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Myth vs.Fact-Public Employees Retirement Association of MN Page 4 of 5 2010 Benefit Reforms Pl3nMudihcdlion; ��cnerdl PIA Pullen F. Fire Corrr•clir�ndl Post Retirement Future Increases of 1% Future Increase increases of 1% for 2011 &2012; increases of 1% until funding then CPI up to until funding ratio of 90% 1.5% until funding ratio of 90% ratio of 90% Deferred 1%for future years beginning January 1, 2012 Augmentation 0%for members terminating after December 31,2011 Contribution Rate 0.25%employee 0.2%employee None Increases 0.25%employer 0.3%employer Vesting Five years Phased In from five to ten years of Hired after service; fully vested at ten years 7/1/2010 Refund Interest Lowered from 6 percent to 4 percent beginning 7/1/2011 Reduction in Unfunded 52.8 billion 5625 million S15 million Liabilities" •Source. Mercer rvtoio Actuarial Valuation The expectation that PERA can earn average investment returns of 8.5 percent is unrealistic and should be reduced to around 4 percent,the average of safe investments like government bonds. Prior to the recent recession,the State Board of Investment regularly bested an annual return of 8.5 percent on PERA's assets.Those assets earned 23.3 percent in Fiscal Year 2011.Based on 2011 year-end valuations,SBI's Investments have maintained an annualized return(after paying Investment expenses)of 8.8 percent over the last 20 years,and 10.13 percent over the past 30 years. That's despite two recessions in the past decade. However,under the 2012 Omnibus Pension Bill our earnings assumption was reduced to 8 percent for the next five years, returning to 8.5 In 2017. The bill also calls for a comprehensive study of future earnings potential for the pension funds in 2015 and 2016. If PERA was tied to guaranteed"safe"investments,contribution rates for members and employers would have to increase greatly to compensate for the loss of potential investment income. PERA and other public pension plans invest for the long term because we are in it for the long term. We are not only paying pension benefits today,but will be funding pensions decades from now,and want to invest accordingly. Public retirement systems are hiding the"true"cost of public pensions from taxpayers. Fact:PERA and most other public pension plans are very transparent in their financial and benefit reporting—much more so than many of our critics. Every year,PERA Issues a Comprehensive Annual Financial Report that goes into great detail on every aspect of the Association's Income and expenses,investment selection and performance,and benefit structure. This report must meet stringent reporting requirements set by the State of Minnesota and the Government Accounting Standards Board. For 28 years,our report has received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada. The Association also undergoes an annual audit by the Legislative Auditor's Office. We hope the above Information helps readers better understand some of the accusations recently leveled against PERA and other public pension plans. All we ask is that everyone take the time to study and evaluate all sides of the retirement plan debate before drawing conclusions about the value of public pension plans today. efiala *Nndlv VMion http://www.mnpera.org/index.asp?Type=B_BASIC&SEC={A4C377CF-1748-4FA4-906F... 8/23/2012