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HomeMy Public PortalAbout2019 Audited Financials THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN FINANCIAL STATEMENTS DECEMBER 31, 2019 AND 2018 Contents Page Independent Auditors’ Report........................................................................ 1 - 2 Management’s Discussion And Analysis ....................................................... 3 - 7 Financial Statements Statements Of Fiduciary Net Position................................................................8 Statements Of Changes In Fiduciary Net Position ............................................9 Notes To Financial Statements ................................................................ 10 - 19 Supplemental Information Historical Trend Information ...........................................................................20 Fund Values And Expense Ratios....................................................................21 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 Defined Contribution 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 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, 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 7 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 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 audit 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 supplemental information on pages 20 through 21, are presented for purposes of additional analysis and are not a required part of the financial statements. The schedules included in supplemental information 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 supplemental 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 DEFINED CONTRIBUTION PLAN Page 3 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended December 31, 2019 and 2018 This report consists of a series of financial statements related to The Metropolitan St. Louis Sewer District (“District”) Defined Contribution Plan (“Plan”). The Statements of Fiduciary Net Position and the Statements of Changes in Fiduciary Net Position (on pages 8 and 9) provide information about this Plan’s net position and changes in its net position during the year. These statements are prepared using the accrual basis of accounting. The Management’s Discussion and Analysis of the Plan’s financial performance provides an overview of the Plan’s financial activities for the years ended December 31, 2019 and 2018. Please read it in conjunction with the Plan’s financial statements. FINANCIAL HIGHLIGHTS 2019  At December 31, the Plan consisted of 540 participants with account balances of $12,963,662 in net position (page 8).  Total increase to the Plan’s net position (page 9) amounted to $4,394,207 consisting of Plan contributions and other additions of $2,539,168 and net investment gain of $2,268,675, offset by deductions of $413,636.  Administrative expenses (part of the deductions to the Plan’s net position) totaled $64,755. This consisted of Vanguard record-keeping and compliance testing, consultant and accounting fees. FINANCIAL HIGHLIGHTS 2018  At December 31, the Plan consisted of 459 participants with account balances of $8,569,455 in net position (page 8).  Total increase to the Plan’s net position (page 9) amounted to $1,125,330 consisting of Plan contributions and other additions of $1,958,418 offset by net investment loss of $630,768 and deductions of $202,320.  Administrative expenses (part of the deductions to the Plan’s net position) totaled $59,639. This consisted of Vanguard record-keeping and compliance testing, consultant and accounting fees. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Management’s Discussion And Analysis (Continued) Page 4 ANALYSIS OF FINANCIAL ACTIVITIES The Plan showed a positive net gain of $1,027,911 when compared to original costs. The Target Retirement 2045 Fund had the greatest gain in value for any one individual fund at $208,225. Value at December 31, Net % of Current Fund Name Cost 2019 Gain/(Loss) Value Vanguard Group, Inc. Institutional Target Retirement 2045 2,295,864$ 2,504,089$ 208,225$ 19.31 % Institutional Target Retirement 2050 1,406,438 1,533,098 126,660 11.83 Institutional Target Retirement 2040 1,316,271 1,431,787 115,516 11.04 Institutional Index Fund 735,615 842,373 106,758 6.50 Institutional Target Retirement 2035 1,308,166 1,413,278 105,112 10.90 Institutional Target Retirement 2055 846,903 923,397 76,494 7.12 Institutional Target Retirement 2025 736,458 787,928 51,470 6.08 Institutional Target Retirement 2030 622,887 671,725 48,838 5.18 Mid-Cap Index Fund Admiral 388,731 433,906 45,175 3.35 International Growth Fund Admiral 430,115 467,737 37,622 3.61 Institutional Target Retirement 2060 355,419 387,234 31,815 2.99 Balanced Index Fund Institutional 219,040 243,814 24,774 1.88 Small-Cap Index Fund Admiral 251,499 267,279 15,780 2.06 U.S. Growth Fund Admiral 204,079 219,186 15,107 1.69 Institutional Target Retirement 2020 153,455 163,341 9,886 1.26 Total Bond Market Index Fund Admiral 196,434 203,885 7,451 1.57 Institutional Target Retirement Income 45,375 47,576 2,201 0.37 Institutional Target Retirement 2065 12,383 13,306 923 0.10 Institutional Target Retirement 2015 6,885 7,179 294 0.06 Prime Money Market Fund 142,181 142,181 — 1.10 Retirement Savings Trust III 72,366 72,366 — 0.56 Windsor II Fund Admiral 189,187 186,997 (2,190) 1.44 Totals 11,935,751$ 12,963,662$ 1,027,911$ 100.00 % Change in Fund Asset Values - 2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Management’s Discussion And Analysis (Continued) Page 5 Value at December 31, Net % of Current Fund Name Cost 2018 Gain/(Loss) Value Vanguard Group, Inc. Total Bond Market Index Fund Admiral 134,852$ 135,519$ 667$ 1.59 % Prime Money Market Fund 92,659 92,659 — 1.08 Retirement Savings Trust III 87,981 87,981 — 1.03 Institutional Target Retirement 2015 5,665 5,329 (336) 0.06 Institutional Target Retirement 2065 8,323 7,516 (807) 0.09 Institutional Target Retirement Income 39,901 38,478 (1,423) 0.45 Institutional Target Retirement 2020 135,140 126,335 (8,805) 1.47 Balanced Index Fund Institutional 177,569 168,098 (9,471) 1.96 Institutional Target Retirement 2060 225,216 202,856 (22,360) 2.37 Small-Cap Index Fund Admiral 177,322 150,631 (26,691) 1.76 Windsor II Fund Admiral 192,860 161,135 (31,725) 1.88 Mid-Cap Index Fund Admiral 273,809 239,919 (33,890) 2.80 U.S. Growth Fund Admiral 223,203 187,672 (35,531) 2.19 Institutional Index Fund 490,342 449,437 (40,905) 5.24 Institutional Target Retirement 2025 578,239 535,941 (42,298) 6.25 Institutional Target Retirement 2030 571,634 524,299 (47,335) 6.12 International Growth Fund Admiral 262,419 212,386 (50,033) 2.48 Institutional Target Retirement 2055 629,740 566,779 (62,961) 6.61 Institutional Target Retirement 2035 1,032,063 940,278 (91,785) 10.97 Institutional Target Retirement 2040 1,123,843 1,017,316 (106,527) 11.87 Institutional Target Retirement 2050 1,101,707 990,779 (110,928) 11.56 Institutional Target Retirement 2045 1,923,240 1,728,112 (195,128) 20.17 Totals 9,487,727$ 8,569,455$ (918,272)$ 100.00 % Change in Fund Asset Values - 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Management’s Discussion And Analysis (Continued) Page 6 INVESTMENT ASSET ALLOCATION  Investment decisions are participant directed. The participants are offered a diversified portfolio of investment options from which to select. These investment options represent a series of mutual funds sponsored and managed by the Vanguard Group. A breakdown of the participant directed asset allocation as of December 31, 2019 follows: THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Management’s Discussion And Analysis (Continued) Page 7 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 plan participants and their beneficiaries. REQUEST FOR INFORMATION This financial report is designed to provide the Board of Trustees, participants, investment managers, and other interested parties 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 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 Change Contributions and Other Additions 2,539,168$ 1,958,418$ $ 580,750 Net Investment Income (Loss)2,268,675 (630,768) 2,899,443 Total Additions 4,807,843$ 1,327,650$ $ 3,480,193 Change Distributions to Participants 348,467$ 138,856$ $ 209,611 Administrative Expenses and Legal Fees 65,169 63,464 1,705 Total Deductions 413,636$ 202,320$ $ 211,316 Change Net Increase 4,394,207$ 1,125,330$ $ 3,268,877 Net Position Restricted for Benefits, January 1 8,569,455 7,444,125 1,125,330 Net Position Restricted for Benefits, December 31 12,963,662$ 8,569,455$ $ 4,394,207 2019 2018 Plan Additions, Deductions, and Net Position are as follows: Plan Additions Plan Deductions Net Position 20182019 2019 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN See the accompanying Notes To Financial Statements. Page 8 STATEMENTS OF FIDUCIARY NET POSITION 2019 2018 ASSETS Investments at Fair Value: Mutual Funds 12,891,296$ 8,481,474$ Investments at Contract Value: Common/Collective Trust 72,366 87,981 Total Investments 12,963,662 8,569,455 NET POSITION RESTRICTED FOR PLAN BENEFITS 12,963,662$ 8,569,455$ December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN See the accompanying Notes To Financial Statements. Page 9 STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION 2019 2018 ADDITIONS TO NET POSITION ATTRIBUTED TO: Investment Income: Interest and Dividends on Investments 301,337$ 228,336$ Net Appreciation (Depreciation) in Fair Value of Investments 1,980,157 (850,476) Total Investment Income (Loss) 2,281,494 (622,140) Less - Investment Managers' and Advisors' Fees 12,819 8,628 Net Investment Income (Loss) 2,268,675 (630,768) Contributions and Other Additions: Employer Contributions 2,291,285 1,895,233 Employee Contributions-Rollovers 187,714 4,721 Plan Expenses Paid by Employer 60,169 58,464 Total Contributions and Other Additions 2,539,168 1,958,418 Total Additions 4,807,843 1,327,650 DEDUCTIONS FROM NET POSITION ATTRIBUTED TO: Distributions to Participants and Beneficiaries 348,467 138,856 Administrative Expenses 64,755 59,639 Legal Fees 414 3,825 Total Deductions 413,636 202,320 NET INCREASE 4,394,207 1,125,330 NET POSITION RESTRICTED FOR PLAN BENEFITS, January 1 8,569,455 7,444,125 NET POSITION RESTRICTED FOR PLAN BENEFITS, December 31 12,963,662$ 8,569,455$ For The Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Page 10 NOTES TO FINANCIAL STATEMENTS December 31, 2019 And 2018 1. Summary of Significant Accounting Policies The following significant accounting policies, which conform to generally accepted accounting principles, have been used consistently in the preparation of The Metropolitan St. Louis Sewer District Defined Contribution Plan’s (“Plan”) financial statements. Basis of Accounting The financial statements of the Plan are prepared under the accrual basis of accounting. Estimates and Assumptions The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Plan Administrator to make certain estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. Investment Valuation and Income Recognition The Plan’s investments in mutual funds are stated at fair value. Shares of registered investment companies are valued at quoted market prices which represent the net asset value of shares held by the Plan at year-end. Units of the Retirement Savings Trust III common/collective trust are valued at contract value which approximates fair value. Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are included in dividend income. Realized gains of $18,330 and $1,239,397 were recorded in the periods ending December 31, 2019 and 2018, respectively. Payment of Benefits Benefits are recorded when paid. Subsequent Events Management has evaluated subsequent events through June 26, 2020, the date through which the financial statements were available for issue. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 11 2. Description of the Plan The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. General The Plan is a defined contribution plan established by the District’s Board of Trustees through Ordinance 13180 and became effective January 1, 2011 and is a qualified plan under Section 401(a) of the Internal Revenue Code. The following regular, full-time permanent employees are eligible to participate in the Plan: (i) employees first hired on or after January 1, 2011, and (ii) employees hired prior to January 1, 2011 who elected to terminate participation in The Metropolitan St. Louis Sewer District Employees’ Pension Plan, effective as of April 1, 2011, in accordance with the provisions of such Pension Plan, and (iii) employees rehired on or after January 1, 2011 who are not eligible to accrue benefits under The Metropolitan St. Louis Sewer District Employees’ Pension Plan. An employee shall become a participant in the Plan on the first day on which he performs an hour of service for the District. The District’s Board of Trustees, primarily to improve benefits to members, amends the Plan in all its respects. 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. 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 intended to provide a means whereby the District may provide retirement benefits to eligible employees and encourage such employees to establish a regular method of savings, thereby providing a measure of financial security for such employees and their beneficiaries upon retirement or in the event of death or disability. All assets of the Plan are the sole property of the Plan and are not subject to the claims of creditors of the District. The Plan Administrator issues a publicly available Summary Plan Description. That information may be obtained by writing to The Metropolitan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555. Contributions Employer Basic Contributions: For each payroll period, the District contributes an amount equal to 7% of the covered compensation earned during such period by each participant entitled to an allocation of such contribution. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 12 Employer Matching Contributions: For each payroll period, the District contributes an amount equal to 50% of the covered compensation of such participant withholding as an annual deferral (as defined in The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust) pursuant to The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust; provided that, before-tax contributions in excess of 4% of the covered compensation of the participant for the payroll period shall not be considered for purposes of Employer Matching Contributions. Employer Matching Contributions shall be up to the maximum amount of compensation that may be taken into account for the Plan year. In no event shall the sum of the employer contributions and employee contributions allocated to the account of a participant for the Plan year exceed the lesser of: (a) The amount specified in the applicable Internal Revenue Code (“Code”), as adjusted annually for any applicable increases in the cost of living. (b) 100% of the participant’s compensation for such year. The compensation limit referred to in (b) shall not apply to any contribution from medical benefits after separation from service. Employee Contributions: The Plan will accept a rollover of an eligible rollover distribution from an eligible retirement plan if the Plan Administrator approves the transaction as meeting the Plan’s rules. This is called a “Rollover Contribution” and for the years ended December 31, 2019 and 2018, $187,714 and $4,721 were eligible rollover distributions into the Plan, respectively. Participant Accounts The Plan Administrator shall establish and maintain a separate individual account for each participant (which may consist of various sub-accounts established by the Plan Administrator) to reflect the participant’s share of contributions made and the income, loss, appreciation and depreciation attributable to the account. The Plan Administrator shall keep accurate records of all contributions, receipts, investment distributions and all other transactions. The amount credited to the individual account of a participant from time to time as of the most recent valuation date shall constitute the entire interest of the participant in the Plan. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 13 Vesting As of any time before the normal retirement age of a participant (other than upon death or permanent disability), the vested percentage of the amounts credited to the Participant’s Employer Basic Contributions Account shall be determined in accordance with the following schedule: Months of Service Vested Percentages Less than 12 0% 12 but less than 24 20% 24 but less than 36 40% 36 but less than 48 60% 48 but less than 60 80% 60 or more 100% Normal Retirement Age is defined as the first day of the month coinciding with or next following a person’s 65th birthday and completion of 60 months of continuous service. The amount credited to the Participant’s Employer Matching Contributions Account shall be fully vested at all times. Investment Options Upon enrollment in the Plan, a participant directs employer contributions in any of the investment options available. The investment options consist of mutual funds and a common/collective trust fund. Employer contributions may be allocated to the Vanguard accounts, in 1% increments, as the participant directs. Vanguard offers participants in the Plan the following investment options: Equity option (Large Cap): Vanguard Windsor II Fund, Vanguard Institutional Index Fund, and Vanguard U.S. Growth Fund - Investment objective is long-term capital appreciation. Equity Diversification option (Small/Mid Cap and International): Vanguard Small-Cap Index Fund, Vanguard Mid-Cap Index Fund, and Vanguard International Growth Fund - Investment objective is long-term capital appreciation. Bond option (Fixed Income): Vanguard Total Bond Market Index Fund - Investment objective is income stability and conservation of principal. Balanced option (Balanced): Vanguard Balanced Index Fund - Investment objective is income, conservation of principal and long-term growth. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 14 Stable Value option (Capital Preservation): Vanguard Retirement Savings Trust III - Investment objective is income stability and conservation of principal. Money Market option (Capital Preservation): Vanguard Prime Money Market Fund - Investment objective is income while maintaining safety of principal. Target Retirement option (Target Date): Vanguard Target Retirement 2015-2065 Funds and Vanguard Target Retirement Income Fund - Investment objective is capital appreciation and current income consistent with its current asset allocation. Distributions Upon a participant’s severance from service, the amount credited to his/her individual account shall be payable to the extent such that it is vested. The value of a participant’s vested individual account balance shall be distributed as soon as administratively feasible. The amount payable to a participant shall be the vested amount credited to his/her individual account as of the valuation date immediately preceding such distribution. This amount shall be distributed in any one or a combination of the following forms as the participant may elect: (a) In one lump sum payment; or (b) In annual, quarterly or monthly installments. Forfeited Accounts Upon a participant’s severance from service, the unvested amount credited to his/her individual account shall be forfeited and credited to the Employer Basic Contributions account and shall be used to reduce future Employer Basic Contributions. If a participant is rehired before incurring two consecutive years break in service, the amount previously forfeited will be restored. If rehired after two consecutive years of break in service, the amounts previously forfeited will not be restored. Forfeitures amounted to $34,902 and $59,365 for 2019 and 2018, respectively. The balances in the account as of December 31, 2019 and 2018 were $5,516 and $2,093, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 15 Administrative Expenses The general administrative expenses of the Plan are paid by the District. These expenses consist of legal, consultant and accounting expenses as well as the administration of the Plan. Expenses attributable to a participant’s choice of optional investments or optional forms of benefit payments are charged to the respective participant’s account balance. Payment of Death Benefits Effective February 2, 2019, the beneficiary of a participant who has a separation from service and who either attained 75 points (combined age and term of service) or attained his/her Normal Retirement Date, Early Retirement Date (age 55 and completion of five years of employment), Postponed Retirement Date, or Disability Retirement Date as of the date of separation, will receive a lump sum payment of $5,000 as long as the participant’s beneficiary is not receiving a life insurance benefit from the District under another arrangement or program apart from this Plan. Retiree Medical Coverage Effective February 2, 2019, the District will provide the same individual medical coverage as active employees if a participant separates from service after attaining 75 points (combined age and term of service) or retires after attaining age 62 and completion of five years of employment. If the participant was receiving any kind of dependent coverage, such as children or spousal coverage, the participant shall pay the additional cost of such dependent coverage and the District will not be liable for the additional cost. The coverage will continue until the participant becomes eligible for Medicare under Title XVIII of the United States Code, dies, or becomes eligible under another group medical plan, whichever first occurs. The District retains the right to amend this policy to require participant contributions, or to otherwise amend or terminate this policy at any time in any manner with respect to some or all retirees. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 16 3. Investments Investment Balances Investments held by custodians in the Plan’s name are as follows: * Represents 5% or more of the Plan’s net position as of December 31, 2019 or 2018, respectively. Mutual Funds:2019 2018 Vanguard Group, Inc. Institutional Target Retirement 2045 2,504,089$ * 1,728,112$ * Institutional Target Retirement 2050 1,533,098 * 990,779 * Institutional Target Retirement 2040 1,431,787 * 1,017,316 * Institutional Target Retirement 2035 1,413,278 * 940,278 * Institutional Target Retirement 2055 923,397 * 566,779 * Institutional Index Fund 842,373 * 449,437 * Institutional Target Retirement 2025 787,928 * 535,941 * Institutional Target Retirement 2030 671,725 * 524,299 * International Growth Fund Admiral 467,737 212,386 Mid-Cap Index Fund Admiral 433,906 239,919 Institutional Target Retirement 2060 387,234 202,856 Small-Cap Index Fund Admiral 267,279 150,631 Balanced Index Fund Institutional 243,814 168,098 U.S. Growth Fund Admiral 219,186 187,672 Total Bond Market Index Fund Admiral 203,885 135,519 Windsor II Fund Admiral 186,997 161,135 Institutional Target Retirement 2020 163,341 126,335 Prime Money Market Fund 142,181 92,659 Institutional Target Retirement Income 47,576 38,478 Institutional Target Retirement 2065 13,306 7,516 Institutional Target Retirement 2015 7,179 5,329 Total Mutual Funds 12,891,296 8,481,474 Common/Collective Trust: Vanguard Group, Inc. Retirement Savings Trust III 72,366 87,981 Total Investments 12,963,662$ 8,569,455$ December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 17 Categories of Asset Risk - Debt Securities Interest Rate and Credit Risk 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 selecting mutual funds for the investment portfolio that manage credit quality and duration of fixed income investments. The Plan will minimize credit risk, the risk of loss due to failure of the security issuer or backer, by selecting mutual funds for the investment portfolio that manage their respective fund under a predetermined average credit risk investment management policy. The following tables provide information on the duration and credit ratings associated with the Plan’s investments with debt securities, including obligations of the U.S. Government or obligations explicitly guaranteed by the U.S. Government within these funds at December 31, 2019 and 2018: Average Percentage Effective of Debt Plan Investments Fair Percentage Duration Not With Debt Securities Value of Debt in Years Rated December 31, 2019: Vanguard Group, Inc. Institutional Target Retirement 2045 2,504,089$ 10% 6.84 0.00% Institutional Target Retirement 2050 1,533,098 10% 6.85 0.00% Institutional Target Retirement 2040 1,431,787 17% 6.87 0.00% Institutional Target Retirement 2035 1,413,278 23% 6.85 0.00% Institutional Target Retirement 2055 923,397 10% 6.84 0.00% Institutional Target Retirement 2025 787,928 38% 6.85 0.00% Institutional Target Retirement 2030 671,725 31% 6.87 0.00% Institutional Target Retirement 2060 387,234 10% 6.84 0.00% Balanced Index Fund Institutiona l 243,814 39% 6.26 0.00% Total Bond Market Index Fund Admiral 203,885 97% 6.26 0.00% Institutional Target Retirement 2020 163,341 47% 6.20 0.00% Prime Money Market Fund 142,181 8% * 0.00% Retirement Savings Trust III 72,366 89% 3.10 0.00% Institutional Target Retirement Income 47,576 67% 5.82 0.00% Institutional Target Retirement 2065 13,306 10% 6.87 0.00% Institutional Target Retirement 2015 7,179 61% 5.90 0.00% * Information is unavailable for this security. The average effective duration only applies to the debt portion of the investment. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 18 4. Fair Value Measurement and Application The Plan has the following fair value measurements as of December 31, 2019 and 2018:  Mutual fund investments of $12,891,296 and $8,481,474, respectively, are valued using quoted market prices (Level 1 inputs). 5. Risks and Uncertainties The Plan invests in various investment securities as directed by the Plan’s participants. Investment securities are exposed to various risks such as interest rate, market, and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the participants’ account balances and amounts reported in the Plan’s Statements of Fiduciary Net Position. Average Percentage Effective of Debt Plan Investments Fair Percentage Duration Not With Debt Securities Value of Debt in Years Rated December 31, 2018: Vanguard Group, Inc. Institutional Target Retirement 2045 1,728,112$ 10% 6.52 0.00% Institutional Target Retirement 2040 1,017,316 15% 6.52 0.00% Institutional Target Retirement 2050 990,779 10% 6.52 0.00% Institutional Target Retirement 2035 940,278 23% 6.52 0.00% Institutional Target Retirement 2055 566,779 10% 6.52 0.00% Institutional Target Retirement 2025 535,941 38% 6.52 0.00% Institutional Target Retirement 2030 524,299 30% 6.52 0.00% Institutional Target Retirement 2060 202,856 10% 6.52 0.00% Balanced Index Fund Institutiona l 168,098 39% 5.94 0.00% Total Bond Market Index Fund Admiral 135,519 99% 5.94 0.00% Institutional Target Retirement 2020 126,335 47% 6.03 0.00% Prime Money Market Fund 92,659 11% * 0.00% Retirement Savings Trust III 87,981 87% 2.90 0.00% Institutional Target Retirement Income 38,478 69% 5.62 0.00% Institutional Target Retirement 2065 7,516 10% 6.63 0.00% Institutional Target Retirement 2015 5,329 60% 5.69 0.00% * Information is unavailable for this security. The average effective duration only applies to the debt portion of the investment. THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN Notes To Financial Statements (Continued) Page 19 6. Plan Termination Although it has not expressed any intent to do so, the District has the right under the Plan to terminate the Plan at any time. In the event of Plan termination, the Trustee shall liquidate the assets and disburse all funds to participants or their beneficiaries. 7. Related Party Transactions The Plan invests in shares of mutual funds managed by an affiliate of Vanguard Fiduciary Trust Company (“VFTC”). VFTC acts as trustee for only those investments as defined by the Plan. Transactions in such investments qualify as related party transactions which are exempt from the prohibited transaction rules. 8. Tax Status The Plan received a favorable determination letter from the Internal Revenue Service (“IRS”) on May 21, 2014, in which the IRS stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. SUPPLEMENTAL INFORMATION THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN See the accompanying independent auditors’ report. Page 20 HISTORICAL TREND INFORMATION Employer Contributions, Distributions To For The Rollovers, And Participants Years Ended Expenses Paid Net Investment And Plan Increase December 31, By Employer Income (Loss) Expenses In Net Position 2019 2,539,168$ 2,268,675$ (413,636)$ 4,394,207$ 2018 1,958,418 (630,768) (202,320) 1,125,330 2017 1,644,620 1,094,223 (233,608) 2,505,235 2016 1,298,838 360,826 (224,325) 1,435,339 2015 1,204,333 (41,012) (106,835) 1,056,486 2014 907,020 134,513 (98,732) 942,801 2013 678,967 204,824 (27,154) 856,637 2012 420,158 44,390 (20,642) 443,906 2011 239,482 (5,193) (30,568) 203,721 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFINED CONTRIBUTION PLAN See the accompanying independent auditors’ report. Page 21 FUND VALUES AND EXPENSE RATIOS This asset-based fee is a measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets, lowering the return in the fund. Lower expense ratios reduce fees coming out of a fund, thus increasing the fund’s rate of return to the participant. The listing below shows all funds and their asset value with their corresponding expense ratio. Value at December 31, Fund Name 2019 Vanguard Group, Inc. Institutional Target Retirement 2045 2,504,089$ 0.09 % Institutional Target Retirement 2050 1,533,098 0.09 Institutional Target Retirement 2040 1,431,787 0.09 Institutional Target Retirement 2035 1,413,278 0.09 Institutional Target Retirement 2055 923,397 0.09 Institutional Index Fund 842,373 0.04 Institutional Target Retirement 2025 787,928 0.09 Institutional Target Retirement 2030 671,725 0.09 International Growth Fund Admiral 467,737 0.32 Mid-Cap Index Fund Admiral 433,906 0.05 Institutional Target Retirement 2060 387,234 0.09 Small-Cap Index Fund Admiral 267,279 0.05 Balanced Index Fund Institutional 243,814 0.06 U.S. Growth Fund Admiral 219,186 0.28 Total Bond Market Index Fund Admiral 203,885 0.05 Windsor II Fund Admiral 186,997 0.25 Institutional Target Retirement 2020 163,341 0.09 Prime Money Market Fund 142,181 0.16 Retirement Savings Trust III 72,366 0.31 Institutional Target Retirement Income 47,576 0.09 Institutional Target Retirement 2065 13,306 0.09 Institutional Target Retirement 2015 7,179 0.09 Vanguard Total/Average Ratio 12,963,662$ 0.12 % Expense Ratio