HomeMy Public PortalAbout2011 Audited Financials
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2011 AND 2010
Contents
Page
Independent Auditors’ Report........................................................................ 1 - 2
Management’s Discussion And Analysis ..................................................... 3 - 12
Financial Statements
Statements of Plan Net Assets .........................................................................13
Statements of Changes in Plan Net Assets ......................................................14
Notes to Financial Statements .................................................................. 15 - 29
Required Supplemental Information
Schedule of Funding in Progress .....................................................................30
Schedule of Employer Contributions ...............................................................30
Note to Required Supplemental Information ...................................................31
Statistical Section (Unaudited)
Performance and Net Asset Value ...................................................................32
Revenue by Source and Total Employer Contributions ..................................33
Expenses by Type and Total Benefit Payments ...............................................34
Member Count and Total Benefit Receipts .....................................................35
Top Ten Investment Holdings and Percentage Distribution ............................36
Schedule of Investment Manager and Advisor Fees ........................................37
Independent Auditors’ Report
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
We have audited the accompanying Statements of Plan Net Assets of The Metropolitan St. Louis
Sewer District Employees’ Pension Plan (the Plan) as of December 31, 2011 and the related State-
ment of Changes in Plan Net Assets for the year then ended. These financial statements are the re-
sponsibility of the Plan’s management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of the Plan as of and for the year ended De-
cember 31, 2010 were audited by other auditors whose report dated July 29, 2011, expressed an un-
qualified opinion.
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 our 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 purpose of expressing an opinion on the effective-
ness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.
An audit 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 man-
agement, as well as evaluating the overall financial statement presentation. We believe that our audit
provides 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 Employees’ Pension Plan as of Decem-
ber 31, 2011 and the changes in plan net assets for the year then ended, in conformity with account-
ing principles generally accepted in the United States of America.
Accounting principles generally accepted in the United States of America require that the manage-
ment’s discussion and analysis on pages 3 through 12 and the schedule of funding progress and em-
ployer contributions on pages 30 and 31 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Govern-
mental 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 inqui-
ries 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. We do not express
an opinion or provide any assurance on the information because the limited procedures do not pro-
vide us with sufficient evidence to express an opinion or provide any assurance.
Board of Trustees
The Metropolitan St. Louis Sewer District
Page 2
Our audit was conducted for the purpose of forming an opinion on the Plan’s financial statements.
The statistical section is presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such 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.
June 26, 2012
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 3
MANAGEMENT’S DISCUSSION AND ANALYSIS
For The Year Ended December 31, 2011
As management of The Metropolitan St. Louis Sewer District Employees’ Pension Plan (the 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 year ended December 31, 2011. 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.
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 Plan net assets
2) Statements of changes in Plan net assets
3) Notes to financial statements
This report also contains required supplemental information to the basic financial statements which
provides actuarial information for use in analyzing the funded status of the Plan and includes:
1) Schedule of funding progress
2) Schedule of employer contributions
3) Additional information regarding required schedules
4) Note to required supplemental information
Certain revenues, expenses associated with administering the Plan, and other trend data are presented
immediately following the note to required supplemental information in the statistical section of this
report.
The basic financial statements contained in this report are described below:
The statements of Plan net assets 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 assets value [assets - liabilities = net
assets] represents the value of assets held in trust 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 Plan net assets displays the effect of pension fund transactions
that occurred during the fiscal year [additions - deductions = net increase (decrease) in net
assets]. This net increase (decrease) in net assets reflects the change in the net assets value of
the statements of Plan net assets from the prior year to the current year. Both statements are
in compliance with Governmental Accounting Standards Board (GASB) Pronouncements.
The notes to the 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 two additional schedules
entitled “required supplemental information.”
The schedule of funding progress (page 29) includes actuarial information about the status of
the Plan from an ongoing, long-term perspective and the progress made in accumulating
sufficient assets to pay pension benefits when due. Valuation assets in excess of actuarial
accrued liabilities indicate that sufficient assets exist to fund the future pension benefits of the
current members and benefit recipients, whereas, excess liabilities require future funding or
investment performance in excess of the actuarial assumed investment returns.
The schedule of employer contributions (page 29) presents historical trend information
regarding the value of total annual contributions required to be paid by employers and the
actual performance of employers in meeting this requirement.
The note to required supplemental information provides explanatory detail to aid in
understanding the required supplemental schedules.
FINANCIAL HIGHLIGHTS 2011
Net assets held in trust for pension benefits totaled $200,340,622 as of December 31, 2011 for
an increase of $1,800,548 or 0.9% as compared with December 31, 2010. This increase in net
assets primarily resulted from cumulative investment gains during the year.
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, 2011, the date of the latest actuarial valuation, the funded ratio of the
Plan was 80.7%. In general, this means that for every dollar of pension benefits due, the Plan
has approximately $0.81 of net assets available for payment. The Plan’s funding ratio
decreased by 0.9 percentage points as compared with the funding ratio for December 31,
2010. The decrease in the funding ratio is primarily attributed to the increase in the Plan’s
present value of future benefits to members and their beneficiaries outpacing the Plan’s
increase in net asset value.
Total increase to the Plan’s net assets (page 13) amounted to $1,800,548 for the year 2011
consisting of an investment gain of $2,215,402 as offset by Plan payments net of
contributions of $414,854.
Administrative expenses (deductions to the Plan’s net assets, page 13) decreased from
$115,434 for 2010 to $91,863 or $23,571 or (20.4%) which primarily reflects the additional
legal costs incurred in 2010 associated with the research, development and spin-off of the
newly created Defined Contribution plan from the Plan.
Effective April 1, 2011, the Plan transferred $70,869 into the newly created Defined
Contribution plan. This covered the share of the twenty-three employees opting out of the
Plan.
FINANCIAL HIGHLIGHTS 2010
Net assets held in trust for pension benefits totaled $198,540,074 as of December 31, 2010 for
an increase of $19,320,602 or 10.8% as compared with December 31, 2009. This increase in
net assets primarily resulted from cumulative investment gains during the year.
The Plan’s funding objective is to meet long-term benefit obligations to the extent possible.
As of December 31, 2010, the date of the latest actuarial valuation, the funded ratio of the
Plan was 81.6%. In general, this means that for every dollar of pension benefits due, the Plan
has approximately $0.82 of net assets available for payment. The Plan’s funding ratio
decreased by 1.7 percentage points as compared with the funding ratio for December 31,
2009. The decrease in the funding ratio is primarily attributed to a decline in the actuarial
value of investments that was impacted by the 2008 investment loss.
Total increase to the Plan’s net assets (page 13) amounted to $19,320,602 for the year 2010
consisting of an investment gain of $19,597,109, as offset by Plan payments net of
contributions of $276,507.
Administrative expenses (deductions to the Plan’s net assets, page 13) remained essentially
flat, showing a slight decrease from $119,535 for 2009 to $115,434 or $4,101 or (3.4%).
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 6
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.
Relative to the Public Fund peer group for 2011 and 2010, the Fund was up by 1.9% and 11.9%,
respectively, which ranked in the 37th and 79th percentile, respectively, of the Public Fund universe.
Net assets held in trust for pension benefits increased by $1,800,548 in 2011 and increased by
$19,320,602 in 2010. These net assets are used to meet ongoing benefit obligation to the Plan’s
participants and their beneficiaries.
The Metropolitan St. Louis Sewer District’s (the District) contributions into the Plan as determined
by the Plan’s actuary increased for 2011 compared to 2010. The item that most significantly
increased the required Plan contribution by the employer is the lingering effect of the large
investment loss from 2008 that is recognized over three years in the actuarial value of the assets.
Another factor contributing to the necessary increase was the actuarial rate of return for 2010 being
only 2.3% vs. the assumed rate of 7.5%.
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 7.5% on average [See Note 9 – Subsequent Events]. Both the Plan’s investment
performance and the rate of return on actuarial value have averaged 11.2% and 9.6%, respectively,
over the last three years and are above the actuarially assumed investment rate of 7.5%. Even though
these are positive factors for the Plan, should future investment performance fall below the actuarially
assumed investment rate it could result in additional contributions in future years.
The Plan continues to retain an investment consultant to identify opportunities to improve investment
return. A suggestion made by the investment consultant is that the Plan should more broadly
diversify its investment asset base. As such, the Plan added new asset classes that have helped to
offset the impact from the significant decline in the value of equity investments that was experienced
in 2008.
Based upon our latest actuarial valuations for the years ended December 31, 2011 and 2010, the
Plan’s actuarial value of assets was less than its actuarial value of liabilities by $49,205,164 and
$42,586,930, respectively. Included in this liability is a deferred but unrecognized loss of $5,451,121
resulting from the difference in the value of Net Assets at December 31, 2011 of $200,340,622 and
the actuarial value of Net Assets at December 31, 2011 of $205,791,743. This means that additional
future funding will be needed to continue to reduce the liability including this deferred but
unrecognized loss.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 7
FINANCIAL ANALYSIS
The condensed statements of Plan net assets as compared to prior years are as follows:
2011 2010 Amount $ Percent
ASSETS
Investments at fair value 200,040,231$ 198,294,751$ 1,745,480$ 0.9%
Other Assets 7,272,756 6,831,456 441,300 6.5%
Total Assets 207,312,987 205,126,207 2,186,780 1.1%
LIABILITIES 6,972,365 6,586,133 386,232 5.9%
NET ASSETS HELD IN TRUST
FOR PENSION BENEFITS 200,340,622$ 198,540,074$ 1,800,548$ 0.9%
For the Years Ended
December 31, 2011 Change
2010 2009 Amount $ Percent
ASSETS
Investments at fair value 198,294,751$ 178,867,750$ 19,427,001$ 10.9%
Other Assets 6,831,456 6,016,977 814,479 13.5%
Total Assets 205,126,207 184,884,727 20,241,480 10.9%
LIABILITIES 6,586,133 5,665,255 920,878 16.3%
NET ASSETS HELD IN TRUST
FOR PENSION BENEFITS 198,540,074$ 179,219,472$ 19,320,602$ 10.8%
For the Years Ended
December 31, 2010 Change
As previously noted, net assets viewed over time may serve as a useful indication of the Plan’s
financial position. At the close of calendar years 2011 and 2010, the assets of the Plan exceeded its
liabilities with $200,340,622 and $198,540,074, respectively, in net assets held in trust for pension
benefits. The net assets are available to meet the Plan’s ongoing obligation to the Plan’s participants
and their beneficiaries.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 8
Despite variations in the stock market, 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
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 the Plan’s net assets as compared to prior years are as
follows:
2011 2010 Amount $ Percent
ADDITIONS
Net investment income 2,215,402$ 19,597,109$ (17,381,707)$ (88.7%)
Employer contributions 10,981,546 10,347,592 633,954 6.1%
Total additions 13,196,948 29,944,701 (16,747,753) (55.9%)
DEDUCTIONS
Benefits paid to retirees and beneficiaries 11,233,668 10,508,665 725,003 6.9%
Transfers to Defined Contribution Plan 70,869 — 70,869 N/A
Administrative expenses 91,863 115,434 (23,571) (20.4%)
Total Deductions 11,396,400 10,624,099 772,301 7.3%
NET INCREASE 1,800,548 19,320,602 (17,520,054) (90.7%)
NET ASSETS HELD IN TRUST FOR
PENSION BENEFITS, January 1 198,540,074 179,219,472 19,320,602 10.8%
NET ASSETS HELD IN TRUST FOR
PENSION BENEFITS, December 31 200,340,622$ 198,540,074$ 1,800,548$ 0.9%
For the Years Ended
December 31,2011 Change
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 9
2010 2009 Amount $ Percent
ADDITIONS
Net investment income 19,597,109$ 29,452,323$ (9,855,214)$ (33.5%)
Employer contributions 10,347,592 8,910,664 1,436,928 16.1%
Total additions 29,944,701 38,362,987 (8,418,286) (21.9%)
DEDUCTIONS
Benefits paid to retirees and beneficiaries 10,508,665 9,832,606 676,059 6.9%
Administrative expenses 115,434 119,535 (4,101) (3.4%)
Total Deductions 10,624,099 9,952,141 671,958 6.8%
NET INCREASE 19,320,602 28,410,846 (9,090,244) (32.0%)
NET ASSETS HELD IN TRUST FOR
PENSION BENEFITS, January 1 179,219,472 150,808,626 28,410,846 18.8%
NET ASSETS HELD IN TRUST FOR
PENSION BENEFITS, December 31 198,540,074$ 179,219,472$ 19,320,602$ 10.8%
For the Years Ended
December 31,2010 Change
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 year ended December 31, 2011 and 2010, total $13,196,948 and
$29,944,701, respectively.
Additions to Plan assets for 2011 were due primarily to investment gains. The Investment
Performance section of this report summarizes the results of investment activity for the year ended
December 31, 2011.
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.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 10
As noted above, deductions for the year ended December 31, 2011 totaled $11,396,400 an increase of
7.3% over 2010. The increase in benefits paid resulted primarily from an increase in the number of
retirees receiving benefits by 25 members or a 4.4% increase. Deductions from Plan net assets of
$11,396,400 were exceeded by additions to Plan net assets of $13,196,948 by $1,800,548 for the year
ended December 31, 2011. The Plan has consistently managed within its administrative expense
budget, with no material variances between planned and actual expenditures.
INVESTMENT PERFORMANCE - 2011
The following are a few characteristics and achievements for the Plan for the year ending
December 31, 2011:
The Plan ended the year with $200,340,622 in net assets.
The Plan’s performance for the year was 1.9% compared to the passive policy index of 1.1%,
and the average five-year return was 4.2% compared to the passive policy index of 3.0%.
New England Pension Consultants, present advisor to the Board of Trustees, recommended
their clients increase their exposure to the Emerging Markets sector. In light of this, a new
asset class entered the Plan’s investment mix. The Plan allocated 5.0% of its portfolio to an
Emerging Markets Fixed Income fund.
The actual asset allocation as of December 31, 2011, as compared to the December 31, 2010
actual allocation, is as follows:
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 11
2011 2010
Equities:
Domestic large-cap stocks 20.0 % 16 - 24 % 20.4 % 20.1
Domestic small-cap stocks 5.0 3 - 7 6.4 6.3
International developed markets stocks 10.0 8 - 12 9.4 9.7
International emerging markets stocks 3.0 2 - 5 2.8 3.5
Fixed Income:
Domestic core bonds 13.0 10 - 16 13.4 14.5
High yield bonds 5.0 3 - 7 4.5 5.5
Global bonds 8.0 6 - 10 8.7 8.1
Credit opportunities 2.0 1 - 4 2.0 1.9
Emerging fixed 5.0 3 - 7 5.0 0.0
Other:
Global tactical 10.0 8 - 12 10.0 9.9
Real estate 5.0 3 - 7 4.5 4.0
Real assets 5.0 3 - 7 4.4 4.8
Market neutral 5.0 3 - 7 5.0 4.9
Cash equivalents 0.0 -- 0.3 0.8
Absolute return 4.0 3 - 7 3.2 6.0
Asset Class
ActualProposed
RangeTarget
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
new proposed targets and ranges which are reflected above.
Overall asset class allocations changed minimally. The Fixed Income asset class saw an increase of
3.6 percentage points mainly due to the Plan broadening its investment strategy to include Emerging
Fixed securities. This was offset by the Other asset class seeing a decrease of 3.0 percentage points
while the Equities asset class decreased 0.6 percentage points. Resolution 2987, effective August
2011, authorized specific investment managers to act on behalf of the Plan to actively manage
specific investment types.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 12
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:
Karl J. Tyminski, Secretary-Treasurer
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
E-mail: kjtymi@stlmsd.com
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying notes to financial statements. Page 13
STATEMENTS OF PLAN NET ASSETS
2011 2010
ASSETS
Investments at fair value:
Mutual funds 79,215,761$ 85,541,511$
Corporate obligations 29,288,059 32,048,509
Collective investment funds 32,742,140 19,285,232
Domestic common stocks 22,444,536 26,493,788
US Treasury and agency obligations 9,962,401 12,640,364
Foreign obligations 10,940,349 8,732,795
Money market funds 3,581,619 2,849,260
Foreign stocks 1,860,413 1,654,584
Municipal obligations 796,650 771,025
Domestic preferred stock 250,202 272,909
Real estate investments 8,958,101 8,004,774
Total Investments 200,040,231 198,294,751
Receivables
Due from brokers for foreign currency
exchange contracts 6,578,581 6,135,013
Due from brokers for pending sales
securities sold 60,299 26,202
Interest and dividends receivable 633,876 670,241
Total Receivables 7,272,756 6,831,456
Total Assets 207,312,987 205,126,207
LIABILITIES
Due to brokers for foreign currency exchange
contracts 6,711,285 6,314,361
Due to brokers for securities purchased 56,394 41,153
Accrued expenses 204,686 230,619
Total Liabilities 6,972,365 6,586,133
NET ASSETS HELD IN TRUST FOR PENSION
BENEFITS 200,340,622$ 198,540,074$
December 31,
For the Years Ended
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying notes to financial statements. Page 14
STATEMENTS OF CHANGES IN PLAN NET ASSETS
2011 2010
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair value of investments (2,455,509)$ 14,953,861$
Interest and dividends 5,530,644 5,437,699
Total Investment income 3,075,135 20,391,560
Less - investment managers' and advisors' fees 859,733 794,451
Net Investment income 2,215,402 19,597,109
Employer contributions 10,981,546 10,347,592
Total Additions 13,196,948 29,944,701
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to retirees and beneficiaries 11,233,668 10,508,665
Transfers to Defined Contribution Plan 70,869 -
Administrative expenses 91,863 115,434
Total Deductions 11,396,400 10,624,099
NET INCREASE 1,800,548 19,320,602
NET ASSETS HELD IN TRUST FOR PENSION
BENEFITS, January 1 198,540,074 179,219,472
NET ASSETS HELD IN TRUST FOR PENSION
BENEFITS, December 31 200,340,622$ 198,540,074$
December 31,
For the Years Ended
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 15
NOTES TO FINANCIAL STATEMENTS
December 31, 2011 And 2010
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 Plan’s financial statements are prepared using the accrual basis of accounting. Employer
contributions are recognized as revenues in the period when due and the District’s Trustees
have made a formal commitment to provide the contribution. Benefits are recognized when
due and payable in accordance with the terms of the Plan. Plan expenses are recorded when
the corresponding liabilities are incurred regardless of when payment is made. Investment
purchases and sales are recorded on a trade-date basis.
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 assets 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 a 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 cost, which
approximates fair value.
Payment of Benefits
Benefits are recorded when paid.
Reclassification
Certain amounts in prior year financial statements have been reclassified for comparative
purposes to conform to the presentation in the current year financial statements.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 16
2. Description of Plan
The following brief description of THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN (the 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 (the District) commencing service
prior to December 31, 2010, 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 defined contribution plan. Current employees with less than ten years of
service on this date could also voluntarily elect to transfer from the Plan and enter the defined
contribution plan. Of the 404 District employees with less than ten years of service, twenty-
three elected to leave the Plan.
Membership in the Plan consists of:
Increase
2011 2010 (Decrease)
Active plan members 838 917 (79)
Retirees and beneficiaries currently receiving benefits 596 571 25
Terminated members entitled to receive benefits 183 183 0
Total 1,617 1,671 (54)
For the Years Ended
December 31,
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. 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 and, as such, is not subject to the
Act’s reporting requirements.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 17
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 equal
to the greater of 50% of the member’s monthly accrued retirement benefit as of the date of
death, or 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.
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. Sick leave is paid out at 1.25%
per year of service times the amount of leave accrued. 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.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 18
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 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.”
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.
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. The Plan is authorized to invest in:
Equity Investments: Common stocks of corporations, mutual funds, or co-mingled
equity funds (Domestic and International, both within defined limits); however, the
investments in equities cannot exceed 47% of total investments.
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); however, the
investment in fixed income cannot exceed 41% of total investments.
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; however the investment in real estate cannot exceed 7% of total investments.
Global Tactical Asset Allocation, Market Neutral, Absolute Return, and Real Assets:
These investment strategies help diversify the investment portfolio while increasing
return and decreasing risk. These investments cannot exceed 12%, 7%, 7%, and 7%
of total investments, respectively.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 19
Futures Contracts: Currency forward contracts for the purpose of currency risk
management of non-U.S. investments.
The fair value of investments managed consisted of the following:
2011 2010
Investments, at fair value
Mutual funds 79,215,761$ 85,541,511$
Corporate obligations 29,288,059 32,048,509
Collective investment funds 32,742,140 19,285,232
Domestic common stocks 22,444,536 26,493,788
U.S. Treasury and agency obligations 9,962,401 12,640,364
Foreign obligations 10,940,349 8,732,795
Money market funds 3,581,619 2,849,260
Foreign stocks 1,860,413 1,654,584
Municipal obligations 796,650 771,025
Domestic preferred stocks 250,202 272,909
Real estate investments 8,958,101 8,004,774
Total Investments 200,040,231$ 198,294,751$
For the Years Ended
December 31,
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:
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate obligations 29,288,059$ 4.32
U.S. Treasury and agency obligations 9,962,401 7.59
Foreign obligations 10,940,349 4.25
Municipal obligations 796,650 9.07
Total 50,987,459$
Portfolio weighted average maturity 5.02
As of December 31, 2011
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 20
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate obligations 32,048,509$ 4.06
U.S. Treasury and agency obligations 12,640,364 7.70
Foreign obligations 8,732,795 4.74
Municipal obligations 771,025 10.40
Total 54,192,693$
Portfolio weighted average maturity 5.11
as of December 31, 2010
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.
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 Foreign
Rating Obligations Obligations Obligations Obligations Total
AA+ 9,962,401$ 157,978$ 3,881,029$ 4,593,537$ 18,594,945$
AA - 294,865 1,340,190 777,052 2,412,107
A- 343,807 11,186,544 4,020,232 15,550,583
BBB - - 5,240,849 67,875 5,308,724
BB - - 1,743,573 1,237,128 2,980,701
B- - 4,906,798 244,525 5,151,323
CCC - - 891,958 - 891,958
Not Rated - - 97,118 - 97,118
Total 9,962,401$ 796,650$ 29,288,059$ 10,940,349$ 50,987,459$
Credit Rating by Investment as of December 31, 2011
U.S. Treasury
S & P & Agency Municipal Corporate Foreign
Rating Obligations Obligations Obligations Obligations Total
AAA 12,640,364$ 45,487$ 5,219,713$ 4,714,291$ 22,619,855$
AA - 261,573 2,048,035 649,173 2,958,781
A- 463,965 9,596,205 1,713,705 11,773,875
BBB - - 4,362,649 348,639 4,711,288
BB - - 2,241,296 519,732 2,761,028
B- - 6,237,319 787,255 7,024,574
CCC - - 2,255,648 - 2,255,648
Not Rated - - 87,644 - 87,644
Total 12,640,364$ 771,025$ 32,048,509$ 8,732,795$ 54,192,693$
Credit Rating by Investment as of December 31, 2010
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 22
Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely impact the fair
value of an investment. The Plan’s policy is to allow the individual investment manager to
decide what action to take regarding their respective portfolio’s foreign currency exposure.
The following table demonstrates the Plan’s current level of foreign currency exposure:
Foreign
Currency Equities Obligations Total
Australian Dollar -$ 1,514,779$ 1,514,779$
British Pound Sterling - 1,467,156 1,467,156
Canadian Dollar - 1,202,752 1,202,752
Hungarian Forint - 454,988 454,988
Indonesian Rupiah - 485,240 485,240
Malaysian Ringgit - 745,358 745,358
Mexican Peso - 1,149,470 1,149,470
New Zealand Dollar - 282,060 282,060
Norwegian Krone - 611,325 611,325
Polish Zloty - 818,931 818,931
South African Rand - 615,638 615,638
South Korean Won - 690,835 690,835
Not denominated in a foreign currency 1,860,413 901,817 2,762,230
Total 1,860,413$ 10,940,349$ 12,800,762$
Foreign Currency Exposure by Asset Class
as of December 31, 2011
(in USD)
Foreign
Currency Equities Obligations Total
Australian Dollar -$ 1,599,850$ 1,599,850$
Canadian Dollar - 1,248,767 1,248,767
Swedish Krona - 947,274 947,274
Polish Zloty - 946,410 946,410
British Pound Sterling - 797,374 797,374
Malaysian Ringgit - 767,296 767,296
Norwegian Krone - 641,578 641,578
Indonesian Rupiah - 499,412 499,412
Hungarian Forint - 233,776 233,776
New Zealand Dollar - 73,990 73,990
Not denominated in a foreign currency 1,654,584 977,068 2,631,652
Total 1,654,584$ 8,732,795$ 10,387,379$
as of December 31, 2010
(in USD)
Foreign Currency Exposure by Asset Class
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 23
Derivatives
Within narrowly prescribed guidelines the Plan permits one investment manager to enter into
derivative and structured financial instruments only where appropriate and for the following reasons:
Hedging. To the extent that the portfolio is exposed to clearly defined risks and there are
derivative contracts that can be used to reduce those risks, the investment managers are
permitted to use such derivatives for hedging purposes, including cross-hedging of
currency exposures.
Creation of Market Exposures. The manager is permitted to use derivatives to replicate
the risk/return profile of an asset or asset class provided that the guidelines for the
Manager allow for such exposures to be created with the underlying assets themselves.
Manager may not use derivative contracts or securities for the following purposes:
a) Leverage. Derivatives shall not be used to magnify overall portfolio exposure to an
asset, asset class, interest rate, or any other financial variable beyond that which
would be allowed by a portfolio's investment guidelines if derivatives were not used.
b) Unrelated Speculation. Derivatives shall not be used to create exposures to securities,
currencies, indices, or any other financial variable unless such exposures would be
allowed by a portfolio's investment guidelines if created with non-derivative
securities.
Permissible derivative investments include:
Futures, forwards and options on any approved physical instruments, including interest
rate futures and options, provided that use of such contracts is designed to dampen
portfolio volatility rather than leverage portfolio risk exposure beyond the limits described
in the Plan’s Investment Policy Statement.
Opportunistic currency positioning, to hedge and cross-hedge the portfolio's currency risk
exposure or in the settlement of securities transactions, subject to the reasons as described
in the preceding section.
Swaps on approved securities, including but not limited to interest rate swaps and
currency swaps.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 24
Open Foreign Currency Exchange Contracts in US Dollars
The investment managers enter into foreign currency exchange contracts to make payment for inter-
national investments and to hedge against changes in exchange rates related to foreign securities.
Foreign currency exchange contracts are agreements to exchange the currency of one country for the
currency of another country at an agreed upon price and settlement date. At December 31, 2011 and
2010 the Plan’s open contracts to purchase and sell by foreign currencies are as follows:
Aggregate
Cost Delivery Unrealized Unrealized
Fair Value Value Dates Appreciation Depreciation
Foreign Currency Exchange
Contracts Purchased:
British Pound Sterling 1,268,146$ 1,266,432$ 3/1/2012 1,714$ -$
Turkish Lira 594,091 617,525 2/10/2012 - 23,434
Chinese Yuan Renminbi 335,760 329,130 1/13/2012 6,630 -
Chinese Yuan Renminbi 352,437 348,024 1/11/2012 4,413 -
Chilean Peso 436,596 444,039 1/26/2012 - 7,443
Singapore Dollar 526,742 528,433 2/23/2012 - 1,691
Aggregate
Cost
Value Fair Value
Foreign Currency Exchange
Contracts Sold:
Australian Dollar 1,589,786 1,705,934 1/13/2012 - 116,148
Canadian Dollar 319,765 320,157 1/15/2012 - 392
Norwegian Krone 598,802 591,493 1/11/2012 7,309 -
New Zealand Dollar 556,450 560,112 3/9/2012 - 3,662
Total 20,066$ 152,770$
Open Contracts as of December 31, 2011
(in USD)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 25
Aggregate
Cost Delivery Unrealized Unrealized
Fair Value Value Dates Appreciation Depreciation
Foreign Currency Exchange
Contracts Purchased:
British Pound Sterling 1,626,711$ 1,616,684$ 3/2/2011 10,027$ -$
Brazilian Real 613,855 589,699 1/28/2011 24,156 -
South Korean Won 566,523 576,249 2/22/2011 - 9,726
Turkish Lira 547,109 579,471 2/8/2011 - 32,362
Polish Zloty 318,326 314,272 1/25/2011 4,054 -
Swedish Krona 291,666 286,451 3/14/2011 5,215 -
Chinese Yuan Renminbi 150,234 149,796 1/21/2011 438 -
Aggregate
Cost
Value Fair Value
Foreign Currency Exchange
Contracts Sold:
Australian Dollar 957,526 1,122,335 1/12/2011 - 164,809
Polish Zloty 341,722 330,023 1/25/2011 11,699 -
Canadian Dollar 317,743 322,913 2/16/2011 - 5,170
Swedish Krona 276,402 284,034 3/14/2011 - 7,632
New Zealand Dollar 127,190 142,428 3/9/2011 - 15,238
Total 55,589$ 234,937$
Open Contracts as of December 31, 2010
(in USD)
The fair value of open foreign currency contracts, including any unrealized appreciation or
depreciation, is recorded in the statements of Plan net assets as amounts due from/to brokers
for securities sold/purchased.
Based upon the advice of the Plan’s investment consultant and the Plan’s investment policy
and guidelines, the investments in foreign currency exchange contracts do not, in the Plan’s
judgment, have any significant, if any, interest rate risk, basis risk, termination risk or rollover
risk.
The currency forward contracts are executed through large money center banks with credit
rating standards. The credit risk exposure could be with the bank counterparty. Depending
on the bank, the degree of credit risk could vary. To reduce the risk of counterparty
nonperformance, the investment manager generally enters into these contracts with
institutions regarded as meeting high standards of credit worthiness. Based on the assessment
of the Plan’s investment manager trading the account and Plan’s investment consultant, the
risk is considered minimal.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 26
Investments Greater Than 5% Of Net Assets Held In Trust For Pension Benefits
which exceed 5% or more of net assets held in trust for pension benefits at December 31,
2011 and 2010 are as follows:
2011 2010
Income Research Management 26,966,319$ <5%
GMO Global Balanced Asset Allocation 19,963,793 19,635,737
Morgan Stanley Inst. International Equity 18,763,480 19,322,101
Brandywine Global Bond 17,519,543 <5%
Vanguard Windsor II Fund 14,508,407 14,116,519
Waddell & Reed 13,774,610 <5%
Pictet 10,013,456 <5%
Pyramis US Equity Market Neutral 9,994,944 <5%
PIMCO <5% 11,308,343
For the Years Ended
December 31,
4. 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 $10,969,154 and $10,306,739 excluding certain professional fees paid by the
District, were made to the Plan in 2011 and 2010, respectively. These contributions were
made in accordance with actuarially determined contribution requirements based on actuarial
valuations performed at December 31, 2011 and 2010, respectively, and consisted of:
2011 2010
Normal Cost 6,150,879$ 6,103,002$
Amortization of the unfunded
actuarial accrued liability 4,052,985 3,484,662
Investment Rate of Return factor of 7.5% 765,290 719,075
Current Year Contribution due
from the District as Calculated
by the Plan's Actuary 10,969,154$ 10,306,739$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 27
Certain professional fees, included in administrative expenses are paid by the District and are
recognized as contributions to the Plan and totaled $12,392 and $40,853 for the years ended
December 31, 2011 and 2010. 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 assets.
5. Funded Status and Funding Progress
The funded status of the Plan as of January 1, 2012, the most recent actuarial valuation date, and
January 1, 2011, is as follows (dollar amounts in thousands):
Valuation Entry Age
for the Actuarial
Actuarial Years Actuarial Accrued Unfunded Annual
Beginning Value Liability AAL Covered
January 1 of Assets (AAL) (UAAL) Payroll
2012 $ 205,792 $ 254,997 $ 49,205 80.7 % $ 49,432 99.5 %
2011 $ 189,012 $ 231,599 $ 42,587 81.6 % $ 51,703 82.4 %
UAAL as a
Percentage
of Covered
Payroll
Funded
Ratio
The schedules of funding progress, presented as required supplementary information following
the notes to financial statements, present multi-year trend information about whether the actuarial
values of Plan assets are increasing or decreasing over time relative to the AALs for benefits.
The information presented in the required supplementary schedules was determined as part of the
actuarial valuations at the dates indicated. Additional information as of the latest actuarial
valuation follows:
Valuation dates January 1, 2012 and 2011
Actuarial cost method Entry Age Normal
Amortization method Level dollar closed
Amortization period 20-year period
Asset valuation method 3-year average of adjusted market values
Post-retirement cost of living CPI with maximum 3% of current benefit or $50/month,
and benefit increases lifetime maximum 45% in the
original benefit or $750/month.
Actuarial assumptions:
Investment rate of return 7.5% per annum (1)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 28
Projected salary increases
based on years of service Years of service
0 10.0% (1)
1 7.5% (1)
2 5.0% (1)
3+ 4.5% (1)
Social Security wage base 4.0% per annum increase (1)
(1) Includes inflation component of 3%
6. 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.
7. 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 changes could materially
affect the amounts reported in the statements of Plan net assets.
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.
8. Tax Status
The plan received a favorable determination letter from the Internal Revenue Service on June
13, 2011, indicating the Plan and its underlying trust are qualified under Section 414(d) of the
Internal Revenue Code. The Plan has been amended since receiving the determination letter;
however, the Plan administrator and the Plan’s tax counsel believe the Plan is currently de-
signed and being operated in compliance with the applicable requirements of the Internal
Revenue Code.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 29
9. Subsequent Events
Management has evaluated subsequent events through June 26, 2012, the date through which
the financial statements were available for issue. Certain actuarial assumption changes were
made and went into effect January 1, 2012. They are as follows:
The assumed interest rate was decreased from 7.5% to 7.25%.
A five-year projection was added to the healthy mortality assumption to reflect
expected future mortality improvements.
The amount of assumed investment related expenses paid from the Trust was
decreased to reflect a more conservative interest rate assumption.
REQUIRED SUPPLEMENTARY INFORMATION
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 30
REQUIRED SUPPLEMENTARY INFORMATION
For The Year Ended December 31, 2011
Six-year historical trend information about the Plan is presented herewith as required supplementary
information. This information is intended to help users assess Plan funding status on a going-concern
basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make
comparisons with other plans.
Valuation Entry Age
for the Actuarial
Actuarial Years Actuarial Accrued Unfunded Annual
Beginning Value Liability AAL Covered
January 1 of Assets (AAL) (UAAL) Payroll
2012 $ 205,792 $ 254,997 $ 49,205 80.7 % $ 49,432 99.5 %
2011 189,012 231,599 42,587 81.6 51,703 82.4
2010 185,753 223,063 37,310 83.3 52,267 71.4
2009 183,679 212,066 28,387 86.6 48,077 59.0
2008 185,356 195,834 10,478 94.6 43,640 24.0
2007 170,757 187,432 16,675 91.1 42,113 39.6
Payroll
Funded
Ratio
UAAL as a
Percentage
Schedule of Funding Progress
($ in thousands)
of Covered
Analysis of the dollar amounts of Plan net assets, AAL, and UAAL in isolation can be misleading.
Expressing Plan net assets as a percentage of the AAL provides one indication of Plan funding status
on a going-concern basis. Analysis of this percentage over time indicates whether the Plan is
becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the
Plan.
Trends in the UAAL and annual covered payroll are both affected by inflation. Expressing the
UAAL as a percentage of annual covered payroll approximately adjusts for the effects of inflation
and aids analysis of Plan progress made in accumulating sufficient assets to pay benefits when due.
Generally, the smaller this percentage, the stronger the Plan.
For the Annual
Years Ended Required Actual
December 31 Contribution Contribution
2011 10,969,154 10,981,546 100.1 % 22.2 %
2010 10,306,739 10,347,592 100.4 20.0
2009 8,859,535 8,910,664 100.6 17.0
2008 7,425,602 7,460,492 100.5 15.5
2007 7,673,240 7,731,672 100.8 17.7
2006 6,847,278 6,875,168 100.4 16.3
a Percentage of
Covered Payroll
Percentage
Contributed
Schedule of Employer Contributions
Contribution as
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 31
REQUIRED SUPPLEMENTARY INFORMATION
For The Year Ended December 31, 2011
NOTE TO REQUIRED SUPPLEMENTAL INFORMATION
Annual Required Contribution (ARC)
The ARC applicable to the Plan’s year ended each year on December 31 in accordance with GASB
Statement No. 25 requires blending of the actuarial valuations. The ARC is presented each year
using the aggregate of the District’s ARCs for the portions of the District’s fiscal years that overlap
the Plan’s fiscal year.
STATISTICAL SECTION (UNAUDITED)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 32
STATISTICAL SECTION
For The Year Ended December 31, 2011
Net Asset Value
(NAV) as of
Year December 31
2002 $ 113,176,548 (8.0) %
2003 137,024,216 21.1
2004 149,053,173 8.8
2005 157,822,577 5.9
2006 174,256,931 10.4
2007 191,382,492 10.8
2008 150,808,625 (21.2)
2009 179,219,472 18.8
2010 198,540,074 10.8
2011 200,340,622 1.9
Performance and Net Asset Value
Total
Plan
Performance
113.2
137.0
149.1 157.8
174.3
191.4
150.8
179.2
198.5 200.3
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net Asset Value
at December 31,
($ in millions)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 33
STATISTICAL SECTION
For The Year Ended December 31, 2011
Employer Investment
Year Contributions Income Total
2002 $ 4,789,473 12.7 % ($ 9,726,380) ($ 4,936,907)
2003 6,002,479 15.9 23,559,415 29,561,894
2004 6,797,077 17.3 11,551,937 18,349,014
2005 7,192,531 17.9 8,475,275 15,667,806
2006 6,875,168 16.3 17,565,462 24,440,630
2007 7,731,672 17.7 18,111,294 25,842,966
2008 7,460,492 15.5 (38,697,159) (31,236,667)
2009 8,910,664 17.0 29,480,945 38,391,609
2010 10,347,592 20.0 19,597,109 29,944,701
2011 10,981,546 22.2 2,144,533 13,126,079
Payroll
Revenues by Source
Employer
Contributions
as a Percentage
of Covered
4,789.5
6,002.5
6,797.1 7,192.5 6,875.2
7,731.7 7,460.5
8,910.7
10,347.6
10,981.5
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Employer Contributions
at December 31,
($ in thousands)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 34
STATISTICAL SECTION
For The Year Ended December 31, 2011
Benefit Administrative
Year Payments Expense Total
2002 $ 4,830,167 $ 96,396 $ 4,926,563
2003 5,607,334 106,892 5,714,226
2004 6,198,470 121,587 6,320,057
2005 6,781,416 116,986 6,898,402
2006 7,841,783 150,548 7,992,331
2007 8,540,957 147,232 8,688,189
2008 9,232,979 104,221 9,337,200
2009 9,832,606 148,157 9,980,763
2010 10,508,665 115,434 10,624,099
2011 11,233,668 91,863 11,325,531
Expenses by Type
4,830.2
5,607.3
6,198.5
6,781.4
7,841.8
8,541.0
9,233.0
9,832.6
10,508.7
11,233.7
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Benefit Payments
at December 31,
($ in thousands)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 35
STATISTICAL SECTION
For The Year Ended December 31, 2011
Terminated
Members
Entitled to
Receive
Year Benefits Total
2002 459 182 829 1,470
2003 482 194 788 1,464
2004 490 190 808 1,488
2005 460
1 198 780
2 1,438
2006 481
1 199 798
2 1,478
2007 504
1 198 811
2 1,513
2008 532
1 196 885
2 1,613
2009 550
1 192 938
2 1,680
2010 571
1 183 917
2 1,671
2011 596
1 183 838 1,617
1 New Actuarial excluded individuals covered by insurance policy.
2 New Actuarial excludes members with less than six months of service.
Benefits
Active Plan
Members
Member Count
Retirees &
Beneficiaries
Currently
Receiving
459 482 490 460 481 504 532 550 571 596
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Benefit Recipients
at December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 36
STATISTICAL SECTION
For The Year Ended December 31, 2011
Market Percentage
Value as of of
Holding December 31, 2011 Plan
Income Research Management $ 26,966,319 13.5%
GMO Global Balanced Asset Allocation 19,963,793 10.0%
Morgan Stanley Inst. International Equity 18,763,480 9.4%
Brandywine Global Bond 17,519,543 8.8%
Vanguard Windsor II Fund 14,508,407 7.3%
Waddell & Reed 13,774,610 6.9%
Pictet 10,013,456 5.0%
Pyramis US Equity Market Neutral 9,994,944 5.0%
Penn Capital 8,994,329 4.5%
UBS Realty 8,958,101 4.5%
Totals $ 149,456,982 74.7%
Top 10 Holdings by Investment Manager
13.5%
10.0%
9.4%
8.8%
7.3%6.9%5.0%
5.0%
4.5%
4.5%
25.3%
Percentage Distribution
as of December 31, 2011
Income Research Management
GMO Global Balanced Asset
Allocation
Morgan Stanley Inst. International
Equity
Brandywine Global Bond
Vanguard Windsor II Fund
Waddell & Reed
Pictet
Pyramis US Equity Market Neutral
Penn Capital
UBS Realty
Other
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 37
STATISTICAL SECTION
For The Year Ended December 31, 2011
2011 2010
Investment Manager Fees:
Income Research Management $ 106,368 $ 104,508
Loomis / Sayles 17,729 13,285
Brandywine Asset Management 76,993 69,366
Fidelity Investments (Pyramis) 87,645 87,361
PENN Capital Management 79,435 77,590
UBS Real Estate 97,046 51,010
Wellington Management 86,004 55,313
Waddell & Reed 82,646 70,812
Buford, Dickson, Harper & Sparrow 46,011 40,428
Kennedy Capital/ARK Asset Managers 56,573 56,162
Total Investment Manager Fees 736,450 625,835
Advisor Fees:
New England Pension Consultants 97,130 127,272
Milliman 26,153 41,344
Total Advisor Fees 123,283 168,616
Total of All Fees $ 859,733 $ 794,451
Schedule of Investment Manager and Advisor Fees
For the Years Ended December 31,
Firm