Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2015 photo by Jonathunder - PublicPublic EmployeesEmployees RetirementRetirement Association Duluth Aerial Lift Bridge - Association ofof MinnesotaMinnesota PensionPension TrustTrust FundsFunds ofof thethe StateState ofof MinnesotaMinnesota 2015 Comprehensive Financial Report This page left blank intentionally. COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2015 of the State of Minnesota Public Employees Retirement Association of Minnesota 84 Years of Service to Minnesota's Public Employees Board of Trustees Don Rambow — Board President, Appointed Cities Representative Kathryn A. Green — Board Vice President, Appointed School Board Representative Rebecca Otto — State Auditor Ross Arneson — Elected Retiree/Disabilitant Representative Paul Bourgeous — Elected General/Correctional Membership Representative Mary Falk — Appointed General Public Representative Leigh Lenzmeier — Appointed County Representative David Metusalem— Elected Police & Fire Representative Thomas Stanley— Elected General/Correctional Membership Representative Lori Volz — Elected General/Correctional Membership Representative Lawrence Ward — Appointed Retired Annuitant Representative Executive Director Doug Anderson Minnesota: Land of 20,000 Report prepared by: Bridges Finance and Education Staff Not only is Minnesota David DeJonge — Assistant Executive Director home to thousands of David Andrews — Accounting Director lakes, streams, and rivers, but also to thousands of Carrie Dittmer — Accounting Officer bridges, many of them historic and/or works of art. Jim Riebe — Accounting Officer Our cover features the Aerial Lift Bridge in Duluth, Takara Archer — Accounting Officer photographed by Jonathunder and posted at John Paulson — Programs Administrator Wikimedia Commons. Debra Otto — Programs Administrator The cover pages for each section of the CAFR fea- tures other notable Minnesota bridges. All these Retirement Systems of Minnesota Building bridges span some obstacle, just as PERA benefits 60 Empire Drive, Suite 200 provide the financial bridge necessary for many of St. Paul, Minnesota 55103-2088 our members to reach a satisfying retirement. 651-296-7460 • www.mnpera.org Member of Government Finance Officers Association of the United States and Canada Table of Contents Page Introductory Section Achievement Awards ............................................................ 3 President's Report .............................................................. 4 Letter of Transmittal ............................................................ 5 Administrative Organization ......................................................10 Board of Trustees ..............................................................11 Retirement System Plan Summary .................................................12 Financial Section Independent Auditor's Report ....................................................17 Management Discussion and Analysis ..............................................19 Basic Financial Statements: Statement of Fiduciary Net Position.............................................24 Statement of Changes in Fiduciary Net Position ...................................26 Notes to the Financial Statements ..............................................28 Required Supplementary Information: Schedule of Changes in Net Pension Liabilities and Related Ratios ....................42 Schedule of Contributions from Employers and Nonemployers ......................44 Notes to Schedule of Contributions ............................................45 Schedule of Investment Returns ...............................................45 Supporting Schedules Schedule of Changes in Assets of Agency Fund....................................45 Schedule of Investment Expenses/Schedule of Payments to Consultants . .46 Schedule of Administrative Expenses ...........................................47 Investment Section Investment Report..............................................................49 Investment Results . .50 Asset Allocation ................................................................51 List of Largest Assets Held........................................................52 Investment Summary at Fair Value .................................................53 Fair Value of Investments ........................................................54 Schedule of Investment Fees .....................................................55 Actuarial Section Actuary's Certification Letter ......................................................57 Summary of Actuarial Assumptions and Methods .....................................59 Sample Annual Rates Per 10,000 Employees .........................................63 Schedule of Funding Progress ....................................................64 Solvency Test ..................................................................65 Schedule of Active Member Valuation Data ..........................................66 Schedule of Retirees and Beneficiaries..............................................68 Determination of Contribution Sufficiency ..........................................70 Determination of Actuarial Value of Assets...........................................72 Schedule of Changes in Unfunded Actuarial Accrued Liabilities ..........................73 Statistical Section Introduction ..................................................................75 Schedule of Changes in Fiduciary Net Position .......................................76 Benefits and Refunds by Type.....................................................80 Statewide Volunteer Firefighter Retirement Plan ......................................82 Revenues and Expenses .........................................................84 Active Members by Age and Service ................................................85 Summary of Membership ........................................................86 Retirements by Retirement Date...................................................87 Schedule of New Retirees and Initial Benefit Paid.....................................88 Schedule of Benefit Recipients by Type .............................................91 Retirees by Age ................................................................94 PERA Annuitant Residency .......................................................95 Principal Participating Employers ..................................................97 Participating Employers . .98 Public Employees Retirement Association 2 of Minnesota Introductory Section Achievement Awards President's Report Letter of Transmittal Administrative Organization Board of Trustees Retirement System Plan Summary Soo Line High Bridge, Stillwater - Photo by Elkman - 2015 Comprehensive Financial Report This page left blank intentionally. Achievement Awards IIntroductoryntroductory SectionSection pcc P The Public Pension Coordinating Council recently recognized PERA for meeting its professional standards for the adminis- tration of public retirement systems. FOA G The Government Finance Officers Association (GFOA) recognizes public retirement systems that meet its rigorous reporting standards with its annual Certificate of Achievement for Excellence in Financial Reporting. It is the high- est form of recognition for accounting and financial reporting in the public pension sector. PERA received this award for our 2014 Comprehensive Annual Financial Report, the 30th time we have been so honored. Public Employees Retirement Association of Minnesota 3 President’s Report Public Employees Retirement Association of Minnesota 60 Empire Drive, Suite 200 Saint Paul, Minnesota 55103-2088 Member Information Services: 651-296-7460 or 1-800-652-9026 Employer Response Lines: 651-296-3636 or 1-888-892-7372 PERA Fax Number: 651-297-2547 PERA Website: www.mnpera.org December 23, 2015 Don Rambow Board President Dear Members, Annuitants, Beneficiaries and Governmental Employers: As trustees of the The Public Employees Retirement Association (PERA) June 30, 2015 association, our main Comprehensive Annual Financial Report is respectfully submitted. fiduciary responsibility Responsibility for the accuracy and completeness of the report rests with PERA. is the preservation and PERA’s net assets at fair market value exceed $26.5 billion on June 30, 2015. safety of the PERA’s assets. It is the trust- PERA’s Executive Director retired in January, 2015, resulting in a ten month ee’s fiduciary duty to search for a qualified replacement. I am excited to report that the national ensure the protection search concluded with the appointment of an Executive Director who has over and furtherance of the 25 years of actuarial experience. interests of our mem- bers, annuitants, and As mandated by the Governmental Accounting Standard Board (GASB), beneficiaries. We rou- PERA reassigned significant resources to prepare for the implementation of tinely meet with our GASB 68. PERA staff prepared numerous online training courses and conduct- actuarial consultant ed numerous webinars related to how implementation of GASB 68 will impact to keep abreast of the the local government’s financial statements. Monthly newsletters related to the current status of the reporting impact of GASB 68 were distributed to local government entities. funds we govern and to study factors that The new GASB reporting requirements are complex and will significantly could have an impact impact local governments’ financial statements.