During the last Board meeting of 2005, the PennsylvaniaMunicipal Retirement Board discussed the most contro-versial and timely actuarial and investment topics fac-ing the pension community today. The System'sconsulting actuary, Eli Greenblum, from The SegalCompany, reported on the System's investment reserveand how it stood vis-à-vis the Board's recently adoptedexcess interest policy. Richard Dahab, the System'sinvestment consultant and President of Dahab Associates,Inc., briefly outlined the System's investment perform-ance for the third quarter of 2005.

The most reassuring news was that as of January 1, 2005,the System's reserve balances were all positive.Recovering from the negative impact of the equity mar-kets' performances in 2000, 2001, and 2003, the con-sultants were able to share that the actuarial calculationsreflected an approximately $15 million unallocated bal-ance on the books. The Board's decisions to continuemanaging the fund's assets in a conservative, prudentmanner had led to an amendment of the excess interestaward policy at the July 2005 meeting. The amended pol-icy requires the System to be able to award at least 0.5%in excess interest before any award is made. The poli-cy is one of several adopted during the past few years thatare designed to ensure the steady growth of the fund evenduring periods of under performing markets. As itstands, the amount of excess interest that could have beenawarded in 2005, based on the previous policies of theBoard, was approximately 0.23%. Due to the amendedpolicy, the System will hold the surplus in reserve andhopefully build on it so that excess interest might beawarded in 2006.

E. Greenblum stated that the feature article in theSystem's fall newsletter regarding under-funded pension

PMRS members within five years of retirement wereinvited to attend one of six retirement seminars heldthroughout the state during the fall of 2005.Representatives from the Social Security Administrationand the PMRS staff discussed a number of topics designedto ready the members for their transition to the "golden

years" of retire-ment. Specifictopics addressedwere: SocialSecurity (SS)benefits - howthey are calculat-ed and how toapply for them;the various types

of retirement options available to members of PMRS; howto apply for retirement; and how benefits are calculated.The representatives addressed the attendees' benefitquestions and concerns - many of them aimed at thefuture security of their retirement benefit.

Representatives from the Social Security Administrationreviewed a number of topics with members including butnot limited to:

w The SS program is not simply a retirement program.The money collected for SS is not reserved in anaccount specifically for a given person. The agencycollects taxes for SS benefits that are dispersed to over45 million Americans who have either retired, filedfor disability, or have filed for survivor benefits.

w The importance of verifying a member's earningshistory with the Social Security Statements that are

Inside This Issue

Board Meeting Review 1

Pre-Retirement Seminars 1

Calendar of Events Insert

Contact Corner Insert

Division Spotlight 3

(See Seminar, Pg 2)

Prospective retirees listen intently toinformation regarding their retirement.

(See Boa r d, Pg 4)

Seminar ( P g 1 )

M e e t u s o n t h e w e b ! w w w . p m r s . s t a t e . p a . u s E m a i l u s : r a - s t a f f @ s t a t e . p a . u s O f f i c e H o u r s : M o n d a y t h r o u g h F r i d a y 7 : 4 5 A . M . t o 4 : 1 5 P . M .

Page 2 Winter 2005 The PMRS Spotlight

Adams County said that although she's been aPMRS member for fourteen years, she did not feelshe would be able to retire when she wants to. Shecited lack of personal knowledge and planning asthe main culprits and indicated that like manyAmericans, she is increasingly worried about healthcare and insurance costs. Her advice for younger

generations: "talk to money advi-sors about how to save for retire-ment and be sure to estimate theamount of savings needed to reachyour goal." She added that whileemployees should begin planningfor retirement between the ages of25 to 30, it would be helpful tohave better access to educationalmaterials to help everyone makemore informed retirement deci-sions.

In an effort to gauge the seminar'seffectiveness and to improve

future communication tools and retirement semi-nars, the PMRS Board and staff will be taking a clos-er look at the recommendations made by thosesuch as L. Redding who attended the seminars.Staff hopes that revamping the presentations willhelp better explain our members' benefits andrenew interest in one's own retirement. If you havequestions regarding your plan or have suggestionsto help us in communicating your benefits moreeffectively, please contact us via email at ra-staff@state.pa.us or by phone at 1-800-622-7968. Wecertainly welcome your suggestions.

Thank you again to all who attended the seminarsthis year. We look forward to seeing many new andreturning prospective retirees next year. Until nexttime… w

mailed every year. These statements reflect theamount of money that is used to determine amember's benefit and are crucial in helpingplan for retirement.

wThe effects of early retirement, extended employ-ment, and benefit deferral on the amount ofbenefits received versus nor-mal retirement.

w Those who participated werestrongly encouraged to con-tact the Social SecurityAdministration three monthsbefore applying for benefits.Members visiting their web-site will find a wealth of infor-mation that includes variouscalculators for estimating ben-efits, information on how toplan for retirement, who is eli-gible for SS, as well as variousSS programs.

To learn more, visit www.ssa.gov or contact theagency by phone at 1-800-772-1213.

The PMRS Staff was also on hand to review theretirement process from start to finish. Memberswho pre-registered were given a packet of informa-tion containing a retirement estimate, a summaryof their plan's benefits, and the actual applicationnecessary for retirement. PMRS staff memberspresented a vast amount of information on retire-ment estimates, retirement options, death bene-fits, excess interest, living wills, and filing forretirement.

One of the most common questions that membershad was whether or not they had acquired enoughbenefits to last them through retirement. Wheninterviewed, seminar attendee Linda Redding of

PMRS member L. Redding (left)with her friend at the pre-retire-ment seminar in York, Pennsylvaniaon November 9, 2005.

The PMRS Spotlight Winter 2005 Page 3

e . p a . u s O f f i c e H o u r s : M o n d a y t h r o u g h F r i d a y 7 : 4 5 A . M . t o 4 : 1 5 P . M .

variety of domestic and international equities,bonds, real estate, and short-term investment funds.The Accounting Division works closely withPennsylvania's Department of Treasury to managethese transactions and to monitor investment

income. Reports are pre-pared every month andthen shared with thePennsylvania MunicipalRetirement Board.

To maintain complete pub-lic disclosure, the Systemundergoes an annual auditby an independent certi-fied public accountingfirm. Each year, the auditis published within theComprehensive Annual

Financial Report which encompasses the System'sfinancial, actuarial, and investment information.The report is sent to the Government FinanceOfficers Association every year for consideration forthe Certificate of Achievement for Excellence inFinancial Reporting Award. The AccountingDivision is happy to report that this award hasbeen received each of the last three years.

With such a flurry of activity in the AccountingDivision, staff constantly looks for ways to improvetheir day-to-day operations. They are extremelyoptimistic that the implementation of a softwareupgrade in 2006 will prove to be one such improve-ment. Not only will municipalities have access totheir account information online, the division willalso have an upgraded accounting package thatwill help to mainstream many business processesand continue to enhance their financial statementprocessing track record. w

In the past year we have taken the opportunity toexplain the inner workings of PMRS in order to giveyou a better understanding of how we manage yourpension plans. Our last and final installment ofour division spotlight showcases the tireless effortsof our Accounting Division.Staff members DonnaMiller, SusanGolembiewski, DianeSchwartz, Diane Bamford,and Chief Renny Witmerhave proven to be an inte-gral part of PMRS.

Perhaps the most notableservice that the AccountingDivision is known for is thepreparation of the AnnualFinancial Statements. Arecently adopted first-come, first served processingpolicy has revolutionized the procedure and hasenabled staff to drastically reduce the amount oftime used to complete the processing of financialstatements.

In addition to the Annual Financial Statements,the division is also responsible for the financialstatements for the System as a whole, the distribu-tion of the Minimum Municipal Obligation (MMO)worksheets, the processing of Quarterly Report ofContributions, answering questions regarding StateAid and Excess Interest, processing incomingmunicipality checks for contributions, managinginvestment transactions, and the preparation ofthe Comprehensive Annual Financial Report.

The System’s assets stem from the contributionsthat municipalities and members put into the fund.This money is pooled together and dispersed toeleven investment managers to purchase and sell a

Back left - Sue Golembiewski, Chief Renny Witmer,Diane Schwartz. Front left - Donna Miller & DianeBamford

had not performed as well during the third quarteras they had hoped. The System's assets did, how-ever, regain a great deal of strength in the month ofNovember.

Finally, despite the System's ongoing failure toreach the real estate allocation target of 10% ofassets, the Board reaffirmed its desire to continuestriving for the 10% allocation. Since the liquida-tion of the CIGNA managed real estate portfolio in2004, which was caused in part by Prudential RealEstate's purchase of certain CIGNA pension busi-nesses, the asset class allocation has only been ableto sustain a 6% level. The Board elected to contin-ue searching for a suitable means to invest in theasset class.

Based on the optimistic reports presented by E.Greenblum and R. Dahab, it appears that the Systemwill begin the 2006 New Year on a strong footing.The PMRB and staff look forward to sharing moregood news in the months ahead. w

Page 4 Winter 2005 The PMRS Spotlight

Board ( P g 1 )

plans in the U.S. only scratched the surface of thetrouble facing numerous employers in both thepublic and private sectors. He said that the contri-bution requirements for a large number of plans haveskyrocketed over just a few years. He also men-tioned the controversy surrounding the latest pro-posed federal pension reform legislation and alludedto the possibility that many plan sponsors will dis-solve their defined benefit programs due to everincreasing risks. Having heard all this, the Board'sdiscussion thereafter reaffirmed their belief thatthe System continues to meet the needs of bothmunicipalities and members in that it remains safeand secure from many of the hardships that non-PMRS plans have been or will be facing.

The Board clearly recognized that the worst of thepension epidemic has yet to be seen. Equally clearto the Board is that PMRS will continue to bestrong due to many factors: its prudent managementof the System's funds, its ability to specifically tai-lor benefits packages for each plan, and itsability to run cost studies that aidin indicating potential problemswith proposed plan changesbeing considered by munici-palities.

As to the System's investmenthistory, the Board learnedthat over the past nineteenyears that Dahab Associateshas been the investment con-sultant for PMRS, the Systemhas consistently performed inthe top third of all pensionplans for nearly every calendarquarter. In regards to the mar-ket, R. Dahab mentioned thatgrowth stocks had been doingmuch better in 2005 than inthe previous year. He also men-tioned that the System's assets

Editorial Board Tim Brulia, Tom Garrett, Kris Gibboney, Ben Mader, Donna Miller, *Shannon DeWaelsche *Editor

(Left to right) Bottom: T. Brulia, D. Castner, B. Mader, K. Gibboney; Row 2: T. Hoot,B. Armstrong, N. Humphrey, J. Lewis, K. Corradi, S. DeWaelsche; Row 3: L. Payne,M. Fischer, D. Miller, D. Shull, D. Bamford, T. Eisenhart, D. Schwartz, J. Rhodes; BackRow: R. Porambo, T. Garrett, R. Eames, P. Weinert, J. Allen. Not pictured: C. Davis,S. Golembiewski, A. Johnston, M. Mortimer, & R. Witmer.

January 17 - January 201099-Rs mailed from PMRS.

January 26 Pennsylvania Municipal Retirement Board Meeting.

January 30Retiree checks mailed from PMRS.

February 1- May 31 Individual member statements mailed to members' home addresses with a copy to employing municipality.

February 1 - May 31 Governmental Accounting Standards Board (GASB Statement No. 25) information (financial statements and accompanying notes) mailed to member municipalities.

February 1Deadline for returning the Quarterly Reports for the 4th Quarter to PMRS.

Note: Member and financial statements will be prepared on a "first-come, first-served" basis, based on when the municipality submitted the completed information.

February 27 Retiree checks mailed from PMRS.

March 15Quarterly Reports for the 1st Quarter mailed to municipalities.

March 15 & 16 Pennsylvania Municipal Retirement Board Meeting (Annual Investment Review).

March 30Retiree checks mailed from PMRS.

March 31 Act 205 Actuarial Valuation Report for January 1, 2005 due at the Public Employee Retirement Commission. (All municipal plans)

Note: The reports are completed by PMRS and for most plans are filed on the even-numbered years by March 31. The valuation date of the reports is January 1 of the odd-numbered years. Upon receipt of the valuation from PMRS, each chief administrative officer must review, sign, and forward the valuation to the PERC.

March 31 Deadline for filing state aid certification form (AG-385) with the Auditor General's Office.