Annual Reports

2018 Annual Report
Report from the CFO

During the fiscal year ended June 30, 2018, account balances exceeded $4.4 billion and benefit payments totaled $358 million. More than 14,300 retired YMCA employees and beneficiaries received monthly annuity payments equaling $262 million, lump sum payments totaled $88 million, and $8 million was paid out in death benefits. On the other side of the ledger, contributions and interest credited to account balances equalled $279 million and $195 million, respectively.

Administrative Cost Benchmarking

The Fund engaged Retirement Plan Analytics (RPA), a Charlotte, NC based consulting firm specializing in retirement plan management, to benchmark our administrative costs.

Unlike a single-employer 401K plan, we do not have any peers providing the same line up of benefits. Protecting account balances from declining in value as a result of market fluctuations, providing a retirement benefit in the form of an annuity that is superior to those found in the market-place and providing a death and disability benefit are not common features in today’s retirement plans.

Further complicating the analysis was our multiple-employer plan status. The Fund supports two plans for each participating employer and a number of plans where the employer no longer exists. A census indicated that there are 1,766 plans and approximately 800 sponsoring employers. These plans vary in the number of participants and the value of the underlying assets.

The largest plans have between 1,000 and 2,500 participants with an average asset value of $52 million, and the smallest have just one participant and average asset value of $59 thousand. The disparity in size required a detailed analysis of the average cost across a range of pension program sizes. In addition, we delivered monthly retirement benefits to more than 14,300 retired YMCA employees and beneficiaries. In conclusion, RPA advised that our administrative costs are within a reasonable range given the complexity of the retirement program.

Actuarial Valuation

As a pension fund, the actuarial estimate of future liabilities is a critical component of our financial statements. The Fund’s actuary, Conduent, completed its detailed review of our participants’ account balances, obligations to retirees and the death and disability benefits. They determined that the value of our liabilities was $7,417 million at June 30, 2018.

The complete Annual Report of the Actuary is available here.

Operating Costs

All operating expenses at the Fund are classified as either “controllable costs” or “non-controllable costs.” Expenses that are considered controllable costs include expenses to operate the plans and support the internal investment team. Non-controllable costs are investment management fees paid directly from the Fund and reported on our financial statements as part of investment expense.

Investment management fees are typically charged as a percentage of the market value of the assets allocated to a specific investment manager. As the market value of the assets grows, the fee in dollars will also grow, but the fee as a percentage of assets will typically remain the same.

Generally, fees related to investments in alternative assets and pooled accounts are deducted from the asset values under management and reported as realized or unrealized losses. As the portfolio allocation to these types of investments has increased over time, the cost to invest our portfolio has shifted from non-controllable costs to realized or unrealized losses. The Fund reports investment returns net of all management fees and internal investment costs.

Many organizations measure their operating cost relative to the value of their assets under management (AUM). In fiscal year 2018 our average AUM increased to $6.9B from $6.2B.

RELATIVE OPERATING COSTS MEASURED IN BASIS POINTS

  2018  2017  2016  2015  2014 
Administrative Expenses 33 36 37 33 34
Investment Expenses
36 38 38 38 36
   Total 69 74 75 71 70

         
Controllable Expenses
47 51 53 46 47
Non-Controllable Expenses 22 23 22 25 23
   Total 69 74 75 71 70
Average AUM $6.9B  $6.2B  $5.9B  $6.1B  $5.7B

Despite the challenges of providing superior service and security to our participants, we managed to end the year with costs slightly under budget. In dollar terms our total cost was 5.2% higher than the previous year, and in relative terms, total cost dropped from 74 to 69 basis points.

KPMG, the Fund’s auditors, concluded their work on July 31. Their opinion, along with the Fund’s financial statements and footnotes, is available here.