Mo Mo-Mosers Cafr 2016 63

John Watson Executive Director Nick Mestres Chief Finance Officer Missouri State Employees’ Retirement System A Component Unit of the State of Missouri Table of Contents Introductory Section 5 Professional Awards 6 Letter of Transmittal 10 Letter from the Board Chair 11 Board of Trustees 12 Administrative Organization 13 About MOSERS 15 Outside Professional Services Financial Section 17 Independent Auditors’ Report 19 Management Discussion and Analysis Basic Financial Statements 24 Statements of Fiduciary Net Position – Pension Trust Funds 25 Statements of Changes in Fiduciary Net Position – Pension Trust Funds 26 Statements of Net Position – Internal Service Funds 26 Statements of Revenues, Expenses, and Changes in Plan Net Position – Internal Service Funds 27 Statements of Cash Flows – Internal Service Funds 28 Notes to the Financial Statements Required Supplementary Information 52 Schedule of Changes in Employers' Net Position Liability – Pension Trust Funds 54 Schedule of Employer Contributions – Pension Trust Funds 55 Schedule of Annual Money-Weighted Rate of Return on Investments – Pension Trust Funds 56 Notes to the Schedules of Required Supplementary Information – Pension Trust Funds Additional Financial Information 59 Schedules of Investment Expenses – Pension Trust Funds 61 Schedules of Internal Investment Activity Expenses – Pension Trust Funds 62 Schedules of Administrative Expenses – Pension Trust Funds 63 Schedules of Administrative Expenses – Internal Service Funds 64 Schedules of Professional Service Fees 65 Investment Summary – Pension Trust Funds 66 Investment Summary – Internal Service Funds Investment Section 67 Chief Investment Officer’s Report 69 Investment Policy Summary 74 Total Fund Review 77 Schedule of Investment Portfolios by Asset Class 78 Investment Advisors 80 Total Fund – Top Ten Publicly Traded Separate Account Holdings 81 Schedule of Investment Results 82 Investment Manager Fees 84 Beta-Balanced Asset Class Summary 87 Illiquids Asset Class Summary 90 Securities Lending Program 2 Missouri State Employees’ Retirement System / Fiscal Year 2016 Table of Contents Actuarial Section 91 Actuary’s Certification Letter 93 Summary of Actuarial Assumptions 99 Actuarial Asset Value Smoothing 100 Employer Schedule of Funding Progress – Pension Trust Funds 101 Summary of Member Data Included in Valuations 102 Active Members by Attained Age and Years of Service 103 Schedules of Active Member Valuation Data – Last Ten Fiscal Years 104 Retirees and Beneficiaries Added and Removed – Last Ten Fiscal Years 110 Short-Term Solvency Test 111 Analysis of Financial Experience Summary of Plan Provisions 112 Comparison of Plans for General State Employees 114 Comparison of Plans for Legislators 116 Comparison of Plans for Statewide Elected Officials 118 Comparison of Plans for Judges 120 Comparison of Plans for Uniformed Members of the Water Patrol 121 Life Insurance Plans 122 Long-Term Disability (LTD) Plans 122 Changes in Plan Provisions 123 Actuarial Present Values Statistical Section 125 Summary 126 Changes in Net Position – Last Ten Fiscal Years 128 Deductions from Net Position for Benefits and Refunds by Type – Last Ten Fiscal Years 130 Valuation Assets (Smoothed Market) vs. Pension Liabilities Last Ten Fiscal Years – Pension Trust Funds 133 Contribution Rates as a Percent of Payroll – Last Ten Fiscal Years 134 Membership in Retirement Plans – Last Ten Fiscal Years 135 Distribution of Benefit Recipients by Location 136 Benefit Recipients by Type of Retirement and Option Selected 138 Benefits Payable Tabulated by Type of Benefit and by Option 139 Average Monthly Benefit Amounts – Ten Years Ended June 30, 2016 146 Retirees and Beneficiaries Tabulated by Fiscal Year of Retirement 148 Total Benefits Payable June 30, 2016 – Tabulated by Attained Ages of Benefit Recipients Photos appearing in the CAFR were taken by MOSERS staff members Brooke Rowden, Sr. Marketing Technologist and Tracy Upschulte, Sr. Strategic Communications Analyst. Missouri State Employees’ Retirement System / Fiscal Year 2016 3 Mission 4 Missouri State Employees’ Retirement System / Fiscal Year 2016 Introductory Section Introductory “At the time I began my employment, state government had a reputation for job security and good benefits. Twenty-five years later, the employee benefit package has proven to be one of the most valuable reasons for staying. Additionally, I began participating in the deferred compensation plan 20+ years ago. I started saving after attending a deferred compensation seminar and understanding how the plan can work for everyone. When I was younger, I was under the illusion that you had to save millions to retire. Over the years, I learned that you don’t have to be rich, but you do need to plan. Pay yourself first. Whether you deduct monthly from your paycheck or empty your pockets every night into a jar — just start saving something. Then don’t touch it until you retire.” – Tiffany Missouri Veterans Commission (DPS) “Pay yourself first. Whether you deduct monthly from your paycheck or empty your pockets every night into a jar — just start saving something.” Introductory Section 5 Professional Awards 6 Letter of Transmittal 10 Letter from the Board Chair 11 Board of Trustees 12 Administrative Organization 13 About MOSERS 15 Outside Professional Services Introductory Section Professional Awards Certificate of Achievement for Excellence in Financial Reporting MOSERS’ Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015, was awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA). This was the 27th consecutive year that MOSERS has received this prestigious award. The Certificate of Achievement is the highest form of recognition for excellence in state and local government financial reporting. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report (CAFR). The CAFR must satisfy generally accepted accounting principles, applicable legal requirements, and GFOA reporting standards. Public Pension Standards Award MOSERS received the Public Pension Standards Award from the Public Pension Coordinating Council (PPCC) in 2015, in recognition of meeting professional standards for plan design and administration as set forth in the Public Pension Standards. This award is presented by the PPCC, a confederation of the National Association of State Retirement Administrators (NASRA), the National Conference on Public Employee Retirement Systems (NCPERS), and the National Council on Teacher Retirement (NCTR). Missouri State Employees’ Retirement System / Fiscal Year 2016 5 Introductory Section Letter of Transmittal October 14, 2016 The Board of Trustees Missouri State Employees’ Retirement System 907 Wildwood Drive Jefferson City, MO 65109 Dear Board Members: It is my pleasure to submit the 2016 Comprehensive Annual Financial Report (CAFR) of the Missouri State Employees’ Retirement System (MOSERS). This CAFR is a presentation of the financial results for MOSERS within the specific time- frame of the last fiscal year. These financial results provide useful measurements for the evaluation of programs and represent a chronicle of plan status from one year to another. At MOSERS, a strong emphasis is placed on transparency. We believe the production of this report assists in that overall mission. Report Contents and Structure This CAFR is designed to satisfy the reporting requirements of state law as stipulated in Sections 104.480, 104.1006, and 105.661 of the Revised Statutes of Missouri (RSMo), as amended. Management has prepared the basic financial statements of MOSERS and is responsible for the integrity and fairness of the information presented. Some amounts included in the financial statements and elsewhere may be based on estimates and judgments. These estimates and judgments were products of the best business practices available. The accounting policies followed in preparing the basic financial statements conform with U.S. generally accepted accounting principles. Financial information presented throughout the CAFR is consistent with that which is displayed in the basic audited financial statements. Ultimate responsibility for the CAFR and the basic financial statements rests with the board of trustees. The executive director and the MOSERS staff assist board members in fulfilling their responsibilities. Systems of internal controls and supporting procedures are maintained to provide assurances that transactions are authorized, assets are safeguarded, and proper records are maintained. These controls include standards in the hiring and training of employees, the establishment of an organizational structure, and the communication of policies and guidelines throughout the organization. Internal controls are reviewed through internal audit programs and all internal audit reports are submitted to the board of trustees. Williams-Keepers, LLC conducted an independent audit of the basic financial statements in accordance with U.S. generally accepted auditing standards. This audit is described in the Independent Auditors’ Report on page 17 in the Financial Section. Management has provided the external auditors with full and unrestricted access to MOSERS’ staff to discuss their audit and related findings, to facilitate independent validation of the integrity of the plan’s financial reporting, and verify the adequacy of

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