits guaranteed to the public employees qualifying under the plans is the fulfillment of the obligation of the people of the Commonwealth to those who have dedicated their professional careers to the service of the people of the Commonwealth. PERAC ANNUAL REPORT 2010 | 1 Letter from the CHAIRMAN he Public Employee Retirement Administration Since the publication of our last Annual Report, Com- return of 13.67% underscore the fact that we are Commission is pleased to release this 2010 Annual missioner Paul Doane, who served as the investment clearly on the right track. TReport reviewing the status of the Massachusetts appointee of the Governor, has left the Commission. public pension plans. Several changes in format have During his tenure Commissioner Doane offered sage Unfortunately, the cynicism regarding public pension been incorporated this year. We believe that this new advice and insight gleaned from his experience as systems that we have noted in past Annual Reports has, information will assist in a meaningful and comprehen- a legislator, pension administrator and investment if possible, grown deeper. This is not a Massachusetts sive analysis of our pension systems. professional. In spearheading the Commission’s review problem but a national problem. Often it appears of placement agents, Commissioner Doane is largely that policy makers and opinion leaders would rather The 2010 election results brought a major change to responsible for the policy adopted by the Commission paint with a broad brush than objectively recognize the composition of the Commission. After decades to regulate the activity of those marketing products the distinctions between the pension plans of different of public service, 24 of those years as Auditor of the and services to the Boards. We wish him well in his jurisdictions. Massachusetts has modest benefit levels, Commonwealth, Joe DeNucci decided not to seek future endeavors. substantial employee contributions and employing re-election. In the early years of the Commission, government units have been responsible in making the support of Auditor DeNucci ensured that future In last year’s Report I stated, “…we must work adequate appropriations to the pension system. None- success could be built on a sound foundation. During together to make appropriate changes, establish fiscal theless, we are often included in the general indict- his tenure, Deputy Auditors Ken Marchurs and John stability, and ensure the viability of our retirement ment of states with elevated benefit levels, relatively Parsons served with distinction on the Commission as system.” The last year has seen great progress in low employee contributions and often deficient, if not his designees and always reflected Joe’s commitment to achieving those goals. Further statutory amendments irresponsible, governmental unit appropriation levels. integrity, professional excellence and fairness. I speak continued reasonable and responsible reforms, and Within the context of our pension law Massachusetts for all Commissioners and staff, past and present, when the stabilization of the systems’ fiscal condition in the has taken action to address issues of concern. These we offer Joe our deepest thanks and best wishes for wake of 2008 was reflected in actuarial valuations. The facts should dispel the notion that a well-run defined the future. investment performance of the systems contradicted benefit pension system is not sustainable. the dire warnings of critics. The newly elected Auditor, Suzanne Bump, joined the As always, the Commission and staff will use our best Commission for a meeting earlier this year. Commis- For the second year in a row, investment performance efforts to assist the retirement boards in safeguarding sioners and staff welcome Auditor Bump and look of the systems generally exceeded return assumptions the interests of system members and beneficiaries. forward to working with her in the years ahead. Her and the recovery from the disaster of 2008 continued. designee on the Commission, Deputy Auditor Gerry Mc- In spite of this rebound and the excellent long term Sincerely, Donough, has hit the ground running and has already returns attained by the Boards, we continued to hear provided valuable assistance to the Commission with from self-anointed experts asserting that investment his knowledge of the intricacies of labor law and his assumptions should be lowered. experience as a former member of the Teachers’ Retire- ment Board. His participation has been

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