Updated January 30, 2009
If you are concerned about the economic events of the past year, you are not alone. First and foremost, the understanding I hope you take away from reading this message is that your retirement benefits are secure!
In recent weeks, several investment schemes have come to light including Bernard Madoff, Roger Nadel, Tom Petters, etc. We are pleased to report that MPERS portfolio has no known direct or indirect exposure to any of these investment schemes. We work closely with our investment advisors to ensure a comprehensive due diligence process that begins before we make an investment commitment and continues through the life of the commitment.
Fortunately, you are among a small percentage of Americans whose retirement security is not directly affected by the current instability in the investment markets. The primary reason your benefits are not impacted is because you are a participant in a defined benefit plan. As a member of a defined benefit plan, your benefits are supported by your employer's legally binding commitment to contribute the dollars necessary to fund your benefits. MoDOT and the Missouri State Highway Patrol assume the current market and investment risk and are required by law to ensure that benefits are available to you during your retirement.
During your employment, the Missouri Department of Transportation and/or the Missouri State Highway Patrol contribute money on your behalf (a percentage of your salary) that is invested in order to pay current and future retirement benefits. The assets set aside to provide your retirement benefits are professionally managed and invested in a well-diversified global portfolio that has generated solid and consistent long-term investment results. Prior to the downturn in the market, our plan's investment performance ranked in the top 25 percent of all public pensions plans over the past one, three and five years. Rest assured, we have the cash required to pay benefits and have not had to sell significant assets at these depressed prices in order to pay benefits.
There will always be significant financial and/or historical events that will impact short- term performance of the financial markets. Just within the last 10 years, we have witnessed the collapse of technology stocks in 2000-2001, the collapse of Enron and WorldCom, the devastation of September 11, 2001 and other events. In reaction to these events, the financial markets dropped dramatically. It is during these times that opportunities are created to gain significant long-term returns. In fact, the drops in the market after these events were relatively short-term in nature, and over the long-term the markets recovered nicely.
Currently, many market participants are being forced to sell assets at any price in order to obtain the cash necessary to remain in operation. Public pension plans invest with a long-term perspective because pension costs can be spread over the working career of a public employee. As a long-term investor, we can look past these short-term event-driven market declines. Our plan can benefit by buying these assets at depressed prices and holding them until prices return to more "normal" levels. Market fluctuations will always exist, but overall the plan is healthy and will continue to process your retirement benefits promptly and accurately.
While recent events in the financial markets are causing anxiety and uncertainty, let me leave you with the reassurance that we are diligently monitoring the investments of the plan and will weather the market volatility as we have in the past. If you have questions about your benefits, we encourage you to call us anytime. We would appreciate you sharing this message with your fellow coworkers and retirees.
