Michigan State Employees’ Retirement System

Michigan State Employees' Retirement System

A Pension and Other Employee Benefit Trust Fund of the State of Michigan

Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2016

M S E R S

Prepared by: Financial Services

for Office of Retirement Services

P.O. Box 30171 Lansing, Michigan 48909-7671

517-322-5103 1-800-381-5111

MICHIGAN STATE EMPLOYEES' RETIREMENT SYSTEM 1

TABLE OF CONTENTS

INTRODUCTORY SECTION.................................................................................................................................... 3 Certificate of Achievement ............................................................................................................................................ 4 Public Pension Standards Award .................................................................................................................................. 5 Letter of Transmittal ...................................................................................................................................................... 6 Administrative Organization ........................................................................................................................................ 10 Retirement Board Members .................................................................................................................................... 10 Advisors and Consultants...................................................................................................................................... 10 Organization Chart .................................................................................................................................................. 11

FINANCIAL SECTION ........................................................................................................................................... 13 Independent Auditor's Report...................................................................................................................................... 14 Management's Discussion and Analysis ..................................................................................................................... 16 Basic Financial Statements ......................................................................................................................................... 20 Statement of Pension Plan and Other Postemployment Benefit Plan Fiduciary Net Position................................. 20 Statement of Changes in Pension Plan and Other Postemployment Benefit Plan Fiduciary Net Position ............ 21 Notes To Basic Financial Statements ..................................................................................................................... 22 Required Supplementary Information.......................................................................................................................... 48 Schedule of Funding Progress ? Other Postemployment Benefit Plan ................................................................... 48 Schedule of Changes in Net Pension Liability......................................................................................................... 49 Schedule of Net Pension Liability ............................................................................................................................ 50 Schedules of Contributions...................................................................................................................................... 50 Schedule of Investment Returns ............................................................................................................................. 51 Notes to Required Supplementary Information ....................................................................................................... 52 Supporting Schedules ................................................................................................................................................. 53 Summary Schedule of Pension Plan Administrative and Other Expenses.............................................................. 53 Schedule of Invesment Expenses ........................................................................................................................... 54 Schedule of Payments for Professional Services.................................................................................................... 54 Detail of Changes in Plan Fiduciary Net Position (Pension and Other Postemployment Benefits)........................ 55

INVESTMENT SECTION ....................................................................................................................................... 57 Report on Investment Activity...................................................................................................................................... 58 Asset Allocation ....................................................................................................................................................... 59 Investment Results .................................................................................................................................................. 59 Largest Assets Held .................................................................................................................................................... 70 Schedule of Investment Fees...................................................................................................................................... 71 Schedule of Investment Commissions ........................................................................................................................ 72 Investment Summary .................................................................................................................................................. 73

ACTUARIAL SECTION.......................................................................................................................................... 75 Actuary's Certification.................................................................................................................................................. 76 Summary of Actuarial Assumptions & Methods .......................................................................................................... 79 Actuarial Valuation Data.............................................................................................................................................. 81 Prioritized Solvency Test............................................................................................................................................. 83 Analysis of System Experience ................................................................................................................................... 85 Summary of Plan Provisions ....................................................................................................................................... 86

STATISTICAL SECTION ....................................................................................................................................... 89 Schedules of Additions by Source............................................................................................................................... 91 Schedules of Deductions by Type............................................................................................................................... 92 Schedules of Changes in Fiduciary Net Position ........................................................................................................ 94 Schedules of Benefits and Refunds by Type .............................................................................................................. 96 Schedules of Retired Members by Type of Benefit ..................................................................................................... 97 Schedule of Funding Progress ? Pension Plan........................................................................................................... 99 Schedule of Other Postemployement Benefits.......................................................................................................... 100 Schedules of Average Benefit Payments .................................................................................................................. 101 Ten Year History of Membership .............................................................................................................................. 105

ACKNOWLEDGMENTS ...................................................................................................................................... 106

2 MICHIGAN STATE EMPLOYEES' RETIREMENT SYSTEM

INTRODUCTORY SECTION

Certificate of Achievement Public Pension Standards Award

Letter of Transmittal Retirement Board Members

Advisors and Consultants Organization Chart

MICHIGAN STATE EMPLOYEES' RETIREMENT SYSTEM 3

INTRODUCTORY SECTION

Certificate of Achievement

4 MICHIGAN STATE EMPLOYEES' RETIREMENT SYSTEM

Public Pension Standards Award

INTRODUCTORY SECTION

MICHIGAN STATE EMPLOYEES' RETIREMENT SYSTEM 5

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