HomeMy Public PortalAbout2018 Audited Financials
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
Contents
Page
Independent Auditors’ Report........................................................................ 1 - 2
Management’s Discussion And Analysis ..................................................... 3 - 13
Financial Statements
Statements of Fiduciary Net Position ..............................................................14
Statements of Changes in Fiduciary Net Position ............................................15
Notes to Financial Statements .................................................................. 16 - 31
Required Supplementary Information Under GASB Statement No. 67
Schedule of Changes in Net Pension Liability ................................................32
Schedule of Employer Contributions ...............................................................33
Actuarial Methods and Assumptions Used ......................................................34
Schedule of Annual Money-Weighted Rate of Return on Investments ...........35
Statistical Section (Unaudited)
Performance and Net Position Value ...............................................................36
Revenues by Source and Total Employer Contributions .................................37
Expenses by Type and Total Benefit Payments ...............................................38
Member Count and Total Benefit Recipients ..................................................39
Top Ten Holdings by Investment Manager and Percentage Distribution........40
Schedule of Investment Manager and Advisor Fees ........................................41
Page 1
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
Report on the Financial Statements
We have audited the accompanying financial statements of The Metropolitan St. Louis Sewer District
Employees’ Pension Plan (the Plan), which comprise the statements of fiduciary net position as of
December 31, 2018 and 2017, and the related statements of changes in fiduciary net position for the
years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Board of Trustees
The Metropolitan St. Louis Sewer District
Page 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
fiduciary net position of the Plan as of December 31, 2018 and 2017, and the changes in fiduciary net
position for the years then ended, in accordance with accounting principles generally accepted in the
United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 3 through 13 and pension plan schedules on pages
32 through 35 be presented to supplement the basic financial statements. Such information, although
not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain
limited procedures to the required supplementary information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of management about
the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audits of the basic financial statements. However, we did not audit the information
and express no opinion on it.
Other Information
Our audit was conducted for the purpose of forming an opinion on the Plan’s financial statements. The
schedules included in the statistical section on pages 36 through 41, are presented for purposes of
additional analysis and are not a required part of the financial statements. The schedules included in
the statistical section are the responsibility of management and were derived from and relate directly to
the underlying accounting and other records used to prepare the financial statements. The statistical
information has not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we do not express an opinion or provide any assurance on it.
CliftonLarsonAllen LLP
St. Louis, Missouri
June 27, 2019
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 3
MANAGEMENT’S DISCUSSION AND ANALYSIS
For The Years Ended December 31, 2018 and 2017
As management of The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Plan”), we
offer readers of the Plan’s financial statements this Management’s Discussion and Analysis (“MD&A”)
of the financial activities of the Plan for the years ended December 31, 2018 and 2017. This MD&A
is intended to supplement the Plan’s financial statements, and we encourage readers to consider the
information presented here in conjunction with those statements, which begin on page 14. The Plan is
a noncontributory single employer defined benefit plan providing retirement benefits as well as death
and disability benefits to all full-time employees of The Metropolitan St. Louis Sewer District
(“District”) commencing service prior to January 1, 2011, the date entrance to the plan was frozen.
OVERVIEW OF THE FINANCIAL STATEMENTS
The following MD&A is intended to serve as an introduction to the Plan’s financial statements. The
basic financial statements are:
1) Statements of Fiduciary Net Position
2) Statements of Changes in Fiduciary Net Position
3) Notes to Financial Statements
This report also contains required supplementary information to the basic financial statements, which
provides actuarial information for use in analyzing the status of the Plan, and includes:
1) Schedule of Changes in Net Pension Liability
2) Schedule of Employer Contributions
3) Actuarial Methods and Assumptions Used
4) Schedule of Annual Money-Weighted Rate of Return on Investments
Certain revenues, expenses associated with administering the Plan, and other trend data are presented
immediately following the required supplementary information in the statistical section of this report.
The basic financial statements contained in this report are described below:
The Statements of Fiduciary Net Position are a point in time snapshot of account balances at
year-end. It reports the assets available for future payments to retirees, and any current
liabilities that are owed as of the statement date. The resulting net position value [assets minus
liabilities equal net position] represents the value of net position restricted for pension benefits.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 4
The Statements of Changes in Fiduciary Net Position display the effect of the Plan’s
transactions that occurred during the year [additions minus deductions equal net increase
(decrease) in net position]. This net increase (decrease) in net position reflects the change in
the net position value of the Statements of Fiduciary Net Position from the prior year to the
current year. Both statements are in accordance with Governmental Accounting Standards
Board (“GASB”) Pronouncements.
The Notes to Financial Statements are an integral part of the financial statements and provide
additional information that is essential for a comprehensive understanding of the data provided
in the financial statements. These notes describe the accounting and administrative policies
under which the Plan operates, and provides additional levels of detail for selected financial
statement items. See Notes to Financial Statements beginning on page 16 of this report.
Because of the long-term nature of a defined benefit pension plan, financial statements alone cannot
provide sufficient information to properly reflect the ongoing Plan perspective. Therefore, in addition
to the financial statements explained above, this financial report includes additional schedules entitled
“Required Supplementary Information Under GASB Statement No. 67.”
The Schedule of Changes in Net Pension Liability (page 32) includes actuarial information
about the status of the Plan from an ongoing, long-term perspective and overall net position of
the Plan. The total pension liability is actuarially determined. A total pension liability in excess
of Plan fiduciary net position indicates that a net pension liability exists.
The Schedule of Employer Contributions (page 33) presents historical trend information
regarding the value of total annual contributions actuarially determined to be paid by the District
and the actual performance of the District in meeting this requirement.
Actuarial Methods and Assumptions Used and the Schedule of Annual Money-Weighted Rate
of Return on Investments (pages 34 and 35) provide information regarding assumptions and
interest rates used in the actuarial calculations.
FINANCIAL HIGHLIGHTS 2018
Net position restricted for pension benefits totaled $260,560,576 as of December 31, 2018 for
a decrease of $17,415,639 or 6.3% as compared with December 31, 2017. This decrease
consists of a net investment loss of $12,912,658 and Plan payments and expenses net of
contributions totaling $4,502,981.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 5
The Plan’s funding objective is to meet long-term benefit obligations to the extent possible. As
of December 31, 2018, the date of the latest actuarial valuation, the funded ratio of the Plan,
defined as the Plan’s fiduciary net position as a percentage of the actuarially determined total
pension liability, was 77.8%. In general, this means that for every dollar of pension benefits
due, the Plan has approximately $0.78 of net position available for payment. The Plan’s funding
ratio decreased by 7.40 percentage points as compared with the funding ratio for December 31,
2017. The decrease in the funding ratio is due to Plan performance below the assumed rate of
return. With the return on the actuarial value of assets being below the expected rate of return,
the recommended contribution for the calendar year ending December 31, 2019 is increasing
slightly to $12,725,462 or 1.8% over the recommended contribution for the prior year of
$12,493,916.
Additions to the Plan’s net position (page 15) decreased from $42,926,496 for 2017 to a
negative $390,482 for 2018, a decrease of $43,316,978 or 100.9%, due primarily to a reduction
of $43,924,923 in the fair value of the investments, offset by an increase of $433,060 in interest
and dividend income and an increase of $175,613 in the employer contributions.
Benefits paid to retirees and beneficiaries (deductions from the Plan’s net position, page 15)
increased from $15,858,355 for 2017 to $16,911,759 in 2018, an increase of $1,053,404 or
6.6%.
Administrative expenses (deductions from the Plan’s net position, page 15) increased from
$101,957 for 2017 to $113,398 in 2018, an increase of $11,441 or 11.2%.
FINANCIAL HIGHLIGHTS 2017
Net position restricted for pension benefits totaled $277,976,215 as of December 31, 2017 for
an increase of $26,966,184 or 10.7% as compared with December 31, 2016. This increase in
net position primarily resulted from a 155.0% increase in investment gains during the year and
by a 21.5% increase in employer contributions offset by a 3.9% increase in benefits paid to
retirees.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 6
The Plan’s funding objective is to meet long-term benefit obligations to the extent possible. As
of December 31, 2017, the date of the latest actuarial valuation, the funded ratio of the Plan,
defined as the Plan’s fiduciary net position as a percentage of the actuarially determined total
pension liability, was 85.2%. In general, this means that for every dollar of pension benefits
due, the Plan has approximately $0.85 of net position available for payment. The Plan’s funding
ratio increased by 6.25 percentage points as compared with the funding ratio for December 31,
2016. The increase in the funding ratio is primarily attributed to the increase in the Plan’s
actuarial value of assets outpacing the present value of future benefits to members and their
beneficiaries. In addition, the present value of future normal costs decreased. For the
December 31, 2017 actuarial valuation, the expected rate of return on assets was decreased from
7.0% to 6.9%. As a result of this change and a return on the actuarial value of assets below the
expected rate of return, the recommended contribution for the calendar year ending
December 31, 2018 is increasing slightly to $12,493,916 or 1.3% over the recommended
contribution for the prior year of $12,328,093.
Additions to the Plan’s net position (page 15) increased from $22,152,288 for 2016 to
$42,926,496 for 2017, an increase of $20,774,208 or 93.8%, due primarily to an increase of
$18,906,123 in the appreciation of the fair value of the investments and an increase of
$2,186,641 in the employer contributions offset by a reduction of $376,637 in interest and
dividend income.
Benefits paid to retirees and beneficiaries (deductions from the Plan’s net position, page 15)
increased from $15,260,904 for 2016 to $15,858,355 for 2017, an increase of $597,451 or 3.9%.
Administrative expenses (deductions from the Plan’s net position, page 15) increased from
$93,592 for 2016 to $101,957 for 2017, an increase of $8,365 or 8.9%.
ANALYSIS OF FINANCIAL ACTIVITIES
The Plan’s funding objective is to meet long-term benefit obligations through investment income and
contributions. Accordingly, the receipt of income from investments and employer contributions
provide the reserves needed to finance future retirement benefits.
Net position restricted for pension benefits decreased by $17,415,639 in 2018 and increased by
$26,966,184 in 2017. This net position is used to meet ongoing benefit obligation to the Plan’s
participants and their beneficiaries.
The Metropolitan St. Louis Sewer District’s (“District”) contributions into the Plan, as determined by
the Plan’s actuary, increased slightly for 2018 compared to 2017. The primary reason for the increase
was the return on the actuarial value of assets below the assumed rate of 6.9%.
Overall, the Plan remains adequately funded and any cumulative difference between actuarial liabilities
and assets is being amortized and funded over an appropriate period. It is important to remember that
the Plan’s funding is based on a long time horizon, where temporary ups and downs in the market are
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 7
expected. The more critical factor is that the Plan be able to meet an expected earnings yield of 6.9%
on average. Both the Plan’s investment performance and the rate of return on actuarial value have
averaged 3.8% to 4.2% over the last three years, which is below the actuarially assumed investment
rate of 6.9%. Since this year’s performance falls below the actuarially assumed investment rate, it
could result in additional contributions in upcoming years.
Based upon the Plan’s actuarial computations under Statement No. 67 of the Governmental Accounting
Standards Board, the actuarially determined total pension liability increased from $326,365,153 as of
December 31, 2017 to $334,957,313 as of December 31, 2018. To calculate the net pension liability,
the Plan’s fiduciary net position is subtracted from the total pension liability. Reducing the total
pension liabilities by the $260,560,576 and $277,976,215 Plan fiduciary net positions as of
December 31, 2018 and 2017, respectively, results in net pension liabilities of $74,396,737 and
$48,388,938 as of December 31, 2018 and 2017, respectively. The existence of a net pension liability
means that additional future funding may be needed to reduce this liability.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 8
FINANCIAL ANALYSIS
The condensed Statements of Fiduciary Net Position as compared to prior years are as follows:
2018 Change
2018 2017 Amount $
ASSETS
Investments at Fair Value 260,477,218$ 277,846,882$ (17,369,664)$
Other Assets 288,581 263,078 25,503
Total Assets 260,765,799 278,109,960 (17,344,161)
LIABILITIES 205,223 133,745 71,478
NET POSITION RESTRICTED
FOR PENSION BENEFITS 260,560,576$ 277,976,215$ (17,415,639)$
2017 Change
2017 2016 Amount $
ASSETS
Investments at Fair Value 277,846,882$ 250,913,578$ 26,933,304$
Other Assets 263,078 245,903 17,175
Total Assets 278,109,960 251,159,481 26,950,479
LIABILITIES 133,745 149,450 (15,705)
NET POSITION RESTRICTED
FOR PENSION BENEFITS 277,976,215$ 251,010,031$ 26,966,184$
December 31,
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 9
As previously noted, net position viewed over time may serve as a useful indicator of the Plan’s
financial position. At the close of calendar years 2018 and 2017, the assets of the Plan exceeded its
liabilities by $260,560,576 and $277,976,215, respectively, in net position restricted for pension
benefits. The net position is available to meet the Plan’s ongoing obligation to the Plan’s participants
and their beneficiaries.
Despite variations in the markets, management and the Plan’s actuary concur that the Plan remains in
a sound financial position to meet its obligations to the Plan’s participants and their beneficiaries. The
current financial position is the result of a successful investment program and prudent management
practices that have been in place for many years.
The condensed Statements of Changes in Fiduciary Net Position as compared to prior years are as
follows:
2018 Change
2018 2017 Amount $
ADDITIONS
Net Investment Income (Loss) (12,912,658)$ 30,579,933$ (43,492,591)$
Employer Contributions 12,522,176 12,346,563 175,613
Total Additions (390,482) 42,926,496 (43,316,978)
DEDUCTIONS
Benefits Paid to Retirees and Beneficiaries 16,911,759 15,858,355 1,053,404
Administrative Expenses 113,398 101,957 11,441
Total Deductions 17,025,157 15,960,312 1,064,845
NET INCREASE (DECREASE)(17,415,639) 26,966,184 (44,381,823)
NET POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 277,976,215 251,010,031 26,966,184
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 260,560,576$ 277,976,215$ (17,415,639)$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 10
As noted above, the funds needed to finance retirement benefits are accumulated through the collection
of employer contributions and through earnings on investments (net of investment expense). Total
additions for the years ended December 31, 2018 and 2017, total ($390,482) and $42,926,496,
respectively.
Additions to Plan assets for 2018 decreased from 2017 due primarily to the decrease in the fair values
of the investments held by the Plan.
The Plan was created to provide retirement, survivor, and disability benefits to qualified members and
their beneficiaries. The cost of such programs includes recurring benefit payments as designated by
the Plan and the cost of administering the Plan.
As noted on page 9, deductions for the year ended December 31, 2018 totaled $17,025,157, an increase
of 6.7% over 2017. The increase in benefits paid resulted primarily from an increase in the number of
retirees receiving benefits by 26 members or a 3.6% increase. The Plan has consistently managed
within its administrative expense budget, with no material variances between planned and actual
expenditures.
2017 Change
2017 2016 Amount $
ADDITIONS
Net Investment Income (Loss) 30,579,933$ 11,992,366$ 18,587,567$
Employer Contributions 12,346,563 10,159,922 2,186,641
Total Additions 42,926,496 22,152,288 20,774,208
DEDUCTIONS
Benefits Paid to Retirees and Beneficiaries 15,858,355 15,260,904 597,451
Administrative Expenses 101,957 93,592 8,365
Total Deductions 15,960,312 15,354,496 605,816
NET INCREASE (DECREASE)26,966,184 6,797,792 20,168,392
NET POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 251,010,031 244,212,239 6,797,792
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 277,976,215$ 251,010,031$ 26,966,184$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 11
INVESTMENT PERFORMANCE - 2018
The following are a few characteristics and achievements for the Plan for the year ended December 31,
2018:
The Plan ended the year with a net position of $260,560,576.
The Plan’s performance for the year was -4.3% compared to the policy benchmark index of -
4.5%, and the average five-year return was 2.9% compared to the policy benchmark index of
3.1%.
The actual asset allocation is as follows:
2018 2017
Equities:
Domestic Large Cap Stocks 25.0 % 15 - 30 % 22.3 % 20.7 %
Domestic Small-Mid Cap Stocks 10.0 5 - 15 7.7 6.7
International Developed Markets Stocks 12.0 5 - 15 11.6 10.3
International Emerging Markets Stocks 6.0 2 - 8 5.7 4.4
Fixed Income:
Domestic Core Bonds 14.0 10 - 20 14.3 14.1
Domestic Core "Plus" Bonds 13.0 10 - 20 13.0 12.3
Global Bonds 8.0 4 - 14 8.5 9.2
Emerging Fixed Income — 0 - 7 — —
Opportunistic Credit — 0 - 5 — —
High Yield Bonds — 0 - 7 — —
Other:
Real Estate 12.0 0 - 12 9.8 8.8
Global Tactical — 0 - 12 — —
Market Neutral — 0 - 7 — —
Real Assets — 0 - 10 — —
Absolute Return — 0 - 7 — —
Hedge Funds — 0 - 20 3.3 12.9
Cash Equivalents — — 3.8 0.6
Asset Class
Actual
Allowable
RangeTarget
December 31,2018
2018
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 12
All asset classes have been rebalanced when needed during the year in order to maintain a weighting
consistent with the strategic allocation ranges. Resolution 2986, effective August 2011, authorized
initial proposed targets and ranges. Resolution 3416, effective April 2018, authorized new proposed
targets and allowable ranges that were implemented in 2018 and are reflected above. Resolution 3226
was adopted July 2015 and resolved that the codified document entitled “Metropolitan St. Louis Sewer
District, Statement of Investment Policy, Objectives and Operating Guidelines” including all
appendices represents the Investment Policy, Objectives and Operating Guidelines of the Employees’
Pension Plan.
Ordinance 15006, effective September 2018, authorized AON Hewitt Investment Consulting, Inc. to
act as the Plan’s investment consultant for the District and provide investment advisory services.
Overall asset class allocations changed moderately. Annual changes in asset allocation are the result
of relative asset class performance, redemptions from investments to pay benefits and Plan expenses,
contributions to new or existing investments, and regular rebalancing transactions. The largest changes
in sub-classes were due to the redemptions of Hedge Fund investments and subsequent additional
investments in the Equity sub-classes and to cash for a subsequent investment into the Real Estate sub-
class. While some of the sub-classes were over target by varying percentage points, they were all still
within the target ranges. Resolution 2987, effective August 2011, authorized specific investment
managers to act on behalf of the Plan to actively manage specific investment types. Resolution 3068,
effective January 2013, amended the master list of authorized investment managers which was further
amended for individual investment managers by Resolutions 3138 (February 2014), 3183 (December
2014), 3209 (May 2015), 3221 (June 2015), 3308 (October 2016), 3319 and 3320 (both in November
2016) and 3415 (April 2018).
FIDUCIARY RESPONSIBILITIES
The Board of Trustees and senior management are fiduciaries of the Plan and Trust. Fiduciaries are
charged with the responsibility of assuring that the assets of the Plan are used exclusively for the benefit
of the Plan’s participants and their beneficiaries.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 13
REQUEST FOR INFORMATION
This financial report is designed to provide the Board of Trustees, our members, ratepayers, investment
managers, and creditors with an overview of the Plan’s finances and accountability for the money
received. Questions concerning any of the information provided in this report or requests for additional
financial information should be addressed to:
Tim Snoke, Secretary-Treasurer
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
E-mail: tsnoke@stlmsd.com
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying Notes to Financial Statements. Page 14
STATEMENTS OF FIDUCIARY NET POSITION
2018 2017
ASSETS
Investments at Fair Value:
Collective Investment Funds 122,410,744$ 153,109,969$
Mutual Funds 55,453,699 50,068,771
Real Estate Investments 25,555,188 24,465,570
Corporate Obligations 20,350,656 20,901,966
US Treasury and Agency Obligations 15,878,117 17,350,296
Money Market Funds 10,299,912 1,931,354
Domestic Common Stocks 9,235,066 8,693,711
Municipal Obligations 754,971 762,356
Foreign Stocks 538,865 562,889
Total Investments 260,477,218 277,846,882
Receivables
Interest and Dividends Receivable 288,581 263,078
Total Receivables 288,581 263,078
Total Assets 260,765,799 278,109,960
LIABILITIES
Accrued Expenses 205,223 133,745
Total Liabilities 205,223 133,745
NET POSITION RESTRICTED FOR PENSION
BENEFITS 260,560,576$ 277,976,215$
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying Notes to Financial Statements. Page 15
STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION
For the Years Ended
December 31,
2018 2017
ADDITIONS TO NET POSITION ATTRIBUTED TO:
Investment Income:
Net Appreciation/(Depreciation) in Fair Value of Investments (15 ,105,052)$ 28,819,871$
Interest and Dividends 2,950,682 2,517,622
Total Investment Income (Loss) (12,154,370) 31,337,493
Less - Investment Managers' and Advisors' Fees 758,288 757,560
Net Investment Income (Loss) (12,912,658) 30,579,933
Employer Contributions 12,522,176 12,346,563
Total Additions (390,482) 42,926,496
DEDUCTIONS FROM NET POSITION ATTRIBUTED TO:
Benefits Paid to Retirees and Beneficiaries 16,911,759 15,858,355
Administrative Expenses 113,398 101,957
Total Deductions 17,025,157 15,960,312
NET INCREASE (DECREASE)(17,415,639) 26,966,184
NET POSITION RESTRICTED FOR PENSION
BENEFITS, January 1 277,976,215 251,010,031
NET POSITION RESTRICTED FOR PENSION
BENEFITS, December 31 260,560,576$ 277,976,215$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 16
NOTES TO FINANCIAL STATEMENTS
December 31, 2018 And 2017
1. Summary of Significant Accounting Policies
The significant accounting policies applied by the Plan in the preparation of the accompanying
financial statements are summarized as follows:
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting
and adhere to U.S. Generally Accepted Accounting Principles as defined by the Governmental
Accounting Standards Board (“GASB”) Pronouncements.
Estimates and Assumptions
The preparation of financial statements in conformity with U.S. Generally Accepted
Accounting Principles requires management and the Plan’s actuary to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of additions to and deductions from net position during the reporting period. Actual results
could differ from those estimates.
Investment Valuation
The Plan’s investment assets, for which U.S. Bank, N.A., acts as trustee (“Trustee”), are
reported at fair value as determined and certified by the Trustee. Investments traded on a
national exchange are valued at reported sales prices. Investments that do not have an
established market are reported at estimated fair value. The money market fund is reported at
amortized cost, which approximates fair value.
Payment of Benefits
Benefits are recorded when paid.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 17
Recently Issued Accounting Standards
During calendar year 2017, the Plan implemented Governmental Accounting Standards Board
(“GASB”) Statement No. 82, Pension Issues – An Amendment of GASB Statements No. 67, No.
68, and No. 73. The primary objective of this Statement is to improve financial reporting by
state and local governments by enhancing consistency in the application of financial reporting
requirements to certain pension issues that include the presentation of payroll-related measures
in required supplementary information, the selection of assumptions and the treatment of
deviations from the guidance in an Actuarial Standard of Practice for financial reporting
purposes, and the classification of payments made by employers to satisfy employee (plan
member) contribution requirements.
Subsequent Events
Management has evaluated subsequent events through June 27, 2019, the date the financial
statements were available for issue.
2. Description of Plan
The following brief description of The Metropolitan St. Louis Sewer District Employees’
Pension Plan (“Plan”) is provided for general information purposes only. Members should refer
to the Plan ordinance for more complete information.
General
The Plan is a noncontributory single employer defined benefit plan providing retirement
benefits as well as death and disability benefits. As a condition of employment, all full-time
employees of The Metropolitan St. Louis Sewer District (“District”) commencing service prior
to January 1, 2011, were eligible to be covered by the Plan. As of January 1, 2011, the Plan
was frozen to new employees. Instead, new employees of the District may participate in The
Metropolitan St. Louis Sewer District Defined Contribution Plan and/or The Metropolitan St.
Louis Sewer District Deferred Compensation Plan and Trust. Current employees with less than
ten years of service on January 1, 2011 could also voluntarily elect to transfer from the Plan
and enter The Metropolitan St. Louis Sewer District Defined Contribution Plan.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 18
Membership in the Plan consists of:
The District’s Board of Trustees, primarily to improve benefits to members, amends the Plan,
established on November 1, 1967. A Pension Committee consisting of two members of the
District’s Board of Trustees, two elected employee members and four members of the District’s
management staff administer the Plan, and thus the Pension Committee is also known as the
“Plan Administrator”. A committee of the District’s Board of Trustees, with the aid of an
investment advisor, reviews and evaluates the Plan’s investments and the related rates of return
on a periodic basis. The Plan is exempt from the requirements of the Employee Retirement
Income Security Act of 1974 (“Act”) and, as such, is not subject to the Act’s reporting
requirements.
Benefit Payments and Vesting
All benefits vest after five years of credited service. Members retiring at or after age 65 with
five or more years credited service are entitled to a pension benefit. The Plan permits early
retirement with reduced benefits beginning at age 55 if the member has completed five years
of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any
member whose combined age and term of service is equal to 75.
Effective January 1, 1999, Ordinance No. 10491 amended the Plan benefits formula. The
annual benefit payable became 1.7% of final average earnings plus 0.4% of final average
earnings that are in excess of covered earnings multiplied by the period of years and months of
credited service not to exceed 35 years. Also, the annual reduction for early retirement was
revised from 5% to 2% prior to age 60 and from 2.5% to 1% after age 60.
Ordinance No. 10664, effective January 1, 2000, amended the Plan benefits formula to 1.45%
of final average earnings plus 0.4% of final average earnings that are in excess of covered
earnings multiplied by the period of years and months of credited service not to exceed 35 years.
This ordinance also provided for a survivor’s benefit for vested members who have not yet
reached their normal retirement date or earned 75 points. The survivor’s benefit is the greater
of (a) 50% of the member’s monthly-accrued retirement benefit as of the date of death, or (b)
15% of the monthly earnings and the member’s monthly-accrued retirement benefit actuarially
reduced under the 100% joint and survivor annuity option. Members are also able to select a
Contingent Annuity Pop-Up option.
For the Years Ended
December 31,
Increase
2018 2017 (Decrease)
Active plan members 545 595 (50)
Retirees and beneficiaries currently receiving benefits 748 722 26
Terminated members entitled to receive benefits 181 178 3
Total 1,474 1,495 (21)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 19
This option allows the member to elect a survivor annuity for life, with the provision that if the
beneficiary should predecease the member, the benefit shall increase to the amount payable had
the survivor option not been selected.
Ordinance Number 10872, effective January 1, 2001, further amended the Plan to extend the
cost of living increases for retirees from a maximum of 30% to 45% of the original benefit.
Effective August 1, 2004, Ordinance No. 11781 amended the Plan to change the benefit formula
to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of
covered earnings multiplied by the period of years and months of credited service not to exceed
35 years without including accrued sick leave. An employee retiring from the District with five
or more years of service will be compensated for any unused accrued sick leave at the rate of
1.25% for each year of District service multiplied by the unused accrued sick leave remaining
at the employee’s current rate of pay up to a maximum of $50,000. Also, the Plan was amended
to provide the retiring member with a 10% partial lump sum payment option. The balance of
the distribution will be paid in accordance with any one of the other payment options available
under the Plan.
Effective August 27, 2011, Ordinance No. 13288 amended the Plan to include the following:
“Upon termination or complete discontinuance of contributions under the Plan, the rights of all
Members to benefits accrued to the date of such termination or discontinuance shall be non-
forfeitable, to the extent then funded.”
The retirement benefit payable to a member who retires after the normal retirement date is the
greater of (a) the benefit that would have been payable on the normal retirement date plus a
special annual retirement benefit provided by the accumulated value, at 4% per annum interest,
of the monthly benefit that would have been received prior to the postponed retirement date, or
(b) the benefit determined as of the postponed retirement date under the normal formula.
Effective September 14, 2017, Ordinance No. 14776 amended the Plan to require enrollment in
Medicare Parts A and B when Members first become eligible for such Medicare programs due
to disability in order to receive, or continue to receive, retiree medical benefits under the
Pension Plan and to clarify that any retiree medical benefits under the Pension Plan will be
secondary to Medicare disability benefits in accordance with the Medicare secondary payor
rules.
Amounts in participants’ accounts are distributed upon retirement, death, disability, or
termination of employment. The normal form of retirement benefit is either a lump sum
payment or equal monthly installments.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 20
3. Cash and Investments
Categories of Asset Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Plan’s
investment in a single issuer. Pursuant to Resolution 3416, the Plan is authorized to invest in
the following; see chart on page 11 for target and allowable ranges.
Equity Investments: Common stocks of corporations, mutual funds, or co-mingled
equity funds (Domestic and International, both within defined limits).
Fixed Income Investments: U.S. government and agency securities, corporate bonds,
debentures, notes, or other evidence of indebtedness assumed or guaranteed by
corporations (Domestic and International, both within defined limits).
Short-term Securities: Commercial paper, treasury bills, certificates of deposit, and/or
money market funds.
Real Estate Investments: Real estate investment trusts and multi-employer property
trusts.
Hedge Funds, Global Tactical, Real Assets, Market Neutral, and Absolute Return
Investments; these investment strategies help diversify the investment portfolio.
For more detailed information, refer to the asset allocation table on page 11 in the
MD&A.
The fair value of investments managed consisted of the following:
As of December 31,
2018 2017
Investments, at Fair Value
Collective Investment Funds 122,410,744$ 153,109,969$
Mutual Funds 55,453,699 50,068,771
Real Estate Investments 25,555,188 24,465,570
Corporate Obligations 20,350,656 20,901,966
US Treasury and Agency Obligations 15,878,117 17,350,296
Money Market Funds 10,299,912 1,931,354
Domestic Common Stocks 9,235,066 8,693,711
Municipal Obligations 754,971 762,356
Foreign Stocks 538,865 562,889
Total Investments 260,477,218$ 277,846,882$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 21
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of
an investment. The Plan does not have a formal investment policy that limits investment
maturities as a means of managing its exposure to interest rates. The Plan had the following
debt securities and maturities:
As of December 31, 2018
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate Obligations 20,350,656$ 4.00
U.S. Treasury and Agency Obligations 15,878,117 5.15
Municipal Obligations 754,971 1.99
Total 36,983,744$
Portfolio Weighted Average Maturity in Years 4.45
As of December 31, 2017
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate Obligations 20,901,965$ 4.41
U.S. Treasury and Agency Obligations 17,350,296 4.67
Municipal Obligations 762,356 2.47
Total 39,014,617$
Portfolio Weighted Average Maturity in Years 4.49
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 22
The Plan will minimize the risk that the market value of securities in the portfolio will fall due
to changes in general interest rates by:
Structuring the investment portfolio so that securities mature to meet cash requirements
for benefit payments, thereby avoiding the need to sell securities on the open market
prior to maturity; and
Monitoring fixed income investment managers’ performances to be sure the fixed
income portion of the investment portfolio is managed to predetermined indexes.
Credit Risk
Investment credit risk is the risk that the issuer or other counterparty to an investment will not
fulfill its obligations. The Plan will minimize credit risk by:
Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors
with which the Plan will do business; and
Diversifying the portfolio so that potential losses on individual securities will be
minimized.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 23
The following tables provide information on the credit ratings associated with the Plan’s
investments in debt securities:
U.S. Treasury
S & P & Agency Municipal Corporate
Rating Obligations Obligations Obligations Total
AAA —$ —$ 2,336,090$ 2,336,090$
AA 15,878,117 458,690 496,593 16,833,400
A— — 3,935,136 3,935,136
BBB — 296,281 9,886,863 10,183,144
Not Rated — — 3,695,974 3,695,974
Total 15,878,117$ 754,971$ 20,350,656$ 36,983,744$
Credit Rating by Investment as of December 31, 2018
U.S. Treasury
S & P & Agency Municipal Corporate
Rating Obligations Obligations Obligations Total
AAA —$ —$ 1,904,484$ 1,904,484$
AA 17,350,296 462,580 692,334 18,505,210
A— — 5,561,589 5,561,589
BBB — 299,776 9,180,598 9,480,374
Not Rated — — 3,562,960 3,562,960
Total 17,350,296$ 762,356$ 20,901,965$ 39,014,617$
Credit Rating by Investment as of December 31, 2017
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 24
Investments Greater Than 5% Of Net Position Restricted For Pension Benefits
Investments that exceed 5% or more of net position restricted for pension benefits at
December 31, 2018 or 2017 are as follows:
4. Fair Value Measurement and Application
The Plan categorizes its fair value measurements within the fair value hierarchy established by
U.S. Generally Accepted Accounting Principles. The Plan had the following fair value
measurements of invested assets as of December 31, 2018 and December 31, 2017:
2018 % 2017 %
BlackRock Russell 1000 Index Fund Non-Lending 58,194,612$ 22% 57,533,365$ 21%
Prudential Core Plus Bond Fund 33,896,439 13% 34,257,814 12%
Morgan Stanley International Equity Fund I 30,442,165 12% 28,707,110 10%
UBS Trumbull Property Fund 25,555,188 10% 24,465,570 9%
Brandywine Global Bond Opportunistic Fixed Income 22,024,186 8% 25,456,038 9%
Morgan Stanley Emerging Markets Fund I 14,879,755 6% N/A
Lighthouse Global Long/Short Fund Limited N/A 19,348,870 7%
Entrust Capital Diversified Fund N/A 16,525,809 6%
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 25
Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Investments by Fair Value Level 12/31/2018 (Level 1) (Level 2) (Level 3)
Debt Securities:
Corporate Obligations 20,350,656$ —$ 20,350,656$ —$
US Treasury Notes and Bonds 13,224,117 13,224,117 — —
US Government Agency Obligations 2,654,000 — 2,654,000 —
Municipal Obligations 754,971 — 754,971 —
Core Plus Bond Commingled Trust Fund 33,896,437 — 33,896,437 —
Global Fixed Income Collective Trust Fund 22,024,186 — 22,024,186 —
Total Debt Securities 92,904,367 13,224,117 79,680,250 —
Equity Securities:
Domestic Equities 77,549,032 9,235,066 68,313,966 —
International Equities 30,980,593 538,865 30,441,728 —
Emerging Markets Fund 14,879,755 — 14,879,755 —
Total Equity Securities 123,409,380 9,773,931 113,635,449 —
Total Investments by Fair Value Level 216,313,747 22,998,048$ 193,315,699$ —$
Unfunded Redemption Redemption
Investments Measured at the Net Asset Value (NAV) Commitments Fre quency Notice Period
Real Estate Funds (1)25,555,188 — Quarterly 60 Days
Diversified Hedge Fund of Fund (3)8,308,371 — Quarterly 90 Days
Total Investments Measured at the Net Asset Value 33,863,559
Money Market at Amortized Cost 10,299,912
Total Investments at Fair Value 260,477,218$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 26
(1) Real Estate Funds - The portfolio assets in this investment consist primarily of high-
quality real estate investments located in major markets throughout the U.S. and are
diversified by property type, geographic region and economic sector. The majority of the
investments are stable, primarily income-oriented properties. The fair values of the
investments in this type have been determined using the NAV per share (or its equivalent)
of the investments. Distributions from dispositions are reinvested as the underlying
investments are liquidated.
Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Investments by Fair Value Level 12/31/2017 (Level 1) (Level 2) (Level 3)
Debt Securities:
Corporate Obligations 20,901,965$ —$ 20,901,965$ —$
US Treasury Notes and Bonds 14,834,340 11,015,059 3,819,281 —
US Government Agency Obligations 2,515,956 — 2,515,956 —
Municipal Obligations 762,356 — 762,356 —
Core Plus Bond Commingled Trust Fund 34,257,814 — 34,257,814 —
Global Fixed Income Collective Trust Fund 25,456,038 — 25,456,038 —
Total Debt Securities 98,728,469 11,015,059 87,713,410 —
Equity Securities:
Domestic Equities 75,479,452 8,693,711 66,785,741 —
International Equities 29,269,899 562,888 28,707,011 —
Emerging Markets Fund 12,097,459 — 12,097,459 —
Total Equity Securities 116,846,810 9,256,599 107,590,211 —
Total Investments by Fair Value Level 215,575,279 20,271,658$ 195,303,621$ —$
Unfunded Redemption Redemption
Investments Measured at the Net Asset Value (NAV) Commitments Fre quency Notice Period
Real Estate Funds (1)24,465,570 —$ Quarterly 60 Days
Global Long/Short Hedge Fund of Fund (2)19,348,870 — Monthly/Quarterly 90 Days/60 Days
Diversified Hedge Fund of Fund (3)16,525,809 — Quarterly 90 Days
Total Investments Measured at the Net Asset Value 60,340,249
Money Market at Amortized Cost 1,931,354
Total Investments at Fair Value 277,846,882$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 27
(2) Global Long/Short Hedge Fund of Fund - Multi-manager fund of funds that invests
principally in global equity markets, combining long investments with short sales in the
pursuit of opportunities in rising or declining markets. The fund of fund manager has the
ability to employ hedge fund managers that employ a variety of strategies within the
long/short strategy. The fair values of the investments in this type have been determined
using the NAV per share of the investments. Redemptions of greater than 90% of the
shareholder’s shares are subject to an estimated 10% holdback to be paid promptly after
the completion of the Fund’s year-end audit.
(3) Diversified Hedge Fund of Fund - Seeks return, long-term capital growth and
diversification through a combination of Managers trading a range of strategies, including,
but not limited to, hedging, distressed securities, arbitrage and special situations. The fair
values of the investments in this type have been determined using the NAV per share (or
its equivalent) of the investments. Shareholders shall have the right to redeem Shares
having a value of up to a maximum of 50% of the Net Asset Value of their shares, as of
the close of business on the last business day of any calendar quarter (the “Redemption
Date”). Remaining shares shall be redeemed on the next quarterly Redemption Date.
Redemptions of greater than 90% of the shareholder’s shares are subject to an estimated
10% holdback to be paid generally no later than 30 days after the completion of the Fund’s
year-end audit.
5. Contributions Required and Contributions Made
Ordinances establishing the Plan provide for actuarially determined annual contributions by the
District that are sufficient to pay benefits when due. The Entry Age Normal funding method is
used to determine contributions.
Contributions of $12,493,916 and $12,328,093, excluding certain professional fees paid by the
District, were made to the Plan in 2018 and 2017, respectively. These contributions were made
in accordance with actuarially determined contribution recommendations based on actuarial
valuations performed at December 31, 2017 and 2016, respectively, and consisted of:
December 31,
2018 2017
Normal Cost 5,238,812$ 5,157,148$
Amortization of the Unfunded Actuarial Accrued Liability 6,448,668 6,364,434
Investment Rate of Return Factor of 6.9% 806,436 806,511
Current Year Contribution Due from the District
as Calculated by the Plan's Actuary 12,493,916$ 12,328,093$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 28
Certain professional fees, included in administrative expenses, are paid by the District and are
recognized as contributions to the Plan and totaled $28,260 and $18,470 for the years ended
December 31, 2018 and 2017, respectively. The District provides office space, utilities, and
other services to the Plan at no cost. Other costs of administering the Plan are financed from
Plan net position.
6. Net Pension Liability of the District
During the year ended December 31, 2014, the District implemented GASB Statement No. 67,
Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25. The
schedule of net pension liability pursuant to the provisions of GASB Statement No. 67 as of
December 31, 2018 and December 31, 2017 is as follows:
Actuarial Assumptions: The total pension liability was determined by an actuarial valuation
as of the measurement date (December 31), calculated based on the discount rate and actuarial
assumptions below for December 31, 2018 and December 31, 2017:
Net Pension Liability
December 31,
2018 2017
Total Pension Liability 334,957,313$ 326,365,153$
Plan Fiduciary Net Position 260,560,576 277,976,215
Net Pension Liability 74,396,737$ 48,388,938$
77.79% 85.17%
Covered Payroll 39,437,165$ 41,868,586$
Net Pension Liability as a Percentage of Covered Payroll 188.65% 115.57%
Fiduciary Net Position as a Percentage of Total Pension
Liability
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 29
December 31,
2018 2017
Inflation Rate 2.50% 2.50%
Projected Salary Increases 4.25% 4.25%
Investment Rate of Return 6.90% 6.90%
Mortality rates were based on the RP-2014 Mortality for Employees and Healthy Annuitants Tables, male
and female rates, with generational projection from 2006 based on the MP-2018 improvement scale for the
December 31, 2018 valuation and MP-2017 improvement scale for the December 31, 2017 valuation and
the RP-2014 Disabled Mortality Tables, male and female rates.
Discount Rate
December 31,
2018 2017
Discount Rate 6.90% 6.90%
Long-Term Expected Rate of Return, Net of Investment Expense 6.90% 6.90%
Municipal Bond Rate N/A N/A
The plan's fiduciary net position was projected to be available to make all projected
future benefit payments of current active and inactive employees. Therefore, the discount
rate for calculating the total pension liability is equal to the long-term expected rate of
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 30
Long-Term Expected Rate of Return
Long-Term
Expected
Arithmetic
Target Real Rate
Asset Class Allocation of Return
Lar ge Cap US Equity 25.0% 4.0%
Small Cap US Equity 10.0% 4.5%
Developed International Equity 12.0% 5.0%
Emerging Markets Equit y 6.0% 5.7%
Domestic Fixed Income 27.0% 1.2%
Global Bonds 8.0% 4.3%
Real Estate 12.0% 3.0%
Assumed Inflation - Mean 2.5%
The long-term expected rate of return is assumed to be 6.9%.
The long-term expected rate of return is determined by adding expected inflation to expected
long-term real returns and reflecting expected volatility and correlation. The capital market
assumptions are as follows:
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
1% Current 1%
Decrease Discount Rate Increase
5.90% 6.90% 7.90%
Total Pension Liability 371,955,385$ 334,957,313$ 303,474,850$
Plan Fiduciary Net Position 260,560,576 260,560,576 260,560,576
Net Pension Liability 111,394,809 74,396,737 42,914,274
The following presents the Net Pension Liability of the District, calculated using the discount rate of
6.90%, as well as what the District's Net Pension Liability would be if it were calculated using a
discount rate that is 1 percentage point lower (5.90%) or 1 percentage point higher (7.90%) than the
current rate.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 31
Rate of Return
For the years ended December 31, 2018 and 2017, the annual money-weighted rate of return
on pension plan investments, net of pension plan investment expense, was -4.73% and 12.28%,
respectively. The money-weighted rate of return considers the changing amounts actually
invested during a period and weights the amount of pension plan investments by the proportion
of time they are available to earn a return during that period. External cash flows are determined
on a monthly basis and are assumed to occur at the beginning of each month. External cash
inflows are netted with external cash outflows, resulting in a net external cash flow in each
month. The money-weighted rate of return is calculated net of investment expenses.
7. Risk Management
The Plan is exposed to various risks of loss related to natural disasters, errors and omissions,
loss of assets, torts, etc. The Plan has chosen to cover such losses through the purchase of
commercial insurance. There has been no material insurance claim filed or paid during the past
three fiscal years.
8. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various
risks such as interest rate, market, and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such change could materially affect
the amounts reported in the Statements of Fiduciary Net Position.
Actuarial present value of accumulated Plan benefits are reported based on certain assumptions
pertaining to interest rates, inflation rates, and employee demographics, all of which are subject
to change. Due to uncertainties inherent in the estimations and assumptions process, it is at
least reasonably possible that changes in these estimates and assumptions in the near term would
be material to the financial statements.
9. Tax Status
The plan received a favorable determination letter from the Internal Revenue Service on
September 10, 2014, indicating the Plan and its underlying trust are qualified under Section
414(d) of the Internal Revenue Code.
REQUIRED SUPPLEMENTARY INFORMATION
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 32
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67
Total Pension Liabilty 2018 2017 2016 2015 2014
Service cost 5,238,812$ 5,157,148$ 5,106,625$ 5,253,091$ 5,409,485$
Interest 22,306,950 22,078,790 20,609,223 20,198,502 19,900,507
Effect of economic/demographic gains or losses (2,041,843) (4,728,693) (882,851) (4,576,597) (3,667,991)
Effect of assumption changes or inputs — 1,667,047 11,664,881 — 6,500,227
Benefit payments (16,911,759) (15,858,355) (15,260,904) (14,474,566) (13,387,127)
Net Change In Total Pension Liability 8,592,160 8,315,937 21,236,974 6,400,430 14,755,101
Total Pension Liability - Beginning 326,365,153 318,049,216 296,812,242 290,411,812 275,656,711
Total Pension Liability - Ending 334,957,313 326,365,153 318,049,216 296,812,242 290,411,812
Plan Fiduciary Net Position
Contributions - employer (including employer paid expenses) 12,522,176 12,346,563 10,159,922 10,071,378 10,682,846
Net investment income (12,912,658) 30,579,933 11,992,366 (1,809,875) 7,066,420
Benefit payments (16,911,759) (15,858,355) (15,260,904) (14,474,566) (13,394,219)
Administrative expenses (113,398) (101,957) (93,592) (90,519) (86,504)
Net Change In Plan Fiduciary Net Position (17,415,639) 26,966,184 6,797,792 (6,303,582) 4,268,543
Plan Fiduciary Net Position - Beginning 277,976,215 251,010,031 244,212,239 250,515,821 246,247,278
Plan Fiduciary Net Position - Ending 260,560,576 277,976,215 251,010,031 244,212,239 250,515,821
District’s Net Pension Liability - Ending 74,396,737$ 48,388,938$ 67,039,185$ 52,600,003$ 39,895,991$
Plan Fiduciary Net Position As A Percentage Of
Total Pension Liability 77.79% 85.17% 78.92% 82.28% 86.26%
Covered Payroll 39,437,165$ 41,868,586$ 42,054,815$ 43,344,502$ 44,663,896$
The District's Net Pension Liability As A Percentage Of
Covered Payroll 188.65% 115.57% 159.41% 121.35% 89.32%
Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
December 31,
Schedule of Changes in Net Pension Liability
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 33
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67
(Continued)
Schedule of Employer Contributions
Plan Year Actuarially Contributio n Contribution
Ending Determined Annual Deficiency Covered as a % of
December 31, Contribution Contribution (Excess) Payroll* Covered Payroll
2009 8,859,535$ 8,859,535$ —$ 52,267,000$ 16.95%
2010 10,306,739 10,306,739 — 51,703,000 19.93%
2011 10,969,154 10,969,154 — 49,432,000 22.19%
2012 11,737,168 11,737,168 — 48,333,000 24.28%
2013 11,391,287 11,391,287 — 46,600,000 24.44%
2014 10,675,321 10,675,321 — 44,663,896 23.90%
2015 10,059,004 10,059,004 — 43,344,502 23.21%
2016 10,145,562 10,145,562 — 42,054,815 24.12%
2017 12,328,093 12,328,093 — 41,868,586 29.44%
2018 12,493,916 12,493,916 — 39,437,165 31.68%
* Payroll as of prior December 31 Measurement Date.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 34
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67
(Continued)
Valuation Timing
Actuarial Cost Method Entr y Age Normal
Amortization Method
Level percent or level dollar Level dollar
Closed, open, or layered periods Layered, 20 year periods
Asset Valuation Method
Smoothing period 3 years
Inflatio n 2.50%
Salary Increases 4.25%
Investment Rate of Return 6.90%
Cost of Living Adjustments 2.50%, with 45.00%/$750 per month lifetime cap
Retirement Age Retirement rates are summarized in the December 31, 2018 Actuarial Valuation.
Turnover Turnover rates are summarized in the December 31, 2018 Actuarial Valuation.
Disability Disability rates are summarized in the December 31, 2018 Actuarial Valuation.
Mortality
The following actuarial methods and assumptions were used in the December 31, 2018 funding valuation. Please see
the valuation report dated May 6, 2019 for further details.
Actuarially determined contribution rates are calculated as of January 1 of the
fiscal year in which the contributions are reported.
Healthy Lives: RP-2014 Mortality for Employees and Healthy Annuitants, male
and female rates, with generational projection from 2006 based on the MP-
2018 improvement scale; Disabled Lives: RP-2014 Disability Mortality, male
and female rates.
Actuarial Methods and Assumptions Used
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 35
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67
(Continued)
Money-Weighted Rate of Return
Plan Year Net
Ending Mone y-Weighted
December 31, Rate of Return
2009 N/A
2010 N/A
2011 N/A
2012 N/A
2013 N/A
2014 2.86%
2015 -0.76%
2016 4.95%
2017 12.28%
2018 -4.73%
Schedule of Annual Money-Weighted Rate of Return on Investments
Note: Schedule is intended to show information for 10 years. Additional years
will be displayed as they become available.
STATISTICAL SECTION (UNAUDITED)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 36
STATISTICAL SECTION
For The Year Ended December 31, 2018
Net Position Value
(NPV) as of
Year December 31,
2009 179,219,472$ 18.8 %
2010 198,540,074 10.8
2011 200,340,622 1.9
2012 223,467,512 11.5
2013 246,247,278 10.2
2014 250,515,821 1.7
2015 244,212,239 (2.5)
2016 251,010,031 2.8
2017 277,976,215 10.7
2018 260,560,576 (6.3)
Performance and Net Position Value
Percentage
Change
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 37
STATISTICAL SECTION
For The Year Ended December 31, 2018
Net
Employer Investment
Year Contributions Income/(Loss) Total
2009 8,910,664$ 17.0 % 29,480,945$ 38,391,609$
2010 10,347,592 20.0 19,597,109 29,944,701
2011 10,981,546 22.2 2,144,533 13,126,079
2012 11,742,410 24.3 23,391,578 35,133,988
2013 11,397,904 24.5 24,001,334 35,399,238
2014 10,682,846 23.9 7,066,420 17,749,266
2015 10,071,378 23.2 (1,809,875) 8,261,503
2016 10,159,922 24.2 11,992,366 22,152,288
2017 12,346,563 29.5 30,579,933 42,926,496
2018 12,522,176 32.3 (12,912,658) (390,482)
Payroll
Revenues by Source
Employer
Contributions
as a Percentage
of Covered
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 38
STATISTICAL SECTION
For The Year Ended December 31, 2018
Benefit Administrative
Year Payments Expenses Total
2009 9,832,606$ 148,157$ 9,980,763$
2010 10,508,665 115,434 10,624,099
2011 11,233,668 91,863 11,325,531
2012 11,910,664 96,434 12,007,098
2013 12,537,990 81,482 12,619,472
2014 13,394,219 86,504 13,480,723
2015 14,474,566 90,519 14,565,085
2016 15,260,904 93,592 15,354,496
2017 15,858,355 101,957 15,960,312
2018 16,911,759 113,398 17,025,157
Expenses by Type
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 39
STATISTICAL SECTION
For The Year Ended December 31, 2018
Terminated
Members
Entitled to
Receive
Year Benefits Total
2009 550
1 192 938
2 1,680
2010 571
1 183 917
2 1,671
2011 596
1 183 838 1,617
2012 614
1 179 803 1,596
2013 636
1 179 761 1,576
2014 660
1 180 710 1,550
2015 691
1 175 665 1,531
2016 717
1 174 626 1,517
2017 722
1 178 595 1,495
2018 748 181 545 1,474
1 New Actuarial excludes individuals covered by insurance policy.
2 New Actuarial excludes members with less than six months of service.
Member Count
Benefits
Active Plan
Members
Retirees &
Beneficiaries
Currently
Receiving
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 40
STATISTICAL SECTION
For The Year Ended December 31, 2018
Market Percentage
Value as of of
Holding December 31, 2018 Plan
BlackRock Russell 1000 Index Fund Non-Lending 58,194,612$ 22.3%
Income Research Management 37,478,040 14.4%
Prudential Core Plus Bond Fund 33,896,439 13.0%
Morgan Stanley International Equity Fund I 30,442,165 11.7%
UBS Trumbull Property Fund 25,555,188 9.8%
Brandywine Global Bond Opportunistic Fixed Income 22,024,186 8.4%
Morgan Stanley Emerging Markets Fund I 14,879,755 5.7%
TimesSquare Small Cap Growth Fund 10,132,217 3.9%
Kennedy Mid Cap Value 9,978,040 3.8%
Entrust Capital Diversified Fund 8,308,371 3.2%
Totals 250,889,014$ 96.2%
Top Ten Holdings by Investment Manager
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 41
STATISTICAL SECTION
For The Year Ended December 31, 2018
2018 2017
Investment Manager Fees:
UBS Global Real Estate 222,551$ 218,702$
Income Research & Management Inc. 130,162 128,147
Brandywine Global Investment Management, LLC 105,655 111,242
Prudential Core Plus Bond Fund & Global Asset 104,557 95,225
Kennedy Capital Management, Inc. 77,814 75,014
BlackRock Institutional Trust Co. 16,257 16,570
Holland Capital Management — 8,619
Total Investment Manager Fees 656,996 653,520
Advisor Fees:
Pavilion Advisory Group Inc. 79,070 104,040
Aon Hewitt Investment Consulting, Inc. 22,222 —
Total Advisor Fees 101,292 104,040
Total of All Fees 758,288$ 757,560$
Note: Some investment managers report investment income net of related expense. The
management fees of these investment managers are not reported in this table because the
fees are not readily separable from investment income.
Schedule of Investment Manager & Advisor Fees
For the Years Ended December 31,
Firm