HomeMy Public PortalAboutDeferred Comp 2005 Audited FinancialsTHE METROPOLITAN ST. LOUIS
SEWER DISTRICT DEFERRED
COMPENSATION PLAN AND TRUST
FINANCIAL REPORT
(Audited)
Year Ended December 31, 2005
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
FINANCIAL REPORT
Page
INDEPENDENT AUDITORS' REPORT 1
MANAGEMENT DISCUSSION AND ANALYSIS 2
FINANCIAL STATEMENTS
Statements of Plan Net Assets 5
Statements of Changes in Net Assets 6
Notes to Financial Statements 7
Contents
Hochschild, Bloom & Company LLP
Certified Public Accountants
Consultants and Advisors
INDEPENDENT AUDITORS' REPORT
August 14, 2006
The Board of Trustees
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
We have audited the accompanying statement of plan net assets of THE METROPOLITAN ST. LOUIS
SEWER DISTRICT DEFERRED COMPENSATION PLAN AND TRUST (the Plan) as of December 31,
2005, and the related statement of changes in plan net assets for the year then ended. These financial statements
are the responsibility of the Plan Administrator. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of the Plan as of December 31, 2004 were audited by
other auditors whose report dated August 19, 2005, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We believe that our audit provides a rea-
sonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net as-
sets of the Plan as of December 31, 2005, and the changes in plan net assets for the year then ended, in confor-
mity with U.S. generally accepted accounting principles.
The management's discussion and analysis is not a required part of the basic financial statements, but is supple-
mentary information required by U.S. generally accepted accounting principles. We have applied certain limited
procedures that consisted principally of inquiries of management regarding the methods of measurement and
presentation of the supplementary information. However, we did not audit the information and express no opin-
ion on it.
CERTIFIED PUBLIC ACCOUNTANTS
❑ 16100 Chesterfield Parkway West, Suite 125, Chesterfield, Missouri 63017-4829, 636-532-9525, Fax 636-532-9055
El 1000 Washington Square, P.O. Box 1457, Washington, Missouri 63090-8457, 636-239-4785, Fax 636-239-5448
www.hbclp.com POLARIS -a. Member: Polaris International with Firms in Principal U.S. and International Cities
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2005
This report consists of a series of financial statements related to The Metropolitan St. Louis Sewer Dis-
trict's Deferred Compensation Plan and Trust (the Plan). The Statements of Net Assets Available for
Plan Benefits and the Statement of Changes in Net assets Available for Plan Benefits (on pages 5 and 6)
provide information about this Plan. These statements include all assets and liabilities using the accrual
basis of accounting. All of the current year's revenues and expenses are taken into account regardless of
when cash is received or paid.
Our management's discussion and analysis of the Plan's financial performance provides an overview of
the Plan's financial activities for the fiscal year ended December 31, 2005. Please read it in conjunction
with the Plan's financial section and notes to the financial section.
FINANCIAL HIGHLIGHTS
Plan Assets, Deferrals, and Deductions
Net assets available for plan benefits exceeded $22.2 million at the end of 2005 and the net asset value
increased by $2.8 million from that of December 31, 2004, due to the combined impact of both an in-
crease in the overall value of the equity markets and an increase in participant contributions. Contribu-
tions from participants were approximately $2.2 million, which was essentially the same as in the prior
year.
Platt Additions for 2005, 2004, and 2003 (in thousands)
2005
2004
Percent
Change
2003
Percent
Change
Employee Contributions
$2,203
$2,051
7.4%
$2,042
0.4%
Interest and Dividends
604
343
76.1
288
19.1
Appreciation/(Depreciation)
in fair value - net
708
1,567
(54.8)
2459
(36.3)
Investment Expense
(1)
(1)
-
(1)
-
Plan Deduction for 2005, 2004, and 2003 (in thousands)
2005
2004
Percent
Change
2003
Percent
Change
Distribution to Participants
$670
$793
(15.5%)
$1,239
(36%)
Page 2
Investment Aspects
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2005
Employee participation in the Plan is on a voluntary basis. As of December 31, 2005 and 2004, there
were 612 and 592 Plan participants, respectively, comprised of: active employees of the District, retir-
ees, or surviving spouses and terminated employees with account balances. Investment decisions are
participant directed. The participants are offered a diversified series of investment options to select
from. These investment options represent a series of mutual funds primarily sponsored and managed by
the Vanguard Group. A breakdown of the participant directed asset allocation is as follows.
8%
Asset Allocation as of Asset Allocation as of
December 31, 2005 December 31, 2004
4%
8%
21% 59%
6% 5%
22%
Asset Allocation as of
December 31, 2003
9%
19% 61%
• Equity
■ Balanced
❑ Fixed Income
❑ Stable Value
■ Cash equivalents
An independent investment consultant, New England Pension Consultants, monitored investment per-
formance of the various options offered to the participants. For 2005 the investment consultant reported
Page 3
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2005
that all actively managed funds with the exception of the International Equity Fund met or exceeded the
appropriate benchmarks, for the balanced or lifestyle funds three of the five investment options met or
exceeded their benchmarks. Performance of the funds are measured net of the corresponding expense
ratios. For 2004, the investment consultant reported that all actively managed funds with the exception
of the International Equity Fund met or exceeded the appropriate benchmarks.
Certain participants with assets valued at $936,638 and $1,028,688 in 2005 and 2004, respectively, are
invested in a series of fixed and variable rate annuity contracts sponsored by Lincoln National Life In-
surance Company. The Lincoln National Life option was phased out in 1992, and any balances repre-
sent undistributed participant balances. This option is no longer available to new participants or for cur-
rent deferrals.
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 the 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 Plans finances and accountability for the money re-
ceived. Questions concerning any of the information provided in this report or requests for additional
information should be addressed to:
Karl J. Tyminski, Secretary -Treasurer
2350 Market Street
St. Louis, MO 63103-2555
Phone: (314) 768-6222
Fax: (314) 768-2701
kjtymi@stlmsd.com
Page 4
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
STATEMENTS OF PLAN NET ASSETS
DECEMBER 31, 2005 AND 2004
2005 2004
ASSETS
Investments at fair value:
Mutual funds $20,944,474 18,050,509
Annuity contracts 936,638 1,028,688
Participant loans 367,999 325,156
Total Investments $22,249,111 19,404,353
NET ASSETS HELD IN TRUST FOR PLAN BENEFITS $22.249,111 19,404,353
See notes to financial statements
Page 5
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
STATEMENTS OF CHANGES IN PLAN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
2005 2004
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Interest and dividends $ 603,665 343,100
Net appreciation in fair value of investments 708,447 1.567,331
Total Investment Income 1,312,112 1,910,431
Less - Investment expenses 450 600
Net Investment Income 1,311,662 1,909,831
Employee contributions:
Elected deferrals 2,165,854 2,039,180
Rollovers 37.249 11.713
Total Employee Contributions 2.203,103 2.050.893
Total Additions 3,514.765 3.960.724
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants and beneficiaries 670.007 792.780
NET INCREASE 2,844,758 3,167,944
NET ASSETS HELD IN TRUST FOR PLAN BENEFITS,
BEGINNING OF YEAR 19,404,353 16,236.409
NET ASSETS HELD IN TRUST FOR PLAN BENEFITS,
END OF YEAR $22.249,111 19,404,353
See notes to financial statements
Page 6
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies consistently applied by THE METROPOLITAN ST. LOUIS
SEWER DISTRICT DEFERRED COMPENSATION PLAN AND TRUST (the Plan) in the prepa-
ration of the accompanying financial statements are summarized below:
1. Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of accounting.
Benefit payments to participants or beneficiaries are recorded upon distribution.
2. Accounting Estimates
The preparation of financial statements in conformity with U.S. generally accepted ac-
counting principles requires the Plan Administrator to make certain estimates and as-
sumptions that affect the reported amounts in the financial statements. Actual results
could differ from those estimates.
3. Investment Valuation
Purchases and sales of mutual funds are recorded on the settlement date. Investments in
mutual funds are valued at fair value based on quoted market prices. Investments in an-
nuity contracts are valued at contract values reported by the insurance company, which
approximate fair value.
4. Administrative Expenses
All general administrative cost of the Plan are paid by The Metropolitan St. Louis Sewer
District (the District), except those attributable to participants' choice of optional invest-
ments or optional forms of benefit payments. Theses expenses are charged to the respec-
tive participants' account balance.
NOTE B - DESCRIPTION OF THE PLAN
The following description of the Plan provides only general information. Participants should refer to the
Plan agreement for a complete description of the Plan's provisions.
1. General
The Plan is a defined contribution benefit plan covering substantially all employees of the
District. The District's Board of Trustees established the Plan in September 1996. The
District does not contribute to the Plan. All assets of the Plan are the sole property of the
Plan and are not subject to the claims of the creditors of the District.
Page 7
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE B - DESCRIPTION OF THE PLAN (Continued)
1. General (Continued)
The Plan Administrator issues a publicly available summary plan description. That in-
formation may be obtained by writing to The Metropolitan St. Louis Sewer District, 2350
Market Street, St. Louis, MO 63103-2555.
2. Contributions
Under the Plan provisions, employees of the District are eligible to contribute into the
Plan, through payroll deferral, any amount not previously reduced or withheld from their
total compensation. In accordance with the Internal Revenue Code as amended, the Plan
limits an individual's annual contribution (adjusted annually) not to exceed $14,000 for
the year ended December 31, 2005 and $13,000 for the year ended December 31, 2004.
Amounts contributed by participants are deferred for federal and state income tax pur-
poses until received as a withdrawal or distribution from the Plan.
Effective January 1, 2002, the Plan was amended and restated to comply with the Eco-
nomic Growth and Tax Relief Reconciliation Act of 2001 (the Act). The Act made sig-
nificant changes to Section 457(b) of the Internal Revenue Code of 1986, as previously
amended, such as: increasing the maximum allowable dollar contribution to $14,000 for
2005 and, if the participant is over the age of 50, they can contribute up to $18,000, in-
creasing the maximum deferral percentage of taxable compensation to 100% as well as
other changes.
Participant contributions may be allocated to the Vanguard Group accounts only, in 1 %
increments as the participant directs. No contributions are currently made to the Lincoln
National accounts:
Equity Option: Vanguard Windsor II Fund, Vanguard Index 500 Fund, and Vanguard
U.S. Growth Fund - Investment objective is long-term capital growth.
Diversification Option: Vanguard Small -Cap Index Fund, Vanguard Mid -Cap Index
Fund, and Vanguard International Growth Fund - Investment objective is long-term
capital growth.
LifeStrategy Option: Vanguard LifeStrategy Growth Fund, Vanguard LifeStrategy
Moderate Growth Fund, Vanguard LifeStrategy Conservative Growth Fund, and Van-
guard LifeStrategy Income Fund - Investment objective is long-term capital growth
and/or income.
Bond Option: Vanguard Total Bond Index Fund - Investment objective is income
stability and conservation of principal.
Page 8
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE B - DESCRIPTION OF THE FUND'S PLAN (Continued)
2. Contributions (Continued)
Balanced Option: Vanguard Balanced Index Fund - Investment objective is income,
conservation of principal, and long-term growth.
Stable Value Option: Vanguard Retirement Savings Trust - Investment objective is
income stability and conservation of principal.
Money Market Option: Vanguard Federal Money Market Fund - Investment objec-
tive is safety of principal.
Loan Fund: The District allows participants to borrow from their account, usually a
percentage of their vested balance.
3. Participant Accounts
Each participant's account is credited with the participant's contribution and allocations
of Plan earnings. Allocations are based on participants' account balances, as defined.
There are no forfeitures applicable to the Plan. Participants' contributions are immedi-
ately fully vested.
At December 31, 2005 and 2004, 612 and 592 District employees, respectively, actively
participated in the Plan.
4. Participant Loans
Active participants, with some exceptions, may borrow from their fund accounts a per-
centage of their vested account balances. Principal and interest is paid through payroll
deductions.
5. Distributions
Participants contributing to the Plan may receive benefits, or withdraw the present value
of funds contributed to the Plan, upon retirement, disability, or termination of employ-
ment from the District or due to financial hardship as defined by the Plan, if approved by
the Plan Administrator.
Participants may select various payout options including lump sum or equal annual pay-
ments over various periods. Participants may also elect to have the value of the account
converted into fixed or variable annuity contracts. All investments, including annuity
contracts, remain assets of the Plan until payments are made to the participants.
Page 9
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE B - DESCRIPTION OF THE PLAN (Continued)
6. Tax Status
The Plan received a favorable determination letter from the Internal Revenue Service on
June 23, 1999, indicating the Plan and its underlying trust are qualified under Section 457
of the Internal Revenue Code.
NOTE C - INVESTMENTS IN MUTUAL FUNDS
Investments held by the custodians in the Plan's name were as follows:
December 31
2005 2004
Mutual funds:
Vanguard Group, Inc.:
Windsor I1 Fund $ 5,991,083* 5,221,440*
500 Index Fund 2,832,635* 2,667,148*
Balanced Index Fund 2,658,160* 2,501,148*
U.S. Growth Fund 2,088,231* 1,854,074*
Total Bond Market Index Fund 1,312,770* 1,098,685*
Retirement Savings Trust 1,271,843* 854,590
LifeStrategy Moderate Growth Fund 795,372 504,720
Federal Money Market Fund 793,433 798,383
Small -Cap Index Fund 762,454 757,287
Mid -Cap Index Fund 734,377 552,033
International Growth Fund 630,705 367,931
LifeStrategy Growth Fund 583,219 420,717
LifeStrategy Conservative Growth Fund 343,157 290,353
LifeStrategy Income Fund 147.035 162.000
Total Mutual Funds 20.944.474 18.050.509
Participant loans
367.999 325.156
Page 10
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE C - INVESTMENTS IN MUTUAL FUNDS (Continued)
December 31
2005 2004
Annuity contracts:
Lincoln National Life:
Fixed earnings option
Lincoln National Fixed 537,744 611,133
Variable earnings option:
Growth and Income Fund 153,645 156,159
Special Opportunity Fund 123,548 118,393
Money Market Fund 32,113 31,822
Trend Fund 23,009 21,954
International Fund 21,527 18,552
Social Awareness fund 10,347 9,584
Managed Fund 9,955 12,379
Equity -Income Fund 9,385 11,505
Aggressive Growth Fund 5,098 4,693
Capital Appreciation Fund 4,879 4,732
Bond Fund 4,642 5,051
REIT Fund 746 -
Global Asset (Putnam) Fund 741
DGPF Real Estate (REIT) Series 14,249
Small Cap Value Series 7.740
Total Annuity Contracts 936,638 1.028.688
$22.249.111 19,404.353
* Represents 5% or more of the Plan's net assets.
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 se-
lecting mutual funds for the investment portfolio that mange their respective fund under a predetermined
average credit risk investment management policy.
The following table provides information on the duration and credit ratings associated with the Plan's
investment in debt -backed mutual funds, excluding obligations of the U.S. Government or obligations
explicitly guaranteed by the U.S. government within these funds at December 31, 2005:
Page 11
TIIE METROPOLITAN ST. LOUIS SEWER DISTRICT
DEFERRED COMPENSATION PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE C - INVESTMENTS IN MUTUAL FUNDS (Continued)
Mutual Funds And Annuity Contracts
With Debt Securities
Vanguard Balanced Index Fund
Vanguard Retirement Savings Trust
Vanguard Total Bond Market Index. Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard Federal Money Market Fund
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Income Fund
Lincoln National Fixed (Annuity Contracts)
Lincoln Money Market Fund
Lincoln Bond Fund
*information is unavailable for this mutual fund.
S&P Credit Quality Percentage Of Total Mutual Fund Average
Average Effective
Credit Duration
Fair Value Rating AAA AA A BBB BB B In Years
$2,658,160 AAA 30.6% 2.0% 3.6% 3.4% - % - % 4.6
1,271,843 AAA 39.0 59.0 2.0 - 2.8
1,312,770 AAA 77.7 4.9 9.1 8.3 - 4.6
795,372 AAA 23.4 1.5 2.7 2.5 - 4.6
793,433 AAA 100.0 - - - 0.1
343,157 AAA 30.8 6.2 7.5 5.4 0.3 0.1 3.5
147,035 AAA 46.3 7.1 9.3 7.0 0.3 0.1 3.8
537,744 AA * * * * * * *
32,133 AA * * * * * * *
4,642 AA * * * * * * *
Page :12