HomeMy Public PortalAbout2012 Audited Financials
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
Contents
Page
Independent Auditors’ Report........................................................................ 1 - 2
Management’s Discussion And Analysis ..................................................... 3 - 11
Financial Statements
Statements of Plan Net Position .......................................................................12
Statements of Changes in Plan Net Position ....................................................13
Notes to Financial Statements .................................................................. 14 - 28
Required Supplemental Information
Schedule of Funding Progress .........................................................................29
Schedule of Employer Contributions ...............................................................29
Note to Required Supplemental Information ...................................................30
Statistical Section (Unaudited)
Performance and Net Position Value ...............................................................31
Revenue by Source and Total Employer Contributions ..................................32
Expenses by Type and Total Benefit Payments ...............................................33
Member Count and Total Benefit Receipts .....................................................34
Top Ten Investment Holdings and Percentage Distribution ............................35
Schedule of Investment Manager and Advisor Fees ........................................36
Independent Auditors’ Report
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
Report on the Financial Statements
We have audited the accompanying statement of plan net position of The Metropolitan St. Louis Sewer
District Employees’ Pension Plan (the Plan) as of December 31, 2012 and 2011, and the related statement of
changes in plan net position for the years then ended, which collectively comprise the District’s basic financial
statements as listed in the table of contents.
Management’s Responsibility For The Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audits. We conducted our
audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Board of Trustees
The Metropolitan St. Louis Sewer District
Page 2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net
position of The Metropolitan St. Louis Sewer District Employees’ Pension Plan as of December 31, 2012 and
2011, and the changes in plan net position for the years then ended in accordance with accounting principles
generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 3 through 11 and the schedule of funding progress and employer
contributions on pages 29 and 30 be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board who considers it to be an essential part of financial reporting for placing the basic financial statements
in an appropriate operational, economic, or historical context. We have applied certain limited procedures to
the required supplementary information in accordance with auditing standards generally accepted in the United
States of America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our inquiries, the
basic financial statements, and other knowledge we obtained during our 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 provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the Plan’s financial statements. The
statistical information is presented for purposes of additional analysis and is not a required part of the basic
financial statements. The statistical information is the responsibility of management and was derived from and
relates directly to the underlying accounting and other records used to prepare the basic financial statements.
The statistical information has not been subjected to the auditing procedures applied in the audit of the basic
financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
June 18, 2013
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 3
MANAGEMENT’S DISCUSSION AND ANALYSIS
For The Year Ended December 31, 2012
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, 2012. 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 position
2) Statements of changes in Plan net position
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 position are a point in time snapshot of account balances at year-
end. It reports the assets available for future payments to retirees, and any current liabilities
that are owed as of the statement date. The resulting net position value [assets plus deferral
outflows - liabilities plus deferral inflows = net position] represents the value of net position
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 position displays the effect of pension fund transactions
that occurred during the fiscal year [additions - deductions = net increase (decrease) in net
position]. This net increase (decrease) in net position reflects the change in the net position
value of the statements of Plan net position 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 15 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 2012
• Net position restricted for pension benefits totaled $223,467,512 as of December 31, 2012 for
an increase of $23,126,890 or 11.5% as compared with December 31, 2011. This increase in
net position 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, 2012, the date of the latest actuarial valuation, the funded ratio of the
Plan was 83.0%. In general, this means that for every dollar of pension benefits due, the Plan
has approximately $0.83 of net position available for payment. The Plan’s funding ratio
increased by 2.3 percentage points as compared with the funding ratio for December 31, 2011.
The increase in the funding ratio is primarily attributed to the increase in the Plan’s actual
value of assets outpacing the present value of future benefits to members and their
beneficiaries. In addition, the present value of future normal costs decreased.
• Total increase to the Plan’s net position (page 13) amounted to $23,126,890 for the year 2012
consisting of an investment gain of $23,391,578 offset by Plan payments net of contributions
of $264,688.
• Administrative expenses (deductions to the Plan’s net position, page 13) increased from
$91,863 for 2011 to $96,434 or $4,571 or (5.0%) which primarily reflects an increase in US
Bank Trustee fees of 3.9%. This represents 68% of the total increase in overall
Administrative expenses.
• On April 23, 2012, the Plan transferred $210 into the Defined Contribution plan. This
covered the share of one employee having their funds enter the Defined Contribution plan.
FINANCIAL HIGHLIGHTS 2011
• Net position restricted 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
position 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, 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 position 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 position (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.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 6
• Administrative expenses (deductions to the Plan’s net position, 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.
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 2012 and 2011, the Fund was up by 12.8% and 1.9%,
respectively, which ranked in the 37th percentile for both years within the Public Fund universe. Net
position restricted for pension benefits increased by $23,126,890 in 2012 and increased by
$1,800,548 in 2011. This net position is used to meet ongoing benefit obligation to the Plan’s
participants and their beneficiaries.
The Metropolitan St. Louis Sewer District’s (the District) contributions into the Plan as determined
by the Plan’s actuary increased for 2012 compared to 2011. The primary reasons for the increase
were twofold: one rested with decreasing the interest rate from 7.5% to 7.25%. The second saw a
five-year projection added to the healthy mortality assumption to reflect expected future mortality
improvements.
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 7.25% on average. Both the Plan’s investment performance and the rate of return
on actuarial value have averaged 8.8% and 7.8%, respectively, over the last three years and are above
the actuarially assumed investment rate of 7.25%. 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 METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 7
Based upon our latest actuarial valuations for the years ended December 31, 2012 and 2011, the
Plan’s actuarial value of assets was less than its actuarial value of liabilities by $45,226,736 and
$49,205,164, respectively. Included in this liability is a deferred but unrecognized loss of $2,323,238
resulting from the difference in the value of Net Position at December 31, 2012 of $223,467,512 and
the actuarial value of assets at December 31, 2012 of $221,144,274. This means that additional future
funding will be needed to continue to reduce the liability including this deferred but unrecognized
loss.
FINANCIAL ANALYSIS
The condensed statements of Plan net position as compared to prior years are as follows:
2012 2011 Amount $Percent
ASSETS
Investments at fair value 223,415,457$ 200,040,231$ 23,375,226$ 11.7%
Other Assets 8,703,827 7,272,756 1,431,071 19.7%
Total Assets 232,119,284 207,312,987 24,806,297 12.0%
LIABILITIES 8,651,772 6,972,365 1,679,407 24.1%
NET POSITION RESTRICTED
FOR PENSION BENEFITS 223,467,512$ 200,340,622$ 23,126,890$ 11.5%
For the Years Ended
December 31,2012 Change
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 POSITION RESTRICTED
FOR PENSION BENEFITS 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 8
As previously noted, net position viewed over time may serve as a useful indication of the Plan’s
financial position. At the close of calendar years 2012 and 2011, the assets of the Plan exceeded its
liabilities by $223,467,512 and $200,340,622, respectively, in net position restricted for pension
benefits. The net position is available to meet the Plan’s ongoing obligation to the Plan’s participants
and their beneficiaries.
Despite variations in the 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 position as compared to prior years are as
follows:
2012 2011 Amount $Percent
ADDITIONS
Net investment income 23,391,788$ 2,215,402$ 21,176,386$ 955.9%
Employer contributions 11,742,410 10,981,546 760,864 6.9%
Total additions 35,134,198 13,196,948 21,937,250 166.2%
DEDUCTIONS
Benefits paid to retirees and beneficiaries 11,910,664 11,233,668 676,996 6.0%
Transfers to Defined Contribution Plan 210 70,869 (70,659)(99.7%)
Administrative expenses 96,434 91,863 4,571 5.0%
Total Deductions 12,007,308 11,396,400 610,908 5.4%
NET INCREASE 23,126,890 1,800,548 21,326,342 1184.4%
NET POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 200,340,622 198,540,074 1,800,548 0.9%
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 223,467,512$ 200,340,622$ 23,126,890$ 11.5%
For the Years Ended
December 31,2012 Change
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 9
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 POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 198,540,074 179,219,472 19,320,602 10.8%
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 200,340,622$ 198,540,074$ 1,800,548$ 0.9%
For the Years Ended
December 31,2011 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, 2012 and 2011, total $35,134,198 and
$13,196,948, respectively.
Additions to Plan assets for 2012 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, 2012.
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, 2012 totaled $12,007,308, an increase
of 5.4% over 2011. The increase in benefits paid resulted primarily from an increase in the number
of retirees receiving benefits by 18 members or a 3.0% increase. Deductions from Plan net position
of $12,007,308 were exceeded by additions to Plan net position of $35,134,198 for the year ended
December 31, 2012. The Plan has consistently managed within its administrative expense budget,
with no material variances between planned and actual expenditures.
INVESTMENT PERFORMANCE - 2012
The following are a few characteristics and achievements for the Plan for the year ending
December 31, 2012:
• The Plan ended the year with a net position of $223,467,512.
• The Plan’s performance for the year was 12.8% compared to the passive policy index of
11.6%, and the average five-year return was 4.5% compared to the passive policy index of
3.6%.
• The actual asset allocation as of December 31, 2012, as compared to the December 31, 2011
actual allocation, is as follows:
2012 2011
Equities:
Domestic large-cap stocks 20.0 %16 - 24 %19.6 %20.4 %
Domestic small-cap stocks 5.0 3 - 7 5.2 6.4
International developed markets stocks 10.0 8 - 12 10.4 9.4
International emerging markets stocks 3.0 2 - 5 3.0 2.8
Fixed Income:
Domestic core bonds 13.0 10 - 20 12.7 13.4
High yield bonds 5.0 3 - 7 5.2 4.5
Global bonds 8.0 6 - 10 7.8 8.7
Credit opportunities 2.0 0 - 5 2.0 2.0
Emerging fixed 5.0 3 - 7 5.2 5.0
Other:
Global tactical 10.0 8 - 12 10.0 10.0
Real estate 5.0 3 - 7 4.4 4.5
Real assets 5.0 3 - 7 4.8 4.4
Market neutral 5.0 3 - 7 4.6 5.0
Cash equivalents ----0.5 0.3
Absolute return 4.0 3 - 7 4.6 3.2
Asset Class
ActualProposed
RangeTarget
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 11
All asset classes have been rebalanced when needed during the year in order to maintain a weighting
consistent with the strategic allocation ranges. Resolution 2986, effective August 2011, authorized
new proposed targets and ranges which are reflected above.
Overall asset class allocations changed minimally. The Equity asset class decreased .8 percentage
points while the Fixed income class saw a decrease of .7 percentage points. This was offset by the
Other asset class seeing an increase of 1.5 percentage points. This was due to an increase of 1.4
percentage points in the Absolute Return sub-class, managed by PIMCO. While this increase put the
sub-class over target, it was still within the target range. Resolution 2987, effective August 2011,
authorized specific investment managers to act on behalf of the Plan to actively manage specific
investment types.
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:
Brenda Schaefer, Secretary-Treasurer
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
E-mail: bschaefer@stlmsd.com
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying notes to financial statements. Page 12
STATEMENTS OF PLAN NET POSITION
2012 2011
ASSETS
Investments at fair value:
Mutual funds 91,640,880$ 79,215,761$
Corporate obligations 29,045,800 29,288,059
Collective investment funds 37,082,646 32,742,140
Domestic common stocks 23,865,980 22,444,536
US Treasury and agency obligations 11,792,140 9,962,401
Foreign obligations 12,564,555 10,940,349
Money market funds 4,845,416 3,581,619
Foreign stocks 1,840,808 1,860,413
Municipal obligations 618,471 796,650
Domestic preferred stock 367,508 250,202
Real estate investments 9,751,253 8,958,101
Total Investments 223,415,457 200,040,231
Receivables
Due from brokers for forward currency
exchange contracts 7,221,683 6,578,581
Due from brokers for pending sales
securities sold 847,166 60,299
Interest and dividends receivable 634,978 633,876
Total Receivables 8,703,827 7,272,756
Total Assets 232,119,284 207,312,987
LIABILITIES
Due to brokers for forward currency exchange
contracts 7,305,924 6,711,285
Due to brokers for securities purchased 1,129,160 56,394
Accrued expenses 216,689 204,686
Total Liabilities 8,651,772 6,972,365
NET POSITION RESTRICTED FOR PENSION
BENEFITS 223,467,512$ 200,340,622$
December 31,
For the Years Ended
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying notes to financial statements. Page 13
STATEMENTS OF CHANGES IN PLAN NET POSITION
2012 2011
ADDITIONS TO NET POSITION ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair value of investments 18,697,576$ (2,455,509)$
Interest and dividends 5,589,459 5,530,644
Total Investment income 24,287,035 3,075,135
Less - investment managers' and advisors' fees 895,247 859,733
Net Investment income 23,391,788 2,215,402
Employer contributions 11,742,410 10,981,546
Total Additions 35,134,198 13,196,948
DEDUCTIONS FROM NET POSITION ATTRIBUTED TO:
Benefits paid to retirees and beneficiaries 11,910,664 11,233,668
Transfers to defined contribution plan 210 70,869
Administrative expenses 96,434 91,863
Total Deductions 12,007,308 11,396,400
NET INCREASE 23,126,890 1,800,548
NET POSITION RESTRICTED FOR PENSION
BENEFITS, January 1 200,340,622 198,540,074
NET POSITION RESTRICTED FOR PENSION
BENEFITS, December 31 223,467,512$ 200,340,622$
December 31,
For the Years Ended
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 14
NOTES TO FINANCIAL STATEMENTS
December 31, 2012 And 2011
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 position during the reporting period. Actual
results could differ from those estimates.
Investment Valuation
The Plan’s investment assets, for which U.S. Bank, N.A., acts as 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.
Subsequent Events
Management has evaluated subsequent events through June 18, 2013, the date the financial
statements were available for issue.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 15
2. Description of Plan
The following brief description of THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN (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 and/or the Deferred Compensation 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. In 2011, 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
2012 2011 (Decrease)
Active plan members 803 838 (35)
Retirees and beneficiaries currently receiving benefits 614 596 18
Terminated members entitled to receive benefits 179 183 (4)
Total 1,596 1,617 (21)
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 16
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 17
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 18
• 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:
2012 2011
Investments, at fair value
Mutual funds 91,640,880$ 79,215,761$
Corporate obligations 29,045,800 29,288,059
Collective investment funds 37,082,646 32,742,140
Domestic common stocks 23,865,980 22,444,536
U.S. Treasury and agency obligations 11,792,140 9,962,401
Foreign obligations 12,564,555 10,940,349
Money market funds 4,845,416 3,581,619
Foreign stocks 1,840,808 1,860,413
Municipal obligations 618,471 796,650
Domestic preferred stocks 367,508 250,202
Real estate investments 9,751,253 8,958,101
Total Investments 223,415,457$ 200,040,231$
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 29,045,800$ 4.08
U.S. Treasury and agency obligations 11,792,140 5.84
Foreign obligations 12,564,555 6.02
Municipal obligations 618,471 10.84
Total 54,020,966$
Portfolio weighted average maturity 4.99
As of December 31, 2012
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 19
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 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 20
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
AAA 11,792,140$ 146,285$ 4,675,683$ 1,569,365$ 18,183,474$
AA - 81,770 2,217,013 2,101,791 4,400,573
A - 390,416 8,107,340 6,099,353 14,597,108
BBB - - 3,798,394 994,087 4,792,482
BB - - 3,503,644 1,393,008 4,896,652
B - - 5,844,308 406,950 6,251,258
CCC - - 764,471 - 764,471
CC - - 134,947 - 134,947
Not Rated - - - - -
Total 11,792,140$ 618,471$ 29,045,800$ 12,564,554$ 54,020,966$
Credit Rating by Investment as of December 31, 2012
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
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 21
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 Foreign
Currency Stocks Obligations Total
Australian Dollar -$ 1,549,362$ 1,549,362$
British Pound Sterling - 540,385 540,385
Euro - 1,129,938 1,129,938
Hungarian Forint - 691,920 691,920
Malaysian Ringgit - 729,445 729,445
Mexican Peso - 2,464,787 2,464,787
New Zealand Dollar - 504,646 504,646
Polish Zloty - 1,148,566 1,148,566
South African Rand - 626,618 626,618
South Korean Won - 790,745 790,745
Not denominated in a foreign currency 1,840,808 2,388,144 4,228,953
Total 1,840,808$ 12,564,554$ 14,405,364$
Foreign Currency Exposure by Asset Class
as of December 31, 2012
(in USD)
Foreign Foreign
Currency Stocks 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$
as of December 31, 2011
(in USD)
Foreign Currency Exposure by Asset Class
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 22
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 23
Open Foreign Currency Exchange Contracts in US Dollars
The investment managers enter into foreign currency exchange contracts to make payment for
international 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, 2012 and
2011 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:
Indian Rupee 664,720$ 687,217$ 3/20/2013 -$ 22,497$
Chilean Peso 475,434 469,253 2/12/2013 6,181 -
Chilean Peso 78,888 77,863 5/15/2013 1,026 -
Australian Dollar - 74,850 2/11/2013 - 74,850
Russian Rouble 350,268 340,014 1/14/2013 10,255 -
Brazilian Real 149,647 147,325 3/19/2013 2,322 -
Brazilian Real 635,212 625,355 3/4/2013 9,857 -
British Pound Sterling 1,731,158 1,713,585 3/12/2013 17,573 -
Euro - 175,418 1/3/2013 - 175,418
Aggregate
Cost
Value Fair Value
Foreign Currency Exchange
Contracts Sold:
Australian Dollar 1,755,929$ 1,725,488$ 2/11/2013 30,442$ -$
Indian Rupee 28,574 - 3/20/2013 28,574 -
Euro 614,250 554,340 2/5/2013 59,910 -
Euro 171,797 155,041 1/3/2013 16,756 -
New Zealand Dollar 565,804 560,175 3/13/2013 5,629
Total 7,221,683$ 7,305,924$ 188,524$ 272,765$
Open Contracts as of December 31, 2012
(in USD)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 24
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 6,578,573$ 6,711,277$ 20,066$ 152,770$
Open Contracts as of December 31, 2011
(in USD)
The fair value of open foreign currency contracts, including any unrealized appreciation or
depreciation, is recorded in the statements of Plan net position 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 25
Investments Greater Than 5% Of Net Position Held In Trust For Pension Benefits
Investments that exceed 5% or more of net position held in trust for pension benefits at
December 31, 2012 and 2011 are as follows:
2012 2011
Income Research Management 28,346,535$ 26,966,319$
Morgan Stanley International Equity 23,232,447 18,763,480
GMO Global Balanced Asset Allocation 22,296,706 19,963,793
Brandywine Global Bond 17,569,186 17,519,543
Vanguard Windsor II 15,597,069 14,508,407
Waddell & Reed 15,364,036 13,774,610
PENN Capital 11,672,173 <5%
Pictet 11,543,870 10,013,456
Pyramis US Equity Market Neutral <5%9,994,944
PIMCO <5%<5%
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 $11,737,168 and $10,969,154 excluding certain professional fees paid by the
District, were made to the Plan in 2012 and 2011, respectively. These contributions were
made in accordance with actuarially determined contribution requirements based on actuarial
valuations performed at December 31, 2012 and 2011, respectively, and consisted of:
2012 2011
Normal Cost 6,195,693$ 6,150,879$
Amortization of the unfunded
actuarial accrued liability 4,748,053 4,052,985
Investment Rate of Return factor (7.25%
for 2012 and 7.5% for 2011)793,422 765,290
Current Year Contribution due
from the District as Calculated
by the Plan's Actuary 11,737,168$ 10,969,154$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 26
Certain professional fees, included in administrative expenses are paid by the District and are
recognized as contributions to the Plan and totaled $5,242 and $12,392 for the years ended
December 31, 2012 and 2011. The District provides office space, utilities, and other services
to the Plan at no cost. Other costs of administering the Plan are financed from Plan net
position.
5. Funded Status and Funding Progress
The funded status of the Plan as of January 1, 2013, the most recent actuarial valuation date, and
January 1, 2012, 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
2013 $ 221,144 $ 266,371 $ 45,227 83.0 %$ 48,333 93.6 %
2012 $ 205,792 $ 254,997 $ 49,205 80.7 %$ 49,432 99.5 %
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, 2013
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 7.25% per annum (1)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 27
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 position.
Actuarial present value of accumulated Plan benefits are reported based on certain
assumptions pertaining to interest rates, inflation rates, and employee demographics, all of
which are subject to change. Due to uncertainties inherent in the estimations and assumptions
process, it is at least reasonably possible that changes in these estimates and assumptions in
the near term would be material to the financial statements.
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
designed 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 28
9. Pending GASB Statements
As of the date of the audit report, the Government Accounting Standards Boards (GASB) has
issued the following statement not yet implemented by the Plan:
Statement Number 67, Financial Reporting for Pension Plans - an amendment of GASB
Statement No. 25, was issued June 2012 and will be effective for the Plan with the fiscal year
ending December 31, 2013. The statement establishes standards of financial reporting for
separately issued financial statements related to pensions for governments whose employees
are provided pensions through pension plans that are covered by the scope of the statement.
Management is in the process of determining the effect of the implementation of this
statement on the Plan.
REQUIRED SUPPLEMENTARY INFORMATION
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 29
REQUIRED SUPPLEMENTARY INFORMATION
For The Year Ended December 31, 2012
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
2013 $ 221,144 $ 266,371 $ 45,227 83.0 %$ 48,333 93.6 %
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
Schedule of Funding Progress
($ in thousands)
of Covered
Payroll
Funded
Ratio
UAAL as a
Percentage
Analysis of the dollar amounts of Plan net position, AAL, and UAAL in isolation can be misleading.
Expressing Plan net position 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
2012 11,737,168 11,742,410 100.0 %24.3 %
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
Schedule of Employer Contributions
Contribution as
a Percentage of
Covered Payroll
Percentage
Contributed
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 30
REQUIRED SUPPLEMENTARY INFORMATION
For The Year Ended December 31, 2012
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 31
STATISTICAL SECTION
For The Year Ended December 31, 2012
Net Position Value
(NPV) as of
Year December 31
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
2012 223,467,512 11.5
Performance and NPV
Total
Plan
Performance
137.0 149.1 157.8
174.3
191.4
150.8
179.2
198.5 200.3
223.5
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net Position Value
at December 31,
($ in millions)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 32
STATISTICAL SECTION
For The Year Ended December 31, 2012
Employer Investment
Year Contributions Income Total
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
2012 11,742,410 24.3 23,391,578 35,133,988
Payroll
Revenues by Source
Employer
Contributions
as a Percentage
of Covered
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 11,742.4
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Employer Contributions
at December 31,
($ in thousands)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 33
STATISTICAL SECTION
For The Year Ended December 31, 2012
Benefit Administrative
Year Payments Expense Total
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
2012 11,910,664 96,434 12,007,098
Expenses by Type
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 11,910.7
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Benefit Payments
at December 31,
($ in thousands)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 34
STATISTICAL SECTION
For The Year Ended December 31, 2012
Terminated
Members
Entitled to
Receive
Year Benefits Total
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
2012 614 1 179 803 1,596
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
482 490 460 481 504 532 550 571 596 614
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Benefit Recipients
at December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 35
STATISTICAL SECTION
For The Year Ended December 31, 2012
Market Percentage
Value as of of
Holding December 31, 2012 Plan
Income Research Management $ 28,346,535 12.7%
Morgan Stanley International Equity 23,232,447 10.4%
GMO Global Balanced Asset Allocation 22,296,706 10.0%
Brandywine Global Bond 17,569,186 7.9%
Vanguard Windsor II 15,597,069 7.0%
Waddell & Reed 15,364,036 6.9%
PENN Capital 11,672,173 5.2%
Pictet 11,543,870 5.2%
Wellington 10,735,447 4.8%
PIMCO 10,373,826 4.6%
Totals $ 166,731,295 74.6%
Top 10 Holdings by Investment Manager
12.7%
10.4%
10.0%
7.9%
7.0%6.9%5.2%
5.2%
4.8%
4.6%
25.4%
Percentage Distribution
as of December 31, 2012
Income Research Management
Morgan Stanley International
EquityGMO Global Balanced Asset
AllocationBrandywine Global Bond
Vanguard Windsor II
Waddell & Reed
PENN Capital
Pictet
Wellington
PIMCO
Other
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 36
STATISTICAL SECTION
For The Year Ended December 31, 2012
2012 2011
Investment Manager Fees:
Income Research Management $ 102,851 $ 106,368
Loomis / Sayles 19,668 17,729
Brandywine Asset Management 76,802 76,993
Fidelity Investments (Pyramis)90,512 87,645
PENN Capital Management 79,311 79,435
UBS Real Estate 110,144 97,046
Wellington Management 83,011 86,004
Waddell & Reed 89,996 82,646
Buford, Dickson, Harper & Sparrow 49,530 46,011
Kennedy Capital/ARK Asset Managers 54,974 56,573
Total Investment Manager Fees 756,799 736,450
Advisor Fees:
New England Pension Consultants 113,697 97,130
Milliman 24,750 26,153
Total Advisor Fees 138,448 123,283
Total of All Fees $ 895,247 $ 859,733
Schedule of Investment Manager & Advisor Fees
For the Years Ended December 31,
Firm