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HomeMy Public PortalAbout2019 Audited Financials THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN FINANCIAL STATEMENTS DECEMBER 31, 2019 AND 2018 Contents Page Independent Auditors’ Report........................................................................ 1 - 2 Management’s Discussion And Analysis ..................................................... 3 - 11 Financial Statements Statements of Fiduciary Net Position ..............................................................12 Statements of Changes in Fiduciary Net Position ............................................13 Notes to Financial Statements .................................................................. 14 - 29 Required Supplementary Information Under GASB Statement No. 67 Schedule of Changes in Net Pension Liability ................................................30 Schedule of Employer Contributions ...............................................................31 Actuarial Methods and Assumptions Used ......................................................32 Schedule of Annual Money-Weighted Rate of Return on Investments ...........33 Statistical Section (Unaudited) Performance and Net Position Value ...............................................................34 Revenues by Source and Total Employer Contributions .................................35 Expenses by Type and Total Benefit Payments ...............................................36 Member Count and Total Benefit Recipients ..................................................37 Top Ten Holdings by Investment Manager and Percentage Distribution........38 Schedule of Investment Manager and Advisor Fees ........................................39 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, 2019 and 2018, 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 audits. We conducted our audits 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, 2019 and 2018, 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 11 and pension plan schedules on pages 30 through 33 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 34 through 39, 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 26, 2020 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 3 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended December 31, 2019 and 2018 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, 2019 and 2018. 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 12. 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 14 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 30) 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 31) 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 32 and 33) provide information regarding assumptions and interest rates used in the actuarial calculations. FINANCIAL HIGHLIGHTS 2019  Net position restricted for pension benefits totaled $296,202,647 as of December 31, 2019 for an increase of $35,642,071 or 13.7% as compared with December 31, 2018. This increase in net position resulted from a 422.4% increase in investment gains during the year with net investment income totaling $41,631,484 offset by a 10.1% increase in benefits paid ($18,626,890 paid in 2019) and 2019 Plan expenses of $102,929 with employer contributions essentially flat compared to the prior year ($12,740,406 contributed in 2019). 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, 2019, 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 83.7%. In general, this means that for every dollar of pension benefits due, the Plan has approximately $0.84 of net position available for payment. The Plan’s funding ratio increased by 5.90 percentage points as compared with the funding ratio for December 31, 2018. The increase in the funding ratio is due to Plan performance above the assumed rate of return. The recommended contribution for the calendar year ending December 31, 2020 is increasing to $13,398,565 or 5.3% over the recommended contribution for the prior year of $12,725,462, mainly due to the changes in the assumed actuarial rate of return from 6.9% to 6.75% and mortality assumptions.  Additions to the Plan’s net position (page 13) increased from a negative $390,482 for 2018 to a positive $54,371,890, an increase of $54,762,372, due primarily to an increase of $54,024,927 in the appreciation of the fair value of the investments and an increase of $592,143 in interest and dividend income and an increase of $218,230 in the employer contributions.  Benefits paid to retirees and beneficiaries (deductions from the Plan’s net position, page 13) increased from $16,911,759 in 2018 to $18,626,890 in 2019, an increase of $1,715,131 or 10.1%.  Administrative expenses (deductions from the Plan’s net position, page 13) decreased slightly from $113,398 in 2018 to $102,929 in 2019. 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 Plan’s funding objective is to meet long-term benefit obligations to the extent possible. As of December 31, 2018, the date of the 2018 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Management’s Discussion And Analysis (Continued) Page 6  Additions to the Plan’s net position (page 13) 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 13) 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 13) increased from $101,957 for 2017 to $113,398 in 2018, an increase of $11,441 or 11.2%. 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 increased by $35,642,071, in 2019 while it decreased by $17,415,639, in 2018. 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 2019 compared to 2018. The primary reason for the increase was the return in 2018 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 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 7.7% to 7.3%, respectively, over the last three 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 $334,957,313 as of December 31, 2018 to $353,995,560 as of December 31, 2019. 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 $296,202,647 and $260,560,576 Plan fiduciary net positions as of December 31, 2019 and 2018, respectively, results in net pension liabilities of $57,792,913 and $74,396,737 as of December 31, 2019 and 2018, 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 7 FINANCIAL ANALYSIS The condensed Statements of Fiduciary Net Position as compared to prior years are as follows: 2019 Change 2019 2018 Amount $ ASSETS Investments at Fair Value 296,151,777$ 260,477,218$ 35,674,559$ Other Assets 333,726 288,581 45,145 Total Assets 296,485,503 260,765,799 35,719,704 LIABILITIES 282,856 205,223 77,633 FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS 296,202,647$ 260,560,576$ 35,642,071$ 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 FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS 260,560,576$ 277,976,215$ (17,415,639)$ December 31, December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Management’s Discussion And Analysis (Continued) Page 8 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 2019 and 2018, the assets of the Plan exceeded its liabilities by $296,202,647 and $260,560,576, 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: 2019 Change 2019 2018 Amount $ ADDITIONS Net Investment Income (Loss) 41,631,484$ (12,912,658)$ 54,544,142$ Employer Contributions 12,740,406 12,522,176 218,230 Total Additions 54,371,890 (390,482) 54,762,372 DEDUCTIONS Benefits Paid to Retirees and Beneficiaries 18,626,890 16,911,759 1,715,131 Administrative Expenses 102,929 113,398 (10,469) Total Deductions 18,729,819 17,025,157 1,704,662 NET INCREASE (DECREASE)35,642,071 (17,415,639) 53,057,710 FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 260,560,576 277,976,215 (17,415,639) FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS, December 31 296,202,647$ 260,560,576$ 35,642,071$ For the Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Management’s Discussion And Analysis (Continued) Page 9 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, 2019 and 2018, equal $54,371,890 and ($390,482), respectively. Additions to Plan assets for 2019 increased from 2018 due primarily to the increase 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 8, deductions for the year ended December 31, 2019 totaled $18,729,819, an increase of 10.0% over 2018. The increase in benefits paid resulted primarily from an increase in the number of retirees receiving benefits by 23 members or a 3.1% increase. The Plan has consistently managed within its administrative expense budget, with no material variances between planned and actual expenditures. 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) FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 277,976,215 251,010,031 26,966,184 FIDUCIARY 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 INVESTMENT PERFORMANCE – 2019 The following are a few characteristics and achievements for the Plan for the year ended December 31, 2019:  The Plan ended the year with a net position of $296,202,647.  The Plan’s performance for the year was 16.2% on a time-weighted basis compared to the policy benchmark index of 17.4%, and the average five-year return was 5.4% on a time- weighted basis compared to the policy benchmark index of 5.7%.  The actual asset allocation is as follows: 2019 2018 Equities: Domestic Large Cap Stocks 25.0 % 15 - 30 % 24.9 % 22.3 % Domestic Small-Mid Cap Stocks 10.0 5 - 15 10.7 7.7 International Developed Markets Stocks 12.0 5 - 15 12.1 11.6 International Emerging Markets Stocks 6.0 2 - 8 6.3 5.7 Fixed Income: Domestic Core Bonds 14.0 10 - 20 13.3 14.3 Domestic Core "Plus" Bonds 13.0 10 - 20 12.5 13.0 Global Bonds 8.0 4 - 14 8.1 8.5 Emerging Fixed Income — 0 - 7 — — Opportunistic Credit — 0 - 5 — — High Yield Bonds — 0 - 7 — — Other: Real Estate 12.0 0 - 12 11.0 9.8 Global Tactical — 0 - 12 — — Market Neutral — 0 - 7 — — Real Assets — 0 - 10 — — Absolute Return — 0 - 7 — — Hedge Funds — 0 - 20 0.4 3.3 Cash Equivalents — — 0.7 3.8 Asset Class Actual Allowable RangeTarget December 31,2019 2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Management’s Discussion And Analysis (Continued) Page 11 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 Investments USA, Inc. (“AON”) to act as the Plan’s investment consultant for the District and provide investment advisory services for the District’s Defined Benefit Plan. Resolution 3539 adopted in September 2019 exercised the first option year to retain AON as the investment advisor for the Plan. 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 in 2019 were due to asset class performance, the continued redemptions of Hedge Fund investments and subsequent additional investments in the Equity sub-classes. While some of the sub- classes were over target by varying percentage points, they were all still within the target ranges. 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. 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 12 STATEMENTS OF FIDUCIARY NET POSITION 2019 2018 ASSETS Investments at Fair Value: Collective Investment Funds 136,062,084$ 122,410,744$ Mutual Funds 70,580,513 55,453,699 Real Estate Investments 32,566,168 25,555,188 Corporate Obligations 21,981,050 20,350,656 US Treasury and Agency Obligations 16,428,797 15,878,117 Domestic Common Stocks 13,798,990 9,235,066 Money Market Funds 3,110,257 10,299,912 Foreign Stocks 1,069,782 538,865 Municipal Obligations 554,136 754,971 Total Investments 296,151,777 260,477,218 Receivables Interest and Dividends Receivable 333,726 288,581 Total Receivables 333,726 288,581 Total Assets 296,485,503 260,765,799 LIABILITIES Accrued Expenses 282,856 205,223 Total Liabilities 282,856 205,223 FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS 296,202,647$ 260,560,576$ December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN See the accompanying Notes to Financial Statements. Page 13 STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION For the Years Ended December 31, 2019 2018 ADDITIONS TO NET POSITION ATTRIBUTED TO: Investment Income: Net Appreciation/(Depreciation) in Fair Value of Investments 38,919,875$ (15,105,052)$ Interest and Dividends 3,542,825 2,950,682 Total Investment Income (Loss) 42,462,700 (12,154,370) Less - Investment Managers' and Advisors' Fees 831,216 758,288 Net Investment Income (Loss) 41,631,484 (12,912,658) Employer Contributions 12,740,406 12,522,176 Total Additions 54,371,890 (390,482) DEDUCTIONS FROM NET POSITION ATTRIBUTED TO: Benefits Paid to Retirees and Beneficiaries 18,626,890 16,911,759 Administrative Expenses 102,929 113,398 Total Deductions 18,729,819 17,025,157 NET INCREASE (DECREASE)35,642,071 (17,415,639) FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS, January 1 260,560,576 277,976,215 FIDUCIARY NET POSITION RESTRICTED FOR PENSION BENEFITS, December 31 296,202,647$ 260,560,576$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 14 NOTES TO FINANCIAL STATEMENTS December 31, 2019 And 2018 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. Subsequent Events Management has evaluated subsequent events through June 26, 2020, the date the financial statements were available for issue. In April 2020, 100% of the assets held in the AMG TimesSquare Small Cap Growth Fund were transferred, in-kind, from the mutual fund to a collective investment trust in order to lower management fees for the investment from 0.98% to 0.80%. In May 2020, the Board of Trustees adopted Resolution No. 3597 for changes to the Plan’s investment policy. Changes include a reduction in the Plan’s assumed investment return from 6.9% to 6.75% to reflect lower expected returns across all asset classes, removal of certain asset classes from the policy and updates to allowable asset class ranges. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 15 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. Membership in the Plan consists of: As of December 31, Increase 2019 2018 (Decrease) Active plan members 493 545 (52) Retirees and beneficiaries currently receiving benefits 771 748 23 Terminated members entitled to receive benefits 180 181 (1) Total 1,444 1,474 (30) THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 16 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. 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 with the overall aggregate amount of such annual increases not to $9,000. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 17 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. Effective February 14, 2019, Ordinance No. 15110 amended the Plan to update the language of Plan benefits for death of a member after retirement and retiree medical coverage. 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 18 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 10 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 10 in the MD&A. The fair value of investments managed consisted of the following: As of December 31, 2019 2018 Investments, at Fair Value Collective Investment Funds 136,062,084$ 122,410,744$ Mutual Funds 70,580,513 55,453,699 Real Estate Investments 32,566,168 25,555,188 Corporate Obligations 21,981,050 20,350,656 US Treasury and Agency Obligations 16,428,797 15,878,117 Domestic Common Stocks 13,798,990 9,235,066 Money Market Funds 3,110,257 10,299,912 Foreign Stocks 1,069,782 538,865 Municipal Obligations 554,136 754,971 Total Investments 296,151,777$ 260,477,218$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 19 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, 2019 Weighted Average Maturity Investment Type Fair Value (in Years) Corporate Obligations 21,981,050$ 3.67 U.S. Treasury and Agency Obligations 16,428,797 5.34 Municipal Obligations 554,136 2.72 Total 38,963,983$ Portfolio Weighted Average Maturity in Years 4.36 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 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 20 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 21 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 —$ —$ 3,322,315$ 3,322,315$ AA 16,428,797 524,046 795,055 17,747,898 A— — 4,013,879 4,013,879 BBB — 30,090 9,862,765 9,892,855 Not Rated — — 3,987,036 3,987,036 Total 16,428,797$ 554,136$ 21,981,050$ 38,963,983$ 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, 2019 Credit Rating by Investment as of December 31, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 22 Investments Greater Than 5% Of Net Position Restricted For Pension Benefits Investments that exceed 5% of net position restricted for pension benefits at December 31, 2019 or 2018 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, 2019 and December 31, 2018: 2019 % 2018 % BlackRock Russell 1000 Index Fund Non-Lending 73,577,533$ 25% 58,194,612$ 22% Prudential Core Plus Bond Fund 36,944,489 12% 33,896,439 13% Morgan Stanley International Equity Fund I 35,695,098 12% 30,442,165 12% UBS Trumbull Property Fund 32,646,318 11% 25,555,188 10% Brandywine Global Bond Opportunistic Fixed Income 24,337,678 8% 22,024,186 8% Morgan Stanley Emerging Markets Fund I 18,621,570 6% 14,879,755 6% TimesSquare Small Cap Growth Fund 16,325,240 6% N/A Kennedy Mid Cap Value 15,340,474 5% N/A December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 23 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Investments by Fair Value Level 12/31/2019 (Level 1) (Level 2) (Level 3) Debt Securities: Corporate Obligations 21,981,050$ —$ 21,981,050$ —$ US Treasury Notes and Bonds 13,242,420 13,242,420 — — US Government Agency Obligations 3,186,377 — 3,186,377 — Municipal Obligations 554,136 — 554,136 — Core Plus Bond Commingled Trust Fund 36,944,488 — 36,944,488 — Global Fixed Income Collective Trust Fund 24,337,678 — 24,337,678 — Total Debt Securities 100,246,149 13,242,420 87,003,729 — Equity Securities: Domestic Equities 103,626,500 13,798,990 89,827,510 — International Equities 36,764,765 1,069,782 35,694,983 — Emerging Markets Fund 18,621,570 — 18,621,570 — Total Equity Securities 159,012,835 14,868,772 144,144,063 — Total Investments by Fair Value Level 259,258,984 28,111,192$ 231,147,792$ —$ Unfunded Redemption Redemption Investments Measured at the Net Asset Value (NAV) Commitments Frequency Notice Period Real Estate Funds (1)32,566,168 — Quarterly 60 Days Diversified Hedge Fund of Fund (2)1,216,368 — Quarterly 90 Days Total Investments Measured at the Net Asset Value 33,782,536 Money Market at Amortized Cost 3,110,257 Total Investments at Fair Value 296,151,777$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 24 (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 12/31/2018 (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 Frequency Notice Period Real Estate Funds (1)25,555,188 — Quarterly 60 Days Diversified Hedge Fund of Fund (2)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 25 (2) 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 $12,725,462 and $12,493,916, excluding certain professional fees paid by the District, were made to the Plan in 2019 and 2018, respectively. These contributions were made in accordance with actuarially determined contribution recommendations based on actuarial valuations performed at December 31, 2018 and 2017, respectively, and consisted of: Certain professional fees, included in administrative expenses, are paid by the District and are recognized as contributions to the Plan and totaled $14,944 and $28,260 for the years ended December 31, 2019 and 2018, respectively. The District provides office space, utilities, and other services to the Plan at no cost. Other costs of administering the Plan are financed from Plan net position. December 31, 2019 2018 Normal Cost 4,902,474$ 5,238,812$ Amortization of the Unfunded Actuarial Accrued Liability 7,001,606 6,448,668 Investment Rate of Return Factor of 6.9% 821,382 806,436 Current Year Contribution Due from the District as Calculated by the Plan's Actuary 12,725,462$ 12,493,916$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 26 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, 2019 and December 31, 2018 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, 2019 and December 31, 2018: Net Pension Liability December 31, 2019 2018 Total Pension Liability 353,995,560$ 334,957,313$ Plan Fiduciary Net Position 296,202,647 260,560,576 Net Pension Liability 57,792,913$ 74,396,737$ 83.67% 77.79% Covered Payroll 36,793,274$ 39,437,165$ Net Pension Liability as a Percentage of Covered Payroll 157.07% 188.65% Fiduciary Net Position as a Percentage of Total Pension Liability December 31, 2019 2018 Inflation Rate 2.50% 2.50% Projected Salary Increases 4.25% 4.25% Actuarial Discount Rate 6.75% 6.90% rates for the December 31, 2018 valuation. Mortality rates were based on the Pub-2010 General Amount-Weighted Mortality Tables for Employees, Healthy Retirees, Disabled Retirees and Contingent Survivors, male and female rates, with generational projection from 2010 using Scale MP-2019 for the December 31, 2019 valuation and the RP-2014 Mortality Tables for Employees and Healthy Annuitants, male and female rates, with generational projection from 2006 using Scale MP-2018 and RP-2014 Disabled Mortality Table, male and female THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 27 Discount Rate December 31, 2019 2018 Discount Rate 6.75% 6.90% Long-Term Expected Rate of Return, Net of Investment Expense 6.75% 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 return. Long-Term Expected Rate of Return Long-Term Expected Geometric Target Real Rate Asset Class Allocation of Return Large Cap US Equity 25.0% 4.2% Small Cap US Equity 10.0% 4.7% Developed International Equity 12.0% 5.0% Emerging Markets Equity 6.0% 5.6% Domestic Fixed Income 27.0% ** Global Bonds 8.0% 2.9% Real Estate 12.0% 3.4% Assumed Inflation - Mean 2.5% The long-term expected rate of return is assumed to be 6.75%. ** Expected to earn less than inflation. 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: THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 28 Rate of Return For the years ended December 31, 2019 and 2018, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 16.19% and -4.73%, 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. Sensitivity of the Net Pension Liability to Changes in the Discount Rate 1% Current 1% Decrease Discount Rate Increase 5.75% 6.75% 7.75% Total Pension Liability 393,492,024$ 353,995,560$ 320,457,446$ Plan Fiduciary Net Position 296,202,647 296,202,647 296,202,647 Net Pension Liability 97,289,377$ 57,792,913$ 24,254,799$ The following presents the Net Pension Liability of the District, calculated using the discount rate of 6.75%, 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 (5.75%) or 1 percentage point higher (7.75%) than the current rate. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Notes To Financial Statements (Continued) Page 29 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 30 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67 Total Pension Liabilty 2019 2018 2017 2016 2015 2014Service cost 4,902,474$ 5,238,812$ 5,157,148$ 5,106,625$ 5,253,091$ 5,409,485$ Interest 22,818,417 22,306,950 22,078,790 20,609,223 20,198,502 19,900,507 Effect of economic/demographic gains or losses (1,966,640) (2,041,843) (4,728,693) (882,851) (4,576,597) (3,667,991) Effect of assumption changes or inputs 11,910,886 — 1,667,047 11,664,881 — 6,500,227 Benefit payments (18,626,890) (16,911,759) (15,858,355) (15,260,904) (14,474,566) (13,387,127) Net Change In Total Pension Liability19,038,247 8,592,160 8,315,937 21,236,974 6,400,430 14,755,101 Total Pension Liability - Beginning334,957,313 326,365,153 318,049,216 296,812,242 290,411,812 275,656,711 Total Pension Liability - Ending353,995,560 334,957,313 326,365,153 318,049,216 296,812,242 290,411,812 Plan Fiduciary Net PositionContributions - employer (including employer paid expenses) 12,740,406 12,522,176 12,346,563 10,159,922 10,071,378 10,682,846 Net investment income 41,631,484 (12,912,658) 30,579,933 11,992,366 (1,809,875) 7,066,420 Benefit payments (18,626,890) (16,911,759) (15,858,355) (15,260,904) (14,474,566) (13,394,219) Administrative expenses (102,929) (113,398) (101,957) (93,592) (90,519) (86,504) Net Change In Plan Fiduciary Net Position35,642,071 (17,415,639) 26,966,184 6,797,792 (6,303,582) 4,268,543 Plan Fiduciary Net Position - Beginning260,560,576 277,976,215 251,010,031 244,212,239 250,515,821 246,247,278 Plan Fiduciary Net Position - Ending296,202,647 260,560,576 277,976,215 251,010,031 244,212,239 250,515,821 District’s Net Pension Liability - Ending57,792,913$ 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 Liability83.67% 77.79% 85.17% 78.92% 82.28% 86.26%Covered Payroll36,793,274$ 39,437,165$ 41,868,586$ 42,054,815$ 43,344,502$ 44,663,896$ The District's Net Pension Liability As A Percentage OfCovered Payroll157.07% 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.Schedule of Changes in Net Pension LiabilityDecember 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 31 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67 (Continued) Schedule of Employer Contributions Plan Year Actuarially Contribution Contribution Ending Determined Annual Deficiency Covered as a % of December 31, Contribution Contribution (Excess) Payroll* Covered Payroll 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% 2019 12,725,462 12,725,462 — 36,793,274 34.59% * Payroll as of prior December 31 Measurement Date. THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 32 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67 (Continued) Valuation Timing Actuarial Cost Method Entry 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 6.75% Cost of Living Adjustments 2.50%, with 45.00%/$750 per month lifetime cap Retirement Age Retirement rates are summarized in the December 31, 2019 Actuarial Valuation. Turnover Turnover rates are summarized in the December 31, 2019 Actuarial Valuation. Disability Disability rates are summarized in the December 31, 2019 Actuarial Valuation. Mortality The following actuarial methods and assumptions were used in the December 31, 2019 funding valuation. Please see the December 31, 2019 actuarial funding valuation report for further details. Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Pub-2010 General Amount-Weighted Mortality Tables with generational projection based on Scale MP-2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 33 REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB STATEMENT NO. 67 (Continued) Money-Weighted Rate of Return Plan Year Net Ending Mone y-Weighte d December 31, Rate of Return 2010 N/A 2011 N/A 2012 N/A 2013 N/A 2014 2.86% 2015 -0.76% 2016 4.95% 2017 12.28% 2018 -4.73% 2019 16.19% Schedule of Annual Money-Weighted Rate of Return on Investments Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. STATISTICAL SECTION (UNAUDITED) THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 34 STATISTICAL SECTION For The Year Ended December 31, 2019 Net Position Value (NPV) as of Year December 31, 2010 198,540,074$ 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) 2019 296,202,647 13.7 Performance and Net Position Value Percentage Change THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 35 STATISTICAL SECTION For The Year Ended December 31, 2019 Net Employer Investment Year Contributions Income/(Loss) Total 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 31.8 (12,912,658) (390,482) 2019 12,740,406 34.6 41,631,484 54,371,890 Payroll Revenues by Source Employer Contributions as a Percentage of Covered THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 36 STATISTICAL SECTION For The Year Ended December 31, 2019 Benefit Administrative Year Payments Expenses Total 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 2019 18,626,890 102,929 18,729,819 Expenses by Type THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 37 STATISTICAL SECTION For The Year Ended December 31, 2019 Terminated Members Entitled to Receive Year Benefits Total 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 1 181 545 1,474 2019 771 1 180 493 1,444 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 571 596 614 636 660 691 717 722 748 771  0 100 200 300 400 500 600 700 800 900 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total Benefit Recipients at December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 38 STATISTICAL SECTION For The Year Ended December 31, 2019 Market Percentage Value as of of Holding December 31, 2019 Plan BlackRock Russell 1000 Index Fund Non-Lending 73,577,533$ 24.8% Income Research Management 39,329,570 13.3% Prudential Core Plus Bond Fund 36,944,489 12.5% Morgan Stanley International Equity Fund I 35,695,098 12.0% UBS Trumbull Property Fund 32,646,318 11.0% Brandywine Global Bond Opportunistic Fixed Income 24,337,678 8.2% Morgan Stanley Emerging Markets Fund I 18,621,570 6.3% TimesSquare Small Cap Growth Fund 16,325,240 5.5% Kennedy Mid Cap Value 15,340,474 5.2% Entrust Capital Diversified Fund 1,667,480 0.6% Totals 294,485,450$ 99.4% Top Ten Holdings by Investment Manager THE METROPOLITAN ST. LOUIS SEWER DISTRICT EMPLOYEES’ PENSION PLAN Page 39 STATISTICAL SECTION For The Year Ended December 31, 2019 2019 2018 Investment Manager Fees: UBS Global Real Estate 282,873$ 222,551$ Income Research & Management Inc. 132,365 130,162 Kennedy Capital Management, Inc. 102,627 77,814 Brandywine Global Investment Management, LLC 99,579 105,655 Prudential Core Plus Bond Fund & Global Asset 93,482 104,557 BlackRock Institutional Trust Co. 23,622 16,257 Total Investment Manager Fees 734,548 656,996 Advisor Fees: AON Hewitt Investment Consulting, Inc. 96,668 22,222 Pavilion Advisory Group Inc. — 79,070 Total Advisor Fees 96,668 101,292 Total of All Fees 831,216$ 758,288$ 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 Firm For the Years Ended December 31,