Keith Hughes
For LAGERS, calendar year 2014 will always be remembered as a year that the system made progress in achieving our mission. The stated Mission Statement is: “To provide secure retirement, survivors’, and disability benefits to members and beneficiaries in the most efficient and economical manner possible, while providing superior service and fulfilling its fiduciary obligations.” And this progress was achieved through an improved focus, through the lens of the membership. If an activity does not directly improve the retirement system for the membership and their employers, it does not get attention. This keen focus makes LAGERS a preferred provider of retirement benefits for members, retirees, employers and taxpayers in Missouri. The LAGERS Board and staff are privileged to hear the membership attesting that the services provided are ‘top notch’ and sufficiently varied to meet the needs of all stakeholders. It is these continual efforts that result in LAGERS frequently being named as the Missouri retirement system that is “Getting it Right” for all stakeholders.
The LAGERS Board of Trustees continues to focus on governance of the system. The Board adopted a formal Actuarial Funding Policy, with a targeted funding ratio of 100%, to ensure the systematic accumulation of assets to pay future benefits. Also, the Board approved an updated Statement of Investment Policy & Objectives permitting the investment staff latitude to pursue investment opportunities, within certain broad guidelines, and promptly report such activities to the Board. These two policies are integral in ensuring that LAGERS operates in the most economical manner possible. At the request of LAGERS employers, the system pursued legislation permitting LAGERS to administer legacy pension plans for employers that placed newly hired employees in LAGERS. This legislation was voluntary in nature to the employer and permitted the legacy plans to seek a more efficient administrative option. This legislation was passed by the Missouri General Assembly and subsequently vetoed by Governor Nixon. These key actions are representative of the board fulfilling their fiduciary obligations to all stakeholders of the system.
For the fifth consecutive year, LAGERS Funding Progress continues to increase with a 2014 prefunded ratio of 91.7%. This is the ratio of assets versus liabilities at a particular measurement date, February 2014. Looking at a more granular level, 36% of the participating employer groups have Funding Levels greater than 100%. And as expected, with 146 new employers in the last decade many newly covered groups are making progress in their funded status. LAGERS continues to provide modest retirement benefits with the average retiree receiving $931 a month. In fact, 94% of the $231 million LAGERS paid in annual benefits in 2014 went to Missouri residents that support the local Missouri economy.
LAGERS investment portfolio continues to post top quartile performance with a one-year return of 6.9% net of fees for the year ending December 31, 2014. Further, looking through the longer-term perspective, the ten-year return of 7.6% and the twenty-year return of 9.2%, exceed the assumed investment return of 7.25%. The Board’s forward thinking governance model exemplified in the Investment Policy continues to deliver superior results. These long-term investment results are evidence that today’s retirement cost are not being passed on to future generations of taxpayers as acclaimed in the popular press but are one further example of the efficient manner that the Board and staff are “Getting it Right” for ALL stakeholders.
The LAGERS website has become the portal to various retirement related communications. In a society that expects 24/7 access to financial data, that is exactly what LAGERS website is delivering and in a variety of different formats. The LAGERS member web portal provides 24/7 access to member’s personal data and over 1 in 4 members (13,000 +) are currently enrolled users. In 2014, those members have run 4,000 personal retirement estimates at their own leisure using current LAGERS data. For those members that are more engaged in social media; the website provides access to Facebook, Twitter, YouTube, and the LAGERS weekly blog. The varied communication formats are just a sample of the superior service provided to the membership providing differing methods for employees to engage in their own personal retirement planning.
As noted in the 2014 review, LAGERS Board and staff endeavor daily to implement the system’s Mission Statement in providing secure retirement benefits to the membership. The numerous examples above site the various ways the system is “Getting it Right” for all stakeholders.
2015 Looking Forward
The 2015 legislative session of the Missouri General Assembly will again consider a bill pertaining to LAGERS administration of legacy pension plans. The bill will likely be very similar to the 2014 legislative proposal with a couple of small modifications to address concerns in Governor Nixon’s veto message. This legislation aligns with LAGERS core business function of providing pensions to local governments and will be pursued again at the request of many LAGERS employer’s seeking this legislative solution.
The system’s financial strength is further exemplified through reductions in employer contribution rates, where 3 out 4 employer contribution rates are staying the same or will be declining during 2015. The system fully expects this trend of lower contribution rates to continue for the next couple of years. This pension contribution relief is greatly appreciated by not only the employers of the system, but the taxpayers in our valued communities as well.
Member education continues to be an emphasis of LAGERS. Specifically, 2015 will include 21 Pre-Retirement Seminars for those members approaching retirement. These seminars are extremely helpful to those approaching retirement and should be mandatory prior to stepping into retirement. In addition, LAGERS staff will be hosting 7 Retiree Link Meetings that are the system’s first retiree focused seminars. Staff trusts that these sessions will permit retirees to renew old friendships and gather current information on their retirement system thereby permitting these individuals to be engaged ambassadors of LAGERS.
Many in the press would have you believe that a secure retirement is no longer available. For those members participating in LAGERS, you know different. LAGERS has a consistent pattern of delivering promised benefits that makes LAGERS a preferred provider of retirement benefits for members, retirees, employers and taxpayers of Missouri local governments. A fully funded retirement plan is attainable and is the focus of your Board and staff.
Keith Hughes, Executive Secretary