Financial and Legislative Update
Messenger
MSRS Board of Directors election results
The MSRS Board of Directors election
results were announced in March. The
Board has two new members, and two
board members were re-elected. The two
new members elected are Wes Skoglund
from the retiree membership and Michael
Keapproth from the Correctional Plan
membership. Allen Hoppe and Michael
Schweyen were re-elected from the General
and Unclassified Plans. The positions are
four-year terms, beginning May 7, 2012 and
ending May 2, 2016.
Allen Hoppe
Hoppe has served on the MSRS board
since 2004. He serves as Senior Manager,
Treasury with the Metropolitan Council
where he has worked for 14 years. Hoppe
has a B.S. and MBA in Finance and has
earned his Chartered Financial Analyst
(CFA) and the banking designation of
Certified Treasury Professional (CTP).
Michael Schweyen
Schweyen has 13 years of state service and
is a District Traffic Engineer with the
Department of Transportation in
Rochester. He has a B.S. in Civil
Engineering from North Dakota State
University. He is a registered Professional
Engineer and Professional Traffic
Operations Engineer. He has worked in the
transportation engineering profession for
25 years.
Wes Skoglund
Wes is a retired DFL State Senator and
Representative who was endorsed by
AFSCME and MAPE in every election. He
was chair of the Judiciary and Financial
Institutions and Insurance committees and
authored over 200 bills on subjects ranging
from pension protection to the control of
sex offenders. He was a Human Resource
management level employee at Control
Data, a teacher for special needs children,
and a Minnesota National Guardsman. He
is a graduate of the University of
Minnesota, Special Olympics coach and
community volunteer. His wife, Linda, is a
MSRS retiree who had a 33-year career with
DEED (Unemployment Department).
Michael Keapproth
Michael has been a correctional officer for
over 27 years with the Department of
Corrections. His education and experience
include: High school graduate, St. Paul
Area T.V.I., Veteran (USN), Correctional
Officer 1984-present, President Local 915
2001-present, chair of C. P. C. 2010present, co-chair C. P. C. 2006-2010, Chair
Unit 8 bargaining 2005-2007, 2011-present
Co-chair Unit 8 2003-2005, 2007-2009.
Newsletter of the Minnesota State Retirement System
“Minnesota is receiving
national recognition for
taking bold and corrective
action in 2010 to reform
our public pension plans.
More importantly, those
changes are working.”
Dave Bergstrom
MSRS
Executive Director
For more information on the board members, visit
our website at www.msrs.state.mn.us
This newsletter can be made available in alternate formats such as Braille, large print, or cassette tape.
Teletypewriter and TDD users call the Minnesota Relay Service at 1-800-627-3529 and ask to be connected to 651-296-2761.
MSRS website to launch new look and features...
Watch for a new look to our
website at www.msrs.state.mn.us
The website, which will launch
late summer, will feature streamlined navigation, interactive
decision-making tools and more.
Inside...
Strong investment returns in
2011 improve MSRS funding
levels......................Page 2
A closer look at public
pension plans.......Page 3
How Minnesota
public pensions
stack up.................Page 3
MSRS Board of
Directors election
results....................Page 4
Spring 2012
Law changes investment
return assumption
the assumed rate of return on investment of
The investment return assumption for the
state’s public pension plans will change from 8.5 pension fund assets the State Board of
Investment (SBI) manages for MSRS. Although
percent to 8 percent starting July 1, 2012. After
the SBI has averaged
five years, the
higher than 8.5 percent in
investment
investment returns—over
return assump10 percent on average
tion will return
since 1980—recent marto 8.5 percent.
ket volatility and lower
This was part of
interest rates have some
the pension bill
people
the Minnesota
questioning whether
Legislature
8.5 percent is too high.
adopted during
Although the financial
this year’s sesturmoil has taken a toll on
sion. The change
pensions throughout the
impacts the
Lock and dam 14 on the upper Mississippi River.
country, MSRS is one of
Minnesota State
the better funded
Retirement
pension plans in
System (MSRS), Public
the country (see
Employees Retirement
inside for more
Association (PERA)
information on
and the Teachers
plan funding).
Retirement
There was
Association (TRA).
discussion about
This change in the
moving the state’s
investment return
public employees
assumption reflects
to a 401(k)-type
the belief that the
retirement plan or
state’s public pension
a hybrid—a complans expect to earn
Upper Saint Anthony Falls dam and waterfall on
bination of tradiless on investments in
Mississippi River in downtown Minneapolis.
tional definedthe short term. The
benefit pension
pension plans also
and a 401(k); however, no major legislative
receive contributions from employers and
changes were passed this year.
employees to help fund the retirement plans.
The funded ratio and asset level of MSRS
The investment assumption rate is important
retirement plans increased significantly since
to public pension plans because lowering the
2009. The increase is from improved investment
rate decreases funding ratios and increases
returns and pension reforms the Legislature
projected liabilities and projected benefit
adopted in 2010. The changes in 2010 lowered
costs, explains MSRS Executive Director
MSRS liabilities about $750 million for the plans
Dave Bergstrom.
it administers.
The investment return assumption reflects
60 Empire Drive, Suite 300
St Paul, MN 55103-3000
PRSRT STD
U S POSTAGE PAID
TWIN CITIES MN
PERMIT NO. 171
Legislative and Financial Update
A closer look at public pensions
Strong investment returns for second
year improves MSRS funding levels
The 23.3 percent investment return for fiscal year 2011 which
ended June 30, had a dramatic positive impact on funding levels
for the retirement plans administered by the Minnesota State
Retirement System (MSRS). This follows a 15.2 percent investment return in 2010. Net assets of the plans grew by $2.6 billion
or 19.7 percent in 2011 for a total of $15.6 billion net assets. These
returns have helped recover from steep losses in 2008-2009.
Funding changes in the last five years
General Plan Funding Level
Year
Funding
Return
2007
98%
18%
2008
88%
-5%
2009
65%
-18%
2010
75%
15%
2011
87%
23%
“So far this fiscal year that ends June 30, 2012, our investment
returns have been flat. However, we are hoping the economic
recovery spurs economic growth,” said MSRS Executive Director
Dave Bergstrom.
When we hear about public pensions, generally the news
articles focus on retirees who receive pensions of
$100,000 per year. To get an accurate picture of what
pension plans actually pay retirees, we need to take a
closer look of what a typical person receives for their
retirement (see related chart). The typical MSRS retiree
receives a monthly $1,436 benefit. Out of 35,000 people
receiving MSRS benefits, only about 30 receive pensions
of $100,000 per year.
The average MSRS retiree
“Although the last ten years of dramatic swings in the stock market
have been challenging, we have taken steps to ensure our funds are
financially stable,” said Bergstrom.
“Over the last five years, employees and employers have increased
contributions, retiree increases have been slowed, and other benefit
changes have been enacted to help improve our funding levels,” he
added. “The financial results show that our efforts are working.
The changes we made to our plans in 2010 have lowered our
liabilities by over $750 million,” Bergstrom explains.
w Retirement age:
63
w Length of career:
24 years
w Annual salary:
$48,000
w Pension:
$1,436/month
In addition, public employees and investment returns
pay 85 percent of the funding for MSRS retirement
plans. Public employer pension contributions, financed
by taxpayers, pay for 15 cents out of every dollar of
pension benefit paid.
“The ‘shared sacrifices’ have increased the stability of our pension
system,” said Bergstrom. “We appreciate that people have stepped
up and helped create a better, more viable retirement system,”
he added.
“Minnesota is receiving national recognition for taking bold and
corrective action in 2010 to reform our public pension plans,”
explains Bergstrom. “More importantly, those changes are
working,” he added.
State Patrol Plan Funding Level
Year
Funding
Return
2007
96%
18%
2008
85%
-5%
2009
62%
-18%
2010
71%
15%
2011
81%
23%
2007
84%
18%
2008
74%
-5%
2009
55%
-18%
“All of the funds showed substantial increases in net assets,”
explained Bergstrom. “All of our funds are financially stable
to pay the promised benefits for many years,” he added.
To download a copy of the 2011 Comprehensive Annual
Financial Report for the Fiscal Year Ended June 30, 2011,
visit www.msrs.state.mn.us, click on General Information, then
Financial Information.
Correctional Plan Funding Level
Year
Funding
Return
Member and employer contributions increased from $625 million
in fiscal year 2010 to $676 million in fiscal year 2011; net investment income was significantly greater in 2011, increasing from
$1.6 billion in 2010 to $2.8 billion in 2011.
2010
61%
15%
How Minnesota public pensions stack up
Employees now contribute about half the cost in Minnesota.
Many states have low or no employee contributions. The
national average is 5 percent for employee and 9.5 percent
for employer, according to Public Fund Survey by the National
Association of State Retirement Administrators (NASRA).
Contribution rates: Minnesota vs. National, 2010
9.5%
5% 5%
2011
71%
23%
5%
Employee
Employer
Public pensions boost Minnesota’s economy
s In 2009, the three statewide public pension plans paid over
165,994 benefit recipients more than $3.4 billion.
s About 90 percent of retirees live and pay taxes in Minnesota.
Retiree spending generates $806 million in federal, state and
local tax revenue in our state.
s Public retiree spending ripples through the economy as one
person’s spending becomes another person’s income. Such
spending supports $5.7 billion in total economic output in
Minnesota.
s This spending supports over 41,000 jobs in Minnesota that
paid $1.9 billion in wages and salaries. Each dollar paid out in
benefits supports $1.68 in economic activity in Minnesota.
Source: National Institute on Retirement Security (NIRS) State-by-State
“Pensionomics 2012: Measuring the Economic Impact of DB Pension
Expenditures” survey, 2012.
MSRS General Plan
Page 2
MSRS Messenger | Legislative and Financial Update
Spring 2012
Spring 2012
National
MSRS Messenger | Legislative and Financial Update
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