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Myth vs. Fact-Public Employees Retirement Association of MN Page 3 of 5 In addition,legislation in 2010 was crafted to ensure pensions are adequately funded decades into the future. As an example,our actuaries placed the Coordinated Plan at 75 percent funded at the end of Fiscal Year 2011,5 percent higher than two years before. (2011 PERA Comprehensive Financial Report) PERA and other public pension plans are hiding the true scope of their future liabilities because they don't report their level of funding based on true market value. Fact: Following the market crash of 2008-2009,critics of PERA and other public pension plans pointed to the huge funding deficits of the plans based on the market value of the assets held by the funds. PERA and most other pension plans smooth the value of assets held over a five-year time span.This is called the actuarial smoothing of asset values. It counteracts much of the short- term volatility of the markets,providing a clearer picture of long-term trends. As you can see from the charts below,our funding ratios have rebounded faster on a market value basis than they have using the actuarial smoothing method we employ. In fact,those funding ratios today are actually higher based on market value—the same valuation method critics were urging be used two years ago.(2007-2011 PERA Comprehensive Annual Financial Report) PERA General Plan Funding History Funding on Actuarial Value Funding on Market Value 13 3'+i 73 6{i 76.4% /5 2?4 77�� , 700% 720% ih,3;; 1 51 a°s Year 7007 7008 2009 2010 2011 Year 7001 200E 2009 2010 2011 Return 18 3%; •5% 18 8% 15 2% 733% fleirirn 183% •5% 18.8% 35 2% 39 2% PERA Police & Fire Plan Funding History Funding on Actuarial Value Funding on Market Value 91.7% q/-r: 33•I' 170,, 80. ,...1, 33 2', t 7 , Year 1007 700E 2009 7010 2011 Year 7007 2008 2009 2010 2031 Return 1R3% •5% 16a% 152% 233% Return 383% S% 18 8% 152% 23.3% Myth:Public employees automatically receive a cost-of-living increase in their pensions every year. While retirees do receive annual adjustments in their pensions,the annual increase is 1 percent until PERA's retirement plans achieve 90 percent funding(up to1.5%,based on inflation for P&P members). Under current law,even when the plans reach 90 percent funding,the annual increase will be a flat 2.5 percent—still slightly below the rate of Inflation over the last 20 years. (Omnibus Pension 9111,2010) If something isn't done now,the pension liability for the taxpayer will only get bigger. Fact: Something has been done. Lost in much of the debate over public pensions in Minnesota is the monumental legislation passed in 2010. The Omnibus Pension Bill lowered PERA's future liabilities by$3.44 billion($9 billion for all three retirement systems)and is already having a profound impact on our funding levels(see above). Approximately 77 percent of those savings came through benefit adjustments,both for active members and retirees. http://www.mnpera.org/index.asp?Type=B_BASIC&SEC={A4C377CF-1748-4FA4-906F... 8/23/2012