Loading...
HomeMy Public PortalAboutDeferred Comp 2003 Audited Financials THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFERRED COMPENSATION PLAN AND TRUST FINANCIAL STATEMENTS DECEMBER 31, 2003 Independent Auditors’ Report Board of Trustees The Metropolitan St. Louis Sewer District We have audited the accompanying Statements of Plan Net Assets of The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust as of December 31, 2003 and 2002, and the related Statement of Changes in Plan Net Assets for the years then ended. These financial statements are the responsibility of the Plan Administrator. Our responsibility is to express an opinion on these financial statements based upon 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net assets of The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust as of December 31, 2003 and 2002, and the changes in plan net assets for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The Management’s Discussion and Analysis on pages 2 through 4 is not a required part of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board. 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 opinion on it. August 31, 2004 2 METROPOLITAN ST. LOUIS SEWER DISTRICT Deferred Compensation Plan and Trust Management Discussion and Analysis This report consists of a series of financial statements related to The Metropolitan St. Louis Sewer District’s Deferred Compensation Plan and Trust (“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 discussion and analysis of The Metropolitan St. Louis Sewer District’s Deferred Compensation Plan and Trust financial performance provides an overview of the Plan’s financial activities for the fiscal year ended December 31, 2003. 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 $16.2 million at the end of 2003 and the net asset value increased by $3.5 million from that of December 31, 2002 due to the impact of the overall increase in value of the equity markets during the year. Contribution from participants was approximately $2.0 million, which was approximately $92 thousand or (4.3%) less than contributions in the prior year. The increase in the equity markets which as measured by the S&P 500 Index increased by 26.4% in 2003. This along with no change in the interest and dividends, along with a reduction of plan participants of some (11.0%) net resulted in a $4.8 million increase of plan additions overall. Plan Additions for 2003 and 2002 (in thousands) 2003 2002 % Change Employee Contributions $2,042 $2,134 (4.3)% Interest and Dividends 288 287 0.3% Appreciation/(Depreciation) in fair value - net 2,459 (2,382) 203.2% Investment Expense (1) (1) 0.0% Distributions to participants decreased by (31.9%) from that of December 31, 2002. However there were 51 individuals that retired in 2003 vs. 31 retried in 2002. There were higher balanced participants retired in 2002 than in 2003. 3 Plan Deduction for 2003 and 2002 (in thousands) 2003 2002 % Change Distribution to Participants $1,239 $1,819 (31.9%) Investment Aspects Employee participation in the Plan is on a voluntary basis. As of December 31, 2003 there were 577 Plan participants comprised of active employees of the District, retirees 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 elect 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. Asset Allocation as of December 31, 2003 61%19% 9% 6%5%Equity Balanced Fixed Income Stable Value Cash Equivalents Asset Allocation as of December 31, 2002 58%17% 11% 6%8%Equity Balanced Fixed Income Stable Value Cash Equivalents Independent investment consultants, Yanni-Partners & NEPC, monitored investment performance of the various options offered to the participants. For 2003 the investment consultant reported that all actively managed funds with the exception of the large capitalization growth 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. Certain participants with assets valued at $1,157,209 are invested in a series of fixed and variable rate annuity contracts sponsored by Lincoln National Life Insurance Company. The Lincoln National Life option was phased out in 1992, and any balances represent undistributed participant balances. This option is no longer available to new participants or for current deferrals. 4 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 received. 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 5 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFFERRED COMPENSATON PLAN AND TRUST STATEMENTS OF PLAN NET ASSETS December 31, 2003 and 2002 2003 2002 Investments at Fair Value $ 16,236,409 $ 12,686,959 Net Assets Held in Trust for Plan Benefits $ 16,236,409 $ 12,686,959 See accompanying notes to financial statements. 6 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFFERRED COMPENSATON PLAN AND TRUST STATEMENTS OF CHANGES IN PLAN NET ASSETS For the Years Ended December 31, 2003 and 2002 2003 2002 Additions: Employee Contributions $ 2,041,688 $ 2,133,784 Investment Income (Loss): Dividends and Interest 288,344 286,935 Net Appreciation (Depreciation) in Fair Value of Investments 2,458,597 (2,381,618 ) Less: Investment Expenses (550) (600 ) Net Investment Income (Loss) 2,746,391 (2,095,283 ) Total Additions 4,788,079 38,501 Deductions: Distributions to Participants 1,238,629 1,819,333 Net Increase (Decrease) 3,549,450 (1,780,832 ) Net Assets Held in Trust for Plan Benefits, Beginning of Year 12,686,959 14,467,791 Net Assets Held in Trust for Plan Benefits, End of Year $ 16,236,409 $ 12,686,959 See accompanying notes to financial statements. 7 THE METROPOLITAN ST. LOUIS SEWER DISTRICT DEFFERRED COMPENSATON PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS For the Years Ended December 31, 2003 and 2002 1. Plan Description: 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 first contributions were made in October 1996. The Metropolitan St. Louis Sewer District (District) does not contribute to the plan. All assets of the Plan are the sole property of The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust and are not subject to the claims of the creditors of the District. The Plan Administrator issues a publicly available Summary Plan Description. That information may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555. 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 Revenue Act of 1978, the Plan limits an individual’s annual contribution to 25% of annual gross taxable compensation, not to exceed $12,000 for the year ended December 31, 2003 and $11,000 for the year ended December 31, 2002. Amounts contributed by participants are deferred for federal and state income tax purposes until received as a withdrawal or distribution from the Plan. Effective January 1, 2002, the Plan was amended and restated to comply with the Economic Growth and Tax Relief Reconciliation act of 2001. The Act made significant changes to Section 457(b) of the Internal Revenue Code of 1986, as previously amended, such as: increasing the maximum allowable dollar contribution to $12,000 for 2003 and if the participant is over the age of 50, they can contribute up to $14,000, increasing 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: ƒ Equity option: Vanguard Windsor II Fund, Vanguard 500 Index Fund, and Vanguard U.S. Growth Fund – Investment objective is long-term capital growth. ƒ Diversification option: Vanguard Small-Cap and Mid-Cap Index Fund and Vanguard International Growth Fund – Investment objective is long-term capital growth. 8 NOTES TO FINANCIAL STATEMENTS: Continued 1. Plan Description, continued: ƒ Life Strategy option: Vanguard Life Strategy Growth, Vanguard Life Strategy Moderate Growth, Vanguard Life Strategy Conservative Growth, and Vanguard Life Strategy Income Funds – Investment objective is long-term capital growth and/or Income. ƒ Bond option: Vanguard Total Bond Market Index Fund – Investment objective is income stability and conservation of principal. ƒ Balanced option: Vanguard Balanced Index Fund – Investment objective is income, conservation of principal, and long-term growth. ƒ Stable Value option: Vanguard Retirement Savings Trust – Investment objective is income stability and conservation of principal. ƒ Money Market option: Vanguard Federal Money Market Fund – ƒ Loan Fund: Effective January 1, 2003, the Plan allows participants to take out a loan from their account, usually a percentage of their vested balance that the participant will pay himself or herself back. 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 immediately fully vested. At December 31, 2003 and 2002, approximately 577 and 655 District employees, respectively, actively participated in the Plan. 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 employment 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 payments over various periods. Participants may also elect to have the value of their 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. 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 code. 9 NOTES TO FINANCIAL STATEMENTS: Continued 2. Summary of Significant Accounting Policies and Plan Asset Matters: Basis of Accounting: The financial statements of the Plan are prepared under the accrual method of accounting. Benefit payments to participants are recorded upon distribution. Accounting Estimates: The preparation of financial statements in conformity with 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: 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 annuity contracts are valued at amounts reported by the custodians, which approximate fair value. These values are based on actuarial assumptions as to anticipated mortality, withdrawals, and investment yield. Administrative Expenses: All general administrative costs of the Plan are paid by the District, except those attributable to participants’ choice of optional investments or optional forms of benefit payments. These expenses are charged to the respective participants’ account balance. 3. Investments in Mutual Funds: Investments in mutual funds held by the custodians in the Plan’s name at December 31, 2003 and 2002, were as follows: 2003 2002 Vanguard Group, Inc. Vanguard Retirement Savings Trust $ 791,894 * $ 647,700 * Vanguard 500 Index Fund 2,368,225 * 1,705,609 * Vanguard Balanced Index Fund 2,130,783 * 1,634,786 * Vanguard Federal Money Market Fund 751,264 * 924,252 * Vanguard International Growth Fund 235,261 146,007 Vanguard LifeStrategy Conservative Growth 145,934 69,245 Vanguard LifeStrategy Growth Fund 348,679 182,916 Vanguard LifeStrategy Income Fund 78,539 25,872 Vanguard LifeStrategy Moderate Growth Fund 267,577 91,765 Vanguard Mid-Cap Index Fund 288,887 174,883 Vanguard Small-Cap Index Fund 522,329 267,348 Balance Carried Forward 7,929,372 5,870,383 10 3. Investments in Mutual Funds, Continued Balance Brought Forward $ 7,929,372 $ 5,870,383 Vanguard Total Bond Market Index Fund 1,000,699 * 1,232,704 * Vanguard U.S. Growth Fund 1,719,901 * 1,268,240 * Vanguard Windsor II Fund 4,143,634 * 3,136,810 Loan Fund 285,594 - 15,079,200 11,508,137 Lincoln National Life: Fixed earnings option: Lincoln National Fixed $ 648,275 $ 729,353 * Variable earnings option: Growth & Income Fund 198,487 177,948 Special Opportunity Fund 112,599 86,998 Managed Fund 23,727 29,327 Equity-Income Fund 32,441 29,256 Money Market Fund 5,847 5,891 Bond Fund 31,242 36,799 Aggressive Growth Fund 10,104 7,698 International Fund 35,398 28,857 Social Awareness Fund 9,296 7,755 Global Asset (Putnam) Fund 2,107 3,190 Trend Fund 19,693 14,723 Capital Appreciation Fund 4,543 3,467 AFIS Growth Fund - - DGPF Real Estate (REIT) Series 12,879 9,707 Small Cap Value Series 6,453 4,601 AMT Mid-Cap Growth Portfolio 4,118 3,252 1,157,209 1,178,822 $16,236,409 $12,686,959 • Represents 5% or more of the Plan’s net assets.