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Comprehensive annual financial report PDF

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ENTS COUECTIOM 2 > 2007 STAlt LIBRARY E. 6th AVE. HELENA.-MONTANA 59620 (Pu6[ic (Empfoyees ^tirement (Boarcf Ji Component Vnit ofthe State ofMontana CompreHensive J4.nnuaC ^inanciaC (Report for tfiefiscaCyear endedJune 30, 2006 MontanaStateLibrary 3 0864 1003 9487 6 STATE OF MONTANA Public Employees' Retirement Board A Component Unit ofthe State ofMontana Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 Public Employees' Retirement System - Defined Benefit Retirement Plan Judges' Retirement System Highway Patrol Officers' Retirement System Sheriffs' Retirement System Game Wardens' and Peace Officers' Retirement System Municipal Police Officers' Retirement System Firefighters' Unified Retirement System Volunteer Firefighters' Compensation Act Public Employees' Retirement System - Defined Contribution Retirement Plan Deferred Compensation (457) Plan Prepared By: The Fiscal Services Bureau Public Employee Retirement Administration 100 North Park, Suite 200 ~ P O Box 200131 MT Helena, 59620-0131 (406)444-3154 1 Table of Contents Introductory Section LetterofTransmittal 5 Public Employees' Retirement Board 11 Montana Public Employee Retirement Administration Organizational Chart 12 Financial Section Independent Auditor's Report I3 Management's Discussion & Analysis 15 Basic Financial Statements: StatementofFiduciarySetAssets -Pension TrustFunds 30 (Thenotes to thefinancialstatementsare an integralpartofthis statement) StatementofChanges in Fiduciary-NetAssets -Pension Trust Funds 32 (The notes to thefinancialstatements arean integralpartofthisstatement) Notes to the FinancialStatements 34 Required Supplementary Information: Schedule ofFunding Progress 78 Schedule ofEmployer Contributions and Other Contributing Entities 80 Notes to the Required Supplementary Information 82 Supporting Schedules: Schedule ofAdministrative Expenses 85 Schedule ofInvestment Expenses 86 Schedule ofConsultants 87 Detail ofFiduciary Net Assets (PERS-DBRP, PERS-DBEd) 88 Detail ofChanges in Fiduciary Net Assets (PERS-DBRP, PERS- DBEd) 89 Detail ofFiduciary Net Assets (PERS-DCRP, PERS-DCEd and DC Disability) 90 Detail ofChanges in Fiduciary Net Assets (PERS-DCRP, PERS-DCEd and DC Disability) 90 Investment Section Report on Investment Activity 91 Rates ofReturn by Asset Class 92 Schedules ofAsset Mix 96 Schedule ofLargest Holdings 104 Investment Summary 108 Actuarial Section Actuary's Certification 1 1 Summary ofActuarial Assumptions and Methods 1 13 Schedule ofActive Member Valuation Data 116 Schedule ofActive MemberComposition 1 18 Schedule ofRetirants and Beneficiaries Added to and Removed from Rolls 120 Solvency Test 122 Summary ofActuarial (Gain)/Loss by Source 124 Summary ofDefined Benefit Plan Provisions 128 Statistical Section Summary ofStatistical Data 145 Changes in Net Assets 146 History ofActuarial Accrued Liabilities 153 Schedule ofFairValues by Type ofInvestment 156 Schedule ofContribution Rate History 161 Schedule ofBenefit Expenses by Type 164 Schedule ofDistributions Processed 168 Schedule ofRetired Members by Type ofBenefit 170 Distribution ofDefined Benefit Recipients by Location 176 Average Benefit Payments 178 Schedule ofAverage Monthly Benefit Payments, All Retirees 186 Principal Participating Employers 188 Schedule ofParticipating Employers 192 INTRODUCTORY SECTION Mission Statement oftfie TTK^B 'The Montana TuBCic TrnpCoyees' 'Retire- ment "BoarcC wiCCficfuciariaCCy adminis- ter its retirementjfCans ancCtrustfund's, acting in tfie Best interest of tfie mem- and Bers Beneficiaries. Mission Statement of tfie MTTJUl 'The Montana TuBCic TmpCoyee 'Retire- ment JAdministration wiCC efficientCy jyrovide quaCity Benefits, education and service to heCp our jyCan memBers and Beneficiaries achieve a quaCity retire- ment. MonlanaPERB ComprehensiveAnnualFinancial 's Tfie Marcus DaCy Mansion CocatecCnear J-famiCton, MT. Marcus DaCy, an enterjjrising Irisfi immigrant,j)urchased tfie JAntliony Cfiaffin fwmesteacCin 1886 to serve as fiis famiCy's summer residence. In 1896 fie Lmift tfie Queen JAnne styfe Victorian mansion wfiicfi tdefamify referrecCto as 'Riverside. In 1910 tfie mansion was renovatedto The Marcus VaCyMansion itspresent Qeorgian- 'Photocourtesyof"DannieSexton/'TraveCMontana 'RevivaCstyfe. Tfie Vafy mansion fias over 56 stunning rooms, witfi 25 bedrooms, 15 Bathrooms, and 7firej)faces—5 of wfiicfi have importedItafian marBfe. The three story, 24,000-squarefoot mansion situatedon 50 treedacres is in the heart ofthe 'Bitterroot Vaffey. 'The "Back Stairs Photocourtesyoj the DalyMansion Tfie JArBor "Photocourtesyofthe 'DaCyMansion The living "Room PhotocourtesyofDonnieSexton/'TravefMontana Digitized by the Internet Archive in 2010 with funding from IVIontana State Library http://www.archive.org/details/comprehensiveann2006mont PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION BRIANSCHWEITZER mpera.mt.gov. GOVERNOR OF MONTANA STATE HELENA(406)444-3154 TOLLFREE(877)275-7372 FAX(406)444-5428 lOON.PARK,SUITE200 POBOX200131 HELENA,MT 59620-0131 November 28, 2006 The Honorable Brian Schweitzer Governor ofMontana Room 204, State Capitol PO Box 200801 MI Helena, 59620-0801 Dear Governor Schweitzer: The Public Employees' Retirement Board (PERB) and its staff, the Montana Public Employee Retirement Administration (MPERA), are pleased to submit this Comprehensive Annual Fi- nancial Report (CAFR) for the fiscal year ended June 30, 2006, in accordance with 19-2-407, Montana Code Annotated. The purpose ofthis letter is to introduce the basic financial state- ments and provide an analytical overview ofthe trust funds' financial activities. The financial information presented in this report is the responsibility of the management of Montana Public Employee Retirement Administration and sufficient internal accounting con- trols exist to provide reasonable assurance regarding the safekeeping ofassets and fair presen- tation ofthe financial statements, supporting schedules and statistical tables. This CAFR was prepared in conformance with the principles of governmental accounting and reporting set forth by the Governmental Accounting Standards Board, including the Management's Discus- sion and Analysis (MD&A). Defined benefit and defined contribution transactions are re- ported on the accrual basis ofaccounting. The Management Discussion & Analysis (MD&A) beginning on page 15, is a discussion, by management, ofthe financial position ofthe retire- ment plans. It provides an overview and analysis ofthe plans' basic financial statements. This MD&A letter oftransmittal is intended to complement the and the two should be read in con- junction. Organizational Structure and Report Contents The PERB is a discretely presented component unit Pension Trust Fund ofthe State ofMon- tana financial reporting entity. For this reason, the financial statements contained in this report are also included in the State of Montana's Comprehensive Annual Financial Report. Fiduci- ary responsibility for the systems rests with the PERB. which consists ofseven members, ap- pointed by the Governor. The members are assigned five-year, staggered tenns. The Board is required to approve a final budget before the beginning ofthe fiscal year. The management of MPERA develops the budget for all plans administered and presents it to the Board. As gov- erned by statute, the Board's defined benefit administrative expenses may not exceed 1.5% of •ANEQUALOPPORTUNITYEMPLOYER' INTRODUCTORY SECTION the total defined benefit plan retirement benefits paid. Costs for the Board to administer the defined contribution plans are included as part of the administrative expenses of the plans. The budget is monitored throughout the year and quarterly updates are provided. The Public Employees' Retirement Board administers ten separate retirement plans, each reported in this CAFR. They include the Public Employees' Retirement System-Defined Benefit Retirement Plan (in its 62"'' year of operation) and Public Employees Retirement ' System-Defined Contribution Retirement Plan, Judges Retirement System, Highway Patrol ' Officers ' Retirement System, Sherifi's ' Retirement System, Game Wardens' and Peace Offi- cers' Retirement System, Municipal Police Officers Retirement System. Firefighters Uni- ' ' fied Retirement System, Volunteer Firefighters Compensation Act and the Deferred Com- ' pensation (457) Plan. The CAFR is divided into the following five sections: • an Introductory Section, which contains the table of contents, this letter of transmittal and administrative organization; • a Financial Section, which contains the report ofthe Independent Auditors, the Manage- ment's Discussion and Analysis, the financial statements of the PERB. the notes to the financial statements, certain required supplementary information and supporting sched- ules ofadministrative expenses, investment expenses and payments to consultants; • an Investment Section, which contains a report on investment activity, investment poli- cies, investment results and various investment schedules; • an Actuarial Section, which contains the Actuary's Certification Letter and the results of the latest actuarial valuation; and, • a StatisticalSection, which includes significant data pertaining to the plans. The pages that follow report the facts and figures that arc the result ofdedicated work, new initiatives, improved processes and continuing efforts made to meet the needs ofour custom- ers. We trust that you and the members of the plans will find this CAFR helpful in under- standing the retirement plans. Economic Condition and Outlook The economic outlook of the plans is based primarily upon investment earnings. For 2006, the PERS-DBRP experienced a 9.07 percent fair value rate ofreturn, for the last three years an average annualized rate of return of 10.19 percent and for the last five years an average annualized rate ofreturn of5.76 percent. The plans are required by law to be maintained on an actuarially sound basis thus protecting participants' ftiture benefits. The PERB contracts with consultants for professional services, which are essential to the effective and efficient operation of the plans. A listing of consultants the PERB has con- tracted with can be found on page 87. The investments of the pension trust funds are governed, primarily, by an investment stan- dard known as the "prudent expert principle." The prudent expert principle is constitution- ally and statutorily mandated and establishes a standard for all fiduciaries, which includes 5 MontanaPERB's ComprehensiveAnnualFinancial

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