FY2010 COMPREHENSIVE ANNUAL FINANCIAL REPORT IOWa public employees’ retirement system A PENSION TRUST FUND OF THE STATE OF IOWA FOR THE FISCAL YEAR ENDED JUNE 30, 2010 I O W A PUBLIC E M PLO Y EES’ RETIREM E NT SYSTEM MEASURED ADJUSTMENTS FOR LONG-TERM SECURITY FY2010 COMPREHENSIVE ANNUAL FINANCIAL REPORT IOWA PUBLIC EMPLOYEEs’ RETIREMENT SYSTEM A PENSION TRUST FUND FOR THE STATE OF IOWA FOR The FISCAL YeAR ENded JUNE 30, 2010 PREPARED BY: IOWA PUBLIC EMPLOYEEs’ RETIREMENT SYSTEM DONNA M. MUELLER CHIEF EXECUTIVE OFFICER Iowa Public Employees’ Retirement System Comprehensive Annual Financial Report 2010 IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM FISCAL YEAR 2010 HIGHLIGHTS MEMBERSHIP: Active Members 165,660 Retired Members* 93,692 CONTRIBUTIONS: Employee $293,471,971 Employer 449,124,413 Service Purchases 12,613,708 DISTRIBUTIONS: Benefits Paid $1,278,555,844 Refunds Paid 41,470,129 INVESTMENTS: Net Investment and Securities Lending Income $2,477,824,094 Investment Rate of Return 13.82% FUNDING: Net Assets Held in Trust for Pension Benefits $19,878,080,628 Ratio of Actuarial Assets to Actuarial Liabilities 81.4% *Unless specifically noted, references to retirees throughout this report include beneficiaries. ii Iowa Public Employees’ Retirement System Comprehensive Annual Financial Report 2010 IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM TABLE OF CONTENTS INTRODUCTION............................................................................................ PAGES 1–24 Professional Awards ............................................................................................................................. 2 Letter of Transmittal ............................................................................................................................. 3 Administration .................................................................................................................................... 15 Investment Board ................................................................................................................................ 17 Benefits Advisory Committee ........................................................................................................... 19 Professional and Consulting Services .............................................................................................. 21 FINANCIAL .................................................................................................. PAGES 25–62 Independent Auditor’s Report .......................................................................................................... 27 Management’s Discussion and Analysis ......................................................................................... 29 Basic Financial Statements ................................................................................................................. 33 Statement of Plan Net Assets ................................................................................................ 33 Statement of Changes in Plan Net Assets ........................................................................... 34 Notes to Financial Statements .............................................................................................. 35 Required Supplementary Information ............................................................................................. 57 Schedule 1—Schedule of Funding Progress ....................................................................... 57 Schedule 2—Schedule of Employer Contributions ........................................................... 58 Other Supplementary Information ................................................................................................... 59 Schedule 1—Investment Income by Specific Source ......................................................... 59 Schedule 2—Schedule of Administrative Expenses .......................................................... 60 Schedule 3—Schedule of Investment Related Expenses ................................................... 61 INVESTMENTS .......................................................................................... PAGES 63–104 Investment Overview ......................................................................................................................... 65 Investment Results .............................................................................................................................. 71 Investment Policy and Goal Statement ............................................................................................ 87 ACTUARIAL ............................................................................................ PAGES 105–124 Actuary’s Certification Letter .......................................................................................................... 107 Principal Valuation Results .............................................................................................................. 114 Actuarial Balance Sheet .................................................................................................................... 115 Solvency Test ..................................................................................................................................... 116 Schedule of Active Member Valuation Data ................................................................................. 117 Retirees and Beneficiaries—Changes in Rolls ............................................................................... 117 Actuarial Assumptions and Methods ............................................................................................ 118 Iowa Public Employees’ Retirement System Comprehensive Annual Financial Report 2010 iii iii IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM STATISTICAL ................................................................................................. PAGES 125–140 Statistical Overview ............................................................................................................................................... 127 Changes in Net Assets ................................................................................................................. 128 Membership Summary ............................................................................................................................. 130 Special Statistics ........................................................................................................................... 130 IPERS Membership by Status ..................................................................................................... 130 Membership by Group ................................................................................................................ 131 Average Benefit Payments for Retirees ..................................................................................... 132 New Retirees by Employer Group ............................................................................................. 134 Schedule of Benefit Payments by Type of Benefit ................................................................... 135 Schedule of Retired Members by Type of Benefit ................................................................... 135 Retired Members by Benefit Option .......................................................................................... 136 Active Membership Statistics ..................................................................................................... 137 Analysis of Change in Active Membership .............................................................................. 137 Principal Participating Employers ............................................................................................. 138 Growth of Net Investment Portfolio Assets .......................................................................................... 139 Investment Returns 1981–2010 ................................................................................................................ 140 PLAN SUMMARY ......................................................................................... PAGES 141–152 Composition ............................................................................................................................................... 143 Membership ............................................................................................................................................... 144 Service Purchases ...................................................................................................................................... 144 Contributions ............................................................................................................................................. 145 Vesting ........................................................................................................................................................ 145 Refunds ....................................................................................................................................................... 145 Benefits ........................................................................................................................................................ 146 IPERS Benefit Payments by Iowa County .............................................................................................. 149 Benefit Payments Summary ....................................................................................................................