Study of retirement and emeritus pay systems

STATE OF GEORGIA
Study of Retirement and Emeritus Pay Systems
for The Governor's Commission for
Efficiency and Improvement in Government
BOWLES & TILLINGHAST, Inc.


8111 PEACHTREE 8TREET. N. E. ATLANTA. GEORGIA 30308 TEl.. 87311328. AREA .0.

BOWLES & T .[c:.:..LINGHAST, Inc.
Actuaries Employee Benefit Plan Consultants

Atlanta, Georgia 30308
September 15, 1965

LTV TOWER DALLAS, TEXAS 711201 TEL. 7.8.0.01, AREA 21.

Mr. William R. Bowdoin, Chairman
Governor's Commission for Efficiency and Improvement in Government
351 State Capitol
Atlanta, Georgia 30303
Dear Sir:
The attached study of the several retirement and emeritus payment systems supported by State contributions is submitted pursuant to the
agreement for services described in our letter dated September 7, 1963, and your letter of acceptance dated September 24, 1963.
Members of our staff are available to meet with the Commission, Legislature or other interested groups.
Yours truly,
BOWLES & TILLINGHAST, INC
~ ~. By.:
TPBjr:bj

STATE OF GEORGIA Study of
Retirement and Emeritus Pay Systems for
The Governor's Comm ission for Effie ieney and Improvement in Government
September 15, 1965
BOWLES & TILLINGHAST, Inc

Section 2
3
40
5 6
7

TABLE OF CONTENTS
Description
Introduction and Outl ine of Study
Summary of Conclusions and Recommendations
Review of iJrovisions of All Systems General Comparison of Benefits for New Members Review of Each System Addendum-Maintaining Purchasing Power of Retirement Income
Organization and Administration Teachers' Retirement System Employees' Retirement System Peace Officers' Annuity and Benefit Fund Firemen's Pension Fund Sheriffs' Retirement Fund Ordinaries' Retirement Fund Superior Court Clerks' Retirement Fund Expense Administration Conclusions and Recommendations
Review of Actuarial Methods and Procedures General Observations and Comments Conclusions and Recommendations
Investments General Investment Objectives Investment Problems Review of Each System Conclusions and Recommendations
Review of Emeritus Pay Systems General Supreme Court Emeritus Offices Court of Appeals Emeritus Offices Superior Court Reporter Emeritus Constitutional Officers Emeritus Conclusions and Recommendations

BOWLES & TILLINGHAST, In,.

Page
1-1
2-1
3-1 3-1 3-1 3-1
3-30
4-1 4-6 4-8 4-10 4-12 4-14 4-16 4-18 4-20 4-23
5-1 5-1 5-1 5-3
6-1 6-1 6-1 6-2 6-5
6-7

SlEeTION 1 INTRODUCTION AND OUTLINE OF STUDY

1- 1

Each year the State Government of Georgia contributes approximately $27, ODD, 000 directly and
indirectly, into retirement systems to pay a part of the cost of benefits for the members of these systems. In addition, the State makes employer contributions to Federal Social Security of approxi-
mately $3,800,000. The members of these retirement systems make total annual contributions which are in excess of $16,000,000 in accordance with the provisions of the various retirement systems
(exclusive of their Federal Social Security contributions). Furthermore, the full cost of certain of the retirement plans is not being fully met and the actual increase in liability which accrues each year is in excess of the amounts contributed plus investment earnings. The total assets held in trust
under these retirement systems is about $359, ODD, 000. Responsible fiscal management requires that
expenditures of this magnitude be examined carefully to assure that the various systems are being administered in the most efficient manner possible and that the basic structure of the retirement systems is sound. This is, then, a logical area for study by the Governor's Commission for Efficiency and Improvement in Government.

On August 8, 1963, the Commission invited consultants to submit information relative to a study
for the Commission of the several retirement and emeritus pay systems to which the State contributes. The Commission requested information regarding the personnel that would conduct the study on behalf of each consulting firm and the amount of fee for the study. On the basis of the repl ies to this invitation, Bowles & Tillinghast, Inc. was selected to conduct the study for the Commission.

The specifications for the study were attached to the Commission's letter dated August 8, 1963.

The following retirement and emeritus pay systems were included:

Year

Constitutional and

Name of Fund or System

Establ ished

Statutory Citations

Teachers' Retirement System

1943

BOWLES & TILLINGHAST, Ine.

Ga. Laws, 1943, pp. 64, 640 1945, p. 454 1947, pp. 872, 1155, 1494 1949, pp. 1183, 1197, 1505 1950, pp. 32, 261 1951, p. 281 1952, p. 254 1953, pp. 114, 341, 390, 470, 394 1957, pp. 8,118, 462, 508 1960, pp. 1116, 935 1961, pp. 352, 388, 392 1964, pp. 219, 669 1965, p:::lge numbers
unknown

Name of Fund or System Employees' Retirement System
Peace Officers' Annuity and Benefit Fund
Georgia Firemen's Pension Fund Sheriffs' Retirement Fund Ordinaries' Retirement Fund Superior Court Clerks I Retirement Fund

Year Establ ished
1949
1950
1955 1963 1958 1952

1-2
Constitutional and Statutory Citations
Constitution, Article 14, Section 1
Ga. Laws, 1949, pp. 138, 1159 1950, p. 416 '1951, p. 394 '1952, p. 175 1953, pp. 160, 349 1956, p. 54 1957, p. 283 1960, p. 1020 196 1, pp. 112, 143 158, 10 1 1964, pp. 115, 158 237 1965, page numbers unknown
Go. Laws, 1950, p. 50 1951, pp. 81, 472 1952, p. 81 1953, p. 574 1954, p. 488 1955, p. 387 1956, pp. 314, 280 1958, p. 341 1959, p. 330 1965, page numbers
unknown
Ga. Laws, 1955, p. 339 1956, p. 368 1957, p. 373 1960, p. 991 1961, p. 417
Ga. Laws, 1963, p. 630
Ga. Laws, 1958, p. 185 1959, pp. 354, 355 1961, pp. 57, 58, 59, 60
Ga. Laws, 1952, p. 238 November-December Session,
1953, p. 332 1964, pp. 202, 407

BOWLES & TILLINGHAST, In,

1-3

Name of Fund or System

Year Established

Constitutional and Statutory Citations

Superior Court Judges' Retirement Fund

1945

Ga. Laws, 1945, p. 362

1946, p. 228

1950, pp. 283, 341

1952, p. 293

1955, p. 152

1956, p. 380

Novembe r-December Sess ion,

1953, p. 108

1964, pp. 303, 198

720

1965, page numbers

unknown

Sol icitors General Retirement Fund

1949

Ga. Laws, 1949, p. 780

1950, p. 228

1953, p. 211

1958, p. 163

1961, p. 226

1964, pp. 214, 366

758

1965, page numbers

unknown

Special Legislation Establishing Emeritus Positions for Constitutional Officers

1957

Ga. Laws, 1957, p. 206 1963, p. 602 1964, p. 683

Special Legislation Establishing Emeritus Positions for Court of Appeals Judges

1943

Ga. Laws, 1943, p, 677

1964, p. 239

Special Legislation Establishing Emeritus Positions for Supreme Court Judges

1937

Ga. Laws, 1937, p. 110 1

1949, p. 1294

1952, p. 260

1953, p. 137

1964, p. 240

Joint Municipal Employees' Retirement System

1965

Ga. Laws, 1965, p. 428

The pertinent portion of the specifications is set forth below:

"The Commission desires that the study of these retirement pions encompass the following items, with emphasis in substantially the sequence of listings:

a. A detailed analysis of the organization for administering each plan with a report upon the weaknesses and strength of the arrangements, alternatives which would be possible with no change in financing and benefit patterns, and the most advantageous alternatives which might be implemented if financing and benefits could

BOWLES & TILLINGHAST, Inc

1-4
be revised in t~e most suitable manner. Priorities as between alternatives should be indi cated and jusfified, A specific analysis of the feasibil ity of centralized administration of several or all plans is to be provided.
b. A detailed analysis of the procedural and accounting systems for each plan with a report on the weaknesses and strengths of the systems employed and with desirable al ternatives under the same condil'lons as under II a" above. Specific attention should be directed to the possibil ities of fund consol idation with retention of accounting segregcHon as necessary/ mechanization of data processing and recording, improved accounting induding intemal control if problems are foulid f improved records management, and generally increased efficiency and economy in administration of the plans.
c. A detailed report upon comparative costs of different alternatives with due consideration to problems of space, equiprre nt / personnel and related problems associated wi th implementation of the favored arrangements.
d. A summary/comparative analysis of the benefit provisions of the plans with special emphasis on differences which might add unduly to administrative costs or difficulties under the proposals, provisions which are unnecessarily costly, provisions which are unrealistic in terms of State policy and customary pension provisions, provisions which are outmoded and other qL!estionable policies.
e. Exploration and explanation of the possibilities for providing various services in regard to their pension plans to Georgia local governments, including such services as administrative counsel ing, actual administration, investment counsel ing, and actual investment on a reimbursable and voluntary basis.
f. IdentificaHon (but not intensive analysis) of pJans which obviously are not actuarially sound with explanation of the determination; identification of plans which appear of doubtful soundness. (While the Commission does not expect to make actuarial studies of these plans, this information would be used in reporting to the Governor and the Legislature on the need, if any/ for detailed actuarial studies.)
g. Identification of sound and weak investment programs and a general outl ine of guideposts for strengthening weaker investment programs.
h. Determination and explanation of changes needed in existing legislation to implement the consultant1s proposals in regard to each retirement plan and for all plans as a group/ including information as to the nature of the changes needed with an index to the appropriate section of the present statutes."
To a certain extent, this report goes beyond the specifications. During the study, it became obvious that the major area for economy and savings was in the proper coordination of retirement benefits and in the el imination of excessive benefits. Also, extensive inequities were found to exist. Consequently, more than the required emphasis was placed on these aspects of the study. On the other hand, no attempt was made to estimate the savings resulting from minor changes in administrative practices or procedures inasmuch as the total possible savings from these sources were
BOWLES & TILLINGHAST, In'.

1-5 insignificant compared to the possible savings from other areas. The staff of the Commission concurs with the emphasis given in the report to the more important areas. The format of the report is set forth in the Table of Contents which precedes this section, The study could not have been completed had it not been for the complete cooperation of the administrators of each retirement system. Acknowledgement of the val uable and prompt assistance of the staff of the Commission in the collection of data and the clarification of ambiguities is also appropriate. The initial report of the study was submitted to the Commission on March 2, 1964. Subsequently, Bowles & Tillinghast, Inc. was requested to review pension legislation enacted during the 1964 and 1965 sessions of the General Assembly and to modify the initial report in accordance with the new statutes. In addition, since factual informaHon and statistical data concerning each of lhe systems were initially secured in the late fall of 1963, up-to-date information was obtained frorn the administrator of each system during April, 1965 for the purpose of making this revised report as current as possible.
BOWLES & TILLINGHAST, Inc

2-1

S Eel !lOIN! 2
SUMMARY OF CONCLUSIONS AND RECOMMENDATiONS

The specifications for this study, see Section 1, limit its scope to a review of certain emeritus pay and retirement systems to which the State of Georgia contributes. Consequently, this report is concerned primarily with retirement benefits, A retirement benefit satisfies an economic need which arises at an advanced age and, thus, is a deferred need, whereas there are other needs, such as provision for income replacement in case of death or disability, which may be classified as immediate in nature. These immediate needs actually may be of more concem to the employees of the State than the deferred needso It is important to retain this perspective when considering any element of an employee benefit program.

A sound total employee benefit program requires that there by:

1.

Consistency in the level of those various employee benefits, including current

basic compensation, wh ich have been designed to cover the specific economic

needs of the employees,

2.

Reasonable adequacy of benefits, and

3.

Proper coordination or integration of benefits.

Statistics publ ished by the Social Security Administration indicate that over 70% of the employees of the State and local governments in Georgia are covered by Social Security. Inasmuch as Social Security is a retirement, disability, medical care, and survivors' benefit program to which contributions are made by the State and local governments as employers, it is essential that the benefits provided thereunder be considered as part of the package of benefits available to employees.

In addition to contributions by employee members of the various systems the State also makes contributions either directly to the systems from general revenues or indirectly through fines and bond forfeitures, marriage license fees and from special taxes.

The principal conclusions and recommendation of this study are summarized below:

1.

Benefit Structure. The benefit provisions of the nine retirement systems for which a

;-etr;:-eme~tTu~dis maintained are widely varied and inconsistent. The benefits to yJ, ich

a new employee member is entitled depend largely upon his classification of employ-

ment thereby c,reating inequities.

2.

~~.!..~.!!~~~f ~~I:..ersh'!'p, There is little coordination among the retirement systems

and many empToyees are covered by more than one retirement system! in addition to

Social Security,

3.

Eligibility. Membership is extended to State employees, certain county and municipal

emPloyees, and to certain individuals who receive no compensation from either the

State or local government.

BOWLES & TILLINGHAST, In'

2-2
4. Office Administration. In general, the office administration and procedures of each of the-;'etfre~e;;tsy~;rm~reefficient. Economy could be achieved in this area if the basic benefit structure of the systems were modified and/or if the administration of the systems were consol idated.
5. Communications. Personnel relations could be significantly improved with the use of d~c;rptrvel"fteraturewhich would effectively illustrate benefits. Also, pre-retirement counselling would result in greater appreciation of the programs.
6. Investments.
a. The various systems have widely different investment philosophy.
b. The accounting procedures do not readily parmit an accurate determination of the investment return on each fund.
c. Professional investment advice should be used to a greater extent.
This study did not include an appraisal of the individual investments held by the various systems; however, a continuing effort should be made to increase the yield of the funds consistent with the principles of safety and liquidity.
The funds of all systems should be consol idated for investment purp':>ses with individual accounting of the interest of the various systems.
7. Actuarial and Financial. The principal retirement systems, covering about 79, 000 mem-
b;:;:-;;';beirlgf~nd;dpursuantto acceptable actuarial principles and procedures. About
3,500 members are covered by systems which are only partially so funded and 117 individuals are in systems which are not being funded. Thus, the major portion of the State's liability under existing retirement systems is appropriately recognized with contributions required thereby being made.
8. ~~~.!.!~:"'~.i'...?.t:!=.'!!.:.. The existing emeritus p':Jy systems are essentially non-contributory, unfunded retirement plans. The action taken by the 1964 General Assembly to abolish such systems for all future p.::Jrticipants with the exception of Superior Court Reporter Emeritus is commendable. It is recommended that the remaining system also be abol ished.
9. Consol idated Retirement System. It is probable that the Attorney General and courts wo~d-;~ethatp;-es;nt~e~be;.~of the retirement systems are entitled to the benefits described therein regardless of what changes might be made in the law with respect to new members. Since much of the difficulty with the retirement structure in the State of Georgia is caused by the lack of coordination of membership and benefits among the several systems, it is recommended that the State clearly identify all groups of employees to whom it has an obi igation to provide retirement benefits and to cover all such employees in a single consol idated retirement system. It is quite Iikely that members of several
BOWLES & TILLINGHAST, Inc

2-3
of the existing retirement systems would elect to become members of the Consol idated Retirement System if such new system provides greater benefits or a more complete program. 10. Legislative Screening. It is imperative that retirement legislation be screened before i'ireachestheTegTsTcitive bodies for final action. This could be accomplished by a joint committee of the House and Senate which should be authorized to retain actuarial and employee benefit plan counsel to assist in the appraisal of the proposed legislation both as to its merits and as to the cost to the State of the legislation. A written report of this appraisal should be made available to the legislators prior to action. Failure to implement effective procedures in this area will lead to the ultimate degeneration of whatever improvements might be accompl ished as a result of this study. 11. Service to Local Governments. At present, inconsistency and inequity exist in the rei1rerrie;:;-t-benents~;aikJbre-to~mployeeosf local governments of the State. Some employees have no coverage for disabi Iity or retirement, some are covered by Social Security only, whereas others are covered under as many as three retirement systems plus Social Security. Various means of providing assistance to local governments are discussed in Section 9. The ideal solution to this problem would be to extend the Consolidated Retirement System to cover employees of local governments under a plan whereby the local government would pay a major portion of the employer cost and the State would pay a small part of the employer cost to provide financial incentive for local governments to elect to cover their employees in this manner. In conclusion, it is recommended that the State clearly define the employees to whom the State has an obligation to provide retirement benefits and then to proceed with the establishment of a single retirement system to cover all such employees and possibly to include the employees of local governments throughout the State. Existing inequities in benefit structures create compell ing reasons for action.
BOWLES & TILLINGHAST, Inc.

3-1
SIEClr II (Q)lNJ ~
REVIEW OF PROVISIONS OF ALL SYSTEMS
A. General
A review was made of the plan provisions under each of the nine retirement systems for which a retirement fund is maintained. A summary of the significant plan provisions as they apply to new members is shown on the chart on pages 3-6, 3-7 and 3-8 to facil itate a comparison of the systems. A detailed resume' of each of the systems is shown in the Appendix. In this section a comparison of the provisions of all systems is made. In addition, each system is discussed separately.
B. Comparison of Benefits for New Members
The major differences between the systems with respect to plan provisions for new members are discussed in the following paragraphs. It is suggested that frequent reference be made to the chart in studying this portion of the report. Comments pertinent to a comparative analysis of the existing systems are as follows:
1. ~1i~~i.li.!Y_~~.!.2~.i.:.!e.~!?!!' The Teachers' Retirement System and the Employees' Retirement System provide compulsory membership for individuals coming within the definition of eligibility under each. The remaining seven plans provide for optional participation by the individuals who meet the eligibility definition within each plan. With the exception of the Firemen's Pension Fund, eligibility is limited to only those who are employed on a full-time basis and, in this respect, the systems are generally consistent.
2. Credited Service. Service for which credit is given for the purpose of determining bEffientsu~dere~chsystem is reasonably uniform in that service for new members is generally limited to those years for which contributions have been made {all systems require employee contributions}. However, the Teachers' Retirement System, Employees' Retirement System, Peace Officers' Annuity and Benefit Fund, Sheriffs' Retirement Fund and Superior Court Judges' Retirement Fund provide credit for service in the Armed Forces of from one to an unl imited number M years with no contributions required. The Solicitors' General Retirement Fund provides credit for service in the Armed Forces during one of the national emergencies if maximum contributions ar~ made. Also, the Superior Court Judges' and Solicitors' General Retirement Funds allow credit for service in positions other than as Superior Court judge and solicitor general, respectively, for which member contributions are not required.
3. Compensation Base for Determination of Benefits. Six of the nine retirement systems ~TQt;~ither~-po7tToo-or~TI-r~t1~m~;:;n;e~efTts to the employees' compensation. The Peace Officers', Firemen's and Sheriffs' retirement systems all provide a fixed dollar amount of monthly benefits and, accordingly, the individual's earnings level is not a consideration in the determination of retirement benefits.
BOWLES & TILLINGHAST, Ino.

3-2
Of those plans which provide benefits related to compensation, there is no consistency with respect to the earnings used for benefit determination. The Teachers' and Employees' Retirement Systems use the average of the highest five consecutive years of earnings, irrespective of when this may occur during the participant's employment. Under the Ordinaries' Retirement Fund the average of earnings during the ordinary's career is used, whereas, under the Superior Court Clerks' Retirement Fund the average of the final four years earnings is used. Superior Court Judges' and Solicitors' General plans base benefits on the compensation received in the year immediately preceding retirement. Of all systems, the Superior Court Clerks' final four year average earnings is the closest to what is generally considered good pension design for determination of benefits. The remaining eight systems need modification in this regard, both from the standpoint of attaining uniformity and, also, to be in keeping with sound pension design principles.
4. Norma I Retirement Date. As is the case with most other provisions, there is no unif07mpatt~nbetweenthevarious systems with respect to the date on which a member can retire with full normal retirement benefits. The Ordinaries' Retirement Fund uses age 65 as a normal retirement date while the Teachers' Retirement System uses age 65. The Employees' Retirement System provides for normal retirement dates of agt:: 65 or age 60 with thirty-five years of service. The remainder of the systems either have no specified age on which normal retirement will occur or use age 55 or 60 and a specified number of years of credited service. The Teachers' Retirement System provides for a compulsory retirement age at 70 with additional provisions for extended participation under certain situations.
Since the cost of providing retirement benefits is greatly influenced by the age at which benefits commence, the appropriateness of the current retirement age should be reappraised for all systems having a retirement age of less than 65.
5. Normal Retirement Benefit. There is a wide divergence between the systems as to b~hth~-;mo-;:;nt-or~o;:maTretirement benefit and the manner in which it is determined. None of the systems gives proper recognition to other sources of retirement income provided for a member through Social Security and other plans available to eligible employees.
The Teachers' has a minimum monthly benefit and all systems have a maximum monthly benefit except the Superior Court Judges' system.
With respect to new employees, all plans either have a fixed dollar benefit amount or a benefit based on a definitely determinable percentage of some compensation as defined under the plan.
There is a great need for a revision in many of the normal retirement benefit formulas for the purpose of providing uniformity for the various groups of individuals covered under the separate plans. In addition, the availability of other retirement income should be considered in determining the appropriateness of the existing benefit levels. This aspect is discussed with respect to each system in greater detail in the follow ing section.
BOWLES & TILLINGHAST, In<

3-3
6. Early Retirement Date. Three of the systems have no provision for early retirement wTIhthe-remafiifngslX having as many different age and service requirements as there are plans. The Peace Officers' system provides an early retirement benefit at age 55 and twenty years of service which is perhaps the most frequently found requirement in retirement plans today. The Teachers' plan has two combinations of attained age and service requirements which is the next most frequently found provision.
7. Early Retirement Benefit. Some of the systems provide for commencement of the ecrrry-ret"iremenn'E;ne"fTt-immediately upon the early retirement date, whereas, others defer payment of the benefit to an older age. The Teachers' system determines the amount of early retirement benefit by applying a reduction factor of 1/4 of 1% for each month that retirement precedes age 65. Th is factor produces a more liberal benefit than would result if actuarial equivalent factors were used. Under the Employees' system a reduction factor of 5/12 of 1% for each month that retirement precedes age 65 is used. Such factor produces a benefit approximately equal to an actuarial equivalent benefit. The remainder of the systems having an early retirement benefit pay either a stipulated dollar amount or the accrued benefit deferred to an older age such as 60.
8. Q~~~~!y_~.!.i.!.~~~!..Q~t~. There is no uniform pattern with respect to the requirements as to service or age with regard to qualification for disability benefits under those systems having a disabil ity provision. Of the nine systems, two have no disability benefits with the remainder of the systems having either benefits available upon disability, irrespective of cause, or one which is limited to disabilities occurring in "I ine of duty". Several of the plans should be revised for the purpose of tightening the requirements for granting disability benefits. This includes providing a definition of total and permanent disability and lengthening the service requirements before disability benefits are available.
9. Disqbil ity Retirement Benefit. Those plans which provide disabil ity benefits geneiCnyanowtlie-normalretTrement benefit which has accrued as of the date of disability. Since there is a considerable variance in the basis for determining normal retirement benefits, the disability benefit lacks the consistency between plans which is desirable.
10. 9E!..!~~.l.~=.t.!!~~~~!~t~e.!'.!.s..:.Only four of the systems permit a member to elect a benefit form other than the normal retirement form provided. These are the Teachers' Retirement System, Employees' Retirement System, Peace Officers' Annuity and Benefit Fund and Superior Court Clerks' Retirement Fund. Theform of options available is limited under each of the four systems with the greatest Iimitation under the Peace Officers' and the Superior Court Clerks' which provide only a joint life annuity as an optional form of payment. If properly administered, allowing optional benefits is a very desirable feature since it provides flexibility without adversely affecting costs.
BOWLES & TILLINGHAST, In'.

3-4
11. Death Benefits. All systems with the exception of the Peace Officers' provide for th~-;:;t~;:;'-cl~mployee contributions without interest in the event of death before retirement. The Peace Officers' has a spec ial lump sum benefit which is in no way related to service or length of membership under the program and is payable in lieu of return of contributions. The Teachers' and Employees' provide additional death benefits based on the benefit payable for disability after completion of approximately fifteen years of service. Also, the Employees' system, through the State Employees' Assurance Department, pays a lump sum benefit to the beneficiaries of all participants upon death, ranging from one to one and one-half year's salary for most participants. The Superior Court Clerks' provides a death benefit to spouses after eligibil ity requirements for normal retirement have been met, which is a lifetime income to the spouse equal to one-third of the normal benefit. Death benefits provided after retirement under the Teachers' and Employees' systems are in accordance with the optional form of benefit payment elected by the member. The other systems provide for the return of contributions less benefit received as of the date of death.
12. Termination of Employment Benefits. Five of the systems provide for return of the emPToyeecontrfb;7tToriswTthoCtinterest upon termination of employment. The Peace Officers' and the Firemen's return only 95% of members' contributions. Both the Teachers and Employees' Retirement Systems provide for the return of contributions without interest for less than five years of service with partial to full interest being returned on the contributions for terminations beyond five years of service. Both the Teachers' and Employees' systems also provide that, after twenty and eighteen years of service, respectively, the employee may leave the contributions in the fund and rece ive an accrued benefit commencing at age 60.
13. Employee Contributions. There is a consistent relationship within each system as h>-th;m-;;th~d~fd~;rmTningretirement benefits and the method of determining member contributions. That is to say, the three plans having a fixed dollar retirement benefit provide for a fixed dollar amount for contributions. The remaining plans which base contributions on earnings provide for employee contributions based on earnings, also. However, participants under a few of the systems provide a lesser portion of benefits through their own contributions than do participants under other systems.
Some of the systems provide for employee contributions through payroll deductions, whereas, others rely upon the employee to remit his monthly contributions to the administrator of the system. As discussed elsewhere in the report, all the systems should provide for payroll deductions to the extent possible.
14. State Contributions. Under the Superior Court Judges' and the Solicitors' General Retfi;mentF;7,;ci'sthere are no State contributions prior to the individual's qual ification for benefit payments. The benefits are treated as salary by the State under both of these systems with the employee contributions applied as an offset to the retirement "salary". Contributions to the Teachers' and the Employees' Retirement Systems are in the form of amounts appropriated by the Legislature, whereas, contributions for the remaining five systems are in the form of either fines and bond forfeitures or special taxes levied on fire insurance companies (the Firemen's Pension Fund is supported through taxation of fire companies).
BOWLES & TILLINGHAST, Ine.

3-5 Although it may be argued that the State makes no contributions to those which are supported through fines and bond forfeitures, such source of revenue should be recognized as indirect State contributions. Conclusions The retirement systems within the State are not consistent, are lacking in coordination, and in a number of instances, have been developed with inadequate consideration of the basic principles of pension plan design. When all separate retirement systems are considered as a single retirement program, the overall result is highly inequitable and unduly costly.
BOWLES & TILLINGHAST, In<.

3-6

COMPARISON OF PRESENT PLAN PROVISIONS

Teachers' Retirement System
Employees' Retirement System

(1) Effective Date of
Plan

(2) Number of
Active Employees

(3) _Eligibility
and Participation

(4)
Credited Service

1943

49,020

All full-time teachers, clerical workers, school supervisors, librarians employed by State Board, registrars of University System, etc. Membership is compulsory.

Years of service for which contributions have been made. Up to five years service in Armed Forces and up to ten years outof-state service under certain conditions.

1949

23,620

A II regu larly emp loyed persons of State and its departments, bureaus, boards and counties, as defined in the act, which are operating under a Merit System of persol)ne I administration and who are not under the Teachers' system. Membership is compulsory.

Years of service for which contributions hove been made plus up to five years service in Armed Forces.

(5) Compensotion
Base for Benefits
Average of highest five consecutive years.
Average of highest five consecutive years.

(6) Normal Retirement
Date
Age 65. (Note: Effe tive 7/1/6".fiObe Ie'wered to age 63 prov ed Board increases minimum for those r tiring prior to 7/1/6.
Age 65 or age 60 with thirty-five years of serv ice.

Peace Officers' Annuity and Benefit Fund

1950

2,794

All full-time peace officers, wardens and guards of State, county and work camps of large municipolities. Membership is optional.

Years of service for which contributions have been made plus up to five years service in Armed Forces.

Not opplicable.

Age 60 and twentyfive years service.

Firemen's Pension Fund
Sheriffs' Retirement Fund
Ordinaries Retirement Fund

1955 1963 1958

2,437 142 92

All full-time employees of State, municipality or class "8" fire departments and volunteer firemen of publ ic financed volunteer departments. Membership is optional.

Years of service for which contributions have been made.

Not applicable.

Age 60 and twentyfive years service.

A II sheriffs of a county of the State. Membership is optional.
A II ordinaries. Membership is optional.

Years of service for which contributions have been made plus up to four years in Armed Forces and four as other peace officer.
Years of service for which contributions have been made.

Not applicable.
,I
II Average of earnings during credited service not , to exceed $1,000
monthly.

I Age 60 and four years service since December 31, 1960, for which contributions have been made.
Age 65 and four years service.

Superior Court Clerks' Retirement Fund

1952

105

All clerks of the Superior Courts Years of service for which con-

Average of final

Age 55 and twenty

of the State. Membership is op- tributions have been made.

four years.

years service.

tiona I.

Superior Court Judges' Retirement Fund

1945

55

A II judges of the Superior Courts Serv ice as judge of the Supreme

Average earnings At option of member

of the State. Membership is op- Court plus service as solicitor

in the year imme- upon completion of

tional.

general, judge, solicitor of city diate Iy preceding eighteen years serv-

or county court or member of

retirement.

ice of which at least

General Assembly or Armed

one full term or its

Forces.

equivalent was

served as Superior

Court Judge.

Sol ic itors' General Retirement Fund

1949

32

All solicitors general of the State. Years of service for which con-

Average earnings At option of member

Membership is optional.

tributions have been made inc lud- in the year imme- after nineteen years

ing creditable service in Armed

diately preceding service.

Forces plus service as assistant

retirement.

solicitor general or solicitor of

a city court.

Teachers' Retirement System

(7) Normal Retirement Benefit

(8) Early Retirement Date

(9) Early Retirement Benefit

(10) Disability Retirement
Date

A monthly lifetime benefit equa I to 1-3/4% of average monthly compensation times creditable service not to exceed forty years. Minimum benefit of $100 for those with thirty-five yeers of service. Proportionate minimum for those with less than thirty-five years of service.

Age 60 and ten years service or age 55 with thirtyfive yeers service.

Accrued benefit reduced 1/4% for each month retirement precedes oge 65.

Fifteen years of service or age 60 and ten years service.

(11) Disability Retirement
Benefit
Ace rued norma I retirement benefit.

3-7
(12) Optional Retirement Payments
a) Return of excess of contributions, accumulated with interest over annuity benefits received. b) 100% or 50% joint and survivor. c) Any approved actuariallyequivalent benefit.

Employees' Retirement System

A monthly lifetime benefit determined in occordance with Benefit Accrual Table. Set of factors used for first $350 of average earn ings. Higher set used for portion of overage earnings in excess of $350.

1) Upon comp letion of five years membership and attainment of age 60, or 2) Completion of thirty years membersbip.

Normal benefit reduced 5/12% for each month retirement precedes age 65.

Th irteen years, three months service.

At Age 60 or Over: G-;:-';;t;;~oT;;;-;~;;;f retirement benefit or projected benefit to age 65. Under Age 60:
Eith-;'-;:-75%-o-;:- 100%
of normol retirement benefit depending upon years of serv ice

0) Return of excess of contributions, accumuloted with interest over benefits received. b) 100% or 50%
ioint and surv ivor.
c) Any opproved octuoriollyequivolent benefit.

Peace Officers' A month Iy Iifetime benefit Annuity and of $125. Benefit Fund

Age 55 and twenty years of serv ice.

$100 monthly lifetime benefit.

No age or serv ice requirement if disability is in "line of duty" Otherwise, none ava ilable.

$100 monthly lifetime benefit.

100% ond 50% joint life annuity.

Firemen's Pension Fund
Sheriffs' Retirement Fund
Ordinaries' Retirement Fund

A monthly lifetime benefit of $72.

Twenty-five years of service.

Deferred benefit beginning at oge 60.

A month Iy Iifetime benefit equal to $40 plus $10 far each year af service over four. $200 maximum monthly benefit.

None available.

None available.

For" Iine of duty" disability, six months after in jury. For heart and respiratory disabilities, five consecutive years of service required.

Normal retirement benefit (S72 monthly lifetime benefit).

None availoble.

None available.

None available.

iI None available.

A monthly lifetime benefit equal to 10% of average monthly compensation plus 2-1/2% of average monthly compensation for each year of credited service over four, but not over twenty.

Four years of service.

Deferred norma I retirement benefit beginning at age 65.

None available.

None ava i lab Ie .

I None available.

Superior Court Clerks' Retirement Fund

A monthly Iifetime benefit equal to the lesser of $240 or 66-2/3% af average compensation.

None available.

None ovoilable.

Sixteen years of service.

Normal retirement benefit.

Two-thirds of normal retirement benefit with 50% of normal benefit continuing to spouse upon death of retired port ic ipant.

Superior Court Judges' Retirement Fund

A monthly lifetime benefit equal to 66-2/3% of compensation received in year immediately prior to retirement.

Age 68 and completion of nine years of serv ice.

50% of salary.

Age 62 and ten years service or age
72 with two consecutive terms of service (e ight years).

50% of sa lory.

None avoilable.

Sol icitors' General Retirement Fund

A monthly lifetime benefit equol to 66-2/3% of monthly compensotion received in year immediately prior to retirement. $500 maximum

None available.

None available.

Upon becoming unable to perform duties due to ill health, member with seventeen years service

Normal retirement benefit.

None available.

monthly benefit.

may retire.

_ _ _ _ _---ll--

.

.

_J_

~

'__

.1.-

_

3-8
Teachers' Retirement System
Employees' Retirement System

(13) Death Benefits
Before Retirement

(14) Death Benefits
After Retirement

For less than fifteen None, except in years service or age 60 accordance with with ten years service, option elected. return of contributions with interest according to termination scale. Otherwise, a disability retirement with 100% joint and survivor is assumed.

For less than thirteen years, th ree months service, return of contributions with interest according to termination sca Ie. Otherwise, a disability retirement with 100% joint and survivor is assumed.

None, except in accordance with option elected.

(15) Additional Death Benefits for Survivors
None.

(16) Term ination of Employment
Benefits

(17)
Employee Contributions

Return of contributions without interest with less than five years service, full interest after fifteen. After twenty, may leave contributions in for accrued benefit at age 60.

6% of pay.

(18)
State Contributions
State contributes 8.29% of salaries minus "chargeback" Local employer contributes 8.29% of salaries it pays plus 8.29% of "chargeback" .

For employment before Return of contribu-

age 51, benefit equal tions without interest

to annua I sa lary far for less than five

first five years. There years service, 3/4

after, increasing 1/2 interest for less than

month per year of serv- fifteen and full in-

ice with maximum 1- terest with more than

1/2 times annual sal- fifteen. After eigh-

ary. No increases

teen, may leave

after age 51 . Other- contributions in for

wise, lower multiple accrued benefit at

of salary.

age 60.

3% of first $4,200 51% of first $4,200

of annual earnings of annual earnings

and 5% excess plus plus 71% of earnings

1/2% of earnings

in exceSs of $4,200

for survivors benefits. p Ius 1/2% to the

State Emp Ioyees'

Assurance Department

for the special survi-

vors benefi t.

Peace Officers' $2,000 lump sum plus Annuity and twenty $100 monthly Benefit Fund payments to benefic i-
ary for" Iine of duty" death, sum of which reduced by any disability benefits received. Otherwise, $2,000 lump sum to benefic iory.

If member has received less than $1,000 in benefits, benefic iary receives difference be tween $2,000 and amount received. Otherwise, beneficiary receives $1,000 lump
sum.

None.

Firemenls Pens ian Fund

Retu rn of c ontributions without interest.

Return of contributions without interest less any benefit payments made.

None.

95% of member's contributions.

$7 per month.

Amounts are appropriated from fines and bond forfe itures.

95% of member's contributions.

$5 per month.

Tox is levied on each
fire insurance com-
pany doing business within the State.

Sheriffs' Retirement Fund

Return of contributions without interest.

Return of contributions without interest less any benefit payments made.

None.

Return of contribu- $20 per month. tions without interest.

Amounts are appropriated from fines and bond forfeitures in cases in which the sheriff or deputy sheriff is involved.

Ordinaries' Retirement Fund

Return of contributions without interest.

Return of contributions without interest less any benefit payments made.

None.

Return of contribu- 5% of net ea rn ings tions without interest. but not to exceed
$50 per month.

Amounts are deducted from marriage license fees, fines and bond forfe itures in cases which come before the ordinaries.

Superior Court Clerks' Retirement Fund

Return of contributions without interest or if el igible to retire, 1/3 of normal retirement benefit is payable to spouse who must be at leastage55.

Return of cantributions without interest less any benefit payments made.

None.

Superior Court Judges' Retirement Fund

Return of contributions without interest.

Return of contributions without interest less any benefit payments made.

None.

Solicitors' General Retirement Fund

Return of contributions without interest.

Return of contributions without interest less any benefit payments made.

None.

Return of contribu- Lesser of $18 per tions without interest. month or 5% of net
income.

Amounts are deducted from fines and bond forfeitures for crimina I cases tried in Superior Courts.

Return of contribu- 5% of sa lary. tions without interest.

Benefits are treated as sa laries pa id by the State.

Return of contributions without interest.

5% af sa lary or fees with a maximum contribution of $450 annually.

Benefits are treated as salaries paid by the State.

3-9
C. Review of Each System
The nine systems have been reviewed individually for the purpose of identifying the provisions under each which are unduly expensive to administer, unrealistic, costLy, of unsound policy or outmoded. Only the most significant items are discussed and, for the purpose of this review, it has been assumed that each of the existing systems will continue to operate independently. To facilitate reference to applicable Georgia law, citations of the original Act are provided for each system. Also cited are those sections in current applicable law which will be affected if spec ific recommended revisions are made.

Considering the scope of the program, the provisions under the Teachers' Retirement System are generally well written. There are, however, a number of provisions which should be revised to el iminate ambiguity, to strengthen the program financ ially and to place it on a more equitable basis.

a. Credited Service. The practice of giving credit for service to teachers who have

taught in states other than Georgia is similar to that of a number of other states.

However, the practice is administratively difficult and it is expensive to verify

such service. Although granting out-of-state credit can be useful as a recruiting

tool, in this case its value as an aid in recruiting seems questionable since a

teacher is required to have five years service in Georgia schools before he may

apply for out-of-state credit, and only if such other stat-e grants credit for serv-

ice in Georgia schools under its retirement system. Also, since the teacher's

contributions for such service claimed by the teacher is 8% of pay received while

Ga. Laws,

teaching in out-of-state schools as compared with the current total contribution

1957, p. 508

of 14.29% for service in Georgia schools, the fund sustains a loss for all out-of-

fSection 32=1 ~904 (5-A)J

state credit granted. In view of these considerations, it is recommended that either the practice of granting out-of-state credit be terminated, or if such credit is to

be granted, the teacher etaiming out-of-state credit should be reqlJi-red to con-

tribute, as a minimum, both the teacher and employer (State and local) contribu-

tions for a II service for wh ich credit is granted.

b. Age Retirement Benefits. The retirement benefit structure of the Teachers' system is reasonable and logical by itself, but many counties and municipalities are providing Social Security benefits for teachers. In fact, based on information secured from the office which administers Social Security coverage for State, county and municipal employees, it is has been determined that approximately
33,000 of the 49,000 individuals (67%) participating in the Teachers' system are
also covered by Social Security. The total benefit from the Teachers' system and from Social Security is often excessive; this is discussed and demonstrated in the following paragraphs.

How much retirement income should an individual have? A realistic criteria is the standard of Iiving he has reached as an active employee as reflected in the amount of his spendable income immediately prior to retirement. The term spendable income as used in this discussion is gross income less an estimate of deductions for income tax, contributions to the retirement plan and

BOWLES & TILLINGHAST, In<

3-10

Social Security and cost of working (clothes, transportation, etc .).Irrespective of the source of funds to provide retirement benefits, i.e", from the employer, the employee or both, it is difficult to justify a larger total spendable income after retirement than the level of spendable income attained prior to retirement. The contributions otherwise required to fund that portion of total retirement income which
provides more than 100% of the employee's active life spendable income could be
used more prudently to increase the employee's current income. Normally, the employed person's financial obligations are reduced at an advanced age since the children have been reared and educated, the home has been paid for and day-today living expenses are generally lower for the older person. Therefore, as a gen-
eral rule, a benefit which is less than 100% of the spendable income level reached
before retirement is adequate at the time the employee retires. In any event, it should not be greater. It is sometimes argued that a retirement benefit greater than the amount of monthly spendable income received immediately prior to retirement is justified since inflation erodes the purchasing power of the retired employee's fixed dollar income and the higher benefit tends to offset such erosion" Whereas it is true that inflation will undoubtedly continue to lessen the purchasing power of the dollar, the problem is not realistically solved by an excessive number of dollars to the retired employee at retirement. The problem should be solved more directly through periodically adjusting the retired employee's income to the extent and in the direction (up or down) of the movement in cost of living. Additiona I comments
on maintaining adequate benefits after retirement are provided on page 3-30.
A further consideration in determining the level of retirement income benefits, which an employer should provide or make available, is the employee's total years of service. If a normal working career is assumed to cover thirty-five years (at age 65), retirement benefits should be related to this period of service. Employees with less service should receive a proportionately lower benefit.
Comment in this report on the level of retirement benefits is limited to the extent such benefits exceed his amount of spendable income for the thirty-five year employee as discussed above. The benefit structure under those systems which provide greater benefits for an employee with thirty-five yedrs of service should be revised
with respect to future participants so that retirement income will not be excessive.
The following two tables have been constructed to illustrate the amount of retirement income, at various earnings levels at retirement, which will produce the same spendable income for an employee after he has retired as he had prior to retirement. The tables reflect the changes in spendable income which occur upon retirement due to the cessation of employee contributions to the Teachers' system and to Social Security, the reduction in federal income taxes and the el imination of expense directly related to active employment which will cease upon retirement (transportation, clothing, etc.).
Table A shows the net amount of spendable income at various earnings levels for active employees.
Table B has been similarly constructed to show the amount spendable income after retirement if total retirement income equals 75% of the active employee's gross month Iy earn ings.
BOWLES & TILLINGHAST, ,,,

3-11

DETERMINATION OF GROSS RETIREMENT INCOME WHICH PROVIDES SAME SPENDABLE
INCOME AS ACTIVE GROSS MONTHLY EARNINGS PROVIDE

TABLE A (1) Active Gross Monthly Earnings

$300 $400 $500 $750

(2) Deductions and Cost of Work ing (a) Employee Contributions: - Retirement System - Social Security
(lD (b) Estimated Income Tax
(c) Cost of Working ~% of (d) Total

18 14 24 15
f7T

24 18 39 20
$TOf

30 18 55 25
ff28

45 18 98 38 $199

(3) Spendable Income While an Active Employee: (1) - (2d)

$229 $299 $372 $551

(4) (3) as Percentage of (1)

76% 75% 74% 73%

TABLE B (1) Retired Life Income (75% of Active $225 Gross Earnings)

(2) Deductions and Cost of Working

(a) Employee Contributions:

- Retirement System

-0-

- Soc ia I Security

-0-

(b) Estimated Income Tax

-0-

(c) Cost of Working

-0-

(d) To.tal

-0-

~,

)

(3) Spendable Income After

Retirement

$225

$300
-0-0-0-0-0-
$300

$375
-0-
-O~
$ 20 -0-
$20
$355

$563
-0-0$ 49 -0-
f49
$514

(4) Percentage of Retired Life* Spendable Income to Active Life Spendable Income

100% 102% 97% 94%

* In those cases where spouse is age 65 or over and also receives Social Security, percentage of spendable income after retirement to active Iife spendable income is somewhat higher.

The percentages on line (4) of Table B show that the spendable income after retirement is approximately equal to that prior to retirement if gross retirement income is equal to 75% of gross monthly earnings while an active employee.

Consequently, it is reasonable to conclude that if a teacher's total retirement income including primary Social Security exceeds approximately 75% of his gross monthly earnings just prior to retirement, the benefits provide increased spendable income after retirement and, to this extent, would

BOWLES & TILLINGHAST, In'.

3-12

certainly be considered more than an adequate retirement income, Therefore, in this and later sections of the report 75% of gross monthly earnings is used to test the degree of adequacy of benefits provided under the various systems.

The following table illustrates, for members retiring at age 65 with thirty-five
years of service a't retirement and at various earnings levels, the total monthly
benefit available under the Teachers' system and under the Teachers' system and Soc iai Security combined. For the purpose ~f this illustrotion g it has been assumed that the gross monthly earnings immediately prior to retirement ore the same as average earnings over the highest five consecutive years. An cvel"~ statement of the benefits shown, if any, due to th is assumpHon is nominal.

Amount of Month ly Benefit as

_A_~~~t_,?~o~.!~t~:.r~~i_! __ !~!"5~~.:![~~f~~~~~ll.E~r:!'i~".: _

Gross Years

Primary Spouse's

Teachers'

Teachers'

Monthly of

Social Social Teachers'

and

Primary dnd

Earnings Service Teachers Security Securitr Only Primary S" S. Spouse's SoS.

$300

35

$184 $105

$52

62%

96%

114%

$400

35

245

127

63

62

93

109

$500

35

306

127

63

62

87

99

$750

35

459

127

63

62

78

87

This table illustrates that most of the teachers with thirty-five or more years service who are also covered by Social Security receive benefits which are in excess of the 75% of monthly earnings discussed on the preceding page. In addition, considerable inequity between participants exists as the result of all members not being covered by Social Security.

Ga. Laws,
1961, p. 392
J ~ection 32-=1
l?905 (2)

It is recommended that Social Security coverage be provided for ail new mem-
bers of the system" It is further recommended that the formu 10 used for the de-
termination of retirement benefits under the Teachers' system be coordinated with Soc ial Security for all future participants. Such a formu la might be of the following type: X% of that portion of the individual is average compensation which is taxable under Social Security plus Y% of averlJge compensation in excess of that taxable under Social Security. The sum of these two items would be multiplied by the number of years of credited service. A formula of this type automatically adjusts to the changes in the taxable base under Soc ial Security.

There are, of course, many possibil ities in setting the percentage rates for X and Y such as the following:

X% -1-
3/4

Y% 1-3/4 1~ 1/2

BOWLES & TILLINGHAST, In<

3-13

Ga. Laws, 1961, p.392
~ection 3~
L2905 (2)(bU

The current definition of average compensation could be changed with respect to new participants to either the average of the final five years earnings or the highest five consecutive years during the last ten years of credited service. The present arrangement of basing average compensation on the highest five consecutive years of service will, in many instances, result in providing a retirement benefit which is not related to the level of the participant's income near retirement.

Ga. Laws, 1961, p. 392 [Section 32=-]
l1.905 (2) ..J
Ga. Laws, 1943, pp. 64 640 f'!ection 32=-]
l2905 (8) ..J

The current plan provides for the payment of retirement benefits until death, at which time all benefits cease, unless an option is elected before retirement. It is suggested that, in lieu of this straight life form of payment, the normal form for future participants be a modified cash refund. Under the latter form of benefit, the member's beneficiary will receive the difference between the total amount received by the member prior to his death and his accumulated contributions with interest thereon as of the date of retirement. This amendment would give assurance to the member that his beneficiary will receive the difference between the total payments received as of the date of his death and his total contributions whether or not he has elected an option. In this connection, it is suggested that Option 1 under the present program be changed to a straight life form.

c.
Ga. Laws, 1961, p. 392 rsection 32=1
U \2905 (2-C

Early Retirement. The present plan provides that, should an employee retire prior to age 65, the benefit otherwise payable at age 65 shall be reduced 1/4 of 1% for each month retirement precedes age 65. This reduction of 3% per year results in a more liberal benefit than an act~rial equivalent-reduction factor would produce. Although not actuarially e,uivalent, a 5% reduction factor per year (5/12 of 1% for each month retirement precedes age 65) more closely approximates the true actuarial equivalent.

d. Death Benefits. A death benefit is p':Jyable should a member die after having attained age 60 with ten years of service or after having completed fifteen or more years of service irrespective of age, provided there is a II normal living beneficiary". The amount of this death benefit is equal to that which would have been payable to the member's beneficiary had the member retired on disability on the date of his death after having elected the 100% joint and survivor option.

The single sum value of the monthly payments to the participant's beneficiary, assuming the benefit is based on a $400 average monthly salary, is equal to from four to seven times the participant's annual salary depending upon his length of service at date of death.

Since members of the system who die prior to completing fifteen years of service receive no death benefit (other than return of accumulated contributions) benefits of this design create significant inequities. For example, a member with fourteen years of service and who has not attained age 60, leaves only his accumulated contributions to the beneficiary upon his death; whereas a member with just one additional year of service and with annual earnings of $4,800 would leave a death benefit equal to approximately four times his annual earnings or about $19,000.

BOWLES & TILLINGHAST, Inc.

3-14

The amount of the death benefit for those who qualify is considerably more liberal than is generally provided by employers. Customarily, an employer will provide a death benefit of one to three times annual earnings and such benefits are normally provided all employees after some minimum waiting period of one to three months. It is recommended that the structure of the death benefits be redesigned so as to lower both the amounts of benefit and the requirements for qual ifying for them.

e.
Ga. Laws,
1962, p. 723 jS"ection 32':""f L:921 (1)(aU

Teachers Contributions. In the event the benefit formula is changed to coordinate plan benefits with those payable under Social Security, as discussed above, it is recommended that there also be a staggered rate of contribution by the teachers.
For example, the contribution rate might be 3% of that portion of total pay taxable
under Social Security. Such a contribution basis will result in contribution rates changing when there are changes in the Social Security taxable base without the need for additional plan amendments.

As noted above, it is recommended that contributions by teachers claiming out-ofstate credit be increased with respect to all such credit granted. It is suggested that this be not less than the combined employee and employer contributions (currently
14.29% of total pay).

f. Participants Under Local Retirement Plans. The present plan provides for the exclusion
of teachers or other individuals who would otherwise be eligible for participation under the State Teachers' Retirement System if such individuals p:::Jrticipate under a retirement plan provided by a local employer. However, if the teacher retiring from the local plan would have been el igible for retirement under the Teachers' system, had he been a participant under the State plan, a benefit computed as described in the Appendix is payable to the local retirement fund up to the amount of benefits p:::lid to the retired teacher by the local plan. Any amount in excess of the local retirement plan benefit is paid directly to the teacher.

Ga. Laws,
1962, p. 723
ffi~~iO(3f2J

Under the present law a teacher participating under a local retirement plan may transfer to another board of education not operating under a local system and establ ish p:::lst service credits under the State system by p:::lyment of the accumulated contributions with interest that would have been made had the teacher always been a participant 04: the State system. Therefore, it is possible that all teachers presently covered by local systems could establish full credit under the State system without the State receiving the usual employing agency contribution. In the past, these occasional transfers have involved individual teachers and therefore have not been of real consequence. However, should there be large groups of teachers transferring into the State plan as a result of consolidation of school systems, the resulting liabilities to the State would be very substantial since the local employing agency is not required to II make Upll any of the contributions which would have been made had its teachers always been under the State plan. The existing law is appropriate to the extent that it applies to the occasional transfer of incividual teachers; however, a provision should be added which requires those local

BOWLES & TILLINGHAST, In.

3-15

employers having a retirement plan for teachers to assist the State in funding past service liabilities should such local plan become inapplicable for teachers through consolidation of school systems.

Summary

In conclusion, the preceding discussion has identified the major areas in which revisions will

result in reduced administration, reduced retirement plan costs to the State and elimination

of inequities which currently exist between teachers within the State. Recommendations

made in each of the areas are summarized as follows:

Ga. Laws, (1) Eliminate the granting of out-of-state service credit, or, if continued, require

1957, p. 508

employee contributions at the total rate of employer and employee contributions

fSection 32=1

(current total rate is 14.29% as compared to the out-of-state credit rate of 8%).

13904 (5-A)J (2) Extend Social Security coverage to all future participants of the system.

(3) Revise the benefit structure for new partie ipants wh ich will:

Ga. Laws,

(a) coordinate benefits from the system with those payable under Social Security,

1961, p. 392 ~ection 32=1
8905 (2) I

(b) give assurance that total spendable retirement income does not exceed spendable income during active employment,
(c) guarantee that the dollar amount of retirement benefits paid to the retiree or

his beneficiary will be at least equal to his accumulated contributions with

Ga. Laws,

interest thereon, and

1962, p. 723

(d) provide for a greater reduction factor fot determining early retirement benefits.

[Section 32=1 (4) Coordinate employee contributions for new participants with those required under

13921

J

Social Security.

(5) Redesign death benefits to provide more equitable and consistent protection for all

Ga. Laws,

members.

1962, p. 723 (6) Require local employing agencies maintaining local retirement plans to assist the

fSection 32=1
J ~904 (3)

State in funding past service liabilities with respect to those teachers transferring to the State plan as a result of consolidation of school systems.

2. ~....P..!~~.:~!.:!..!!::~.:!:!.t_~~t.:~ (Ga. Laws, 1949, pp. 138, 1159)

At the time the nine systems were initially reviewed (late 1963) the Employees ' Retirement System was found to be the most complex and requiring the most extensive revisions to eliminate inequities and provisions which are administratively expensive, unrealistic and unduly costly. Legislation enacted during the 1964 regular session of the General Assembly has resulted in significant changes in the determination of benefits for employees covered under the plan on or after April 1, 1964.

Employees covered under the system prior to April 1, 1964, will receive benefits in accordance with the new basis; however, they will not receive less than that which would have been payable under the program in effect prior to April 1, 1964. Accordingly, for employees covered before April, 1964, benefits will be determined on the new basis as well as the old and the higher of two amounts will be payable. Although the effect of these recent changes has been to generally increase the level of benefits for many employees, further changes are required to eliminate many inequities under the program.
The following provision was enacted in 1964:
liOn and after April 1, 1964, the Board of Trustees is hereby authorized to adopt simplified benefit tables which will enable a member to estimate his retirement allowances. Such tables as adopted shall (1) be based on an actuarial study, (2) maintain the actuarial soundness of the system, (3) be applied to the member's average monthly earnable

BOWLES & TILLINGHAST, In'

3-16

compensation during a five year period and (4) be applicable to all members. Provided, however, the above provisions or the application of such tables shall not reduce or impair the amount of any allowance or benefits to which any person who was a member on April 1, 1964, would have been entitled at that time or would be entitled at any time thereafter under tables or calculations which were in effect at that time or at any time prior thereto or at any time prior to the adoption of such simplified benefit tables. II

Pursuant to this law the Board of Trustees, during its regular meeting held on April 9, 1964, adopted certain tables and methods for determining benefits under the system. With the adoption of the new tables, determination of benefits for new employees has been considerably simplified; however, there remainsanumber of major areas for revision which are discussed below. It should be noted that the majority of present members and all new members of the Employees' system are covered by Social Security.

a. Age Retirement Benefits. Age retirement benefits from the system for members covered

prior to April 1, 1964, are equal to the greater of (1) and (2):

(1) Basic money purchase benefit plus a supplemental benefit based on the highest

month's earnings and service.

(2) A benefit determined by:

(a) Multiplying a factor by the number of years credited service.

(b) The resulting product is a percentage wh ich in turn is appl ied to average com-

pensation to arrive at the monthly benefit.

One set of factors is used for the first $350 of average monthly eal"nings and a somewhat

higher set of factors is used for average earn ings in excess of $350. Factors for a num-

ber of different periods of service are shown below:

Factors for Determining Percentage* of

Years of Credi table Serv ice

M0 nth Iy A v era geE a rna b Ie Com pen sat ion
pp Aj)pliCabletoFirSi1350-----A ncObTe-te,-O;.;1350

5

.780

1.30

10

.870

1.45

15

.960

1.60

20

1.050

1.75

25

1.140

1.90

30

1.230

2.05

35 (or more)

1.320

2.20

* Factor is multiplied by years of service to obtain percentage.

For new employees covered after April 1, 1964, retirement benefits are determined in accordance with (2) above.

The Board has defined average monthly earnirlgs as the average during the five highest completed consecutive fiscal earning periods as an employee of the State. In accordance with the Act, the new table of factors was developed on the basis of an actuarial study and eliminates some of the inequities under the old system and, at the same time, permits future employees' to estimate their monthly retirement benefits. Under the system of benefit determination applicable to those covered under the plan prior to April 1, 1964, it is virtually impossible for members to estimate their prospective retirement benefits without the assistance of the administrator of the system. The program is therefore not adequately appreciated because the members cannot fully understand what is provided for them. The new tables will, for the most part, eliminate this shortcoming insofar as new employees are concerned.

BOWLES & TILLINGHAST, Inc

3-17

The new basis for determining benefits results in an increase in benefits for most salary levels, particularly for those employees having thirty to thirtyfive years of service at retirement. On the other hand, employees with low
earnings ($300 a month at retirement) and long periods of service (forty-five
years of service) receive lower benefits under the new method. As pointed
out above, however, employees covered by the system prior to April 1, 1964,
receive the greater of the two benefits.

Using the same approach as illustrated for the Teachers' in 1(b) of the discussion of that system, it was found that the same guidelines for determining excessive benefits are appropriate for the Employees' system and, since an employee who has thirty-five years service receives a total retirement income,
including Social Security, of more than 75% of his gross monthly earnings
just prior to retirement, the system provides greater spendable income after retirement than during the employee's active employment. It has been found
that this is true with regard to those employees covered prior to April 1, 1964,
and is also true to a greater degree for most new employees who will have benefits determined under the new table.

The following table illustrates, for members retiring at age 65 with thirty-five
years of service at retirement and at various earnings levels, the total monthly benefits payable under the Employees' system using the new benefit tables and under the Employees' system and Social Security combined. For the purpose of this illustration, it has been assumed that the gross monthly earnings immediatey prior to retirement are the same as average earnings over the highest five consecutive years. An overstatement of the benefits shown, if any, due to this assumption is nominal.

Gross Monthly Earnings

Years of
Service

Amount of Monthly Benefit as

_!-_"E~~_~.M.~.!.~t~~~.!!.!.__ !~~~~~[:..~~~~~11~~~!.~~_ Primary Spouse's Total Excluding Total Including

Employees' Social Social Spouse's Socia I Spouse's Social

System Security Security

Security

Security

$300

35

$139

$105

$52

81%

99%

$400 35

200

127

63

82

98

$500

35

277

127

63

81

93

$750

35

470

127

63

80

88

This table illustrates that employees with thirty-five or more years of service
receive benefits which are in excess of the 75% monthly earnings discussed on page 3-10.

BOWLES & TILLINGHAST, In,

3-18

Go. Laws,
1949, pp. 138,
1159 ~ection 5 (2~

The new benefit tables are constructed so as to provide greater recognition of Social S~curity than was the case under the old method; however, further coordination with Social Security would be desirable since the higher table of factors is applied to earnings above $350 whereas Social Security benefits are paid with respect to the first $400 of earnings. In addition, as shown in the above table, total benefits including primary Social Security provide more spendable income for the thirty-five year career employee after retirement than immediately before retirement for all salary levels. Where the spouse also receives Social Security, the increase in spendable income is even greater. Accordingly, a further revision which produces a general decrease in benefit levels is recommended for new employees. Both a reduction in benefits and further recognition of Social Security could be accomplished b'y the adoption of a formula such as recommended for the Teachers Retirement System.

b.
Ga. Laws, 1949, pp. 138, 1159 !Section 51 K3)(b), (4L)

Disability Benefits. In the design of disability benefits, it is also important to take Soc ial Security and income tax considerations into account. Social Security provides a basic pension for the disabled employee and provides up to an additional $127 per month if there are dependent children. The Internal Revenue allows a disabled employee to exclude up to $100 per week, $5,200 annually, from his taxable income. Taking the tax consideration into account and the discontinuance of employee contributions, a disability pension that provides approximately 70% of compensation will provide the same spendable income to the average employee. An employee rarely recovers from a disability which provides him with more spendable income than did his active employment.

T~e following table shows the approximate disability benefit under the new benefit tables adopted by the Board for an employee earning $400 per month:

Soc ial

Employees' and Soc. S.~c.

Emp.

Employees' Security Minimum Maximum

Age Years of Service System MTn:-1ACix. ~mt. %-!'ciY Ami'". O/d"PaY

25 Less than 13yrs., 3 mos.
13 yrs., 3 mos. to 18 yr~.
18 yrs. to 22 yrs. , 9 mos.
22 yrs., 9 mos. to 27 yrs., 6 mos.
Over 27 yrs., 6 mos.

-0$ 112
150 172 229

$127 $254 $127 32% $254 64% 127 254 239 60 366 91 127 254 277 69 404 101 127 254 299 75 426 107 127 254 356 89 483 121

BOWLES & TILLINGHAST, In<

3-19

Social

Employees' and Soc. Sec.

Emp.

Employees' Security

Minimum

Maximum

Age Years of Service System MT;:--M;;'x-: Amt:--%Pay Amt:--%Pay

35 Less than 13 yrs.,

-0-

3 mos.

13 yrs., 3 mos.

$ 70

to 18 yrs.

18 yrs. to 22 yrs.,

93

9 mos.

22 yrs., 9 mos. to

120

27 yrs., 6 mos.

Over 27 yrs.,

160

6 mos.

$127 $254 $127 32% 127 254 197 49 127 254 220 55 127 254 247 62 127 254 287 72

$254 64% 324 81 347 87 374 94 414 104

45 Less than 13 yrs.,

-0-

127 254 127 32

254 64

3 mos.

13 yrs., 3 mos.
to 15 yrs.

47

127 254 174 44

301 75

From the preceding table it can be concluded that:

(1) The disability benefits are very liberal for members employed at the younger ages who have at least thirteen years, three months of service at date of disability.

(2) Inequities exist between employees becoming disabled after the same period
of service with the same compensation. For example, if the employee was
hired at age 25 and became disabled after eighteen years of service, he would receive a minimum of $277 per month wh i1e an employee with the same service and compensation who was hired at age 35 would receive only $220 per month.

c.
Ga. Laws,
1949, pp. 138, 1159
5l rsection
[13)(a), (4U

Involuntary Separation. For involuntary separation, without prejudice, the system provides the same benefit as if the employee were disabled. The need for a benefit this liberal is highly questionable. It is recommended that this provision be deleted and, in Iieu thereof, the employee's benefit accrued to date of separation be provided. This benefit would either commence at nor-
mal retirement or at the option of the employee, paid immediately with the bene~it actuarially reduced.

d. Death Benefits. After thirteen years and three months of service of an employee, the benefic iary of a deceased employee receives a pension
determined in the same manner as for disabil ity but assuming the election
of Option 2 which provides 100% continuation of the pension to the
benefic iary at death. In addition to th is death benefit, there is a sur-
vivor's benefit for members employed prior to age 56, equal to twelve
times his monthly salary which increases one-half month's salary for

BOWLES & TILLINGHAST, In<.

3-20

each year of service in excess of five years up to a maxrmum of eighteen times the monthly salary, provided that there are no increases for service or increased salary after attainment of age 51.

The graph on the following page illustrates the single sum value of the total death benefits as a multiple of annual salary. The following comments pertaining to the death benefits are appropriate:

Go. Laws, 1949, pp. 138, 1159
5l rsection
l{3)(a), (4Lj
e.

(1) None of the other systems included in this study provides for a death benefit of this liberality.
(2) It is uncommon for employers to make available death benefits as high as seven to eight times annual salary after fifteen to twenty years of serv ICe.
(3) There may be certain death benefits available under Social Security in addition to those under the system. No consideration of these was in the table shown, but the value of the Social Security death benefits could be as high as those available under the system.
It is recommended that the structure of the death benefits be redesigned and consistent benefits provided for all employees for whom the State has an obi igation to provide such benefits.
Authority Delegated to the Board of Trustees. In the past, the General Assembly delegated substantial authority to the Board of Trustees in the operation of the Employees system. As a result, the Board has been given the power to establish benefit levels and, also, the amount of State contribution rates to the system. As an example of this latter authority, effective July 1, 1964, the Board increased the State's contribution 1/2 of 1% of the total salary for both Division A and Division B members. Normally, the function of a board is limited to the administration of the law. Certainly, the power to establish benefits and contribution rates should be retained by the State Legislature. This practice of the General Assembly giving such extensive power to the Board of Trustees is the greatest deficiency with respect to the manner in which the over-all Employees system has been developed since its original establishment in 1949. It is recommended that the law specify, in detail, the basic benefit determination and rates of contribution for both the State and covered employees.

Summary

The basic structure of benefits of the Employees' Retirement System provides excessive benefits in several areas and is one in wh ich undesirable inequities exist.

Corrective legislation is required to more closely coordinate normal retirement, disabil ity and death benefits with those prov ided by Soc ial Security. In addition, statutory law should detail the basis for benefit determination and the rates of contribution to be made by the State. Although extensive legislation is required to accomplish the desired changes, the resulting structure can provide a more logical, equitable and less costly retirement system.

BOWLES & TILLINGHAST, In'

DEATH BENEFIT AS A MULTIPLE OF ANNUAL SALARY

1

1

12

11

10
91 Multiple

---

8.

of

7+ Annual

6t Salary

5

4

3

2

1

Years of Servke

0,

5

10

15

20

2S

30

35

40

45

BQsed on a Member Employed crl Age 25 with an Average Annual Salary of $4,800

~

EMPLOYEES' RETIREMENT SYSTEM
BOWLES & TILLINGHAST, (n,

-~

3-22

3 ~~=..9.i~~~~~.!l.!:!~~_~~_~.!:!~.!.tY~.!:!s! (Go. Laws, 1950, p. 50)
The significant plan provisions contained in the current Act which have created problems from the standpoint of administrative difficulty and generally do not follow sound pension design principles are as follows:

a.
Ga. Laws, 1962, p. 39
~ection ~
b.
Ga. Laws, 1962, p. 39 ~ection 1!J

Eligibility. The legislative act covering the operation of this system provides that any full-time peace officer employed by the State or any political subdivision thereof is eligible to participate. Administration of the eligibility provision has been xtremely difficult because of the use of the term "peace officer". There does not seem to be a generally accepted defi nit ion of the term. Upon a rev iew of the minutes of the Board of Commissioners as well as correspondence from the system's legal counsel it is apparent that no uniform standard has been applied in accepting or rejecting individuals requesting participation. The absence of a workable definition of "peace officer" is a gross deficiency in this program and has resulted in expensive litigation quite likely in the future, unless the current legislation is amended to more clearly specify those persons eligible to partic ipate.
Retirement Benefits. After twenty years of credited service and attainment of age 55 a member receives a lifetime monthly benefit of $100. After twenty-five years of credited service and attainment of age 60, a benefit of $125 is payable for life. In the absence of other retirement income this benefit will generally be inadequate and is not related to the individual's income needs at retirement. However, since it is estimated that from 70% to 80% of the present members partic ipate in one or more other retirement systems including Social Security, this benefit is perhaps adequate for the ma jority of members. On the other hand, if this plan were being reviewed without recognition to other available sources of retirement income, it woo Id be recommended that the benefit formula be changed to more properly recognize needs by relating retirement income to the level of compensation near retirement.

Ga. Laws,
1962, p. 39 ~ections 9, 1!J

The benefits provided are an extremely attractive "buyll to the members since it is estimated that their contributions of $7 per month accumulated with interest for a period of twenty-five years will provide only about 15% of the value of the benefit, which value is approximately $18,000 at age 60. Notwithstanding the fact that the plan is financially attractive to members, inequities do occur since a member must contribute continuously unti I age 55 to receive the $100 benefit even though this may result in a twenty-five or thirty year period during which contributions are made. Therefore, a member entering the plan at age 36 can retire at age 55 and commence drawing a $100 monthly benefit. However, a member entering the program at age 30 must contribute for a total of twenty-five years (until age 55 if he is to qualify for the $100 benefit). It is recommended that the plan be changed so as to eliminate this inequity.

BOWLES & TILLINGHAST, In'

3-23

c.
Ga. Laws,
1962, p. 39 ~ections 13, 1!J

Death Benefits. A separate death benefit provides for a lump sum pay-
ment in the amount of $2,000 if death occurs prior to retirement and not in the line of duty I and $4,000 if death is a direct result of an injury
sustained in the line of duty. Death benefits provided after retirement are determined on the basis of the amount which the member receives in retirement benefits prior to death. It is recommended that the lIafter retirement'l benefit be eliminated and the normal form of benefit payment be changed from a Iife income to a modified cash refund benefit under which the difference between the amount received by the member prior to death and the total of his accumulated contributions will be paid to his beneficiary.

Ga. Laws, d.
1962, p. 39 ~ection ~

Termination and Reinstatement. Upon termination of membership the plan
provides for a return of 95% of the member1s contributions. In lieu of this it is recommended that the program provide that 100% of a member's con-
tributions be returned without interest upon termination of membership under the plan. The plan provides for the reinstatement of individuals who previously terminated membership. There is no limit to the number of times a person may be reinstated. Any such reinstatement is granted upon receipt by the administrator of all monies previously refunded plus
contributions with 6% interest for other periods of service as a peace
officer. With respect to re instatement, it is recommended that the member be requ ired to pay interest on the amount refunded for the period that has e lapsed since the refund was made. Also, if contributions are withdrawn, only one reinstatement should be permitted. Periods during which the member suspends his contributions should be limited to one year after which all periods for which contributions are not made will forever be forfeited 0

e. Ga. Laws,
1962, p. 39 ~ection 1!J
f. Ga. Laws, 1959, p. 330
~ection 1q}

Optional Form for Benefit Payment. To provide for greater flexibility in fulfilling the needs of retired members, additional options should be made available. If properly administered and provided on an actuarial equivalent basis, it will not adversely affect the cost of the proRram.
Contributions. Contributions by the State are Iimited to payments from fines and bond forfeitures. This provision in the Act is the single most difficult feature to administer. Although the Act specifically provides that the Peace Officers' Annuity and Benefit Fund will have first claim on monies paid in fines and bond forfeitures, it has been the experience of the administrator that many courts are remitting less than required in accordance with the law. Assuming that this source of revenue is continued for the operation of the program, the law should provide for the imposition of a penalty on courts which do not conform. The fund has sustained a considerable expense as a result of the litigation required to receive monies due it from the various courts throughout the State. In all Iitigation to date, the rul ing has been in favor of the retirement fund and the court has been required to pay the fines and bond forfeitures for the period that rem ittances were not made; however, no
BOWLES & TILLINGHAST, In'

3-24

penalties have been imposed and therefore there has not been adequate inducement for the courts to make timely remittances. As discussed elsewhere in the report, the system is currently actuarially insolvent. The present law should be revised to provide monetary penalties to the courts which do not remit the sums required by law. Furthermore, since it is not possible at the present time to determine the exact number of courts which should be making remittances, a control list should be developed for this purpose.

4. Firemen's Pension Fund (Ga. Laws, 1955, p. 339)

The following areas should be revised to improve the retirement benefit program provided under the Firemen's Pension Fund.

a.
Ga. Laws,
1956, p. 368 ~ection 1 (2[1

Eligibility. It is suggested that the eligibility provisions be amended so as to permit participation by only permanent full-time fire department employees. The extension of membership to volunteer firemen is a questionable practice for the following reasons:

(1) Although certain requirements are prescribed in the Act for a volunteer fireman to be el igible for participation, there is no practical manner in which it can be determined if these requirements are being met.

(2) Since volunteer firemen are not paid a salary by the State, county or a municipality, it does not seem that the State or any political subdivision thereof has an obligation to make retirement benefits available.

(3) rndividuals who are volunteer firemen should rightfully look to their fulltime employer for assistance in providing retirement income.

b. Retirement Benefits. Those comments made in connection with the Peace

Go. Laws,

Officers' Annuity and Benefit Fund apply in this instance since the Firemen's

1947, p. 323 ~ection ~

Pension Fund also provides a flat dollar monthly benefit. This type of benefit is not considered an appropriate basis for providing adequate retirement

benefits. Again, this assumes that no other benefits are available to the

covered participants. Although information was not obtainable with respect

to duplication of coverage, it is reasonable to assume that a high percentage

of those participating under the Firemen's fund have a retirement income

benefit from other sources.

It is estimated that the value of the $72 monthly benefit payable at age 60 to a fireman is approximately $11,000 of which amount he will have provided 25% through his own contributions. Accordingly, the State has undertaken a substantial liability with respect to retirement benefits for firemen.

BOWLES & TILLINGHAST, In,

3-25

The program could be made more flexible by providing an early retirement benefit actuarially reduced at age 55 with twenty-five years of service and by providing actuarial equivalent optional retirement benefits in lieu of monthly life income benefits.

c.
Ga. Laws, 1957, p. 323 ~ection 7A (aD

Disability Benefits. A definition of total and permanent disability should be provided in the Act to limit disability retirements to only those who are actually totally and permanently disabled. Since there can be many interpretations as to what constitutes total and permanent disabil ity, confusion and misunderstanding can be el iminated by clearly defining the type of disabil ity for which a benefit will be granted.

d. Termination Benefits. Upon termination, a fireman may withdraw 95% of his

contributions without interest. This same privilege is granted to individuals

who continue as firemen. If the fireman is later re-employed or subsequently

elects to again become a member after having withdrawn his contributions,

he may become a member of the fund and receive credit for previous service

Go. Laws,

by repaying withdrawn contributions with 6% interest. Since there is pres-

1956, p. 368 ~ection 5A]

ently no limit to the number of times reinstatement may be granted, it is recommended that any such re instatement be Iimited to one. In addition,

no withdrawals should be permitted while employed as a fireman.

The following provisions are those which are deemed to be inappropriate for a retirement plan of this type:

a. Retirement Benefits. A retirement benefit can be earned in a four year con-

tributionperiod. This is an extremely short period of time to qualify for a

Ga. Laws,

retirement benefit. This requirement is unrealistic from a financial stand-

1963, p. 630
~ection 1~

point and also from the standpoint of the State's obligation to provide retirement income for individuals serving for such short periods of time. This

arrangement stems from the practice of electing the sheriff to four year terms.

Ga. Laws,

Although the amount of benefit does vary with length of service, it is in no

1963, p. 630
~ection 1~

way related to retirement income needs which are most readily expressed as a percentage of earnings during the period near retirement.

Ga. Laws,
1963, p. 630
~ection 2~

In addition to benefits provided under this system, all members are el igible to participate in the Peace Officers Annuity and Benefit Fund and also may haye coverage at the local level which could be Social Security.

The estimated value of a $200 benefit (payable with twenty years of credited service) at age 60 is approximately $31,000. Of this amount, the sheriff provides through his monthly contributions of $20 approximately 20% to 25% of the value of this benefit.

To provide greater flexibility the plan should provide for actuarial equivalent optional retirement benefits in lieu of the monthly life income benefit.

BOWLES & TILLINGHAST, In<.

3-26

b. State ContriblJtions. The State contributions are in the form of amounts col-

lected from fines and bond forfeitures provided the amount of the fire or bond

forfeiture is sufficient to meet costs and all other priority claims. It is there-

fore quite likely that in addition to the problem which has been experienced

by the Peace Officers' Annuity and Benefit Fund of collecting the fines and

forfeitures, the low priority claim on this source by the Sheriffs' Retirement

Fund will result in inadequate State contributions. In this regard, the Act

provides that should funds from member contributions and contributions from

the courts be actuarially deficient to provide full benefits, a pro rata per-

centage of benefits will be paid until such time as the fund is replenished.

This provision is extremely ambiguous and since actuarial deficiency is not

Ga. Laws,

defined, it could be interpreted in different ways. It is recommended that

1963, p. 630
~ection 2:[]

this provision be clarified to eliminate future misunderstandings and administrative difficulties.

6. Ordinaries Retirement Fund (Ga. Laws, 1958, p. 185)

The provisions relating to eligibility of membership and credited service appear to be satisfactory under this program. There are, however! a number of defic iencies in other provisions which are discussed below:

a.
Ga. Laws, 1959, pp. 354, 356 ~ection lq] Ga. Laws, 1958, p. 185 ~ection 7~

Retirement Benefits. As pointed out in the discussion of other systems, the retirement plan should provide an income which is reasonably adequate in
relation to an employee's earnings near retirement. In general, the plan
should enable an employee to maintain the standard of living to which he has become accustomed considering other probable sources of income he will have after retirement. Hence, the benefit should be based on the average of earnings during a limited period immediately prior to retirement. Since the Ordinaries' retirement program bases benefits on the individuals average earnings for up to a twenty year period, benefits are not adequately related to earnings near retirement. Although the rate of 2~% per year at which benefits accrue is very liberal, benefits are limited to 50% of the average of earnings during the twenty year period. The design of the plan would be improved if the accrual percentage rate for each year were reduced, the number of years of possible credited service increased, and the average earnings on which benefits are based changed to the highest five consecutive years for the last ten years of credited service. Also, other possible sources of retirement income should be recognized to eliminate dupl ication which produces excessive benefits.
Since there are no optional forms of benefit payments currently available, it is recommended that these be provided. Also, there is no disability provision which sould be included to provide disability benefits for those becoming totally and permanently disabled. Such a provision is advantageous to the member since disability benefits received from a formal program are tax-exempt up to a maximum of $100 per week under the present federal income tax regulations. The disability benefit could be the accrued benefit based on service and earnings as of the date of disabil ity.

BOWLES & TILLINGHAST, Inc

3-27
The present program is an attractive one to eligible ordinaries in that it is estimated that an individual who averages $10,000 annual earnings with twenty years of service will receive a benefit having a value of approximate Iy $55,000 at age 65. The member's contribution of 5% of the first $1,000 monthly earnings results in the member providing approximately 25% to 35% of the value of benefits received.
b. Employer Contributions. As is true with a number of the other systems, the State's contributions are derived from a portion of fines and bond forfeitures. An additional source of revenue comes from services rendered by the ordinary in connection with the application, issuing and recording and filing of marriage licenses. Should the funds derived from the sources as provided in the Act be actuarially deficient to pay all benefits in full plus contingent and other liabilities, a pro rata percentage of benefits will be paid until such time as the fund is replenished. However, a provision in the Act is necessary which periodically requires actuarial studies so that the adequacy of funds to meet future payments may be determined.

The provisions relating to el igibil ity of membership and credited service appear to be satisfactory. Those provisions for which changes are recommended are as follows:

Ga. Laws, a. Retirement Benefits. It is recommended that the normal retirement age be

1952, p. 243 ~ection 1~

increased from 55 to either 60 or 65. A retirement age of 55 greatly increases the cost of providing the benefits and such a provision is not in

keeping with customary pension plan design, particularly for individuals

in non-hazardous occupations. Assuming that no other retirement income,

including Social Security, is available to Superior Court clerks, the two-

thirds of final four years average earnings is a reasonable benefit. How-

ever, since there is a maximum of $240 and since a very high percentage

of the members currently earn more than $300 a month, the benefit is, for

all practical purposes, a flat $240 monthly benefit. Increasing the retire-

ment age to 65 and providing a unit benefit for each year of credited

service would improve the design of this program. Also, as stated for

other systems, provisions should be included which will eliminate dupli-

cation of benefits due to other sources of retirement income.

The estitnated value of a $240 monthly benefit at age 55 is $36,000. The employees contribute 5% of net pay not to exceed $180 per year. Assuming the maximum contribution is made for a twenty year period, the member provides for 15% to 20% of the value of th is benefit through his own contributions. As is true with other systems enacted by the State, this is an extremely It good buylt for the participants.

BOWLES & TILLINGHAST, In,

::'.~"i,~:-r>:;,.:<>,-;: ", :
3-28

8. ~~~~~_~~..!'.~~.5!g,~ (Go. Laws, 1945, p. 362)

This retirement program is very similar to the emeritus pay systems discussed in Section 7 with the exception that there are member contributions and a fund is maintained with respect to such contributions. By virtue of their position, it is perhaps desirable to provide a somewhat more liberal retirement program than is necessary for other positions within the makeup of the State, county and local governments. However, it appears that tpe present program is exceedingly Iiberal. Furthermore, legislation was enacted in 1964 which extends Social Security coverage to Superior Court judges with the State making the required emp loyer contribut ions.

a.
Ga. laws, 1960, pp. 161, 166 rsection 24=1
J ~611 a
Ga. laws, 1955, pp. 152, 153
[Section 241
~610 a ..J

Retirement Benefits. Annual benefits payable for life equal to two-thirds of the salary received by the judge in the year immediately preceding retirement is in itself quite liberal. A person having served at least four years as a Superior Court judge is entitled to the benefit irrespective of his attained age after completing a total of eighteen years of creditable service. Included in creditable service is service as a Superior Court judge, a solicitor general of a judicial circuit, as a judge or solicitor of a city or county court of the State, membership in the General Assembly or service in the Armed Forces. Since service in a variety of positions is allowed and there is no age requirement, this program is very liberal. Giving due consideration to the financial obligation of the State and a reasonable benefit for individuals holding this position, a more satisfactory retirement program would stipulate a definite age at which full benefits are paid with an additional provision allowing early retirement at a reduced benefit. Other provisions which shou Id be inc luded are a unit of benefit for each year of service and optional forms of benefit payments.

Assuming an annual salary of $14,000 in the year immediately preceding retirement, the approximate value of the benefit payable to a Superior Court judge at age 55 is $140,000. His contributions for an eighteen year period at 6% of salary provides from 13% to 18% of the value of this benefit. If the member retires at age 65, again assuming a salary of $14,000, the value of his benefit is approximately $100,000. Member contributions provide from 15% to 20% of the age 65 benefit.

9. Solicitors' General Retirement Fund
This retirement program is essentially the same as that provided Superior Court judges except that the retirement pay is limited to a maximum of $6,000 a year. The discussion relative to Superior Court judges is equally appl icable with respect to this retirement program.

BOWLES & TILLINGHAST, In.

3-29
Assuming a maxtmum henefit of $6,000 per year, the approximate value of such a benefit commencing at age 55 is $90,000 of which the participant provides from 10% to 15% through his own contributions. The maximum payment of $-0,.000 annually commencing at age 65 has a value of approximately $65,000 of which the participant provided from 15% to 20% through his own contributions. Suggested revisions in this system are the same as those discussed under the Superior Court Judges' plan.
Definite Age for Full Retirement Be'1efits: Go. Law, 1951, p. 597 ~ection 24-2902 ~
cil Change in Benefit: Ga. Law, 1949, pp. 780, 781 ~ection 24-2904
BOWLES & TILLINGHAST, Inc.

3-30
ADDENDUM
Maintaining the Purchasing Power of Retirement Income
In the discussion of the adequacy of retirement income on page 3-10, it was pointed out that there are direct and effective means to adjust retirement income to offset the eroding effect of inflation on the purchasing power of the dollar. Two plans which have been used for this purpose are the variable annuity or equity type plan and the cost of Iiving retirement plan. These plans are similar in that neither pays fixed dollar amounts during the period of retirement. They are unl ike with respect to the basis used in varying the monthly benefit payments. In theory, both plans respond to variations in the purchasing power of the dollar.
The equity plan is based on the premise that cost of living parallels common stock values (including appreciation). It suggests that a retiree cOl)ld enjoy a more nearly level standard of Iiving if he receives a fl uctuating income from a fund invested in common stocks. Equity plans provide a retired employee with a definitely determinable number of shares or units of interest in the total assets held with respect to retired lives. Using the unit as a basis for determining the pension, the payments to the retirees vary directly with the current value of the fund as refleeted by common stock values and dividends. Since over the years there has been a direct correlation between the movement of the value of equities and that of cost of living, the equity type plan tends to stabilize the purchasing power of retirement incomes. The pioneer in the equity benefit field is the College Retirement Equities Fund in New York, commonly referred to as CREF. It is a companion fund of the long established Teachers' Insurance and Annuity Association which pays fixed dollar benefits.
Cost of living pensions, on the other hand, are adjusted in relation to the cost of living index published by the Bureau of Labor Statistics. The component factors of the index are also publish~d and the indices published by the Bureau reflect the composite purchasing habits of the entire population which are somewhat different from the purchasing habits of retired persons. Some cost of living plans use the published national index without adjustment whereas other plans are based upon the index adjusted to reflect geographic region and purchasing habits of retired employees.
The following is an example of one cost-of-living plan under which the value of monthly income for pensioners is based on two factors: (a) the number of units of pension credited to the employee's account, and (b) the value of each unit as adjusted in relation to the cost of living index. At the time the employee retires, the II units of pension" are merely those which the employee has earned based on the formula under the plan. For example, under the Georgia Teachers' plan the number of units might be determined on the basis of the current formula (or a similar one) which provides a benefit equal to 1-3/4% for each year of service times .:In average of earnings near retirement. After the employee has retired, his pension is then checked semi-annually or annually. As the cost of living increases or decreases a corresponding adjustment is made in the employee's pension. Small variations may be ignored; large variations can be limited, say to 2% or 3%. Itls possible to incorporate a method to smooth minor month-to-month fluctuations in the cost of living index by basing all computations on a twenty-four monthly moving average of the latest twenty-four consumer price index reports of the Bureau of Labor Statistics. As indicated above, these reports can be adjusted to reflect the purchasing habits of older people as well as the geographic region in wh ich they are located.
BOWLES & TILLINGHAST, In<

3-31
A growing number of employers will-take steps to stabilize the purchasing power of retirement income and it is recommended that the State of Georgia consider a similar undertaking when further liberalizations are contemplated. The argument that higher than adequate incomes should be paid at the point of retirement to offset erosion of the purchasing power of this income during retirement years cannot be justified (see page 3-10). Should the economy falter and the purchasing power of the dollar increase, then the excessive retirement income becomes more excessive. On the other hand, upon being accustomed to the higher income, the retired employee is still faced with the problem of lowering his initially excessive standard of retirement living as inflation erodes the purchasing capability of his retirement income. The cost-of-living plan is a simple, a direct and, perhaps, the most satisfactory solution from the employee1s viewpoint. With respect to cost, the extent of additional contributions required for the cost-of-I iving feature cannot be measured independently of the investment program of a plan because investment in equities offers a reasonable hedge against increases in costs which may develop due to the cost-of-I iving feature. The twentieth century has shown a strong long-term correlation between the growth in value of equity investments and increases in the cost of living, even though in the short-term the movement of these factors has sometimes been in opposite directions. If the correlation were perfect, it follows that there would be no additional employer and/or employee contributions associated with the cost-of-living adjustment feature provided all of the assets held for retired employees were invested in equity investments. If, however, all investments held for retired employees were in fixed income securities and the maximum annual cost-of-Iiving adjustment in retirement income were set at a specified percentage by the plan provisions, the maximum additional required contributions can be estimated with a substantial degree of confidence. For example, if a plan provides that retirement income will be adjusted according to a cost-of-I iving index but such adjustment shall not exceed 2% per year, the maximum increase in required contributions to the plan would be approximately 18% to 20%~
BOWLES & TILLINGHAST, Ino.

4-1 $IEClfIlOINl ..
ORGANIZATION AND ADMINISTRATION
The organization and administrative procedures of each of the retirement systems were reviewed in detail. This involved an analysis of methods and a review of personnel. This section includes a brief review of the organizational structure of each of seven systems. The Superior Court Judges' and the Solicitors' General systems are administered by the State Treasurer's office with no clearly establ ished organizational structure. Thus, these two systems are not inc luded. On the following three pages there is a listing of the nine systems and certain information concerning the administering Boards. One of the charts reveals that there are thirty-three Board members in the aggregate for all nine systems. Ten of the Board members are employed by the State, six of whom are ex officio members of the Boa rd of one or more systems. Ideally, a Board should consist of knowledgeable, active and interested members who can attend all Board meetings and actively discharge the management responsibi Iity of the Board. Four of the thirty Board members have a total of seventeen Board memberships, or an average of more than four each. These members would not be expected to serve effectively and actively each system. There is merit in a Board member's not serving on the Board of any system of which he is an employee member. Such a restriction would prec lude his being in a position of conflict of interest. Since the nine different Boards logically serve the same basic purposes, it is apparent that there must be considerable dupl ication of effort resulting from the existence of nine separate Boards.
The statistical data on page 4-5 reveal that the Teachers' and Employees' systems have 92% of the total members and 92% of the total contributions. The five smallest systems represent less than 1% of the members and less than 2% of the total contributions. There is included in this section an organizational chart constructed as of April 1, 1965, for each
of seven systems with pertinent comments related to their operations. Foltowing a brief discussion of the expenses of admin istration of the systems, there are conc lusions and recommendations pertinent to organization and administration.
BOWLES & TILLINGHAST, Inc

RETIREMENT SYSTEMS OF GEORGIA

System Teachers' Retirement System Employees' Retirement System Peace Officers' Annuity and Benefit Fund Firemen's Pension Fund Sheriffs' Retirement Fund Ordinaries' Retirement Fund Superior Court Clerks' Retirement Fund Superior Court Judges' Retirement Fund Solicitors' General Retirement Fund

Location Atlanta Atlanta Griffin Atlanta Griffin Dalton Chatsworth Atlanta Atlanta

Administrator George E. Pittman W. Frank De Lamar Bill Ramsey Max Wiggins Bill Ramsey Ernest McDonald F. R. Kendrick Jack B. Ray Jack B. Ray

Attorney Attorney General
Attorney General
Arthur W. Bolton (Griffin)
Attorney General
Frank Twitty (Camilla)
Ernest Mc Donald (Dalton)
P. To McCutchen
Attorney General
Attorney General

..
~
Approval of Original Plan August 3, 1943 February 3, 1949 February 1, 1950 March 3, 1955 April 16, 1963 March 21, 1958 February 15, 1952 March 9, 1945 February 17, 1949

BOWLES & TILLINGHAST, Inc

Name of Individual
R. P. Ba Icom, Jr. James L. Bentley James Blissit Frank Block Esalee Burdette Ben B. Burgess
Grady W. Cochran Eugene Cook Ernest B. Davis Wallace Gray T. C. Greer
Eugene Gunby A. J. Hill Ralph Hood
Frank Hughes Ben T. Huiet Tommie S. Hunt

MEMBERS OF BOARDS RETIREMENT SYSTEMS OF GEORGIA

Position

------ ------ -----r-.---- .. ---,-- Emp. Month and Year Commenced Current Service as BO::lrd Member

of State

Teachers

Employees

------~----
Peace Firemen Sheriffs

Ordinaries

~~-p-er-;-ol S~eri~r~~~;ri-c-iton

Officers

our

our enerc

Clerks Judges

Warden, State Prison

X

Insurance Commissioner
Board of Regents C & S National Bank Teacher, Wilkes County Clerk of Superior Court, DeKalb County Chief of Police, Fort Valley Attorney General State Auditor

X 1-63* 7-65 3-64
I 7-65
X X 3-64*

Clerk, Coweta County
Chairman of Sheriffs Group, County Officers Association Chairman Retirement Board Sheriff, Pulaski County County Superintendent, Glynn County
Secretary, G. E. A.
Commissioner of Labor Chairman of Clerks Group, County Officers Association

7-64
3-56*
IX

1-63*

8-59 1-63*

1-63*

2-63*

9-65 2-50*

I

1-65

1-63* 1-63* 8-45* 8-45"

I

I

1-65

I 7-64* I

1-64 4-63

9-49*

1-65
~
I
eN

Name of Individual

Position

T

Emp ....-M-o-n-th-.a..-n-d--Y--e-a.r..-C--o-m-m....e-n-c-e-d- ..C..-u-r-r-e-n-t -S-e-r-v-i-ce....-a-s--B-o..a.-r-d--M-e-m--b-er---

of

Peace

Sc:cerior SuCerior Sol icitors

StatE

Teachers Employee

Off' Icer

Firemen Sheriffs Ordinaries . ourt CI erks

ourt J udges

G enera

Mrs.A. L. Hussey Ordinary, Toombs County

P. T. McCutchen, Sr. Attorney

Raymond W. McGill Secretary of Fire Assoeiatior

Paul E. Manners

Vice President, First National Bank of Atlanta

George C. Mutimer

President, Peace Officers Association; Sheriff Richmond .County

Jack B. Ray

Treasurer

X

Carl E. Sanders

Governor

X

Howard A. Schaffer Marietta Fire Chief

Griffen Smith

Chairman, Association, County Commissioners of Georgia

R. E. Spence Dan Stringer
Edwin L. Swain
Horace Tate Alton Tucker
Dr. Ralph Tyson 'N. M. Williams

Gainesville Fire Chief

Sheriff, Cherokee County

State Merit System

X

Executive Secretary, GJ.EA.

Chairman of Ordinaries Group, County Officers Association

Board of Regents

X

Treasurer, State Highway X
Department

Total Members

10

* Indicates ex officio members.

7-63 6-60

8-64 9-63*

1-65 4-63-*

1-63*

1-63* 8-62

4-65*

1-63*

11-61* 1-63* 1-63*

11-61 * 1-63*

3-65*

9-49*

8-64 4-63
6-64

7-63 2-64

9

7

6

5

5

5

5

3

3

-

STATISTICAL DATA
FISCAL YEAR 1963-1964

Teachers

l. Number of Members: a. Active
b. Retired-Serv ice -DisabiI ity
c. Total

48,217
3,678 355
52,250

Employees

Peace Officers

22,233
1,581 103
23,917

2,909
580 33
3,522

Firemen

Superior Sheriffs IOrdinaries Court
Clerks

Superior Court

Solicitors

Judges General

2,382

147

89

102

53

32

130

0

43

0

5

24

20

12

0

0

0

0

2,555

147

94

126

73

44

2. Contributions:
a. Member b. Non-Member c. Total

$11,910,781 $ 3,664,387 $ 319,026 $ 135,785 $ 66,393 $ 20,300 $ 12,728 $ 53,980 $14,249 18,077,737 6,395,311 1, 145,840 492,535 102,958 92,472 125,506 158,213 48,360 29,988,518 10,059,698 1,464,866 628,320 169,351 112,772 138,234 212, 193 62,tJJ9

3. Retirement Benefits
Paid

$ 6,761,832 $ 1,882,050 $ 770,906 $ 125,689 -0- $ 4,335 $ 55,698 $196,057 $65,746

~
In
BOWLES & TILLINGHAST, Inc

4-6
e Tea c her sIR e-t ire men t S y s t m
Lines of Authority and Functions. Certain of the employees in the system feel that they report di7~tiyt;the-&~c.;tiV~S~cr~tary& Treasurer although the organization chart indicates otherwise. It is natural for the employees who have been associated with the ES&T for many years to feel that they should report directly to him. The employees readily admit that certain of the other supervisors are "over" them, and they understand that they can get answers from them if they can't have audience with the ES&T. The management of the system is aware of this condition.
The organization chart reveals two levels of line authority between the ES&T. Actually, this is the result of a plan to provide for the orderly transition of responsibility when the ES&T retires. Even though Accounts Executive is shown as he is in the organization chart, he is actually in turn to become the Deputy ES&T. A review of the operations did not reveal any problems generated by the position of the Accounts Executive. Probably a more realistic presentation would show Williams as currently the supervisor of both General Office Administration and Accounting. However, currently an effort is being made to acquire an employee to assume much of the detail work now being performed by the Accounts Executive so that he can have more time to devote to general planning and administration in the various sections in anticipation of his move to Deputy ES&T. This will improve the administrative organization even though it might appear to produce a topheavy organizational structure. Whenever possible to do so, all administrative matters should be routed through the Accounts Executive and the Deputy ES&T before being presented to the ES&T.
~f.i~!.=~9'_~f_t.b~~ts.!.E!...m~ The various sections within the system are operating efficiently.
~~!J~i~!:!.CJ'_c:!!~~~'!!'~!.: The employees of the system appear adequately proficient in the performance of their duties and they appear to understand their functions.
Adequacy of Records and Controls. Records and controls of the system are adequate. The system keepsneat;a~~rote-ariCrcompiete records. The ES&T is commended for the diligent controls maintained on fiscal operations.
Since April 1, 1965, the system has been utilizing an IBM 1440 computer which is operated by employees of the Georgia Employees' Retirement System. The computer has replaced the unit record IBM system previously used for accounting work and although additional programming and adapting to the new system is required, the system should ultimately improve the over-all efficiency of administration. A further discussion of the computer installation will be found on page
4-8.
Miscellaneous. Certain minor changes which might be desirable have been discussed with the E~~~tT~-Se~~tary& Treasurer.
BOWLES & TILLINGHAST, Inc

TEACHERS' RETIREMENT SYSTEM Organizat ional Structure

I Investment Counselors f
I
I I Senior Stenographer Miss B. York
I
General Office Administration Section

Board of Trustees

I
Executive-Secretary & Treasurer

G. E. Pittman

I

I

Deputy Executive Secretary & Treasurer

W. H. Rucker

I

I

Accounts Executive

R. J. Williams
T T

Accounting Section

- Administrative Aide Mrs. E. G. Holladay

Senior Clerk

~

(Membersh ip)

Mrs. C. R. Jackson

Intermediate Clerk (Filing)
Mrs. M. E. Hemphill

Senior Accountant Miss M. Pirkle
Senior Accounting Clerk Mrs. D. B. Watts
Bookkeeping Machine Operator
Mrs. E. K. Harley

I I Senior Stenographer Mrs. B. Wiggins
I
I. B.M. Section Programmer - Analyst
J. A. Hauther
Senior Clerk Miss P. Roberts
Intermediate Clerk Mrs. A. Taylor

~
I
"

4-8
Employees' Retirement System
Lines of Authority and Functions. Certain of the employees of the system feel that they report cnrectiytotli~-EXecGihteSecretary& Treasurer, although the organization chart indicates otherwise. Th is is caused in certain instances from the long association of certain employees with the ES&T, and in other instances where the employee's work involves technical details, the employee feels the need to check with the ES&T.
The ES&T should require that all administrative matters be first directed to the Deputy ES&T if at all possible. This, of course, will neither preclude the ES&T's checking any phase of the operation nor prevent him from injecting himself into any administrative area which needs his counsel and guidance.
If the ES&T should retire and the Deputy ES&T assume the position of ES&T, there would be no one famil iar with all areas of the system's operations to assume theposition of Deputy ES&T. The management of the system is aware of this condition. Plans should be made for constructive action in this area since depth in management is as desirable here as in the Teachers' system.
Efficiency of the System. The efficiency of the system suffers considerably from the lack of adeq~t;-ofTfc;s~~;:-Alrareas of the system are crowded. There are only two areas adequate for holding interviews--the ES&T's office and the Deputy ES&T's office. Even so, it is necessary at times to hold interviews at other places in the office. This adds to the distraction already created by the over-crowded conditions.
No areaS were found where material savings in administrative costs could be obtained.
As of May 1, 1964, GERS installed a 1440 electronic computer which is also being used by the Georgia Merit System and the Teachers' Retirement System. A review of the operation of the system indicates that at the present time it is not being used as a fully integrated computer system, but rather is largely used as a unit record installation which was the type system the GERS used prior to installation of the computer. Although this results in some inefficiency, this condition is only temporary and often exists in new computer installations until such time as the personnel operating the system have acquired sufficient experience and the necessary computer programs have been developed and placed in operation. The personnel who were operating the old installation were sent to computer programming school and are now in the process of acquiring the necessary practical experience for implementing computer concepts.
Additional space for the installation is required for the existing operation and therefore there is no room for growth. Although the present equipment is adequate for the work anticipated for the Employees' Retirement System, use of the Computer Center by other departments could necessitate expansion in the facilities.
Proficiency of Personnel. All employees of the system appear adequately proficient in the perfOrmanceofilielrd"Ut'ie'5-and they appear to understand their functions.
~~~~~c:Y_~!~=-~~s_~~_~~~~I!. The records and controls of the system are adequate. The system maintains neat, accurate and complete records, and the ES&T should be commended for the dil igent controls maintained.
BOWLES & TILLINGHAST, Inc

EMPLOYEES' RETIREMENT SYSTEM Organizational Structure

IGeorgia Real Estate Investment Boardb""'1

I I--

Board of Trustees

""'1

I

Assistant Attorney General

~1I--1I '

I

I 1I -----1

Actuary

I

I

Investment Counselors

I L_ ~..J

Executive Secretary & Treasurer W. F. Delamar

.-.J-----1

F.R.A. Servicing Agents

I

Confidential:>ecretary Miss M. L. Davis

Deputy Executive Secretary & Treasurer E. W. Van Houten

Finance Division
Prin. A,cct. - C. E. Gilmore

Computer(::enter Chief - D. C. Raine

Field Representative H. G. Talley

S-enior Stenographer (Vacancy)

J,

4-10 Peace Officers' Annuity an-d Benefit Fund !:.ine5.-~_~.!.ho!.i'!y_a~_~~~t.!.~".!.. The Iines of authority as revealed on the organization chart are foTrowed. The employees of the Peace Officers' Annuity and Benefit Fund also administer the Sheriffs' Retirement Fund. The organizational structure and personnel are the same for both funds. E.f.f.i-=!:~:'y_~f_~.!.t.=~. The internal systems and procedures of the fund appear to be acceptably efficient. There is a problem related to the source of non-member contributions to the fund since it is impossible to ascertain the amounts that should be collected from each of the non-member contribution sources. (See Appendix for reference to contributions to the fund other than from members.) The management of the fund has found it necessary to resort to court action to collect non-member contributions from certain of these sources. Recently the Board authorized the Secretary-Treasurer to uti! ize the full ~ime services of a Field Representative for making spot audits of payments made to the system by the courts. Such activity will continue for a ninety day period at the end of which time the Board will evaluate the results and determine if the practice should be continued. ~~~~i.=!!.c:Y_~!'=~~'!!'=!.: The employees of the fund seem to be adequately proficient in their duties and appear to understand the ir function. A~~~c:Y_of!.=~~~s_<!!,,~_~~!!~ls. The records and controls of the fund appear to be adequate except Jor the source of non-member contributions and, of course, it is impossible for this to be controlled by the fund.
BOWLES & TILLINGHAST, In<.

PEACE OFFICERS' ANNUITY AND BENEFIT FUND
Organizational Structure [ Investment Counse lors
IGeorgia Real Estate Board
~
I
- - - - - - - - - - - - - BOWLES & TILLINGHAST, Inc

4-12 Firemen's Pension Fund Lines of Authority and Functions. There are 2-1/2 employees involved in the administration of
'ih-e-runrlhefunctTonsandITii'es of authority are as they appear on the organization chart.
~!!~.!..e~.:.t.~~~!!=~.:.. The efficiency of the administration of the fund appears to be adequate. Proficiency of Personnel. The employees of the fund seem to be adequately proficient in their dutiesandOppeariO-understand their function. ~de~~c:L~_R..=.:.~~~c:!'l~_~o~~!!. Records and controls maintained by the Firemen's Pension Fund are adequate.
BOWLES & TILLINGHAST, In'

GEORGIA FIREMEN'S PENSION FUND Organizational Structure

Board of Trustees
Secretc.-y-Treasurer M. Wiggins

I Legal

I Secretary (I)
M. Hanners

I
Clerk (Half Time) (2 J. Jackson

~
I
Co)
BOWLES & TILLINGHAST, Ino.

4-14 Sheriffs' Retirement Fund ..!:!!'~~~_~~~~!.!l.~~~~~~!.!~~.:.The functions and lines of authority of the fund are as they appear on the chart of the organizational structure. The same personnel are also employees of the Peace Officers' Annuity and Benefit Fund and administer that fund. Efficiency of the Fund. The efficiency of the fund is adequate. The only problem area is the so~rceo7-;;on-membercontributions. (See Exhibit A for reference to contributions to the fund other than from members.) ~r~~~i~~':Y_~!~!:...~'!!'~!: All of the employees of the fund seem to be adequately proficient in their duties and appear to understand their function. ~~~~~':Y_~_R.:~~~s_~~_~.!!~~I!~The records and controls maintained by the fund are adequate.
BOWLES & TILLINGHAST, In,

SHERIFFS' RETIREMENT FUND Organizational Structure

I Board of Commissioners 1--------1 Legal

I

I Sec retary

( 1)

I Mrs. J. R. Reeves

I

Adm inistration

J

Members <:Ierk -and (2J

I-

Retirement Clerk

Mrs. J. Gilbert

Bookkeeper and (3)

~

Members Clerk

A. Malone

Receptionist and Court (4; '-I Clerk and Payroll Clerk
H. C. Brooks

Secrefary':'"Treasurer B. Ramsey
I

BOWLES & TILLINGHAST, Inc

I
Auditing
~ FIe Id Representatlve (5) James F. Walker
~ FIe Id Representatl.ve (6) G. Williams
~
I
~
01

4-16 Ordinaries! Retirement Fund Lines of Authority and Functions. The Secretary-Treasurer and Attorney of the fund is th~ only ;mpfoyee-pcifdby-fh;fund-:- However, a clerk in the law office operated by the SecretaryTreasurer and Attorney performs most, if not all, of the necessary general office duties. The Secretary-Treasurer and Attorney handles all inquiries concerning the legal technicalities of the fund, signs checks and any other neGessary documents, attends appropriate meetings and makes reports concerning the fund. Efficiency of the Fund. The efficiency of the administration of the fund appears to be adequate fn-OiTrespectS~- - - - Proficiency of Personnel. All of the employees of the fund seem to be adequately proficient in t'"heTr-dutles-and-appearto understand their function. Adequacy of Records and Controls. The records and controls maintained by the fund are adequate,-TheonlyprObrem-ar;;lS"the soarce of the non-employee contributions to the fund.
BOWLES & TILLINGHAST, Inc.

ORDINARIES' RETIREMENT FUND Organizational Structure

Board of Commissioners

I ____ --~ Actuary

Secretary-Treasurer and Attorney C. E. McDonald
Clerk Mrs. E. J. Coggins

~
I
.~ ....., BOWLES & TILLINGHAST, 1.<

4-18
Superior Court Clerks! Retirement Fund Lines of Authority, As the Secretary-Treasurer is the only employee employed by the fund, the o~yTineof;cth;;'ity is that which runs from the Board of Commissioners to the Secretary-Treasurer and no problems exist in this area, Efficiency of the Fund, The efficiency of the fund is certainly adequate, especially when viewed T~theli9ht~rthe-;'-;destadministration expenses of the fund, Proficiency of PersonneL The Secretary-Treasurer is very proficient in administering all areas of hf's-;:-esponsfbility---H-e-fs a retired Superior Court clerk and understands his duties very well and is particularly valuable because of his having been a Superior Court clerk Adequacy of Records and Controls. All records of the fund are accurately, neatly and legibly preparecT.-1;istTng-controisappear to be adequate for the fund, A problem exists with respect to the source of the non-member contributions. (See Exhibit A for reference to contributions to the fund other than from members,) The Secretary-Treasurer does a good job of scanning the payment history of each county and checks into any abnormal change in the amount of the contribution, There is a good control on all monies after they are received in the Secretary-Treasurer's office,
BOWLES & TILLINGHAST, In,

SUPERIOR COURT CLERKS' RETIREMfNT FUND Organizational Structure

Board of Commissioners
Secretary-Treasurer F. R. Kendrick

.,
i I : r Investment Counselors

II
II II
1--1
J iI I
L

I Legal Counselors

BOWLES & TILLINGHAST, In<

4-20
Expense of Administration
The chart which follows shows the expenses of each of seven of the nine retirement systems during the fiscal year 1963-64. The Superior Court Judges' and Solicitors' General systems have been omitted since they are administered by the State Treasurer and expenses involved are not directly determinable.
The expenses incurred in the operation of the Social Security Unit of the Employees' Retirement System, which are determined and allocated on a basis which appears to realistically reflect the cost of administering the Social Security Unit, are shown separately. This Unit collected approximately $25,000,000 in employee-employer contributions from approximately 115,000 participants in over 1,300 reporting groups. A total of 21,750 of these participants were members of Division A of the Employees' system. Three employees of the Employees' system are permanently assigned to the Social Security Unit.
The Social Security Unit is self-supporting. All reporting groups except State departments are charged .3% (3/1O of 1%) of total contributions for administration expense and, in addition, investment income is received from savings accounts in which the advance deposits required of certain reporting units have been deposited. The total amount of cash currently being held in savings accounts is approximately $1,200,000. Also, income is realized from short term investments in U. S. Treasury bi lis during the period quarterly remittances from reporting units are held prior to their transfer to the Social Security Administration in Ba!timore. Although the current income for administration is in excess of expenses of the Social Security Unit, such excesses will be used as current sources of income diminish or for the purpose of reducing future administration charges to the reporting units.
Administrative Expenses
Board of Trustees. In the case of the Employees' system, one Board member receives compen~tiO;~f$~OOOper year allocated as an expense equally divided between the Employees' system and the Social Security Unit. If this amount is compensation for legal services, it should be so classified. It is shown as travel expense in the audit reports and as Board of Trustees in the table. The three peace officers who serve on the Board of the Peace Officers' system receive a $25 per diem for attending Board meetings. The 1964 January Legislature provided a $20 per diem for each day of meetings as well as travel expenses for Board members of the Teachers' system.
~~!i_~~.!:.i~~ This represents all salaries paid to the employees, full or part-time, of each system.
Legal Fees. This figure includes all professional fees and charges, court costs and other expensesinvolved.
Actuarial Fees. This includes all actuarial services rendered. In the case of the Employees' system~add1ilonal services were rendered during 1963-64 with regard to publishing a descriptive booklet of the benefits for the members; consequently, the fee is approximately $10,000 higher than the usual annual fee.
BOWLES & TILLINGHAST, (no.

4-21
Investment Expense. This represents the fees charged by the agencies servicing the investment accoU"ntsortlieSystems. The Teachers' system utilizes the services of the C & S National Bank. The Employees' system is serviced by the First National Bank of Atlanta for $24,000 a year with the balance of the $47, 135 going to five FHA servicing agencies.
~~.!: This figure includes only the actual rental incurred for office space.
Travel. This represents the expenses incurred in reimbursement of employees and Board members fc,r-;;~y and all travel incurred in the performance of their duties for the system.
Other. This represents all other expenses than the seven itemized above, including office ma~hin;rental, IBM rental, office supplies, postage and all miscellaneous expenses normally incurred.
Capital Invested This represents an approximate value placed on all furniture, fixtures and equipment owned by the system such as typewriters, desks, check writing machine, bookkeeping machines, etc. In the case of the Peace Officers' it includes $47,000 invested in their own building and lot in Griffin, Georgia.
Number of Members The total number of active and retired members, rounded to the nearest 10.
Total Number of Staff Employees The number of employees on the payroll of the system, excluding the Board members.
Total Contributions This is the total contribution, member and non-member, received by the system.
Unit Expense Factor as a Percentage of Contributions This factor is calculated by dividing the sum of administrative expenses and 10% of capital invested by the total contributions.
Unit Expense Factor Per Member This factor is calculated by dividing the sum of total administrative expenses and 10% of the capital invested by the total number of members.
Unit Expense Factor with Adjustment Since the Teachers', Employees' and Social Security Division pay no office rent, the administrative expenses have been increased by a rent charge of $600.per staff employee per year. This produces a slightly higher unit cost as shown in this item.
The high unit expenses for the four smallest systems shown are not unexpected. The unit expense per member in the Employees' system would be expected to be higher than for the Teachers' system since the Employees' system involves a considerably more complicated plan than the Teachers' system. The public relations and pre-retirement counselling effort of the Employees' system also increase their un it costs per member.
BOWLES & TILLINGHAST, Inc.

Item

EXPENSE OF ADMINISTRATION

~

FISCAL YEAR 1963-1964

~
"J

Total (Excl. ~_______ ~________ ~________~1~!~~ ________________________

Social

Peace

Superior

Social

Security) Teachers Empfoyees OffIcers Firemen Shenffs 0 rdmanes Court CI erks Security

1- Administrative Expense:

a. Board of Trustees

$ 6,813

b. Staff Saldl::ies

227,749

c. legal Fees

16,803

d. Actuarial Fees

28,364

e. Investment Expense

94, 178

f. Office Rent (see Item 8) 4,863

g. Travel

14,056

h. other

90,984

i. Total

$483,810

$ 583 90,433 3,077 8,530 40,000
01,414 50,025 $194,062

$ 4,000 74,296
-018,544 47, 135
-01,067 19,850 $164,892

$ 1,305
37,525 6,.932
-06,466
-09,663 9,855 $71,746

-0$15,919
2,359
-0-02,647
400 6,616 $27,941

$ 490 3,023 1,455
-0327
1,694 1,062 1,008 $9,059

$ 24 2,383 2,200
-0-
-0330 238
2,732 $7,907

$ 411 4,170
780 1,290
250 192 212 898 $8,203

$ 4,000 58,550
-0-0-
-O-
-02,624 25,618 $ 90,792

2. Capital Invested

$118,371 $ 32,266 $ 16,000 $63, 103 $ 5,228 $ 424 $ 750

$ 600

NA

3. Toto I Number of Members

82,620 52,250 23,920

3,520 2,560

150

90

4. Total No. Staff Employees 5. Total Contributions (OOO's)

49

17

$ 42,562 $" 29,989

18 $ 10,060

(Same Em-

8

3 ployees as

Peace Off.

$ 1,465 $ 628 $ 169

1 $ 113

130

115,000

2

3

$ 138 $ 25,000

6. Unit Expense Factor as %
of Total Contributions
7. Unit Expense Factor Per
Member
8. Unit Expense Factor and
Adjustment (Per Member)

1.20%

.70% 1.70%

5.30% 4.50% 5.40% 7.1'0%

$6.00 $3.80

$7.00

$22.20 $11.10 $60.70 $88.70

NA

$4.00

$7.40

NA

NA

NA

NA

6.00% $63.60
NA

.40% $.80 $.80

4-23
The expense as a percent of total contributions is not a reliable index since it would reflect the varying degrees of actuarial funding which in tum would determine the total contributions and thus such a percent.
The costs per'member for the two rna lor systems appear to be reasonable. The un it costs for the others are statistically not very meaningful.
Conclusions and Recommendations
Generally, the various systems are efficiently administered. ThiS reflects both the effect of good fiscal accountflng procedures required by the State and the caliber of admini:5rrative pe~or,nel. The systems are being administered in accordance with the law. There appears to be proper accounting for member contributions but there are problems related to securing non-member contributlons in certain systems; such as in the Peace Officers l , Ordinaries', a,.,d Superior Court Clerks' (See Exhtbit A for reference to cont.rfbutlons other than from members.)
In the absence of signtftcant revisions in the total benefit and organizational structure of the systems, there appear to be no areas in which substantial economies may be achieved in the administration (excluding investments) of the systems, except perhaps in the area of a centralized electronic data processing and computing service.
A problem area involved in the Peace Officers&, Sheriffs', Superior Court Clerks' and Ordinaries' systems Is the source of non-member contributions. The only way to assure that all non-member contributions are being made to those systems that derive their non-member contributions from fines and bond forfeitures is to have every county concerned audited. However, such an audit would be very expensive. An alternative would be to change the source of the contributions. If neither of these two methods is practicable, the very least that should be done is to have spot audits each year.
Ideally, Georgia should have one retirement system under which at least all State employees would be covered, with one Board of Trustees, one administrative office and one fund. Such a consblidation would initially probably not produce a significantly lower office procedures administrative expense rate. Ultimately it appears that such a consolidation could effect' an cdministrative expense savings (other than effect on investment return) of from $30,000 to $50,000. If the various systems uHlized the electronic computing fac iI ities available in the State and combined all funds into one large fund for investment, there could be a savings in actuaiilal and ll'lvestmen't fees under consolidation of the actuarial and investment functions even though there were no admInistrative consolidation.
BOWLES & TILLINGHAST, Ino.

5-1
SIEClrllOINl S
REVIEW OF ACTUARIAL METHODS AND PROCEDURES
General
The specifications for this study included the following:
"ldentification (but not intensive analysis) of plans which obviously are not actuarially sound with explanation of the determination; identification of the plans which appear of doubtful soundness. II
In making this determination, the actuarial reports and the experience studies made for the various retirement systems during the last seven years were studied. The opinions expressed in this section are based upon a review of these reports and upon the conclusions presented therein. All of the reports appear to have been prepared using accepted actuarial methods and procedures.
The table on the following page has been prepared to summarize a few basic characteristics of each retirement system and certain other facts which have a bearing on the actuarial and financial condition of the systems.
Observations and Comments
For all systems, except the Superior Court Judges' and the Solicitors' General, a comparison of lines 2 and 3 of the table shows that the annual contributions to each retirement system exceed the annual benefit payments by substantial amounts. The State contributes to the Superior Court Judges' and Solicitors' General systems only the amounts necessary, in addition to contributions previously made by the retired members, to pay current benefits to each such member.
Comparison of lines 4 and 5 of the table shows that the assets of the Teachers', Employees', Firemen's and Ordinaries' systems substantially exceed the liabilities with respect to members and benefic iaries presently receiving benefits. The Sheriffs' plan was establ ished in 1963 and no benefits are being paid at the present time. The Iiabil ities of the Superior Court Judges' and Solicitors' General systems are unknown but no State funds in excess of the amounts necessary to make current benefit payments have been contributed to these funds. The assets of the Peace Officers' system amount to only $6,400,000 compared to liabilities of approximately $9,000,000 with respect to members or beneficiaries currently receiving benefits.
Line 8 of the table indicates that only two systems, the Teachers' and Employees', have any requirements in the law regarding actuarial valuations and the experience studies and the frequency thereof. Both systems require valuations annually and experience studies not less frequently than every five years. Both systems do have regular annual valuations and have had experience studies conducted recently as indicated on line 9.
BOWLES & TILLINGHAST, In<.

SUMMARY OF DATA RELATED TO THE ACTUARIAL AND FINANCIAL CONDITION OF EACH SYSTEM

.'I".,

J. Number of Members: a. Active b. Retired
2. Estimoted Totol Annual Contribution
3. Estimated Annual Benefit Pay-Out

Teachen'
48,217 4,033
$30,000,000 6,760,000

Employees'
22,233 1,684
$10,100,000 1,880,000

Peace Officers'
2,909 613
$ 1,500,000 771,000

Firemen's
2,382 173
$ 628,000 126,000

Sheriffs'
147

$170,000 -0 -

Ordinaries'
89 5
$113,000 4,300

Superior Court Clerks'
102 24
$ 138,000
56,000

Superior Court Judges'
53 20
$212,000
196,000

Solicitors' General
32 12
$ 63,000
66,000

4. Estimoted Liability for Members Receiving Benefits
5. Estimated Assets

55,000,000 264,000,000

25,000,000 80,000,000

9,000,000 6,400,000

1,400,000 5,500,000

--
327,000

35,000 .642,000

500,000 792,000

Unknown 294,000

Unknown 147,000

6. Basis of Contributions: a. State

Percent of payroll. Percent of payroll. Allocations from fines ond bond forfeitures.

Taxes on fire insurance companies doing business in the State.

Allacations from fines and bond forfeitures.

Allocations from marriage licenses, fi nes, and bond forfe itures.

Allocations from Benefits are

fines and bond guaranteed

forfeitures.

by State.

Benefits are paid in full by State.

b. Member

Percent of pay.

Percent of pay.

Flat monthly amount.

Flat monthly amount.

Flat monthly amount.

Percent of pay with Percent of pay- Percent of pay. Percent of pay

fixed dollar maxi- roll with fixed

with fixed dol-

mum.

dollar maximum.

lar maximum.

7. Basis of Benefits

Percent of finol average pay for each year of service.

Percent of career
pay and finol average pay for each year ()f service.

Flat amount related to service.

Flat amount.

Flat amount re- Percent of average
lated to service. pay.

Percent of pay with fixed dollor maximum.

Percent of pay. Percent of pay with fixed dollor maximum.

8. Provisions of Law Regarding: a. Frequency of actuarial valuations. b. Frequency of experience studies. c. Insuffic iency of fund.

Annual.

Annual.

Every 5 years.

Every 5 years.

Annual valuations Board has power indicate amounts to increase State necessary f",r suffi- contributions . c iency of fund and fixes contribution percent accordingly.

9. Year of Most Recent: a. Actuarial valuation. b. Experience study.

1964 1964

1964 1963

10. Data from Most Recent Actuarial
Report: a. Accrued liability for all members b. Assets of system.
c. Unfunded accrued liability.

$369,000,000 234 ,000 ,000
135,000,000

$90,000,000 72,000,000
18,000,000

None.

None.

None.

None.

None.

None.

None.

None.

Benefits reduced when funds not available to pay benefits.

Benefits reduced when funds not available to pay benefits.

Benefits reduced Benefits reduced

when actuarial when actuarial

valuation reveals valuation reveals

inodequacy of inadequacy of

current contribu- current contribu-

tions.

tions.

None.

None.

None.

None.

None.

None.

Benefits reduced when funds not available to pay benefits.

State assumes full liability for benefits.

State assumes full liability for benefits.

1960 None.

1963 None.

1963 None.

1961 None.

1964 None.

None. None.

None. None.

$17,200,000 2,500,000
14,700,000

$7,300,000 4,600,000 2,700,000

Unknown $327,000
Unknown

Unknown $642,000 Unknown

$1,920,000 650,000
1,270,000

Unknown $294,000' Unknown

Unknown $147,000' Unknown

11. Actuarial Methods and Assumptions

Elaborate valuation Elaborate valuation Valuation indimethods and assump- methods and assump- cates that current tions based on expe- tions based on expe contributions are rience of system rience of system. fram 1/2 to 3/4 Current contribution Current contribution of contribution rate slightly greater rate slightly greater required to supthan rate required than rate requ ired port the benefits. to meet full current to meet full current Eventual insolcost and to cover cost and to cover veney of Fund is interest on existing interest on existing very probable. unfunded liabilities. unfunded liabilities.

Valuation indicates that current contributions are odequate to support the benefits provided by the system.

Approximate val- Approximate valua- Valuation indi-

uation methods tion methods and cates that cur-

and assumptions assumptions indi- rent contribu-

indicated that cated that contribu- tions are ade-

contributions

tions will probably quate to support

will prabably be be adequate to sup- the benefits pro-

adequate to sup- port the benefits. vided by the

port the benefits. Actual experience system.

Fund started in more favorable than 1963, no expe- assumptions on whic~

rience data

calculations were

available.

mode.

None.

None.

* All member contributions.

5-3
A review of line 10 shows that four systems; Teachers', Employees', Peace Officers', Firemen's and Superior Court Clerks'; have substantial unfunded liabilities in excess of the liability covered by the assets of its systems. The funding of the Teachers', Employees', Firemen's and Court Clerks' systems provide for the payment of interest, at least,on the unfunded liabilities.
Group 1 - Systems in wh ich contributions and benefits are related to the same base. The Teachers' and Employees' systems are in this group.
Group 2 - Systems in which the State contribution is essentially independent of, or only indirectly related to, the basis for member contributions and benefits. The Peace Officers', Firemen's, Sheriffs', Ordinaries' and Superior Court Clerks' systems are in this group.
Group 3 - Systems in which the State contributes only the amounts required to meet the benefit payments as they fall due. The Superior Court Judges' and the Solicitors' General systems may be considered to be in this group.
The actuarial valuations performed on Group 1 plans produce contribution rates which are inherently more stable than those for Group 2 plans under which the contributions are, at best, only indirectly related to the base of the benefits provided by the systems.
The valuation reports as summarized on line 11 of the table indicate that, in the opinion of the actuary of each system, the Teachers', Employees', Firemen's, Sheriffs', Ordinaries' and Superior Court Clerks' systems are being funded pursuant to accepted actuarial methods and procedures. The Peace Officers' plan is definitely underfunded; the total assets on hand of $6,400,000 is only slightly more than 70% of the liability which exists with respect to the retired members and their benefic iaries.
No valuation has been performed for the systems of the Superior Court Judges' or the Sol ic itors' General.
Conclusions and Recommendations
In general, certain retirement systems (Teachers', Employees', Firemen's, Sheriffs', Ordinaries' and Superior Court Clerks') are being funded j:)Ursu"ant to accepted actuarial methods and these systems cover more than 79,000 members. About 3,500 members are covered by a system (Peace Officers') which is partially funded and fewer than 117 members are covered by systems (Superior Court Judges' and Solicitors' General) to which the State does not contribute in advance of the amounts required to meet current benefit payments.
It is recommended that steps be taken to provide for the adequate advance funding of benefits for all systems. In order to measure the magnitude of the contribution deficiency wh ich exists at present, it will be necessary to obtain an actuarial study of each of the Peace Officers', Superior Court Judges' and Solicitors' General systems.
BOWLES & TILLINGHAST, Inc

6-1
SIEClrllOlNl cffl
I NVESTME NTS
General
The assignment of Bowles & Tillinghast with respect to investments included lIidentification of sound and weak investment programs and a general outline of guideposts for strengthening weaker investment programslJ It was also specified that "spec ific attention should be directed to the possibilities of fund consolidation with retention of accounting segregation as necessaryll.
The discussion in this section is confined to general principles, with no attempt to evaluate individual investments. Comments are made, however, on classes of investments as opposed to individual securities.
In evaluating the success of any investment program a determination of the yield and appreciation of each fund is essential. Unfortunately, because of the diversity of reporting procedures, and in some cases the lack of data, it was impossible to calculate these figures for each fund on a consistent basis.
Investment Objectives
The basic investment objectives of all of the funds are the same, although the emphasjs on individual objectives varies by the size of the fund and by the nature of the retirement plan. The investment portfol io of each fund should reflect these objectives. The attainment of the optimum investment portfolio would be facilitated by a clearly defined statement, preferably in writing, of the investment policy for each system. The following basic objectives should be reflected in such policy:
1. ~~~!:!!y_~!!.i~~..iE~I...:. The most important objective for each fund is security of principal. Safety does not necessarily require that the market price of an investment never fall below its costs, but it does require that unsound and unprofitable risks be avoided. Safety of princ ipal may be achieved only through careful selection of individual commitments and diversification, unless investments are confined to governmental securities and insured deposits and loans.
2. ~i..9~i~!!t. liquidity has been defined as the ability to readily convert investments Into cash. liquidity will recognize the relationship of cash income to demonds for benefit payments. Liquidity may also be important if it is felt that long term commitments may be undesirable at certain times and that investment opportunities will improve:
3. Adequate Return. Each fund requires a return on investment which will be sufficient, withT~urecontributionsand invested assets, to support the benefits to be paid.
BOWLES & TILLINGHAST, Inc

6-2
'S"everaTpTOns 4. Appreciation. For certain funds appreciation may be as important as current income. provide for benefits based on final average earnings. During a period of inflation, salary increases usually follow the increased cost of living and, in many plans this results in increased pension benefits. Investment objectives of such plans should recognize this relationship and hedge against increased pension liabilities by investing a portion of the fund in investments which are similarly affected by inflation, i.e., equity investments. The difference between seeking reasonable capital growth and speculation must, however, constantly be kept in mind. The funds of the various systems are monies held in trust to meet future obligations; if these obligations are to pay a predetermined dollar amount it is not desirable to invest in equities in the hope that appreciation will permit raising benefit levels. Equities involve more risk than debt securities, and should be included only as part of a carefully considered plan which places each of the economic hazards in its proper perspective. The ability to meet contractual obligations of the plan should never be endangered.
5. ~lP.!:!:Yi.si.~...:. The importance of adequate supervision of the investment portfolio requires that the necessary time and ability be provided for such supervision.
6. Legal Limitations. Each fund must operate within the legal limitation imposed. The Clerks' O-;di~ro-iesi:theSuperiorCourt Judges' and the Sol ic itors' General funds are limited to legal investments for trust funds in Georgia. Authorized investments for other funds are related to those permitted for insurance companies.
7. Conflict of Interest. No investment, of course, should be made where any conflict of hlterestontlie-part-of those authorizing or influencing the investment could possibly be involved.
Investment Problems
A table presenting the distribution of assets of each fund is shown on the following page. The table indicates that of the nine funds, the largest has assets of more than $260,000,000 and the smallest approximately $150,000. The wide variation in portfolio size alone means that the investment problems of the various funds are quite different. In addition, the apparent ob jectives of the funds place widely different emphasis on basic investment objectives.
The five smallest of the nine funds have, in total, less than one-half of 1% of the total assets. Because of their comparatively small size these funds have investment problems which differ from those of the larger funds. These spec ial problems inc lude:
1. It takes a larger percent of the total assets in cash, demand deposits, treasury bills and other investments which can be converted to cash readily to maintain a reasonable degree of Iiqu idity than is the case of the larger funds.
2. It is more difficult to obtain the desired diversification of investments.
3. Investment expenses, even though nominal, are necessarily a higher percent of the investment income.
BOWLES & TILLINGHAST, 1.<

DISTRIBUTION OF ASSETS OF EACH FUND Market Value as of Date Shown

Teachers'

Employees'

Peace Officers'

2/28/65
--A;;;ou~t--rOI;-

--Amo3;/;3';1-/;6-5-T-%--

3/31/65 --An,o-;;nt--r%--

Superior

Firemenls

Sheriffs'

Ordinaries'

Court Clerks'

10/26/64

3/31/65

3/31/65

3/31/65

T -Aino~nt--'-o/c,-- -A;;;ount "To- -Amo-;;nt'-o/c,-- -A;;;ount-i"%--

Superior

Solicitors'

Court Judges'

General

3/31/65

3/31/65

-A""mo~nt-I-o/c,-- -A;;;ou~tTo/;;---

I. Cash and Demand Deposits
2. Time Depos its
3. Treasury Bills
4. Savings & Loan Deposits
5. Bonds of Federa I Government and Government Agencies
6. State, State Authority and Municipal Bonds
7. Other Bonds
8. Mortgage Loans FHA and VA

! $ 1,893,354 1%
-0- ---
5,202,520 2
--- 170,000
3,240,181 1 i !
- 0 - ---
185,544,860 70
-0- ! ---

$ 187,727 ! ---0- ---
947,333 1%
187,500 ---
2,498,570 3
- 0 - ---
47,300,128 59 !
3,583,972 4

$ 93,478 : 2%
I 1 1 I
55,000 I 1
I
- 0 - 1I --I I
680,000 : 11
I 1 I I
208,400 3
i
- 0 - ---
1,166,676 18
188,525 3

$ 155, 575 1 3%
I I

i $ 7,050 2%
I I I

1

- 0 - J ---

-O-

I

I--

:I
- 0 - ---

-0-

I
1---

---

1

515,000 1 9

-0-

I
J --I
:1 ---
I
I
1 ---
I I I

258,950 5 i

II
95,290 29
1 I I
I

197,735 4

-0- ---

1,124,148 20

-0-

---
1

1

I

- 0- ---0- ---

$ 12,264 1, 2%
I I I
290,000 I1 45
I
-0- ---
340,000 53

-0- ---
I
i
- 0 - ---

- 0 - ---

-0-

I
1 ---
I I I

$ 45,085 6%
- 0 - ---
-0-
500,000 63
25,500 3
1 I
I 8,440 II 1
I
-0- --- 0 - ---

$ 54,332118%
I 1
II
240,000 82
I
- 0 - I1 --I I
-0- ---

- 0 - ---

-0-0-0-

i
I
11 --I I
I I 1--I I
I
1--I I I

$ 27,458: 19%
I I I

I
I 120,000 81 I

I -0- I --I

-0-

I I ,I ---
I
I

-0-0-

I I I --I 1 1 I I I 11 ___
1
I
I

-0- ---

-0- ---

9. Other Mortgage Loans 10. Mutual Funds II. Stock - Common
Preferred 12. Other
13. Tota I

18,910,550 7

-0- --I
1
41,753,8091 16 7,261,4121 3
I

-0-

I I 1 --1
r
1

I
$263,976,6!r61100%
I

6,756,386 9
-0- ---
14,949,224 19
846,825 I 1
I 1
3,158,701 1 4
1 1 I I
$80,416,266 hOO%
I

653,412 10
- 0 - ---
I
3,093,528 I 48 218,188 : 3
+1 --I
46,765*1 1 1,350:: ---
I I
$6,405,322 1100%
I
1

I
496,4351 9
1
I
1,260,3321 23
I

1,455,016: 26 64,3501 1
1

-0 -

I I I ---
1 1 I

1
$5,527,5411100%
1 I

-0- ---
- 0 - ---

225,082 I 69
- 0 - I ---
I

-0-

1 1 1 ---
1 1
,1

$327,422: 100%
I 1

-0-0-

I 1 I ---
1 .L 1 1 1 --1

-0-0-

I I --1 I --1

- 0 - ---
-0- 1---
I
:
211,266 I 27 - 0 - 1I ---
1

1
, -0- I ---
I I

-0-

1 1 1---
1

I

I

I

I

1 1
$642,264: 100%
J

1

1
$792,291 1100%



J

1

-0-
-0-
-0-0-
-0-

1 I I --1
:
1---
i
I
1 1 --1 1 ---
1 1 1 1 1 --I I I

I
P1
$294, 332 00%
I

-0- ---

-0- ---

-0- ---0- ---

-0-

I
T
1 --I 1
i

I

$147,458 :100%

I

I

* Home Office Building

0-

l U. S Treasury F. H.A. Debentures

c!.,

6-4
4. Professional supervision is relatively more expensive to secure.
5. The smaller funds are not in a position to take advantage of special situations such as direct placements.
Certain of the smaller funds have attempted to meet these prob'ems by confining their investments to types where relatively little supervision is required or to types where supervision is furnished but is paid for by a significantly reduced yield. An example of the former is savings and loan deposits which, to the extent that they are insured, require no supervision as far as security of principal is concerned. An example of the second is the investment in mutual funds, where a percentage (usually from 6% to 8%) of the investment is paid as a commission and a portion of the earnings of the fund is retained to cover the cost of management of the fund.
There are at least two possible solutions to the problems of the smaller funds~
1. Bank Pooled Funds. By the use of bank pooled funds it is possible to obtain skilled in~stmeMtiii;oogement,the advantages of investing larger sums of money, and at the same time maintain the balance between dollar assets and equities appropriate for the particular fund. Several banks have various types of pooled funds available.
2. Pooled Retirement Fund. The assets of all nine funds are approximately $359,000,000. Asr;,g~-f~;d;;mp7fs~-~rofthese assets, but retaining separate accounting for each system, would provide a fund large enough to accomplish the basic objectives of the systems. It would be necessary to have two sub-funds, one composed of fixed dollar assets and the other of equities. Individual systems could participate in these two sub-funds in the desired proportions. The advantages of such an arrangement would be:
a. The fund would be able to obtain adequate diversification geographically, by industry, by corporation with in an industry, by maturity date and by c lass of security. This would minimize the danger of bsses due to the decline of any industry, to a disaster in any geographic region, to error or defalcation by any management group, to changes in the price level or to changes in the interest rate.
b. The size of the fund would justify using professional investment counsel and would lower the unit cost of investment counsel.
c. The use of two sub-funds would permit the individual retirement system to participate in the fixed dollar asset fund and the equity fund in the exact proportions deemed best for its particular situation.
d. The size of the fund would make it possible to partic ipate in special investment opportunities, as direct placements.
BOWLES & TILLINGHAST, In<

6-5
Review of Each System
Teachers'
The assets of the Teachers' system are currently about $264,000,000. The fund utilizes the services of the Citizens and Southern National Bank for investment advice and agency service. In addition, a ViCe President of the C & S Bank with considerable investment experience is on the Board of the system.
The Teachers' system provides for benefits based on final average salary, and consequently a fairly substantial investment (perhaps from 20% to 40%) might appropriately be in equities. Currently, there is only 16% in equities.
~~J~.:~~
The assets of the Employees' system are currently about $80,500,000. The system utilizes the services of the First National Bank of Atlanta for investment advice and agency service, and has a Vice President and Trust Officer of the bank on its Board.
The benefits provided under the system are based on final average salary, and so a fairly substantial investment in equities is indicated. At present the fund has 19% of its assets in equities. Current investment practice is to place approximately 40% of new money in equities, so this figure should increase fairly rapidly.
Peace OfficersI
The assets of the Peace Officers I fund are currently about $6,500,000. The system uses the Fu Iton National Bank for investment advice and agency service, and at the suggestion of the bank has made substantial changes in its portfol io, including disposing of mutual fund investments and taxexempt bonds.
About 48% of the assets of the fund are in equities. Since the plan provides a flat benefit of $100 or $125 a month, with no provision for increasing this amount, it may not be necessary to have such a large percent of the total fund in equities.
Firemen's
The assets of the Firemen'sfundare currently about $5,500,000. The system does not have a formal plan for securing investment advice, however, it plans to select an Atlanta bank to provide investment advice on a continuing basis.
At present the fund has $198,000 invested in tax-exempt securities. The fund is not subject to federal income tax, and a higher net yield could be obtained by investing this money in taxable securities. Approximately 23% of total assets are in mutual funds. Of this figure, 18% is in common
BOWLES & TILLINGHAST, In,

6-6
stock mutual funds, and the balance-is 5% in balanced funds. In addition, 26% is invested directly in common stocks. Consequently, this fund is invested to about 50% of its assets in equities. The benefits provided by the plan, however, are for a flat dollar amount and, therefore, it may not be necessary to have such a substantial portton of total assets invested in equities.
Sheriffs'
The assets of the Sheriffs' fund are currently about $327,000 in assets. Approximately 69% of the total assets are invested in common stocks. The system utilizes the services of the First National Bank of Atlanta for investment and agency service.
The Sheriffs' plan provides for a fixed dollar benefit, and consequently a high proportion of the assets should be in fixed dollar investments, with a relatively small amount in equities. It would be appropriate, therefore, to place new money in fixed dollar investments until such time as the greatest proportion of assets are in fixed dollar investments.
Ordinaries'
The assets of the Ordinaries' fund are currently about $642, 000. As of March 31, 1965, about 53% of this was in savings and loan deposits and 45% in time deposits and treasury bills.
The Ordinaries' plan provides for an income based on the average salary of the employee during his working years. In event of a general increase in salaries, liabilities will increase also, although not to the extent that is the case for those plans where the benefit is based on final salary. An investment in common stocks is recommended for this fund, perhaps from 15% to 30% of the fund.
~'1'..:!:!~':-.~c:.u!t..~~!..k!:" The assets of the Superior Court Clerks' fund are currently about $792, 000. As of March 31, 1965, 63% of this was in savings and loan deposits, 16% in bonds, and the balance in cash and time deposits. Approximately $26, 000 is invested in tax-exempt bonds. The yield to the fund could be
increased by investing in taxable securities.
The plan provides a flat dollar benefit of $240 monthly for most participants. A general increase in salary level will, therefore, only slightly increase the Iiabil ities of the fund and it is therefore appropriate to have only a relatively small investment in equities.
~'1'..:!:!~':..~c:.u!t..-!.u~i~':" The assets of the Superior Court Judges' fund are currehtly about $294,000. As of March 31,1965, 82% of the fund was invested in bank Certificate of Deposits.
All of the fund represents employee contributions and earnings thereon. A special effort to increase the earnings of the fund is indicated since the present yield is limited to the comparatively low return of bank Certificate of Deposits.
BOWLES & TILLINGHAST, In<_

6-7
Sol icitors' General
The assets of the Sol icitors' General fund are currently about $147,000. As of March 31, 1965, 81 % of this was invested in bank Certificate of Deposits.
All of the fund represents employee contributions and earnings thereon. A special effort to increase the earnings of the fund is indicated since the present yield is limited to the comparativel y low return of bank Certificate of Deposits.
Conclusions and Recommendations
Our study of the funds led to the following specific conclusions and recommendations:
1. It is extremely important that retirement funds be invested to attain the highest net yields and appreciation consistent with safety of principal and required liquidity. If this is accomplished, State and employee contributions can be reduced and/or benefits may be increased. Variations in the net yield on invested assets are highly significant in terms of dollars of investment income; an increase of only 1/4 of 1% in the annual rate of earnings or appreciation of the total assets currently under investment of $359,000,000 would create additional annual income of approximately $900,000.
2. Each of the funds should reappraise its investment objectives and analyze how nearly its current portfolio and investment policy fulfills these objectives. The provisions of the individual system and the size of that particular fund must be taken into account in determining the most advantageous distribution of assets by type of investments.
3. The Teachers' fund, the Employees' fund, the Peace Officers' fund and the Sheriffs' fund are utilizing professional investment counsel on a regular basis. Those funds not currently utilizing regular professional investment advice should do so. A bank or professional investment service will, for a nominal charge, recommend specific investments on a continuous basis or review the portfol io periodically.
4. The Teachers', Employees', Peace Officers' and Sheriffs' utilize the services of a local bank for investment advice. This service should be provided as a staff function and the Board member experienced in investments should not be associated with the bank providing the investment service; otherwise, such Board member is placed in the position of voting, as a trustee, on the recommendations of his employer. Because of the substantial sums of money, the larger funds should have professional appraisal of their investment portfolio by a firm of independent investment counselors which spec.ialize in portfolio review in addition to the continuing review made by investment counsel retained on a regular basis.
5. The Georgia Real Estate Investment Board provides a desirable double check on the qual ity of mortgage investments for the various retirement funds.
6. Approximately $.'5,200,000 of mortgage investments is currently secured by church properties. The difficulty of foreclosure and the usefulness and marketability of the building flfter foreclosure rClises serious doubts as to the advisabil ity of substantial amounts in such Investments for rE~'tirement funds unless other collateral security is offered and obtained.
BOWLES & TILLINGHAST, Inc

6-8
7. Certain of the funds are not realizing the maximum investment income that is possible. This is due to one or more of the following:
a. A larger than necessary proportion of assets in cash demand deposits or treasury bills.
b. The holding of securities which are tax-exempt for federal income tax purposes.
c. Less than full util ization of treasury bills or other short-term investments for investment of funds until long-term investments are selected.
Correction of these practices, where necessary, should increase investment income.
8. Several of the funds have a substantial investment in savings and loan deposits throughout the State of Georgia. These deposits are spread so that they are entirely insured, thereby assuring the ultimate safety of the investment. There is virtually no investment expense associated with this type of investment. However, there appears to be little attempt to select the savings and loan associations which are paying the highest rates of dividend.
9. Different standards of legal eligible investments exist for the various funds. The: investment of funds of the Employees' Retirement System and the Teachers' Retirement System is restricted to the provisions under the laws for domestic Iife insurance companies. Uniform legislation is recommended. In this connection, it should be noted that insurance companies are required to keep 75% of their reserves invested in securities other than common stocks. A strict interpretation of this provision might mean that certain of the funds are unduly restricted and are in violation of this interpretation of the law.
10. Uniform accounting and reporting procedures should be required of all funds. At present, it is virtually impossible for most of the funds to determine the true rate of return of the fund. For example, the treatment of a premium paid or discount received on the purchase of a bond makes it impossible, without amortizing each bond in the portfol io from the time of purchase to the present, to distinguish between interest income and amortization of premium or discount. Uniformity would enable direct comparison of the results of one fund with another.
11. Consolidation of all funds for investment purposes, but retaining separate accounting for each system, should result in a significantly better investment portfolio for the smaller retirement systems. If it is not feasible to utilize a pooled fund for all plans in the near future, the smaller funds could well find that yield, security and diversification would be increased by taking advantage of pooled funds offered by certain of the larger banks.
BOWLES & TILLINGHAST, In<.

6-9

12, The above recommendations which require legislative action should be incorporated into the following sections of the Georgia law as indicated for each system:

Teachers I

Ga. laws, 1963, p. 433, Section 32-2917

Employees'

Ga. laws, 1949, pp. 138 et. seq., Section 7 1963, p. 546

Peace Officers'

Ga. laws, 1963, p. 262, Section 4

Firemen's

Ga. laws, 1963, pp. 266, 339, Section 4

Sheriffs I

Ga. laws, 1963, p. 632, Section 5

Ordinaries'

Ga. laws, 1963, p. 265, Section 3

Superior Court Clerks'

Ga. laws, 1963, p. 263, Section 3

Superior Court Judges'

Ga. laws, 1945, pp. 362, 366, Section 24-26180

Solicitors' General

Ga. laws, 1949, pp. 780, 784, Section 24-29150

BOWLES & TILLINGHAST, In.

7-1
SIEClTlOINI "1
REVIEW OF EMERITUS PAY SYSTEMS
A. General
For purposes of this report, emeritus pay systems refer to those laws which have been enacted by the General Assembly to provide a continuation of partial salary to certain elected officials of the State. These systems do not involve pre-funding of the benefits ultimately provided and are not retirement plans as the term is normally used. At the present time, there are four categOfies of emeritus pay systems:
1 C!::i.=!..:!..~st..!~~ Em~!.!~~~~3...9~ iat~:!..~tic~~~~!!~~of t~~~'P!.~-=_<:'~-'!.:. The raw creating these positions and providingfor the appointment to the positions by the Governor was enacted in 1937. A resume' of this law is shown in paragraph B below.
2. Judge Emeritus of the Court of Appeals. The law creating this position and providingcippOfntmenttotheposftiOnbythe Governor was enacted in 1943. A resume' of this law is shown in paragraph C below.
3. Superior Court Reporter Emeritus. The law creating this position and providing for ;i"ppolntmenttothe"~;ffTceby-rudgesof the Superior Court was enacted in 1952. A resume' of this law is shown in paragraph D below.
4. Constitutional Officers Emeritus. The law creating emeritus pay positions for ccmstTt"'Ctf~naTofffC-;;;:Sar;dproviding for the appointment to the positions by the Governor was originally enacted in 1957 and amended in 1962. A resume' of
r this law is shown in paragraph E below.
B. ,Supreme Court Emeritus Offices
1. EI igibility and Appointment. Persons who may be appointed to emeritus offices ;i"retheChi-;;rJusi1ce~rtheSupreme Court of Georgia and associate justices of the court. Appointments are made by the Governor upon being advised by the justice that he desires to resign his position as a justice and accept the position of Justice Emeritus. In order to be appointed to these emeritus offices, eligible persons must have attained age 70 and have been in continuous service for more
than ten years as justices of the Superior Court, the Court of Appeals or the
Supreme Court. Anyone who is appointed to fill a vacancy on the Supreme Court when over 60 years of age will not be eligible for emeritus pay until he has completed fifteen years continuous active service on the Supreme Court.
BOWLES & TILLINGHAST, Inc

7-2
2. Monthly Pay. Emeritus pay is equal to 66-2/3% of the annual salary at the ti;;e-;f;pp-;~tment to the emeritus position and is payable monthly for Iife so long as the individual does not run for political office and serves on the Advisory Appellate Council.
3. Other "Retirement" Pay. In 1952 officers and employees, except justices of i11eS~pre;;eC-;~rt;;ereincluded under the State Merit System and, therefore, participate in the Employees' Retirement System. Justices were exc luded from the State Merit System and the Employees' Retirement System; however, they are covered under the federal Social Security program.
C. Court of Appea Is Emeritus Offices
1. Eligibility and Appointment. Any judge of the Court of Appeals of the State ;;;ybe;pp-;~t~~Ca-J~geEmeritusprovided he has attained age 59 and has had ten years of continuous service as a judge of the Court of Appeals or the Supreme Court.
Appointments are made by the Governor upon being advised by the judge that he desires to resign his position as a judge and accept the position of Judge Emeritus.
2. Monthly Pay. Emeritus pay is equal to 66-2/3% of annual salary at the time of ;pp-;~tm~tto the emeritus position and is payable for life so long as the individual does not run for political office and serves on the Advisory Appellate Council.
3. Other" Retirement" Pay. In 1952 officers and employees, except judges of the C;~torAppe;is;;erelncludedin the State Merit System and, therefore, participate in: the Employees' Retirement System. Judges of the Court of AppeaJs were excluded from the State Merit System and the Employees' Retirement System; however, they are covered under the federal Social Security program.
D. Superior Court Reporter Emeritus
1. EI igibil ity and Appointment. Any reporter or court stenographer in any Superior
Co~tJUdkT;j~Trc~it-;hohasserved as court reporter in the same circuit for forty or more consecutive years is el igible for appointment to the position of Reporter Emeritus. The appointment is made by the judge of the Superior Court upon receipt of an appl ication from an el igible court reporter.
2. Monthly Pay. The Court Reporter Emeritus is pa id a sa lary of $200 per month f07Tifeancrliis duties in this position are to serve as a court reporter whenever a judge of the Superior Court requests his service without additional compensation except in certain cases for which a fee is provided.
The monthly salary is paid on a pro rata basis by each county comprising the circuit on the basis of population according to the most recent federal census. Each county's pro rata share changes as there are changes in federal census figures.
BOWLES & TILLINGHAST, In<

7-3
3. Other "Retirement" P<:l.: Although there are a few exceptions, the emeritus pay
constitutes the only"retirement" income provided court reporters by virtue of a State-enacted tlretirement" program. The federal Social Security program has not been extended to court reporters.
E. Cons,titutional Officers Emeritus
1. Eligibility and Appointment. Constitutional officers who may be appointed to ;';eritusoffices-are:-ShJteTreasurer, State School Superi ntendent, Comptroller General, Commissioner of Labor, Publ ic Service Commissioner, Commissioner of Agriculture. In order to be appointed to the emeritus offices, el igible persons must have attained age 65 and have completed twenty years of continuous service in anyone or more of these offices.
The Governor appoints el igible persons to the emeritus positions upon being advised, in writing, by the individual that he desires to resign from one of the above offices.
2. ~":>.!!~.!.Y_Pa.Y.:. Emeritus pay is equal to 66-2/3% of salary at the time of appointment to the emeritus position, but such pay may not be greater than $12,000 annually. Allowances of $240 annually for services on boards and commissions is not included in calculating salaries on which emeritus pay is based. Payments are made for life provided the individual consults, advises and assists the active officeholder of that office from which he retired, when requested, and consults and advises the Executive Department when requested by the Governor.
3. Ot~e.!~!:..t.!!~'2:!:..n.!.I~~~ All active constitutional officers, except the State Treasur:er, participate in the Employees' Retirement System and contribute thereto. The State Treasurer was specifically excluded as the result of not being brought under the State Merit System when all other constitutional officers and their employees were brought under the Merit System by an Act in 1957. Individuals holding emeritus positions continue to contribute to the Employees' Retirement System,and continue to participate thereunder as long as they receive emeritus pay. A person holding an emeritus position cannot receive payments under the Employees' Reti rement System.
F. Conclusions and Recommendations
The emeritus pay systems discussed in this section are, in essence, unfunded non-contributory benefit programs which provide liberal retirement income allowances to those individuals who qualify. Although payments to eligible persons are subject to conditions with respecfto their avai'labil ity to give assistance to the active officeholder the reasons for providing such liberal benefits to emeritus officeholders under separate systems are not clear.
The constitutional officers, except the State Treasurer, also participate in the Employee's Retirement System and receive therefrom valuable coverage in the event of disability, death
BOWLES & TILLINGHAST, In,

7-4
or termination of service. Liberal retirement income is provided for those individuals who are covered by emeritus pay systems but are not covered under the Employees' Retirement System. However, they do not have disabil ity and death benefits prior to retirement as do participants of the Employees' Retirement System. Consequently, significant inequity exists. Additional inequity is created because not all of the persons covered by the emeritus pay systems are covered by Social Security. Also, there is no consistency between the emeritus pay system with respect to qualification for benefits or the amount of income provided. It is recommended that, except for persons now on emeritus status, the emeritus pay systems discussed in this section be discontinued. All persons who would otherwise be el igible for emeritus pay by virtue of their position should be included in the Consolidated Retirement System or the Employees' Retirement System with credit given for all prior service. Where this change is deemed to make any of the affected positions unattractive to qual ified persons, it is recommended that appropriate adjustment be made in active service pay.
BOWLES & TILLINGHAST, In<.

SEClfllOINl &B DEFINITION AND DEVELOPMENT OF ULTIMATE OBJECTIVE

8-1

General
Sections 3 through 7 of the report present an assessment of the current status of the retirement and emeritus pay systems to which the State contributes. The assessment clearly indicates that there is a need for revision of the basic structure of the retirement systems and that certain phases of the administration of the systems could be improved. Consideration of the effect of membership in more than one system gives further emphasis to the inequity which exists. The effect of the duplicate memberships is illustrated in the following subsection.
To achieve the desired improvements, a two-phased approach is necessary:
1. Mechanics for the control of retirement policy must be establ ished.
2. The ultimate objective must be defined and the steps necessary to achieve the objective must be formulated.

Duplication of Membership

The following table has been prepared to illustrate the total retirement income available to
certain selected classes of employees assuming they retire at age 65 with thirty-five years of
service. Duplicate memberships, as shown in the illustration, are known to exist in the State at the present ti me.

MONTHLY RETIREMENT BENEFIT AT AGE 65 WITH THIRTY-FIVE YEARS
OF SERVICE FOR MONTHLY EARNINGS AS SHOWN

P Ia ns From Which Me mber Receives Benefits

________~2~!~~l~~~l~a~ _______

$200

$500

$750

A* B**

A* B**

A* B**

Teachers' Teachers' and Social Security Employees' and Social Security Superior Court Judges' and Social Security Superior Court Clerks I and Social Security Employees' , Peace Officers', and Soc ial
Security Peace Officers', Sheriffs' and Social Security

$125 207 182 217 217
307 409

$125 249 224 259 259
349 451

$306 $306 433 496 377 440 460 523 327 390
502 565 452 515

$459 $459 586 649 539 602 627 690 327 390
664 727 452 515

Benefit Wh ich Provides Same Spendable Income After Retirement Amount Percentage of Earnings

$150 75%

* - Plan Benefits to Participants ** - Plan Benefits to Participants Plus Spouse's Social Security

$375 75%

$562 75%

The last line of the table shows the amount of monthly benefit which would provide the retired employee with the same amount of spendable income as he had prior to retirement. The table shows that certain classes of employees receive total retirement benefits from various systems which provide spendable income after retirement in excess of spendable income before retirement.

BOWLES & TILLINGHAST, In'

8-2
Leg i s Iat i ve Ret i rem e nt P Ian Co mmit tee s
It is important that controls on retirement plan legislation be put into effect at an early date. It seems probable that the character, cost, and implication of some of past retirement legislation was not fully understood by the legislators and, in the pressure of their work, retirement legislation may not have received the attention wh ich it deserved.
Examples of legislation affecting the retirement systems in the State which were not given adequate consideration with respect to costs and the long term impl ications of the effect of such legislation can be found in the several acts passed during the 1965 General Assembly. A brief discussion of three such 1965 revisions is provided for illustrative purposes:
1. House Bill No. 496 passed by both Houses of the General Assembly provides for a reduction in the normal retirement age under the Teachers' Retirement System from 65 to 63 (age at which a member may retire with full benefits). The bill further provides that this revision in retirement age will become effective only upon action by the Board of Trustees to increase the minimum benefit for employees retiring prior to July 1, 1961, from $4.50 for each year of service (up to forty years), to $5.00 for each year of service. Such legislation has the effect of placing with the Board of Trustees the power to substantially increase the Iiabil ities under the system and does so without making any provision for funding these increased Iiabil ities. The actuary for the system estimates that it will require additional contributions of approximately $750,000 a year to reduce the retirement age if the current level of funding of liabilities under the system is to be maintained. In addition, such legislation will undoubtedly result in demands on the part of members of the Employees' Retirement System to reduce the age at wh ich full benefits are paid under their system.
2. House Bill No. 261 includes a provision which will enable teachers to claim credit for mil itary service up to a maximum of five years under the following conditions:
a. Prior service to be granted at no cost to the member for any period of mi Iitary service prior to January 1, 1945.
b. Credit will be granted for any period of active military service after January 1, 1945, provided the member pays the regular employee contribution of 5% on compensation last paid to him as a teacher before entering mil itary service or 5% on the compensation first paid to him as a teacher after returning from military service plus 3~% interest compounded annually to date of payment for such active military service between January 1, 1945 and July 1, 1961. A contribution rate of 6% plus 3~% compound interest is required for periods of military service claimed subsequent to July 1, 1961.
c. The law further provides that any person who. leaves the teaching profession to enter mil itary service may return to the teaching profession at any time within five years after being released from such service and
BOWLES & TILLINGHAST, In,

8-3
will receive credit for military service in accordance with the above provisions. Also, any person who interrupts college training to enter military service or completes college and enters military training may enter the teaching profession at any time within five years after release from service and receive credit for mil itary service in accordance with the above provisions.
This legislation was enacted without any investigation as to the amount of Iiabil ities which might be incurred by the State for granting such credit to existing members. Also, the five year period for returning to or entering the teaching profession after mil itary service is very Iiberal. The period most commonly used is three months and then only if the member was an active employee (teacher) at the time he enters mi Iitary service.
3. House Bill No. 43 which passed both the House and Senate provided for the granting of credit for service as a member of the General Assembly or as an employee of the executive branch of the State government after January 1, 1953, to certain named elected officials. This act was subsequently repealed before becoming operative upon disclosure that substantial additional funds would be required to provide such service credit. In all probability, with an adequate screening mechani.s:m the initial bill would never have been enacted. It was repealed only after considerable publicity had been given to the nature and financial consequences of its provisions. Unfortunately, there has been a significant number of similar "spec ial interest" bills p~ssed over the years which have not received widespread publ icity and, as a result, inequitable and costly retirement plan provisions have been enacted.
No specific "Standing Committee" in the House or Senate currently exists to which proposed retirement legislation can be referred for study. Due to the compl icated nature of retirement benefit planning and the very great potential long-term liability to the State, it is recommended that the President of the Senate and the Speaker of the House appoint Standing Committees in the respective houses whose sole responsibility will be to carefully weigh any proposed legislation which, in any way, affects retirement benefits to any State, county, or municipal employee.
Further, it is recommended that a set of guidel ines be adopted by the committees and that these guidelines be applied when reviewing proposed legislation. The Legislative Counsel should be requested to designate a member of his staff to serve the committee on a continuing basis. The committee should request the Budget Bureau Director to determine and report the fiscal effects of any legislation approved by the committee which involves additional funds. In addition, it is recommended that the Budget Director and the committees be empowered to retain consulting counsel on a continuing basis in order to obtain an independent appraisal of the merits of the legislation and the costs thereof. A written report of such appraisals shourd be made available to the legislators prior to the legislation being presented on the floor of the respective houses. With the wealth of talent and experience which is apparent from a cursory review of the qual ifications of the present legislators, it should not be difficult to obtain for the committees the services of men who are competent and experienced in this area and, even more important, who are vitally interested in the retirement plan sponsored by governmental groups throughout the State.
BOWLES & TILLINGHAST, In'

8-4
The manner in which the State of FI-orida screens pension legislation may be of interest in this respect. The Florida Legislature created a Legislative Reference Bureau to serve its members in a staff function on all legislative matters. The Bureau is administered by a legislative council comprised of members of the house and senate. The same law creates a standing committee of the legislative council on personnel and retirement and authorized the committee to employ the services of an actuary. The contract between the actuary and the committee provides that the actuary shall serve as consultant to the committee and to the administrators of the various retirement systems. Both the committee and the administrators are vitally interested in sound pension legislation and therefore request the actuaries to provide whatever information is desired by the senate or house committee on pensions to assist them in the evaluation of ali proposed legislation. Bills affecting pensions in the State of Florida are referred to the house and senate committees on pensions and the house committee has a firm pol icy that all bills must be reviewed and evaluated by the actuary not only as to financial consequences but also as to whether the proposed legislation is in accordance with sound planning and whether it tends to promote consistency with other state retirement systems.
It is the general consensus of opinion of the committee members and administrators that the procedure works well and that the resulting pension legislation in the State of Florida is significantly better than it otherwise might have been. It is also the general consensus of opinion that the practice of employing the services of an independent consulting actuary to assist the legislators has been of great assistance in enabling the legislators to properly evaluate the proposed legislation. The consulting services would be ineffective, however, if it were not for a nucleus of legislators who are willing to shoulder the responsibilities of creating and maintaining sound retirement systems even though at times it is an unpopular position.
One of the more important functions of the consultant which should not be overlooked is that the legislators and the administrators are able to resist political pressures to support questionable retirement legislation by pointing to the consultant's findings as to the merit and financial considerations of such legislation.
There has been some discussion in Florida regarding the passage of a law which would require that all proposed legislation must be evaluated by an independent consultant and that this evaluation must be made available to all legislators prior to the time action is taken on the proposed legislation. This would,in effect, make the present discretionary practice of the retirement and personnel committee a legal requirement and extend the distribution of the report on the evaluation of the proposed legislation to all legislators rather than to only committee members.
It is most important that effective controls be placed upon retirement legislation by one technique or another. Each year a great many bills affecting the retirement systems in minor ancl' in major ways are submitted to the Legislature. Failure in this area is likely to result in the deterioration of any improvements which might be made as a result of this study.
Ultimate Objective
The ultimate objective to which the State should strive is a single retirement system to cover all employees of the State, all of the teachers, and perhaps even all of the employees of local governments. This system is referred to throughout the reoort as the Georgia Consolidated
BOWLES & TILLINGHAST, Inc

8-5
Retirement System. The extension of coverage to local governments is discussed in greater detail in Section 9.
An immediate and complete consol idation of all nine existing systems into a slngle system which would affect benefits for current participants is not considered practical or feasible. In th is respect, it is important to remember that the Attorney-General and courts would probably rule that the members of the present retirement systems are entitled to the benefits provided by that system, irrespective of future changes in the law. Therefore, it is recommended that the Consol idated Retirement System be made appl icable only to new employees of the State and for all present employees who elect coverage in the new system.
The existing systems would continue but ultimately be d1ssolved as current members under each either elect participation under the Co I":so Iidated system or withdrew through termination, death, disabil ity or retirement.
it is recommended that the Consol idated Retirement System provide career employees (those with, say, thirty-five years of service) with benefits that are adequate to permit the employee to maintain his same standard of Iiving after retirement as he enjoyed during his years of active service with pro rated benefits for employees who are in eligible employment for only a portion of their career. There is no justification for providing benefits at a higher levelland steps should be taken to assure that, if any other retirement plan were sponsored which is supported directly or indirectly by State funds or by legislated private funds, the benefits derived therefrom would be reduced from the benefits provided by the Consol idated Retirement System. On the other hand, the benefits should be adequate in order to minimize pressure by minority groups to increase or supplement the benefits provided by the system.
In addition to providing the obvious economy of administration and advantages from the investment point of view, the principal problem of the structure of the State retirement systems would be solved, at least for new employees, inasmuch as the opportunity for dupl leatior. of benefits from various retirement plans would be el iminated. Furthermore, benefits would be related directly to the salary and service of the participants and would no longer depend upon the particular classification of employment of the member except to the extent deemed appropriate and provided by the Consol idated Retirement System (e. g., earl ier retirement for firemen and law enforcement officers as compared to office employees.)
A suggested organizational chart of the Georgia Consol idated Retirement System is shown on the following page. It includes a division having as its primary responsibil it)'" the counseH in..g of employees who attain retirement and receive benefits under the plan. It is anticipated that this counselling would include all aspects of adjustment to retired life, not just the benefits available under the retirement system. This is a service that has frequently been overlooked in the administration of retirement systems. Further, there is a division for public relations. It iS'anticipated that this division would prepare and distribute material to both members and the public regarding the retirement system and continually apprise employees of the merits of the program in order that the employees fully understand the program and the worth thereof in order that the State would receive credit and appreciation for the large sums of money required to finance such a program. In effect, retirement benefits are defer~ed compensation and they should be viewed by employees as part of compensation when they are considering a Iternative job opportunities, Without a complete communication of the merits and berefHs of a retirement program, there is Iittle hope that the employees will develop the proper appreciation of the retirement system and
BOWLES & TILLINGHAST, Inc

(Xl
J..
GEORGIA CONSOl/DATED RETIREMENT SYSTEM

,~-----------r I ---------

I

I

Board

of -----------,-----------,

Trustees

,

I

I

I

Director

sistant Director Office Manager

1. Employee contributions
2" Employer contri-
butions
3. Social Security
reports
4. Fiscal records 5. Benefit computa-
tions
6. Benefit payments I Tax forms

L All monies in/out
2. Budget" 3. GCRS payroll 4. Taxes 5. Office purchases

l. Collections from reporting agencies
2. Reports to Social
Security Administration
3. Public relations 4. Education

----~------1
J
[~e~:~:~J

I

_____I

_

L~

Computations and cer- Works with prospec- 1. Education;

1. Handles all details

tification:

tive retirees through

a. covered em-

pertaining to bring-

1. Retirees

departments or report-

ployees

ing in new counties

2. Terminations

ing units;

b. public

cities or other eli-

3. Estimates for

1. Assist with adjust- 2. Preparation of bro-

gible units

active employees

ment to retired life

chures and other 2. Establish basis for

4. Control of benefit 2. Review personal

literature to assist

granting part serv-

payments:

finances - budget,

in 1.

ice benefits.

a. life payments

wills, loans, in- 3. Assist benefit sec-

b. disability

surance, etc.

tion with control

payments

3. Advise of retire-

of benefit payments:

5. Certification of

ment benefits and

a. Iife payments

benefits under

options available

b. disability pay-

reciprocityargu- 4. Advise of rights

ments

ments

under State health

insurance plan

5. Act as clearing

house for job oppor

tunities

8-7
benefits provided thereunder. The establ ishment of the detai Is of the benefit structure, design, and operation of the Consolidated Retirement System is an additional project beyond the scope of this study.
S t e ps To war d U Itim ate 0 b j e c t i v e
Ideally, all existing systems should be abolished and a one-system program installed. However, it is recognized that this is not practical and if the ultimate objective is to be realized, it probably must be done in steps over a period of time. Members of the Commission are well qualified to determine the legislative processes required to accomplish the ultimate objective; however, the following sequential order of steps is provided as a suggested procedure to implement the recommendations in th is report:
1. Provide legislative leaders with a full disclosure of the current status and nature of the many and varied retirement programs currently supported by State funds. This step will require time and effort so that the lawmakers are adequately educated on the importance of corrective legislation.
2. Establish standing committees in each house of the Legislature whose function will be to screen and analyze all retirement legislation.
3. Enact legislation creating a Consolidated Retirement System. Such legislation should:
a. Clearly define the employee groups eligible for membership.
b. Establish a realistic benefit structure,
c. Provide adequate administration facilities, and
d. Provide for the funds required to support the system.
In addition, this legislation (or companion legislation) should close all existing systems to new entrants and provide for the transfer of individual or groups of individuals into the Consol idated system on an optional basis.
Legislation should also create a Georgia Retirement Board composed of seven individuals to be appointed by the Govern0r for staggered terms. The membership on the Board should include individuals experienced in the administration of retirement systems and individuals who are familiar with the problems of the various State employee groups that are to be inc Iuded under the system.
4. Enact legislation which provides for the immediate consolidationof the ihvestment functions and the ultimate consolidation of administrative functions now being performed independently by each of the separate systems. These functions would be handled by the organizational structure created to administer the Georgia Consol idated Retirement System and include:
a. Investment of Funds - One large common trust fund should be establ ished under which the funds of each of the existing separate systems could be pooled in such a manner that anyone fund will not lose its identity, but will realize investment income in proportion to its share of the total combined fund. This
BOWLES & TILLINGHAST, Inc.

8-8
step would not only create a very substantial investment base, but would also simpl ify the investment procedures and functions of the existing separate funds and e Iim inate much dup Iication of effort by those responsible for investing funds of the various systems.
b. Administration - To the extent possible, administrative procedures and regulations should be placed on a uniform basis with respect to all of the various existing systems. Initially, the systems other than the Teachers' Retirement System and the Georgia Employees' Retirement System should be administered by the administration faci Iity of the Consol idated system. Subsequently, the Teachers' and the Employees' systems should be brought under the central administration office.
Although it may be advisable to extend eligibility under the Consolidated Retirement System to county and municipa I employees, it is recommended that this extension be secondary to the primary objective of the consolidation of all State retirement systems. The considerations relative to the extension of coverage to local units are discussed in Section 9.
Conclusions and Recommendations
Because of the benefit structure of the various existing plans and because of duplication of membership in more than one State-supported retirement system, certain individuals receive a total retirement income which exceeds the retirement income which would provide the member with the same spendable income as he had prior to retirement. Duplication of membership should be eliminated or, alternatively, the existence of other benefits should be recognized in each separate plan and appropriate a 1I0wances made in the benefits paid by each. Since it is probable that the courts would rule that members in the present systems are entitled to benefits provided by that system, irrespective of future changes in the law, any revisions would apply only to new members.
It is recommended that "Standing Committees" be appointed in each house having as their sole responsibility the critical review of all proposed retirement legislation. These committees would not only play an important role in necessary corrective legislation with respect to the existing systems, but would also serve as a control on all future retirement legislation.
It is recommended that a Georgia Consolidated Retirement System be establ ished which will replace all existing systems with respect to new individuals coming under job classifications considered eligible for State-supported retirement benefits. It is further recommended that the investment and administrative functions with respect to the existing systems be assumed by the organizational structure required for the Consol idated system.
BOWLES & TILLINGHAST, In'

9-1 SIEClrllOINl 9 SERVICE TO LOCAL GOVERNMENTS

General

There are many valid reaSons why the State should be interested in the pension programs of local governments throughout the State, not the least of which is the promotion and cultivation of good government practice. Sound pension planning results in over-all economy and produces savings which can be utilized for other worthwhile projects for which adequate funds are not available. Since the State does have both a direct and indirect interest in the financial welfare of local governments, the design and efficiency of their retirement programs should be of interest to the State. The 1965 General Assembly establ ished a Joint Municipal Employee Retirement System which is discussed in the Addendum on page 9-7.

The State is, in no small way, responsible for some of the problems facing local governments in sponsoring retirement programs for their employees. This is because the State is currently providing retirement benefits to certain employees of local governments. In fact, the principal portion
of the membersh ip of a II retirement systems, except the Emp loyeesI, is compri sed of emp loyees of
local governments. Certain county employees have been successful in becoming members of the Employees' system by virtue of securing legislation which provides that their service is an adjunct to the function of a State department and, consequently, entitles them to participation in the Employees' Retirement System even though their compensation is from the county. Hence, when a county attempts to do a thorough job of plan design for its employees, it is confronted with the problem of certain selected classes of employees already being covered for various levels of benefits under State-sponsored retirement plans. The problem of properly coordinating with these plans is difficult indeed.

As a result of this, inconsistenc ies and inequities exist in the retirement benefits available to employees of local governments. The table on page 9-3 shows the approximate monthly benefits available under the various systems. Using the benefits shown on page 9-3, the table below has been prepared to show the benefits available to certain classes of employees, assuming retirement at age 65 with thirty years of service. It has also been assumed that each employee earns a level amount of monthly earnings, as indicated, during each year of employment. While this is unlikely to occur, the purpose of the table is to demonstrate the great inequity which exists among classes of employees of local governments. The conclusions reached by this demonstration would not be materially affected by this assumption of level earnings.

MONTHLY RETIREMENT BENEFIT AT AGE 65 AFTER THIRTY. YEARS SERVICE FOR MONTHLY EARNINGS AS SHOWN

Employee of Local Government Without Local Retirement Plan and:
1. Without Social Security 2. With Social Security

Monthly Earnings
$~O-----$500-----$~O

-0$ 84

-0$127

-0$127

BOWLES & TILLINGHAST, Inc

9

,..,
-L

____ ~~~2~lr_~~r~J~~~_

$200

$500

$750

3. With Social Security and Firemen's

$156

4. With Social Security and Peace

Officers'

209

5. With Social Security, Peace Officers'

and Sheriffs I

409

6. With Social Security and Ordinaries'

184

$199

$199

252

252

452

452

377

502

Employee of Local Government With Local

Retirement Plan Providing Month Iy Benefit

Equal to 30% of Earnings and:

1. Without Social Security

60

2. With Social Security

144

3. With Social Security and Firemen's

216

4. With Social Security and Peace

Officers'

269

5. With Social Security, Peace Officers'

and Sheriffs I

469

6. With Social Security and Ordinaries' 244

150

225

277

352

349

424

402

477

602

677

527

727

Benefit Which Provides Same Spendable Income After Retirement
Amount Percentage of Earnings

150 75%

375 75%

562 75%

The last line of the tables shows the amount of monthly benefit which would provide the retired employee with the same amount of spendable income as he had prior to retirement. Any benefit which exceeds this amount will provide increased spendable income after retirement and, to this extent, is in excess of what is considered to be adequate retirement benefits.

It is important to note that only the primary Social Security benefit has been included in the table.
If the spouse of the employee has also attained age 65, the amounts of benefit shown would in-
crease in the following amounts:

Employee's Monthly Earnings

Increase

$200

$42

500

63

750

63

This illustration demonstrates that certain groups of efll)loyees in local government employment do not have any provision for retirement coverage, whereas, others enjoy coverage which is excessive. Other duplication of coverage exists by which certain employees qualify for benefits as excessive as those illustrated; the combinations shown demonstrate the effect of duplication of membership.

BOWLES & TILLINGHAST, Inc

APPROXIMATE NORMAL RETIREMENT MONTHLY BENEFITS

At Retirement

I Average
Compensation

Years Service

$200 $300
-$400

I

I I

10

I I I

20
30

I I

40

I

! 10

20

30

40

!

10

20

30

40

$500 $750 $1,000

!

10

20
30
40 i

I I I

10
20

I I

30

I
I

40

I
I I

10
20

I I

30

I
I

40

Teachers' Age 65*
$ 35 70 105 140
53 105 158 210
70 140 210 280
88 175 263 350
131 263 394 525
175 350 525 700

Employees' Age 65*
$ 17 42 74 106
26 63 111 158
38 91 160 229
52 126 221 317
88 214 375 537
125 301 529 757

Peace Officers'
Age 60*
-0$100
125 125

Firemen's
Age 60*
-0-0$ 72 72

-0-

-0-

100

-0-

125

72

125

72

-0-

-0-

100

-0-

125

72

125

72

-0-

-0-

100

-0-

125

72

125

72

-0-

-0-

100

-0-

125

72

125

72

-0-

-0-

100

-0-

125

72

125

72

Sheriffs' Age 60*
$100 200 200 200
100 200
200 200
.'
100 200
200 200
100
200 200 200
100
200
200
200
100
200 200
200

Ordinaries'

Superior

Superior

Court Clerks' Court Judges'

Age 65*

Age 55*

Any Age*

$ 50

-0-

100

$133

100

133

100

133

$100** 133 133 133

75

-0-

150

240

150

240

150

240

150** 200 200 200

100

-0-

200

240

200

240

200

240

200** 267 267 267

125

-0-

250

240

250

240

250

240

250** 333 333 333

188

-0-

375

240

375

240

375

240

375** 500 500 500

250

-0-

500

240

500

240

500

240

500** 667 667 667

Solicitors' General Any Age*
-0$133
133 133
-0200 200
200
-0267 267 267
-0333 333 333
-0500 500 500
-0500 500 500

Social Security Age 65*
$84 84 84 84
105 105 105 105
127 127 127 127
-
127 127 127 127
127 127 127 127
127 127 127 127

* Assumed retirement age.
** Applicable only if attained age 68 or older
'0
c!> BOWLES & TILLINGHAST, Inc

9-4
In the long run, probably the most-effective action that the State could take to encourage local governments to establish reasonable plans and to administer them efficiently is to set a good example by providing at the State level reasonable retirement benefits under systems which are efficiently handled. There is much that can be done to improve the image of the State in this respect. As long as selected groups of employees are eligible for excessive coverage under combinations of State-sponsored plans, local plans, and Social Security, agitation among groups of other employees to obtain coverage for themselves equally as good is virtually a certainty. This agitation has existed in the past, exists currently, and will continue to exist in the future until a more responsible attitude toward retirement legislation is developed within the State.
In addition to creating a better image of its own affairs, the State might consider the following methods of assisting local governments:
1. Establish guidelines and possibly model legislation for the guidance and use of local governments.
2. Establish an advisory board which would offer service to local governments on a voluntary basis.
3. Consider the extension of the Consolidated Retirement System discussed in Section 8 to include the employees of local governments.
These suggestions are discussed in greater detail below.
Guidelines and Model Legislation
The establ ishment of guidel ines and the preparation of model pension legislation with provisions to minimize duplication of coverage and to assure actuarial soundness would be a valuable assistance to local governments. To be really effective, it would be necessary to provide some method by which these guidelines must be followed in the establishment of new plans or in the amendment of existing plans. Earlier in this report, the establishment of a joint committee by the House and Senate to which all legislation affecting pension and retirement plans of the State would be referred prior to action by the House and Senate has been strongly recommended. It is further recommended that the scope of the activities of this cornmittee include a review and appraisal of legislation proposed for local governments.
Another approach to implementing the use of the guidelines might be to include the more important ones in the revised Constitution which has been under consideration. The Constitution might henceforth require that any retirement plan established by a local government must conform to certain standards; for example, it must contain:
1. A maximum benefit provision which includes the benefits available under Social Security and all other plans to which the State contributes directly or indirectly, and
2. A requirement that the benefits provided by the plan be funded pursuant to accepted actuarial methods and procedures as certified by an accredited actuary.
BOWLES & TILLINGHAST, Inc.

9-5
Advisory Board
It is proposed that the Advisory Board be comprised of five members, one competent citizen of the State who is experienced in each of the following areas: administrative, investments, actuarial, legal, and government operation, The Board could be established by a special Act of the Legislature which would ,provide for an adequate appropriation to enable the Board to serve effectively, The Board would be free to engage staff to make studies or to engage outside professional assistance, The services offered by the Board to the local governments would be on a completely voluntary basis and would largely be an educational function. Consequently, it would necessarily involve a substantial contribution of time and energy by the members of the Board,
The activities of the Board are more than likely to be successful if it had as its primary duty other responsibilities in the retirement field, It follows logically that f should the State decide to establish a Consolidated Retirement System for all present members or a State-wide plan for all employees of the State and local governments as discussed below, this function might well be served by the Board and staff established in conjunction with such new plan.
S tat e -W ide Sy s t e m
The purpose of the following paragraphs is to briefly outline the characteristics of a State-wide retirement plan which would cover employees of both State and local governments and to indicate some of the results which would be accomplished by such a system and some of the problems which are now known to exist.
One of the essential characteristics of such a plan would be a substantial direct State subsidy in order to encourage local government groups to participate in the plan in order to obtain their share of the subsidy. It is possible that this might be accomplished by direct withholding of funds, where appropriate, to the local government. A slightly less effective technique would be for the State to make a substantial contribution to the State-wide system which would make the cost of benefits to the local governments significantly less than the cost of providing the some benefits under a separate plan,
It is contemplated that each member of the retirement system would also be covered under Social Security and this would be a prerequisite to coverage under the State-wide system, Further, there would be provision for the reduction of benefits to or the expulsion of groups which estabIished separate systems financed by government money or legislated private money if the total benefit exceeded a maximum established in the State-wide system. The employees of local governments who serve a substantial number of years with the government are entitled to provision for their retirement years and, hopefully, a completely adequate level of benefits could be provided under the State-wide plan and supplementary plans would be entirely unnecesso'ryo
Coverage could be extended to:
1, Only employees hired after the date of establ ishment of the State-wide plan,
2. All present employees of local government groups for future service benefits only, or
3. All present employees of local government groups for future service and past service benefits.
BOWLES & TILLINGHAST, In<

9-6
It is anticipated that the Cbst for future service benefits would be established as a flat percentage of pay and, consequently, the contributions would be made on the basis of the covered payroll. If past service benefits were elected, additional liability would be incurred which would probably be most feasible to handle on an individual basis.
Such a system would have the following results:
1. A complete coordination of benefits from all State and local retirement plans.
2. Portability of service credits between local and State governments as service under such a system would include service as either a State! county or municipal employee.
3. There would be centralized administration and centralized investmenl of funds which provides opportunity for consistency and economy of operation,
The recognized problems which exist would include the following:
1. It is probable that the Attorney-General and the courts would rule that any employee hired prior to the effective date of the legislation for the State-wide system is covered by the retirement system to which he contributed as of such effective date as if it were a contract between the employee and the State. Consequentlyf the extension of benefits to employees who already enjoy existing plans would have to be on an optional basis, if cit a II.
2. There may be some problem in withholding funds from local governments for the Stotewide retirement system and quite impossible where no direct subsidy is made by the State. It would appear that the techn ique of the State mak ing a direct contribution to the State-wide retirement system would be the solution to problems in this area.
It is of interest to note that at least six states have now adopted a single state-wide retirement system covering employees of both state and local governments.
Con c Ius ion san d Re com Om end a t ion s
It is recommended that a detailed study be made of the financial and political feasibility of a
State-wide retirement system covering all employees of State and local government groups, The establishment of such a system offers the greatest opportunity of all for the elimination of inequity and for the creation of economy and of a reasonable structure of benefits.
The minimum action is the appointment of a legislative committee or substitute body to evaluate all retirement plan legislation in the light of guidelines established by legislation crealing the comm ittees.
BOWLES & TILLINGHAST, 1.<

9-7
ADDENDUM
Joint Municipal Employee Retirement System
House Bill Number 440 passed by both the House and Senate during the 1965 session of the General Assembly authorizes the establishment of a Joint Municipal Employee Retirement System. As stated in the' Act, such a system "will permit municipal corporations, regardless of size, to provide certain benefits to their employees, will reduce over-all administrative costs which might be prohibitive if undertaken individually, will make possible better investment opp:)rtunities, and through a provision for continuity of service will provide added security for professional employees who transfer from one municipality to another within the State".
This step taken by the Legislature is commendable with respect to enabling the smaller and medium sized cities in the State of Georgia to have economical basis for providing retirement benefits for their employees. The composition of the Board and framework for the administration of the program appears reasonable. However, the Act perhaps should have extended eligibility for particip::ltion to county governmental units as well as municipal ities since many of the smaller counties have the same need for an economical and administratively feasible retirement program. Also, the Act provides for a II money purchase" type plan which is generally not considered appropriate for either governmental or corporate groups. Contributions by the employees are permitted. As stated in the Act, the money purchase benefit plan establ ishes fixed contributions with the pension benefit being the variable factor and is contrasted with the more popular types of plans under which benefits are predetermined with the contributions being the variable factor. Although the "money purchase" type plan has the advantage of minimizing and limiting contributions by the municipality, it normally is not a satisfactory method for providing adequate retirement benefits, particularly for those employees within ten to fifteen years of retirement.
It is quite likely that having adopted the concept of providing retirement benefits for its employees, the cities will be faced with the problem of substantially increasing contributions to provide a reasonably adequate benefit for all employees. If this is a correct assumption, then the cities would be well advised to recognize the liabilities for such benefits and undertake funding of the costs upon the adoption of the plan. The real danger in the money purchase approach is that cities will hurriedly adopt a plan under the mistaken belief that the long range cost will be limited to annual payments equal to the fixed contribution rate. Excellent examples of both the need to eventually recognize the adequacy of retirement benefits and the substantial liabilities resulting therefrom are the Teachers' Retirement System and the Georgia Employees' Retirement System. Both plans were initially established on the "money purchase" basis ann in each case a definite formula for determining benefits (with costs varying) was subsequently established. Although both plans are currently actuarially sound, the financial burden of current and future generations of taxpayers would be considerably lighter had funding of the liabilities for the predeterminable benefits commenced at the time the plans were adopted.
The Board of Trustees of the Joint Municipal Employees' Retirement System has resolved to secure amendatory legislation which will enable municipalities to adopt a "fixed benefit" retirement program in Iieu of the money purchase plan.
BOWLES & TILLINGHAST, Inc.

APPENDIX
BOWLES & TILLINGHAST, In<

APPENDIX A RESUME' OF PROVISIONS OF EACH RETIREMENT SYSTEM

System Teachers Retirement System Employees Retirement System Peace Officers Annuity and Benefit Fund Firemen's Pension Fund Sheriffs Retirement Fund Ordinaries Retirement Fund Superior Court Clerks Retirement Fund Superior Court Judges Retirement Fund Solicitors General Retirement Fund

Page
A-l A-5 A-10 A-13 A-15 A-18 A-20 A-22 A-24

BOWLES & TILLINGHAST, In,

A-1 TEACHERS' RETIREMENT SYSTEM

Date of Original Approval:

1943.

Amendments:

Each year since 1943 except 1944, 1946, 1948, 1951, 1954 and 1955.

Eligibility
Persons employed not less than half-time as classroom teachers, clerical employees or supervisors of teachers employed by the State Board of Education, the State Board of Vocational Education or the Board of Regents of the University System of Georgia; all personnel of the Agricultural Extension Service of the University of Georgia; all regional and county school librarians, registrars of each unit of the University System, Secretary and Treasurer of the Board of Regents--all of whom are defined as "teachers".

Membership
Compulsory for teachers hired on or after January 1, 1944, and optional for those hired prior to January 1, 1944, provided that a teacher otherwise eligible shall not be classified as a member while in the service of an employer which operates a local retirement system for teachers.

Credited Service
Membership service and service for which a valid prior service certificate is held. Under certain conditions credits can inc lude up to five years of military service. Such service prior to January 1, 1945, granted at no cost to members.
Out-of-State Credit. Any member with five or more years of current Georgia service may qualify
fO'"r-Uptotenyearsofout-of-state service from states which give credit for service in Georgia schools.

Retirement Conditions
For members hired on or before June 30, 1961 (Group A), anyone of the following ~onditions:
1. Thirty-five years of service. 2. Age 60 with one or more years of service.
For members hired after June 30, 1961 (Group B), anyone of the following conditions:
1. Age 60 or older with ten or more years of service. 2. Age 55 with thirty-five or more years of service.

BOWLES & TILLINGHAST, Ino.

A-2
Members in Group A may retire under the provisions of Group A or Group B, whichever method produces the larger benefit.
Retirement is compulsory at age 70 except that a member age 70 may remain in service until the end of the current school year or a member teacher whose service is necessary for the efficient operation of a school system may remain in service until the end of the school year in which the member attains age 73. Retention in service until age 73 does not apply to the retirement of teachers of the University of Georgia System.
Retirement Benefits
For a Service Retirement Prior to Age 65. An annual annuity equal to 1-3/4% times years of credit;bieSe-;';iCe;;crltoe;c~edT;-rtyy~~;:;t;imes average salary for best five consecutive years minus 1/4% of said annual annuity for each month under age 65 at retirement. (Legislation enacted in 1965 provides that the reduction factor will apply only to retirements occurring prior to age 63. It will become effective on July 1, 1965, only if the Board increases the IIminimum benefit ll (see below) to $5.00 for those who retired prior to July 1, 1961.)
For a Service Retirement at Age 65 or Over. An annual annuity equal to 1-3/4% times years of credftcl:>T;-se7vic~-oott;-e~eecTfc;;:-tyye;rs,times average salary for best five consecutive years.
Minimum Benefit. A minimum service retirement allowance of $100 per month is provided for memberswithti-iiitY.:f~eyears of creditable service or a proportionate part thereof if he has completed less than thirty-five years of creditable service. Periodically, the Board of Trustees has increased this floor to a minimum of $4.50 per month for each year of service up to a maximum of forty years.
Disability Benefits
A disabled member who has completed fifteen or more years of service or who has attained age 60 and has completed ten or more years of service may retire with a benefit computed as a service retirement allowance on the basis of his creditable service and earnings as of the time of his disability as if he had atta ined age 65 (I. e., no reduction of benefit for ages under 65).
Optional Retirement Payments
In Iieu of the normal retirement payments above, all of which continue during the Iifetime of the retired employee only, reduced monthly payments are available under the following options:
1. Upon the death of the retired member, the excess of his contributions accumulated with interest at retirement, over the annuity payments wh ich were purchased with employee contributions, arepaidto a designated beneficiary or to his estate.
2. The reduced retirement allowance payable to the retired member is continued, upon h is death, during the Iifetime of a designated beneficiary.
BOWLES & TILLINGHAST, In<

A-3
3. One-half of the reduced-retirement allowance payable to the retired member is continued, upon his death, during the lifetime of a designated beneficiary.
4. A reduced retirement allowance payable during the lifetime of the retired member, with the provision that, upon his death, some other benefit shall be payable. Such option must be approved by the Board and be actuarially equivalent to the normal form of payment.
Termination Benefits
A member with less than five years of service will receive his contributions with no interest credit.
A member with more than five years, but less than fifteen years of service, will receive his contributions plus.three-fourths of the regular interest rate of the plan compounded annually.
A member with fifteen or more years of service will receive his contributions accumulated with the plan's rate of interest.
Members with an aggregate of twenty years of service may letlve contributions in the fund and receive accrued benefits at age 60.
Death Benefits
A death benefit is payable should a member die after having attained age 60 with ten years of service or completing fifteen or more years of service, provided there is a normal living beneficiary. Otherwise, the total amount of member contributions are payable to his estate.
The amount of benefit is equal to that which would have been payable to the member's beneficiary had the member retired on disability on the date of his death and died after an election of Option 2 had become effective.
Teachers' Contributions
Members contribute 6% of their monthly salary excluding travel expenses. Members who are age 65 and have forty years of service are not required to make contributions after the end of the school year in which they attain age 65 and complete forty years of service. Contributions f~r out-of-state service is 8% of salary earned in other states plus 3-1/2% interest.
Local Contributions
The local employer contributes 8.29% of the salary and chargeback* paid by the local Board of Education.
* The term "c hargeback" refers to that portion of the State-paid salary which is charged to the local employing unit by the State.
BOWLES & TILLINGHAST, Inc.

A-4
State Contributions
The State contributes 8.29% of that portion of the member's salary which it pays minus the chargeback.
Benefits for Members of Local Retirement Funds
A pension is payable from the system on account of a teacher who is in the service of an employer operating a local retirement fund and who has not become a member of the system, if, at the time of his retirement under the local retirement fund, he would have been eligible to retire on a service retirement allowance under the system had he been a member.
The service retirement pension payable on account of a member of a local retirement fund consists of:
1. A pension equal to the annuity which would have been allowable at the age of retirement if the teacher had been a member of the system and had made contributions at 5% of his earnable compensation paid from State funds, but not to exceed the annuity allowable at age 65 computed on the basis of such contributions as he would have made prior to age 65; plus
2. If the teacher has a prior service certificate in full force and effect, an additional pension equal to the annuity which would have been provided at the age of retirement or at age 65, whichever is earlier, by contributions at the rate of 15% of his earnable compensation paid from State funds during his prior service.
If the pension exceeds the amount payable under the local fund, the local fund is reimbursed for the benefit it pays to the teacher and the excess is paid by the State system to the retired teacher. If the amount payable is equal to or less than the amount payable under the local fund, the entire amount is payable to the local fund.
If, by reason of change of employment, a teacher's status is changed from membership in a local fund to membership in the State system or from the State system to a local fund, his previously acquired credits in the State system are continued.
Administration
The system is administered by a Board of Trustees consisting of the State Auditor, the State Insurance Commissioner, the Secretary of the Georgia Education Association, the Executive Secretary of the Georgia Teachers and Education Association, one school administrator or principal, an employee of the Board of Regents, one classroom teacher, a citizen of the State experienced with investments and one member of the system appointed by the Governor. The first four above are members by virtue of their office, the next three are elected by the Annual Delegate Assembly of the Georgia Education Association and the next is elected by the Board of Trustees.
BOWLES & TILLINGHAST, Inc

EMPLOYEES' RETIREMENT SYSTEM

A-5

Date of Original Approval:

February 3, 1949.

Amendments:

Each year since 1949 except 1954 and 1955.

EI igibi I ity
All employees of the State of Georgia and its departments, bureaus, boards and counties, as defined in the act, which are operating under a State merit system of personnel adm inistration and who are not covered under the Teachers' Retirement System and who are employed in positions normally requiring actual performance of duty during not less than nine months out of the year.

Membership
Membership is compulsory for all eligible employees hired after January 1, 1950. Eligible employees hired before that date could elect membership. The system is divided into two divisions:
Division A is the Social Security Coverage Group. It includes all individuals becoming a membe70n or after September 1, 1956, and those members as of October 1, 1962, electing to come under Division A. Once becoming a member of Division A, an individual may not transfer to Division B.
Division B includes employees not covered by Social Security. It consists of individuals who were-members of the system as of August 31, 1956, who elected not to go under Division A and did not subsequently elect membership in Division A prior to October 1, '962.

Credited Service
Prior service means service rendered before July 1, 1953. Such service must have been certified byOctober1, 1961, except former employees who were members as of July 1, 1961, and had at least ten years of service prior to July 1, 1950, who had not previously elected non~embership and who completed five years membership service after July 1, 1961, may receive certification for such service prior to July 1, 1950.
Membership service means service rendered as a member of the retirement system since July 1, T949:--Upto-ff;e-~ars of military service may be granted.
Credited service is the total of prior service plus membership service; provided that credit will not b;-gf~e~Tormore than one year for anyone year of actual service. Under the April 1, 1964 amendment, no credit is given for service after age 65.

BOWLES & TILLINGHAST, In<

A-6
Average Earnable Compensation The five highest completed consecutive fiscal earnings period as a State employee.
Retirement Conditions ?.~~~~~~t:!.r.=~~'!!' Age 60 and five years membership, or thirty years of membership in the system. For partic ipants who are covered prior to April 1, 1964, and receive benefits computed under the alternative method described below: Service Retirement. Basic Money Purchase Benefit - age 60 and five years credited service, or thTrtyy~rs-;;~cTItedservice regardless of age. Supplemental Benefit - normal retirement is age 65 with fourteen years of service. Benefit may commence at any age between 60 and 65 at reduced amount. Q~~~!.!!Y_~!~~~!!~ Payable upon involuntary separation from employment without prejudice after eighteen years credited service or upon permanent disability after thirteen years and three months credited service.
Retirement Benefits Service Retirement
1. A monthly benefit based on a benefit accrual table which relates to the employee1s earnings and years of credited service.
2. Either a refund of contributions made by the participant and not matched by the State, or the annuity purchasable with these contributions.
If the employee retires prior to age 65 and has not attained age 60 and completed thirty-five years of service, his benefit will be reduced by 5/12% for each month by which his age at retirement is less than 65. If the employee retires after age 65, he will receive the same benefit which he would have received at age 65. For participants who were covered under the system prior to July 1, 1964, the following benefits are payable if greater than those provided above:
BOWLES & TILLINGHAST, Inc

A-7
1. An annuity which is the actuarial equivalent of the employee's accumulated contributions at retirement.
2. A pension which is the actuarial equivalent of the member's accumulated contributions since entry into the plan to age 65 plus the member's contributions of 5% of earnings prior to January 1, 1954.
3. A pension which is the amount purchasable by the amount of the prior service accumulations. Prior service accumulation is the amount the member would have contributed through June 30, 1953, plus the matching contribution that would have been made by the State.
4. A supplemental benefit for those who qual ify by having fourteen or more years service at age 65 equal to years of service at retirement multiplied by a benefit rate per year of service with resulting percentage being applied to highest' monthly earnings while a contributing member.
A member who has at least thirty-five years of service and who is not less than 60 years old will receive the same benefit which would have been payable at age 65 if he had continued in service with no further changes in compensation.
In no event will the total monthly benefit after computation of options exceed 90% of the highest monthly salary of a member while a State employee.
_ D_is.abi Ii:t..1v. Retirement_
1. If the member has attained age 60, he receives the equivalent of a service retirement allowance or the disability allowance described in c or d below, whichever is greater.
2. a. If the member is under age 60 but has completed thirteen years and three months of credited service, he receives 75% of the service retirement allowance which would have been payable at age 60 if compensation had remained unchanged.
b. If the member is under age 60 but has completed eighteen years of credited service, he receives the service retirement allowance which would have been payable at age 60 if compensation had remained unchanged.
c. If the member is under age 60 but has completed twenty-two years and nine months of credited service, he receives 75% of the service retirement allowance which would have been payable at age 65 if compensation had remained unchanged.
d. If the member is under age 60 but has completed twenty-seven years and six months of credited service, he receives the service retirement allowance which would have been payable at age 65 if compensation had remained unchanged.
BOWLES & TILLINGHAST, Ino

Death Benefits
If a member dies who has at least thirteen years and three months of credited service, his beneficiary receives the benefit which would have been payable if the member had retired under the disability provision and had elected the 100% Joint and Survivor Option (Option 2).
If a member dies who has less than th irteen years and three months of service and is under age 60, his contributions will be returned to his beneficiary in accordance with the termination section below.
Survivors' Benefits
Survivors' benefits are available to those employees who are under age 56 on the date of his employment. Employees contribute 1/2% of earnable compensation toward the benefits, and the employer contributes the same percentage. Benefits provided through group life insurance issued by the State Employees' Assurance Department.
Benefits are equal to a multiple of monthly salary. For those employees who become covered before the attainment of age 51, twelve times monthly salary is provided for the first five years of coverage increasing by one-half month's salary for each additional year of coverage with a maximum benefit of eighteen months' salary. Provided, however, no increases are made after attained age 51. For those employees who become covered after the attainment of age 51, the multiple is less, beginning with eleven times monthly compensation for those who become covered at age 51, such multiple decreasing by one for each year to seven times monthly compensation at age 55.
Termination
If a member terminates employment before becoming eligible to receive benefits, his contributions will be returned to him:
1. Without interest, if he has less than five years membership service. 2. With three-fourths of the regular interest, if he has five but less than fifteen years
membership service. 3. With full regular interest if he has fifteen or more years of membership service.
If a member who has eighteen or more years of credited service terminates and does not withdraw his contributions, his rights will vest and he will be eligible for a deferred benefit beginning at age 60 and equal to his accrued benefit.
Optional Forms of Benefit Payment
The normal form of benefit payment is a Straight Life Option. At any time before benefit payments begin, the member may elect to convert his benefits to one of the following options:
9!.!~~!..:-_~~s~_R!~~~..9..p.!.~!:!.. Return of excess of member's accumulated contributions over the annuity received by him.
BOWLES & TILLINGHAST, Inc.

A-9
Option 2 - 100% Joint and Survivor Option. Continuation of member's benefits after his death-to-adesf~inatedbeneffciCiryfOrtl'ielTfetime of the benefic iary
Q.f!.!~~~-=-~~~~~!..~~_~.!'.~~c:!:_~...!!.?~. Continuation of one-half of the member's benefits after his death to a designated beneficiary for the beneficiary's lifetime.
Option 4. An allowance payable for life with an amount, designated by the member, paid to-abeneficiary upon the member's death provided such amount does not exceed what would otherwise be continued to the benefic iary under Option 2.
Employees' Contributions
Division A. Members contribute 3% of the first $4,200 of annual earnings and 5% of annual earn~gs~-ID<cess of $4,200. Changes in the taxable salary base under Social Security do not affect employee contributions to the Employees' Retirement System.
Division B. Members contribute 5% of compensation. After attainment of age 65 and/or completi;;;f-thfrty-five years service, continued contributions are optional.
Members also contribute 1/2% of salary for survivors' benefits, if the member is covered, otherwise to provide an increased annuity benefit. Any new member under age 56 must be covered under survivors'benefitsunlesshe has previously declined the coverage.
Members may elect to contribute, subject to the Board's approval, additional amounts in order to provide an additional annuity upon retirement, provided that the total retirement allowance may not exceed one-half of final aver.age compensation at retirement or at age 65, wh ichever occurs first.
Employer Contributions
The employer contributes a percentage of earnable compensation of members, known as the normal contribution, and an additional percentage of earnable compensation, known as the accrued liability contribution. The employer also contributes to an Expense Fund for the administrative expenses of the system. Total employer contributions with respect to each member are as follows:
!2~.!.s.!.c:!:!_~. 5~% of the first $4,200 annua I sa lary, 7~% of annua I sa lary in excess of $4,200. !2~.!.s..!.c:!:!_~ 7~% of total annual salary.
In addition, the State contributes 1/2% of annual salary into the Survivors' Benefit Fund.
Administration
The system is administered by a Board of Trustees consisting of the State Auditor (ex officio), the State Insurance Comm issioner (ex offic io), the State Merit System Director (ex offic io), one member appointed by the Governor, two members elected by the above Trustees and a seventh member who is neither a member of the system nor a holder of public office, and who has at least ten years experience in the investment of monies.
BOWLES & TILLINGHAST, In<

A-10

PEACE OFFICfRS' ANNUITY AND BENEFIT FUND

Date of Original Approval:

February 1, 1950.

Amendments:

Each year since 1950 except 1957, 1960, 1961 and 1964.

Eligibility
Any full-time peace officer employed by the State or any political subdivision thereof. The term "peace officer" also includes deputy sheriffs employed by the sheriffs, wardens and guards of State or county public work camps or work camps of municipalities having a population of at least 70,000. In addition, full-time employees of the fund are el igible.

Membership
Peace officers may become members by making application to the Board, filing a medical examination and fi ling for periods of past service credit. Those persons serving as peace officers on Apri I 1, 1965, must have made application by December 1, 1965; others must make application within eight months from the date of becoming a peace officer. No one who becomes a peace officer after December 1, 1965, and who is age 45 or older may become a member. A member withdrawing contributions after April 1, 1965, while still employed as a peace officer may never again become a member.

Credited Service
All periods of certified service prior to March 1, 1951, and certified service after that time for which the member makes contributions. A member in good standing who enlists or is drafted into the Armed Fort:es may receive up to five years of credited service without contributions, provided he returns to employment as a peace officer within six months after discharge.

Retirement Conditions
Service Retirement. A member must have attained age 55 and completed twenty years service. Rem~yretfrewTtlia larger benefit if he has attained age 60 and completed twenty-five years of service.
If a member has completed twenty years of service but has not attained age 55, he may retire, continue making contributions to the fund and receive a deferred benefit beginning at age 55. If he has completed twenty-five years of service but has not attained age 60, he may retire, continue making payments to the fund and receive a deferred benefit beginning at age 60.

BOWLES & TILLINGHAST, Ino.

A-11
Each member must make contributions to the fund for a period of at least twenty years before becoming eligible to retire. If a member is otherwise eligible for retirement, he may retire and have his monthly contributions deducted from his retirement pay until he has completed the twenty year contribution requirement. Anyone who becomes a member on or after April 1, 1965, must contribute to the fund for at least five years, regardless of past service credits, and remain an active peace officer during such five year period.
Disability Retirement. A member who becomes totally and permanently disabled in line of duty may retfrec;riCfrect!iveci'isability benefits.
Retirement Benefits
Service Retirement. The monthly life benefit payable upon retirement at age 55 and twenty years sei="Vicers-$10O:-At age 60 with twenty-five years service the monthly life benefit is $125.
~!:~~!.!!y_~.!.~~m.:.:'!.: The monthly life benefit payable at disability retirement is $100.
Death Benefits
If a member dies prior to retirement but not in line of duty, his designated beneficiary will receive a benefit of $2,000.
If death occurs in Iine of duty or as a direct result of injury sustained in Iine of duty, the designated beneficiary will receive a benefit of $4,000; $2,000 to be paid in a lump sum and the balance at the rate of $100 per month for twenty months. Prov ided, however, the tota I death benefit of $4,000 will be reduced by the amount of disabil ity benefits, if any, received by the member from the fund.
If a member dies after retirement and after having received $1,000 or more in retirement benefits, his beneficiary will receive a death benefit of $1,000. If he has received less than $1,000 in benefits, his beneficiary wi II rece ive the difference between $2,000 and the amount of benefits previously received.
Termination
If a member ceases to be a peace officer, he will be refunded 95% of the contributions he made to the fund. Voluntary withdrawal is also permitted with return of 95% of contributions.
Optional Forms of Benefit Payment
In lieu of a straight life annuity payment, a member may elect, at the time of his retirement, to receive the actuarial equivalent of his benefit under one of the optional forms below:
100% Joint Life Annuity. A monthly benefit payable during the member's lifetime. At his d~thtT-;es~mebenefit;i11 continue to his wife for the remainder of her lifetime.
BOWLES & TILLINGHAST, Inc

A-12
If a member's wife predeceases him, no other wife is entitled to benefits upon the member's death. If a widow who is receiving benefits remarries, her monthly benefit wi II terminate. 50% Joint Life Annuity. A monthly benefit payable during the member's lifetime. At his death50%ofthebeMfit will continue to his wife for the remainder of her lifetime. If a member's wife predeceases him, no other wife is entitled to benefits upon the member's death. If a widow who is receiving benefits remarries, her monthly benefit will terminate.
Peace Officers' Contributions Each member contributes $7 per month to the Fund for all service after March 1, 1951, for which he receives credit.
Stat e Con t rib uti on s State contributions will be made from fines and forfeited bonds in accordance with a scale set out in the act which provides for contributions of from $2 to $5, depending on the dollar amount of each fine or bond forfeiture. Such amounts are to be paid before any costs or other claim against fines and bond forfeitures.
Administration The plan is administered by a Board of Commissioners consisting of six members as follows: the Governor, the Attorney-General, the Comptroller General, the President of the Peace Officers' Association of Georgia, and two members of the Peace Officers' Association to be elected by the Association who are active members of the Fund or are receiving benefits from the Fund. The Board elects a Secretary-Treasurer who serves at the pleasure of the Board.
BOWLES & TILLINGHAST, Inc.

FIREMEN1S PENSION FUND

A-13

Date of Original Approval:

March 3, 1955.

Amendments:

Each year since 1955 except 1958, 1959, 1964 and 1965.

Eligibility
All persons employed on a permanent basis by a full-time fire department of the State or any municipality or political subdivision thereof or a class 118 11 department or better are eligible to become members of the fund. Regularly enrolled volunteer firemen of a volunteer fire department which is publicly financed and which holds drills and meetings of at least eight hours monthly, who attend not less than 75% of drills, meetings and fires in every calendar year, are also eligible.

Membership
Application for membership must have been made within six months after the approval of the act, if then employed, or, if employed later, within four months after becoming a fireman. Membership was reopened in 1961 for a period of four months to allow eligible persons to join ortrejoin the fund.

Retirement Conditions
Service Retirement. Normal retirement is at age 60 provided the fireman has twenty-five years service.
Early retirement is permitted after twenty-five years service' with a deferred benefit beginning at age 60.
Disability Retirement. Any fireman who becomes totally and permanently disabled in line of duty mayreti7eSi;monthsafter sustaining such injury.
Any fireman who becomes totally and permanently disabled as a result of a heart disease or respiratory disease may retire provided he has at least five years consecutive service immediately preceding the date of disability.

BOWLES & TILLINGHAST, In<

A-14 Retirement Benefits The benefit for either service or disability retirement is $72 monthly. For persons who retired prior to April 1, 1956, and who had made contributions to the plan for at least one year, the benefit is $50 monthl y.
Death Benefits If an active or retired member dies, his designated beneficiary receives the difference between
the member's contributions and any benefit payments v.h ich may have previousl y been made.
Termination If a member terminated employment as a fireman, he may withdraw 95% of his contributions. If he is later re-employed as a fireman, he may again become a member of the Fund and receive credit for previous service if he repays his contributions with interest at 6% per annum.
Firemen's Contributions Each fireman who is a member of the Fund contributes $5 per month. Any member who becomes six months delinquent in his contributions is removed from membership.
State Contributions A tax of 1% of gross premiums on fire, lightning, extended coverage, inland marine and windstorm insurance policies is levied on each fire insurance company doing business within the State and covering property within the State. Payments by insurance companies are made directly to the Secretary-Treasurer of the Fi remen l s Pension Fund. The Act further provides that the above tax is the sole source of revenue in addition to employee contributions.
Administration The Fund is administered by a Board consisting of the Governor of Georgia, ex officio, the State Insurance Commissioner, ex officio, the Secretary-Treasurer of the Georgia State Firemen's Association and two other members elected by the Georgia State Firemen's Association who serve for terms of four years each. The Board appoints a Secretary-Treasurer who serves at the pleasure of the Board and whose salary is determined by the Board.
BOWLES & TILLINGHAST, 1.<.

SHERIFFS RETIREMENT FUND

A-15

Date of Original Approval:

April 16, 1963.

Amendments:

None.

Eligibility
Any duly qualified ana commissioned sheriff of the Superior Court of a county of the State of Georgia.

Membership
Optional for any eligible sheriff. Application for membership must be filed within one year of approval date of the act or from the date he begins serving as sheriff, if later.

Credited Service
Periods of Service Prior to January 1, 1961. Upon making application for membership within ti-ieprescribeci"peilodortTme;-cin-elrgibleSheriff may request credit for all periods of service as a sheriff prior to January 1, 1961. Any such service not reported at time of application will at no time be credited. In addition, credit will be given for periods of servir.e, listed by the sheriff, in the Armed Forces of the United States not to cxceec: four years, and as a peace oHicer, other than as sheriff, for the State, municipality or pulitical subc:ivision thereof for a period not to exceed four years. In order to be given credit for service in the .Armed Forces or as a peace officer, other than sheriff, a member must have served as a sheriff for a minimum period of eight years subsequent to December 31, 1960.
~~!?~..?.!.~~r~!5.= S~~'=9.~~!..!?_~~.=m~~]..!!....!~~. Upon making application for membership within the prescribed period of time, the sheriff wiff receive credit for the period from January 1, 1961, to date of application and must remit $20 for each month of such period. Service after the date of the app Iication is credited as long as contributions are continued and the individual continues to be eligible for membership. However, the member may suspend contributions and later make up such contributions together with 6% interest at any time prior "to retirement.

Retirement Conditions
Attainment of age 60 with a minimum service period of at least four years since December 31, 1960, for which period contributions by the sheriff must have been made.

BOWLES & TILLINGHAST, In'

A-16

Retirement Benefits
$40 per month plus an additional $10 per month for each full year or a pro rata amount for partial years of credited service over four years, however, in no event will the maximum monthly benefit exceed $200. $20 per month for each year of service prior to January 1, 1961, which has been credited and for which contributions have not been made as of the date of retirement, is deducted from the monthly retirement bendit. Such deductions continue until a total of $20 for each month of credited service prior to January 1, 1961, has been withheld, or until a maximum of twenty years has been paid or withheld or until the death of the member, whichever occurs fi rst.

Optional Benefits:

None.

Disability Benefits:

None.

Termination and Withdrawal Benefits
Return of member's contributions without interest (;.. member's request. Reinstatement fonowing breaks in service as a sheriff is provided. Howevt;;;, if contributions are withdrawn at any time, membership may not be reinstated.

Death Benefits
~:!~..=3..=!.!~~.::~t..:. Return of member's contributions without interest to surviving widow or his estate.
After Retirement: Return without interest of that portion of member's contributions which have ~~be;';p<iidT';benefits

Sheriffs' Contributions Sheriffs contribute $20 per month or pro rata amount for fractiona I month.

State Contributions
In all criminal and quasi-criminal cases for violations of State statutes and traffic laws in which any sheriff, or deputy sheriff acting in behalf of the sheriff, acts in official capacity and in 'which a fine is collected or in which a bond is forfeited in the amount of $5 or more, the amount of $1.50, or a lesser amount thereof, is allocated to the Sheriffs' Retirement Fund provided the fine or bond forfeiture is adequate to meet costs and all other priority claims.

BOWLES & TILLINGHAST, Inc

A-17 In the event funds from the above sources (member and State contribution:;) ere actuarially deficient to provide full benefits, a pro rata percentage of such benefits is paid until such time as there are sufficient funds to make full payments. Administration The System is administered by a Board of Commissioners consisting of the Chairman of the Sheriffs' Group of the County Officers' Association, the Chairman of the County Commissioners' Group of the County Officers' Association and three other persons elected by the Sheriffs' Group from its membership at its annual meeting_ A paid Secretary-Treasurer is elected by the Board which determines his salary, not to exceed $5, 000 annually.
BOWLES & TILLINGHAST, In<

A-18

ORDINARIES' RETIREMENT FUND

Date of Original Approval:

March 21, 1958.

Amendments:

1959, 1961 and 1963.

Eligibility All qual ified and commissioned ordinaries of counties of the State of Georgia.

Membership
Application must have been made by February 28, 1962, or within twelve months after first becoming an ordinary, whichever is later.

Credited Service
Service since December 22, 1953, as a qual ified ordinary excluding any time for which contributions have not been made.

Retirement Conditions
Normal retirement is at age 65 provided the ordinary has served at least four years.
Early retirement is permitted after four years service, with a deferred benefit payable beginning at age 65.

Retirement Benefits

10% of average monthly earnings* plus 2-1/2% of average monthly earnings for each year of credited service over four, but not exceeding a total of twenty years.

* Average monthly earnings is the average of net earnings or gross salary during credited service. No' credit is allowed for earnings over $1,000 monthly.

Optional Benefits:

None.

Disability Benefits:

None.

BOWLES & TILLINGHAST, Ino.

A-19 Death or Termination Benefits Death Before Retirement. In the event of death or termination as an ordinary prior to retirement, ~~tJIWtiOns-wHn;e-rehJrned Death After Retirement. In the event of death after retirement, the excess, if any, of the ordTnaryTs-contribUtiO~sover the sum of benefits paid will be returned to the estate of the ordinary.
Ordinaries' Contributions Each ordinary will contribute 5% of net earnings, if on a fee basis, or gross earnings, if on a salaried basis, up to a total of $50 per month for all service as an ordinary since December 22, 1953. No contributions are made on earnings over $1,000 monthly.
State Contributions An amount equal to 20% of marriage license fees plus contributions from fines and bond forfeitures paid with respect to violation of State statutes or traffic laws in cases which come before the ordinaries. From $1 to $2.50 is contributed, depending on the dollar amount of each fine or bond forfeiture. Such amounts are contributed before payment of costs and other claims against the fines and forfeitures. In the event funds from the above sources (member and State contributions) are actuarially deficient to provide full benefits, a pro rata percentage of such benefits is paid until such time as there are sufficient funds to make full payment.
Administration The Retirement Fund is administered by a Board of Commissioners consisting of the Governor of Georgia, the Attorney-General, the Chairman of the Ordinaries' Group of the County Officers' Association and two members elected by the Ordinaries' Group. The Board elects a SecretaryTreasurer who serves at the pleasure of the Board.
BOWLES & TILLINGHAST, In<.

A-20

SUPERIOR COURT CLERKS RETIREMENT FUND

Date of Original Approval:

February 15, 1952

Amendments:

1953 November-December session, 1962, 1963 and 1964.

Eli~ibility
Clerks of the Superior Courts of Georgia.

Membership Appl ication for membership is made to the Board. No prescribed time for making appl ication.

Credited Service
Years of service prior to 1952 claimed by the clerk and as approved by the Board plus service since 1952 for which contributions have been made.

Retirement Conditions
Service Retirement. A member must have attained age 55 and have completed twenty years se-;:-';;~e;;-;~ie;k-clthe Superior Court. Service as a deputy clerk may be included but at least twelve years of the required twenty must have been as clerk and four years must have been served continuously as clerk immediately preceding retirement for which contributions were made.
Disability Retirement. Payable upon total permanent disability for a member who has sixteen yea-;:-;-cl-C;:ed1~crser~ice.

Retirement Benefits
The monthly benefit for either service or disabil ity retirement is the lesser of $240 or twothirds of salary during the last four years prior to retirement.

O.ptional Bene. fits In lieu of the above retirement benefit, a clerk may elect to receive a reduced monthly benefit equal to two-thirds of the normal benefit and, at his death, one-half of the normal benefit will be payable to the surviving spouse.
BOWLES & TILLINGHAST, In<.

A-21 Termination Contributions made may be withdrawn without interest at any time; after withdrawal, the clerk may become a member of the Fund and receive credit for previous service if he repays his contributions with interest at 6% per annum.
Deat h Benefits If a member with less than twenty years of service dies before retirement, his total contributions will be returned without interest to his estate. If a member dies who is eligible to retire but has not done so, his surviving spouse will receive a monthly lifetime benefit equal to one-third of the normal retirement benefit. The surviving spouse must be at least 55 years of age and have been married to the deceased six years immediately prior to his death. If a member dies after retirement, the difference, if any, between the total contributions without interest and the amount of benefits received will be returned to the member's esfate.
Clerk's Contributions Each clerk will contribute the smaller of $18 per month or 5% of net' income (gross income less personal expenses for his office) received for services as a clerk. Any clerk who receives as net income $4,320 or more per year will contribute not less than $216 per year to the fund.
State Contributions Contributions will be equal to $1.50 for each case involving fines or forfeited bonds of over $5 in criminal and quasi-criminal cases for violating State statutes tried in any Georgia court of which the clerk of the Superior Court is clerk.
Administration The Fund is administered by a Board of Commissioners consisting of three clerks elected by the Clerks' Group, the Governor and the Attorney-General. The Board appoints a SecretaryTreasurer who serves at the pleasure of the Board.
BOWLES & TILLINGHAST, 1.<.

A-22

SUPERIOR COURT JUDGES' RETIREMENT FUND

Date of Original Approval:

March 9, 1945.

Amendments:

1946, 1950, 1952, 1953, 1955, 1956, 1957, 1960, 1961, 1964 and 1965.

Eligibility Any judge of the Superior Court of the State of Georgia.

Membership and Credited Service
Eighteen years as a judge of the Superior Court. Service may be included as a solicitor general of a judicial circuit, as a judge or a solicitor of a city or county court of the State, as a member of the General Assembly, and service in the Armed Forces. One complete term or its equivalent number of years in two or more terms must have been served as a judge of the Superior Court.

Retirement Conditions
Service Retirement. Retirement may be in the nineteenth year of service with full benefits, or if amembei-lsfn-thetenth year of service and has attained age 68 with a reduced benefit.
Q.!.-~I:!!i!y_~.!.~~m..:.!!!.: Payable upon disability for a member who has attained age 62 with ten years of service or has attained age 72 with two consecutive terms as judge.

Retirement Benefits
Service Retirement. The monthly Iife benefit payable in the nineteenth year of service is twoihTrds;frOO~thlys~ary. At age 68 in the tenth year of service, it is one-half of monthly salary. Such payments shall continue for life; however, the retired judge is prohibited from practicing law or from practicing as an attorney, proctor or solicitor in any court in the United States.
Q~~I:!!i!y_~.!.~~m..:.!!!: One-half of monthly salary.

Optional Benefits:

None.

BOWLES & TILLINGHAST, In<.

A-23
Death or Termination
Upon death, resignation or other disqualification to hold office, the judges' contributions will be returned without interest.
In the case of death after retirement, the excess of the fudge's contributions, if any, over the sum of benefits received will be returned to his widow or personal representative.

Judges' Contributions:

5% of salary.

State Contributions
Benefits are considered as annual salary paid by the State of Georgia and are paid without regard to the sufficiency of the Retirement Fund.

Administration
The Superior Court Judges' Retirement Fund is administered by a Board of Trustees consisting of the Governor, the Treasurer, and the Attorney-General. The Treasurer holds and invests funds received from contributing members.

BOWLES & TILLINGHAST, In<

A-24

SOLICITORS' GENERAL RETIREMENT FUND

Date of Original Approval:

February 17, 1949.

Amendments:

1950, 1953, 1956, 1958, 1961, 1964 and 1965.

Eligibility All solicitors general of the State of Georgia.

Membership and Credited Service
Sol icitors general must make contributions to the fund and remain in active office for a period of at least nineteen years and until retirement. Periods of service while assistant solicitor general or sol icitor of a city court count toward nineteen year. service requirement. Also, service in the Armed Forces during World War I, " or Korean War for which contributions are made may be counted.

Retirement Conditions
Service Retirement. After nineteen years service, members may retire and be appointed to the ;fffceofSOliCTto;:-GeneraI Emeritus.
~~~I:ll!!y_~.!.!.!:~m.:~!.: After seventeen years service, members who are unable to perform official duties may retire upon certification, provided they continue pro rata contributions for the necessary length of time.

Retirement Benefits
The salary of a Solicitor General Emeritus will be equal to two-thirds of the salary or fees of the member in the calenday year immediately prior to his retirement as an active solicitor general, provided that no annual payment shall exceed $6,000, such salary to continue for life.

Optional Benefits:

None.

BOWLES & TILLINGHAST, In<

A-25
Death or Termination Upon death, resignation or other disqual ification to hold office, the member's contributions will be returned without interest. In the case of death after retirement, the excess of the member's contributions, if any, over the sum of benefit's received, will be returned to his widow or personal representative.
Solicitors' General Contributions Sol icitors general contribute 5% of their salary or fees each year up to a total of $450 per year. If contributions not made prior to February 15 following year for which they are due, 6% interest penalty imposed. Contributions are not required for periods of credited service as assistant solicitor general or solicitor of a city court; however, contributions plus 6% single interest are required for service in World War I, World War II and the Korean conflict.
State Contributions Benefits are considered as annual salary paid by the State of Georgia and are paid without regard to the sufficiency of the retirement fund.
Transfer of Funds to State Employees' Retirement System A member transferring to an agency which is under the State Employees' Retirement System shall have his contributions transferred.to that system plus 20% of his contributions, which amount is paid from the funds appropriated to operate the Superior Courts of the State.
Administration The Solicitors' General Retirement Fund is administered by a Board of Trustees consisting of the Governor, the Treasurer and the Attorney General. The Treasurer holds and invests funds received from contributing members.
BOWLES & TILLINGHAST, Inc.