Annual report 1998 [1998]

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INTRODUCTORY SECTION TABLE OF CONTENTS

BOARDS OF TRUSTEES

LETTER OF TRANSMITTAL

LEGiSLATION

ACTUARIAL SUMMARY

EMPLOYEES' RETIREMENT SySTEM

;

PUBLIC SCHOOL EMPLOYEES RETIREMENT SySTEM

LEGISLATIVE RETIREMENT SySTEM

TRIAL JUDGES AND SOLICITORS RETIREMENT FUND

STATE EMPLOYEES' ASSURANCE DEPARTMENT (GTLI)

DISTRICT ATTORNEYS' RETIREMENT SYSTEM

SUPERIOR COURT JUDGES RETIREMENT SySTEM

INVESTMENT SECTION POOLED INVESTMENT FUND STRUCTURAL ANALYSIS OF INVESTMENTS/RATE OF RETURN TEMPORARY INVESTMENTS/BoNDS COMMON STOCK HOLDINGS MORTGAGES, REAL ESTATE

AUDITED FINANCIAL STATEMENTS TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT BALANCE SHEETS: HISTORICAL TREND INFORMATION, SUPPLEMENTARY INFORMATION, AND ADDITIONAL INFORMATION

1 2-3 4-8
9 - 11 12 - 14 15 - 17 18 - 20 21 - 23 24 - 25 26 - 27
28 29 30 31 32
33 34
35 - 61

INTRODUCTORY SECTION BOARDS OF TRUSTEES

Joe Edwards, Ph.D. Chairman Commissioner, Retired Department of Human Resources
Claude L. Vickers, ex-officio State Auditor Department of Audits
Dan Ebersole, ex-officio Director Office of Treasury & Fiscal Services

Dana Russell, ex-officio Commissioner
State Merit System

William E. Strickland Vice Chairman
Commissioner, Retired Georgia Revenue Department
William E. Sumner Attorney at Law Atlanta, Georgia
John W. Mcintyre Chairman and CEO, Retired Citizens & Southern National Bank

Jeanne Hill Director Georgia School Bus Drivers Association

Members of ERS Board of Trustees

Lilla May Hunsley Director, School Nutrition Program
Gwinnett County

Billy Shaw Abney Juvenile Court JUdge

Members of ERS Board of Trustees
1fi.egis1atw ~tirntnf~~srnt ~tnt.e~ocinl~.Cttrit~ Wrnst Jlfunn
.orgia ~lMinn <!lnnfrilmtinn Jlmt
Members of ERS Board of Trustees

Spencer Lawton, Jr. State Court Solicitor

Joe Edwards, Ph.D., Chmn. Commissioner, Retired Department of Human Resources
Dan Ebersole, ex-officio Director Office of Treasury & Fiscal Services

Claude Vickers, ex-officio State Auditor
Department of Audits
Dana Russell, ex-officio Commissioner
State Merit System

Marti Fullerton, ex-officio Commissioner
Department of Labor
John W. Mcintyre Chairman and CEO, Retired Citizens & Southern National Bank

Zell Miller, ex-officio Governor State of Georgia

~u:pri.or <!lour! Jjclrg5 ~tirntnf~~sim / Jlfunn ~istrid l'tt.orn~51 ~tirntnf~~srnt / Jlfunn

Rudolph Johnson Director
Employees' Retirement System

Dan Ebersole, ex-officio Director
Office of Treasury & Fiscal Services

Employees' Retirement System of Georgia 1

INTRODUCTORY SECTION LETTER OF TRANSMITTAL
RUDOLPH JOHNSON, DIRECTOR
December 1, 1998
It is a pleasure to present the 1998 Annual Report on the systems and programs administered by the Employees' Retirement System (ERS). By statute, the staff ofERS administers eleven separate and distinct systems / programs: the Employees' Retirement System, the Public School Employees Retirement System, the Legislative Retirement System, the Superior Court Judges Retirement Fund / System, the District Attorneys' Retirement Fund / System, the Trial Judges & Solicitors Retirement Fund, the Georgia Defined Contribution Plan, the State Employees' Assurance Department (GTLI), and State Social Security contracts with political subdivisions.
This report includes the following:
letters from our actuaries, Buck Consultants, Inc. and Watson Wyatt & Company, on the funding of the retirement systems and the Group Term Life Insurance Program with highlights from the most recent valuation of each system,
an investment report, including a listing of the Pooled Investment Fund Portfolio, the auditors' report from Deloitte & Touche, a synopsis of legislation affecting the retirement systems passed by the 1998 General
Assembly.
EducatIonalPrograms
In 1970 the Employees' Retirement System developed and began offering preretirement planning seminars for prospective retirees. For many years the program was only available to those within five years of retirement eligibility. In recent years the program has been expanded to reach all employees.
There are now two different seminars. Financial Planning covers comprehensive and long-range financial planning. Topics include Social Security, Deferred Compensation, insurance coverage, savings and investments, wills and estate planning, as well as the benefits from the ERS. Retirement Planning is more appropriate for members within 5 years of eligibility for retirement. While covering many of the same topics as the Financial Planning seminar, emphasis is placed on the needs of retirees and the adjustments to be made during retirement.
Both programs are two days long and are held in our Atlanta office, as well as other locations throughout the state. The programs are expanded according to demand and as we are able to accommodate with our small staff. Classes are coordinated and conducted by our staff with outside resource people.
Employees' Retirement System of Georgia 2

INTRODUCTORY SECTION LEITER OF TRANSMIITAL
Investments
During Fiscal Year 1998, investments of the "Pooled Investment Fund", which includes the funds from all systems administered by the Employees' Retirement System with the exception of the Georgia Defined Contribution Plan, continued to grow. The fiscal year average book value of the fund was $8,461,000,000. Investment income was $1,368,300,000 resulting in a yield on the average investment for the period of 16.17%. The investment status of ERS is excellent. The very high quality of the fund's investments is in keeping with the continued policy of "conservatism" and "preservation of capital." The return on investments is well in excess of actuarial requirements.
We hope you find this report informative. It is intended as a basis for making management decisions and for determining responsible stewardship for the assets contributed by the retirement systems' members and their employees. It is distributed to all employers as our link between the retirement systems and our membership.
We would like to express our gratitude to the Boards of Trustees for their leadership. We appreciate the support of Governor Miller, the Legislature, and departmental officials. With this continued interest and support, and the diligence of our staff, we can assure our members and retirees that we will continue to maintain a successful operation that provides protection and financial soundness to the retirement system.
~~ Rudolph Johnson Director
Employees' Retirement System of Georgia 3

INTRODUCTORY SECTION LEGISLATION
ALL LEGISLATION PASSED DESCRIBED BELOW BECAME EFFECTIVE ON JULY 1, 1998.
ACT 656 (SB 326) - EMPLOYEES' RETIREMENT SYSTEM Amends law relating to disability benefits payable to certain law enforcement officers disabled in the line of duty, to include in such coverage parole officers employed by the State Board of Pardons and Paroles and probation officers employed by the Department of Corrections. (Code Section amended: 47-2-221)
ACT 526 (HB 381) - PUBUC SCHOOL EMPLOYEES RETIREMENT SYSTEM Allows the retirement benefit to be increased to a maximum of $12.00 per month for each year of service contingent on funding being provided by the General Assembly. (Code Section amended: 47-4-101 (b))
Funds were made available for an increase from $9.50 to $10.00 for each year of service effective July 1, 1998, but not to the new maximum of $12.00 allowed under Act 526.
Act 820 (HB 441) - EMPLOYEES' RETIREMENT SYSTEM Allows individuals employed by the Georgia Lottery Corporation to make an irrevocable election to discontinue membership in the Employees' Retirement System no later than 60 days following the earlier of the date on which Federal Internal Revenue Service rules favorably as to the Corporation's participation in a qualified deferred compensation plan or within 60 days following the date of employment. Employees electing to remain under ERS shall not be eligible to participate in any pension plan offered by the Lottery Corporation. New hires after the implementation date of the new system will not be members of the ERS. If the Corporation participates in any such deferred compensation plan, it shall not be authorized to maintain a pension plan for its officers and employees. The maximum percentage of a participant's salary which the Corporation may pay into any pension plan for or on behalf of the participant shall be 7Yz %. Vesting schedule is outlined in the Act. (Code Section amended: 47-2-70.1)
Act 528 (HB 442) - EMPLOYEES' RETIREMENT SYSTEM Allows a retiree who was or is unmarried at the time of retirement and later marries to convert his/her allowance into a modified retirement allowance of equivalent actuarial value under Option 2,3,4, or 5. Such election must be made by December 31, 1998 or within 6 months of marriage, whichever date is later. (Code Section amended: 47-2-121(a))
Employees' Retirement System of Georgia 4

INTRODUCTORY SECTION LEGISLATION
ACT 529 (HB 443) - EMPLOYEES' RETIREMENT SYSTEM Allows retirement, based on years of service, with at least 25 years but less than 30 years of service and under age 60 with an actuarial equivalent reduction in the retirement allowance that does not create any accrued liability against ERS. The actuary has determined that a 7% reduction will be required for each year under 30 years of service or age 60, whichever is less. (Reductions do not apply to disability or death allowances.) Any member under age 60 or with less than 30 years of creditable service shall not become eligible for cost-of-living adjustments until age 60 or when 30 years of service would have been obtained, whichever occurs earlier. (Code Section amended: 47-2-120)
Act 821 (HB 661) - EMPLOYEES' RETIREMENT SYSTEM Allows any person who is vested under ERS or TRS and was employed on or after January 1, 1997 in an agency covered by the other System to elect continued membership in the system in which the member is vested. The election must be made by September 30, 1998 or within 60 days of becoming employed in a position covered by the other System. Election is irrevocable. A person employed between January 1, 1997 and June 30, 1998 who elects to remain under ERS shall be governed by current ERS/TRS transfer provisions under 47-2181(a). (Code Section amended: 47-2-181 and 47-3-81)
Act 532 (HB 724) - EMPLOYEES' RETIREMENT SYSTEM Allows the election of ERS membership under the New Plan for any full-time assistant district attorney, secretary, investigator, clerical assistant, paraprofessional, or victim or witness assistance personnel employed by a circuit-paid district attorney from funds paid for the operation of such office by the counties of the judicial circuit if the employee is not eligible for membership in a county retirement plan. Each county in the circuit must first enact a rule/regulation authorizing such membership after which the employee may send notice to ERS of election of membership within the following 60 days, which is irrevocable. The rule/regulation cannot be revoked unless each county in the judicial circuit approves same. Any revocation shall not apply to an employee hired prior to revocation. Any employee already a member of ERS who transfers, without a break in service, to a position as a circuit-paid district attorney employee shall continue in the same membership status.
Any state-paid district attorney employee who is a member of ERS on July 1, 1998 may establish prior service of up to five years as a circuit-paid district attorney employee under ERS if the employee was not a member of any other public retirement system. The member shall provide proof of employment and the compensation paid and shall pay the employee and employer contributions that would have been paid by or on behalf of such member as if he/she had been a member during such time period, plus regular interest. The district attorney's office is authorized to supplement such payments. Only such service may be granted that will not create any accrued unfunded liability on ERS. (Code Section amended: 47-2-264.1)
Employees' Retirement System of Georgia 5

INTRODUCTORY SECTION LEGISLATION
Act 702 (HB 751) - SUPERIOR COURT JUDGES RETIREMENT SYSTEM, TRIAL JUDGES AND
SOliCITORS RETIREMENT FUND, DISTRICT ATTORNEYS' RETIREMENT SYSTEM
Creates the Georgia Judicial Retirement System under O.C.G.A. 47-23-20 for current and future members/retirees of the Superior Court Judges Retirement System, the Trial Judges and Solicitors Retirement Fund, the District Attorneys' Retirement System, and certain persons employed by the Legislative Counselor the Attorney General's Office (currently covered under the ERS) who are required to be a member of the State Bar of Georgia. The fund shall be administered by the ERS Board of Trustees with three additional members appointed by the Governor, who shall be either a superior court judge, state court judge, district attorney, state court solicitor-general, or juvenile court judge.
Normal retirement is age 60 with 16 years of service and a benefit of 66.66% of salary. An additional 1% will be paid for each year of service between 16 and 24 years. Early retirement is allowed with 10 years service with a benefit based on the actual years in proportion to 16. Disability retirement is allowed with 4 years of service with a benefit of one-half of maximum for 16 years or 10 years with a benefit of two-thirds of the maximum. COLAs are permitted at a maximum of 3% annually or Il1z% each January and July.
Employee contributions are 712% and the employer contribution shall be paid by DOAS based on an amount determined by the Board of Trustees.
A contribution for spousal coverage of 212% of salary must be made for 10 years and may be discontinued after 16 years. Spousal benefits are 50% of the amount payable to the retiree at the time of death or 50% of the amount payable had the member been retired as of the date of death.
Act 536 (HB 885) - EMPLOYEES' RETIREMENT SYSTEM Allows an employee of the Georgia Public Telecommunications Commission who became a member of ERS at the time the Commission was created on July 1, 1990 to receive credit for previous service with the Foundation for Public Broadcasting in Georgia. Inc. The member must make such election by December 31, 1998 and pay the accrued liability as determined by the ERS Board of Trustees. Each such member shall have only one election and no additional service may subsequently be purchased. (Code Section added: 47-2-325)
Act 896 (HB 886) - EMPLOYEES' RETIREMENT SYSTEM Allows benefit calculations based on the member's highest average earnable compensation during a period of 24 consecutive calendar months instead of 8 consecutive calendar quarters. Salary limitations used in benefit calculations are removed. (Code Section amended: 47-2-28,223,334)
Employees' Retirement System of Georgia 6

INTRODUCTORY SECTION LEGISLATION
Act 537 (HB 936) - EMPLOYEES' Retirement System Provides that any person first employed in an ERS covered position on and after July 1, 1998 who is age 60 or over may elect to not become a member of ERS. Any active member on July 1, 1998 who was age 60 or older when he/she first became a member of ERS may make a written election to withdraw from membership and withdraw his/her contributions plus regular interest thereon. Such election shall be irrevocable. (Code Section added: 47-2-72)
Act 538 (HB 937) - EMPLOYEES' RETIREMENT SYSTEM Provides that each full-time employee of a district attorney who is compensated from state funds shall be a member of ERS as a condition of employment. Any employee who is already a member by virtue of service with another employer shall be entitled to credit for all service rendered while an employee under ERS. (Code Section added: 47-2-267)
Act 540 (HB 944) - EMPLOYEES' RETIREMENT SYSTEM Provides that a member who was employed by the executive branch of state government between January 1, 1980 and January 1, 1986 on a full-time basis and accrued annual and sick leave but did not qualify for ERS membership shall obtain up to three years of credit for such period. The member shall pay employee and employer contributions that would have been payable had he/she been a member during the period based on compensation received, plus regular interest thereon. Application for such credit must be made no later than January 1, 1999. a.C.G.A. 47-2-334 is amended also to allow credit for a member of the New Plan. (Code Section added: 47-2-96.2)
Act 704 (HB 1082) - PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM Allows a current and future retiree who was unmarried at the time of retirement to change to an actuarially reduced benefit in order to leave a benefit under Option A or B to the new spouse. The election must be made by December 31, 1998 or within six months of marriage, whichever is later. (Code Section added: 47-4-102(f))
Act 900 (HB 1088) - EMPLOYEES' RETIREMENT SYSTEM Allows a person who became a member pursuant to a.c.G.A. 47-2-242 or 243 (an officer or employee of the Supreme Court or Court of Appeals) to obtain prior service credits as an officer or employee of a state court judge while covered by a county retirement plan if such member has not yet begun receiving a benefit from the county plan. This law also allows a person who became a member pursuant to a.c.G.A. 47-2-264 (secretary of a superior court judge or district attorney) to obtain prior service credits as a secretary of a state court judge while covered by a county retirement plan if such member has not yet begun receiving a benefit from the county plan.
Employees' Retirement System of Georgia 7

INTRODUCTORY SECTION LEGISIATION
Such election must be made by December 31, 1998 or within six months of becoming a member. If the funds are still on deposit with the county, the county shall transfer the employee contributions, plus regular interest to ERS. If the funds have been withdrawn, the employee shall pay to the board any employee contributions which have been paid to the local retirement system or on behalf of the employee, plus 5% interest per annum. The member shall receive credit for such service as the amount transferred will actuarially fund under ERS. If the service credited is less than the actual number of years of service, the member may obtain credit for the additional service by paying the full actuarial cost of such service. (Code Section added: 47-2-245)
Act 546 (HB 1096) - ALL SYSTEMS Provides that in the event a person designated by a member of a public retirement or pension system as the primary beneficiary of a survivor's benefit does not survive the member by at least 32 days, any such survivor's benefit provided by such system shall be paid to the secondary beneficiary, or as otherwise provided by law. (Code Section added: 47-1-14)
Act 901 (HB 1103) - EMPLOYEES' RETIREMENT SYSTEM Allows up to 10 years of creditable service (instead of 5 years) to any member who rendered temporary full-time service in the legislative branch of state government prior to becoming a member. Deletes the requirement that the service be "immediately" prior to becoming a member and changes references to "part-time" service to read "temporary full-time" service. Member must apply by January 1, 1999 to establish this credit and pay employee and employer contributions that would have been paid had she/he been a member during such time together with regular interest thereon. (Code Section amended: 47-2-96.1)
THE GENERAL ASSEMBLY PROVIDED AN INCREASE IN THE EMPLOYER CONTRIBUTION RATE TO ALLOW
THE BENEFIT FACTOR FOR MEMBERS OF THE NEW PLAN TO BE INCREASED FROM 1.64% TO 1.70% FOR MEMBERS RETIRING AFTER JULY 1, 1998.
Employees' Retirement System of Georgia 8

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER

Bue'
CONSULTANTS
200 Galleria Parkway, N.W. Suite 1200
Atlanta, Georgia 30339-5945

November 18, 1998

Board of Trustees EmployeesI Retirement System of Georgia Two Northside 75 Atlanta, Georgia 30318

Attention: Mr. Rudolph Johnson, Director

Gentlemen:

Section 47-2-26 of the Code of Georgia which governs the operation of the Employees' Retirement System of Georgia provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement System on the basis of regular interest and the table last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the System prepared as of June 30, 1997. The report indicates that annual employer contributions at the rate of 11.00% of compensation for Old Plan members and 16.00% for New Plan members are sufficient to support the basic benefits of the System as in effect in 1998.

The System is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. Since the previous valuation, the interest rate assumption has been changed from 7.50% to 7.00% and the salary increase assumption has been decreased by 0.50% at each age. The valuation method used in the most recent valuation is the entry age normal cost method. Gains and losses are reflected in the unfunded accrued liability which is being amortized by regular contributions within an 8-year period.

On the basis of the recommended contribution rate, the Retirement System is being funded in conformity with the minimum funding standard set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the System is operating on an actuarially sound basis and the sufficiency of the retirement funds to provide the benefit called for by the System may be safely anticipated.

Sincerely,

"

~.~t::r~//7Z;.t1~/){~ .~/ #

Edward A. Macdonald

Principal and Consulting Actuary

Employees' Retirement System of Georgia 9

ACTUARIAL SECTION VALUATION BALANCE SHEET

- as oE]une 30, 1997-
DOLLAR AlvIOUNTS IN THOUSANDS

ACTUARIAL LIABILITIES
(1 ) Present value of prospective benefits payable on account of present retired members, beneficiaries of deceased members, and members entitled to deferred vested benefits: Service and disability benefits Death and survivor benefits Deferred vested benefits Total
(2) Present value of prospective benefits payable on account of present active members: Retirement and survivor allowances Refunds of members' contributions Total
(3) TOTAL ACTUARIAL LIABILITIES

$ 2,883,064 277,631
134,936

$ 3,295,631

$ 7,249,605 58,267

7,307,872 $ 10603,503

PRESENT AND PROSPECTIVE ASSETS (4) Actuarial value of assets (5) Present value of total future contributions = (3) - (4) (6) Present value of future member contributions and employer paid
member contributions (7) Present value of future employer contributions = (5) - (6) (8) Employer normal contribution rate (9) Present value offuture payroll (1%) (10) Prospective normal contributions = (8) x (9) (11 ) Prospective unfunded accrued liability contributions = (7) - (10) (12) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 3,171,197
$ 1,915,238 5.47%
$ 217,221

$ 7,432,306 1,255,959
1,188,199 727,039
$ 10603503

Employees' Retirement System of Georgia 10

ACTUARIAL SECTION SUMMARY OF PRINCIPAL RESULTS

- as oEJune 30, 1997-
DOLLAR AMOUNTS IN THOUSANDS

Valuation Date
Active members: Number Annual Compensation
Retired members and beneficiaries: Number Annual allowances
Assets: Market Value Actual Value
Unfunded actuarial accrued liability
Amortization Period
Recommended employer contribution rates:

June 30. 1997

June 30, 1996

71,784

74,356

$

1,977,928 $

1,968,714

20,981

19,786

$

335,117 $

295,358

$

9,290,383 $

7,468,993

7,432,306

6,140,080

$

727,039 $

1,103,025

8 years

11 years

Old Plan Normal Accrued Liability Group Term Life Insurance Total
New Plan Normal (includes 4.75% paid for member) Accrued liability Group Term Life Insurance Total

5.47% 5.28 0.25 11.00%
10.22% 5.28 0.50 16.00%

4.55% 6.09 0.00 10.64%
9.30% 6.09 0.25 15.64%

The valuation takes into account the effect of amendments to the System enacted through the 1998 session of the General Assembly.

Employees' Retirement System of Georgia 11

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER

BUC' CONSULTANTS
200 Galleria Parkway, N,W. Suite 1200
Atlanta, Georgia 30339-5945

November 18, 1998

Board of Trustees EmployeesI Retirement System of Georgia Two Northside 75 Atlanta, Georgia 30318

Attention: Mr. Rudolph Johnson, Director

Gentlemen:

Section 47-4-60 of the law governing the operation of the Georgia Public School Employees' Retirement System provides that the employer contributions toward the cost of the System shall be actuarially determined and approved by the Board. We have submitted the report giving the results of the valuation of the System prepared as of June 30, 1997. The report indicates that an annual employer contribution at the rate of $347.83 per active member is sufficient to support the benefits of the System as in effect in 1998.

The System is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The valuation method used in the most recent valuation is the entry age normal cost method. Since the previous valuation, the interest rate assumption has been changed from 7.50 % to 7.00 % Gains and losses are reflected in the unfunded accrued liability which is being amortized by regular contributions within a 20-year period.

On the basis of the recommended contribution rate, the Retirement System is being funded in

conformity with the minimum funding standards set forth in Code Section 47-20-10 of the Public

Retirement Systems Standards Law. In our opinion, the System is operating on an actuarially

I) sound basis and the sufficiency of the retirement funds to provide the benefits called for by the
System may be safely 'anticipated.

Sincerely,

/;rl/tlt /~.. c/. I...;'

I

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n/,I

/1"/'~
/
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"i~ LL/ Ci

Edward A. Macdonald

Principal and Consulting Actuary

Employees' Retirement System of Georgia 12

ACTUARIAL SECTION VALUATION BALANCE SHEET

- as oEJune 30, 1997-

ACTUARIAL LIABILITIES
(1 ) Present value of prospective benefits payable on account of present retired members, beneficiaries of deceased members, and terminated members entitled to deferred benefits

$ 260,315,933

(2) Present value of prospective benefits payable on account of present active members: Service retirement allowances Disability retirement allowances Refunds of members' contributions Total
(3) TOTAL ACTUARIAL LIABILITIES

$ 258,824,584 24,392,524 2,870,467 $ 286,087,575
$ 546403508

PRESENT AND PROSPECTIVE ASSETS

(4) Actuarial value of assets
= (5) Present value of total future contributions (3) - (4)

$ 462,639,000 $ 83,764,508

(6) Present value of future member contributions to the Members' Contributions Funds

7,754,580

(7) Present value of future employer contributions to the
= Pension Accumulation Fund (5) - (6)

$ 76,009,928

(8) Employer normal contribution rate

$

338.36

(9) Present value of future membership service
= (10) Prospective normal contributions (8) x (9) = (11 ) Prospective unfunded accrued liability contributions (7) - (10)

215,405

72,884,436 3,125,492

(12) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 546403508

Employees' Retirement System of Georgia 13

ACTUARIAL SECTION SUMMARY OF PRINCIPAL RESULTS

- as oEJune ]0, I997-

Valuation Date

Active members: Number

Retired members and beneficiaries:

Number

Annual allowances

$

Assets:

Market Value

$

Actuarial Value

Unfunded actuarial accrued liability

$

Recommended contribution rate per active member:

Normal

$

Accrued Liability

Total

$

Estimated annual employer contributions:

Normal

$

Accrued Liability

Total

$

June 30, 1997
31,162
10,514 25,018,588 $
578,299,000 $ 462,639,000
3,125,492 $
338.36 $ 9.47
347.83 $
10,543,974 $ 295,104
10,839,078 $

June 30, 1996
31,313
10,272 22,220,044
471,863,000 377,490,000
23,732,112
270.60 164.92 435.52
8,473,298 5,164,202 13,637,500

The valuation takes into account the effect of amendments to the System enacted through the 1998 session of the General Assembly.

Employees' Retirement System of Georgia 14

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER
Bue'
CONSULTANTS
200 Galleria Parkway, NW. Suite 1200 Atlanta, Georgia 30339-5945

November 18, 1998
Board of Trustees EmployeesI Retirement System of Georgia Two Northside 75 Atlanta, Georgia 30318
Attention: Mr. Rudolph Johnson, Director
Gentlemen:
Section 47-6-22 of the Code of Georgia which governs the operation of the Georgia Legislative Retirement System provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement System on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the System prepared as of June 30, 1997. The report indicates that annual employer contributions at the rate of $410.72 per active member are sufficient to support the benefits of the System as in effect in 1998.
The System is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. Since the previous valuation, the interest rate assumption has been changed from 7.50% to 7.00%. The valuation method used in the most recent valuation is the unit credit actuarial cost method. There is no unfunded accrued liability as of June 30, 1997.
On the basis of the recommended contribution rate, the Retirement System is being funded in conformity with the minimum funding standards set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the System is operating on an actuarially sound basis and the sufficiency of the retirement funds to provide the benefits called for by the System may be safely anticipated.

r;;'a~ Sincerely,

/

Edward A. Macdonald

Principal and Consulting Actuary

Employees' Retirement System of Georgia 15

ACTUARIAL SECTION VALUATION BALANCE SHEET

- as oEJune 30, 1997-

ACTUARIAL LIABILITIES
Present value of prospective benefits payable on account of:
(1) Present retired members and beneficiaries of deceased members and members entitled to deferred vested benefits
(2) Present active members: Service retirement allowances Disability retirement allowances Survivor allowances Refunds of members' contributions Total
(3) TOTAL ACTUARIAL LIABILITIES

$

13,957,203

$

5,598,789

384,817

285,048

266,478

$

6,535,132

$

20,492,335

PRESENT AND PROSPECTIVE ASSETS

(4) Actuarial value of assets

(5) Present value of total future contributions = (3) - (4)

$

(6) Present value of future member contributions

(7) Present value of future employer contributions = (5) - (6)

$

(8) Prospective normal contributions

(9) Prospective unfunded actuarial accrued liability contributions = (7) - (8)

(10) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 2,295,335
1,180,850

18,197,000 1,114,485 1,291,584

(110,734)

$

20492,335

Employees' Retirement System of Georgia 16

ACTUARIAL SECTION SUMMARY OF PRINCIPAL RESULTS

- as oEJune 30, I997-

Valuation Date
Number of active members
Retired members and beneficiaries: Number Annual allowances
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability (surplus)
Employer normal contribution rate per active member Normal Accrued Liability Total
Estimated annual employer contributions: Normal Accrued liability
Total

June 30, 1997 204

June 30, 1995 199

174

160

$

944,381 $

854,253

$

22,746,000 $

16,726,000

18,197,000

13,137,000

$

(110,734) $

723,275

$

451.44 $

349.60

(40.72)

473.22

$

410.72 $

822.82

$

92,094 $

69,570

(8,307)

94,171

$

83,787 $

163,741

The valuation takes into account the effect of amendments to the System enacted through the 1998 session of the General Assembly.

Employees' Retirement System of Georgia 17

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER

sue
CONSULTANTS
200 Galleria Parkway, NW. Suite 1200
Atlanta, Georgia 30339-5945

November 18, 1998

Board of Trustees Georgia Trial Judges and Solicitors
Retirement Fund Two Northside 75 Atlanta, Georgia 30318

Attention: Mr. Rudolph Johnson, Director

Gentlemen:

Section 47-10-22 of the Code of Georgia which governs the operation of the Georgia Trial Judges and Solicitors Retirement Fund provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Retirement Fund on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the Fund prepared as of June 30, 1997. The report indicates that employer contributions at the rate of 11.58 % of compensation are sufficient to support the benefits of the Fund as in effect in 1998.

The Fund is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the Fund and to reasonable expectations of anticipated experience under the Fund. Since the previous valuation, the interest rate assumption has been changed from 7.50 % to 7.00 % and the salary increase assumption has been decreased by 0.50% at each age. The valuation method used in the most recent valuation is the entry age normal cost method. There is no unfunded accrued liability as of June 30, 1997.

On the basis of the recommended contribution rate, the Retirement Fund is being funded in conformity with the minimum funding standards set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. In our opinion the Fund is operating on an actuarially sound basis and the sufficiency of the retirement funds to provide the benefits called for by the Fund may be safely anticipated.

~~'~" Sincere.l. y ,

( ./?

.'/c .( ~ r .. _.

/

..

.

./'

! Y!
/

/
I

.

/<'"/

.///
.//,

/~./

L -'t

d!.'r'/'/t!' ~

Edward A. Macdonald

Principal and Consulting Actuary

Employees' Retirement System of Georgia 18

ACTUARIAL SECTION VALUATION BALANCE SHEET

- as of]une JO, I997-
ACTUARIAL LIABILITIES Present value of prospective benefits payable on account of:
(1) Present retired members and beneficiaries of deceased members and members entitled to deferred vested benefits
(2) Present active members (3) TOTAL ACTUARIAL LIABILITIES

$

9,003,439

37.086,087

$

46089526

PRESENT AND PROSPECTIVE ASSETS

(4) Actuarial Value of Assets:

= (5) Present value of total future contributions (3) - (4)

$

(6) Present value of future member contributions

= (7) Present value of future employer contributions (5) - (6)

$

(8) Employer normal contribution rate

(9) Present value of future payroll (1 %)

$

= (10) Prospective normal contributions (8) x (9)

= (11 ) Prospective unfunded accrued liability (surplus) contributions
(7)-(10)

(12) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 10,476,526
$ 4,530,716
19.27% 717,971
$

35,613,000 5,945,810
13,835,477 (9,304.761) 46089526

Employees' Retirement System of Georgia 19

ACTUARIAL SECTION SUMMARY OF PRINCIPAL RESULTS

- as oEJune 30, 1997-

Valuation Date
Active members: Number Annual compensation
Retired members and beneficiaries: Number Annual allowances
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability (surplus)
Recommended employer contribution rates: Normal Accrued Liability (surplus)
Total

June 30, 1997

June 30, 1995

161

144

$

7,305,431 $

5,990,878

36

36

$

538,464 $

475,371

$

44,516,000 $

30,158,000

35,613,000

25,925,000

$

(9,304,761 ) $

(3,972,049)

19.27% (7.69)
11.58%

17.34% (5.76)
11.58%

The valuation takes into account the effect of amendments to the System enacted through the 1998 session of the General Assembly.

Employees' Retirement System of Georgia 20

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER
Bue
CONSULTANTS
200 Galleria Parkway, N.W. Suite 1200 Atlanta, Georgia 30339-5945
November 18, 1998
Board of Trustees Employees I Retirement System of Georgia Two Northside 75 Atlanta, Georgia 30318
Attention: Mr. Rudolph Johnson, Director
Gentlemen:
Chapters 47-2 and 47-19 of the Code of Georgia which govern the operation of the Georgia Employees' Group Term Life Insurance Plan provide that the actuary shall make periodic valuations of the contingent assets and liabilities of the Insurance Plan on the basis of regular interest and the tables last adopted by the Board of Trustees. We have submitted the report giving the results of the valuation of the Plan prepared as of June 30, 1997. The report indicates that the Plan is in close actuarial balance. Combined employer and employee contributions at the rate of 0.75% of salary are sufficient to support the benefits ofthe Plan.
The Plan is funded on an actuarial reserve basis. The actuarial assumptions used are in the aggregate reasonably related to the experience under the Plan and to reasonable expectations of anticipated experience under the Plan. Since the previous valuation, the interest rate assumption has been changed from 7.50% to 7.00% with a corresponding decrease in the assumed rates of salary increase. In our opinion the Plan is operating on an actuarially sound basis and the sufficiency of the funds to provide the benefits called for by the Plan may be safely anticipated.
/ Ie / Y
Sin. ce.r.el Yo.urs, / ' / : "
{(/';/> 11~1'/~'/(y/cf1l' ,[ !
Edward A.Macdonald Principal and Consulting Actuary
Employees' Retirement System of Georgia 21

ACTUARIAL SECTION VALUATION BALANCE SHEET

- as oE]une ;0, 1997-
ACTUARIAL LIABILITIES (1) Present value of prospective benefits payable on account of present
retired members (2) Present value of prospective benefits payable on account of present
active members (3) TOTAL ACTUARIAL LIABILITIES

$ 150,777,200
$ 485,472,926 $ 636250126

PRESENT AND PROSPECTIVE ASSETS (4) Present value of assets (5) Present value of future member premiums (6) Present value of future employer contributions (7) Total present assets and present value of future employee premiums
and employer contributions (8) Actuarial (Surplus) Deficit (9) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 465,271,000 68,763,751 110,656,003
$ 644,690,754 (8,440,628)
$ 636250126

Employees' Retirement System of Georgia 22

ACTUARIAL SECTION SUMMARY OF PRINCIPAL RESULTS
rnup '(fLenn jfi.ife ~nsuranc
- as ofJune 30, 1997-

Valuation Date
Active members: Number Annual compensation
Retired members: Number Insurance amount
Assets: Book Value Actuarial Value Market Value
Actuarial (surplus) deficit
Contribution rates:
Old Plan Members Employee Employer Total
New Plan Members Employee Employer Total

June 30, 1997

June 30, 1995

71,784

74,004

$

1,977,927,608 $

1,883,922,392

16,249

14,271

$

424,654,674 $

345,552,861

$

N/A $

337,197,000

465,271,000

337,197,000

581,589,000

N/A

$

(8,440,628) $

(19,231,752)

0.50%* 0.25 0.75%
0.25% 0.50 0.75%

0.50%* 0.00 0.50%
0.25% 0.25 0.50%

* 0.25% paid by employer

The Plan has been amended to increase the minimum amount of insurance coverage for members who retire on or after July 1, 1998 from 40% of the age 60 coverage to 70% of the age 60 coverage.
The employer contribution rate has been increased by .25%.

Employees' Retirement System of Georgia 23

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER
"Wt "'~atsonWyatt ;;orldwide
June 10, 1998

Watson Wyatt & Company
Suite 432 4170 Ashford-Dunwoody Road, N.E. Atlanta, GA 30319-1466
Telephone 404 252 4030 Fax 404 256 3549

Board of Trustees District Attorneys' Retirement System
c/o Mr. Jim Larche, Deputy Director
Two Northside 75 Suite 300 Atlanta, GA 30318

Subject:

District Attorneys' Retirement System

Dear SirslMadams:

As the actuary for the District Attorneys' Retirement System, we have made annual valuations of the assets and liabilities of the Retirement System. We have submitted a report giving the results of the most recent valuation of the System prepared as of July 1, 1997. The report indicates that an annual employer contribution of $0, along with the State pick-up of employee contributions of a portion of compensation, are sufficient to support the basic benefits of the System as in effect in 1997. The benefits valued in our study are summarized in the report.

We used actuarial assumptions in the valuation which are reasonable in the aggregate and which represent our best estimate of anticipated experience. We used the entry age normal actuarial cost method in determining the plan's normal cost and required employer contribution. This method computes each year's normal cost as a level percentage of covered compensation. In addition, this method produces a relatively level pattern of funding over time, and thereby provides equity between various generations of taxpayers.

The Retirement System is being funded in compliance with the State of Georgia minimum funding standards under Code Section 47, Chapter 20. In our opinion, the District Attorneys' Retirement System is operating on an actuarially sound basis, and assets are sufficient to provide benefits on an on-going plan basis. We have not calculated the liabilities on a plan termination and settlement basis, although it appears that assets would be sufficient.

Sincerely,

~M
Mark Rich Actuarial Analyst
Employees' Retirement System of Georgia 24

0fJUi1-'~
Bonnie Seals, F.S.A. Actuary

ACTUARIAL SECTION ANNUAL COSTS AND VALUATION RESULTS

- as oEJune ;0, 1997-

A. Participant Information

1. Participating Employees 2. Participant Compensation 3. Terminated Vested ParticipantsA 4. Terminated Non-vested ParticipantsAA 5. Retirees and Beneficiaries 6. Retiree and Beneficiary Annual Benefit Payments

52 $ 4,112,763
5
9
$371,199

B. Actuarial Value of Assets (AVA)

$ 21,816,050

C. Actuarial Present Value of Accumulated Benefits

1. Retirees and Beneficiaries 2. Terminated Participants 3. Active Participants
Total As a Percentage of AVA

$ 3,357,766 763,485
7,711,460 $ 11,832,711
184.3%

D. Funded Status

Unfunded Actuarial Accrued Liability (Surplus)

($ 7,748,274)

E. Cash Contribution

1. Minimum Required ContributionAAA a) Normal Cost b) Unfunded Accrued Liability Total

$ 554,733 (637,878) ($ 83,145)

2. With Interest to End of Year As a Percentage of Compensation

($ 89,381) (2.17%)

" Due a deferred monthly benefit
"" Due a refund, not a deferred monthly benefit """ Per OCGA 47-20-13, since the actuarial value of assets exceeds 150% of the actuarial present value of the accumulated
retirement system benefits, the System is exempt from the minimum funding standards specified by OCGA 47-20-10.

These figures are for the District Attorneys' Retirement System. The District Attorneys' Retirement Fund was closed on June 30, 1978. There are no active members. The Fund is administered by ERS. Retirement payments are funded through Department of Administrative Services appropriations.

Employees' Retirement System of Georgia 25

ACTUARIAL SECTION ACTUARY'S CERTIFICATION LETTER
Wt "' 1l 4atson Wyatt ;;orldwide
June 10, 1998

Watson Wyatt & Company
Suite 432 4170 Ashford-Dunwoody Road, N.E. Atlanta, GA 30319-1466
Telephone 404 252 4030 Fax 404 2563549

Board of Trustees Superior Court Judges Retirement System c/o Mr. Jim Larche, Deputy Director Two Northside 75 Suite 300 Atlanta, GA 30318

Subject:

Superior Court Judges Retirement System

Dear SirslMadams:

As the actuary for the Superior Court Judges Retirement System, we have made annual valuations of the assets and liabilities of the Retirement System. We have submitted a report giving the results of the most recent valuation of the System prepared as of July 1, 1997. The report indicates that an annual employer contribution of$O, along with the State pick-up of employee contributions of a portion of compensation, are sufficient to support the basic benefits of the System as in effect in 1997. The benefits valued in our study are summarized in the report.

We used actuarial assumptions in the valuation which are reasonable in the aggregate and which represent our best estimate of anticipated experience. We used the entry age normal actuarial cost method in determining the plan's normal cost and required employer contribution. This method computes each year's normal cost as a level percentage of covered compensation. In addition, this method produces a relatively level pattern of funding over time, and thereby provides equity between various generations of taxpayers.

The Retirement System is being funded in compliance with the State of Georgia minimum funding standards under Code Section 47, Chapter 20. In our opinion, the Superior Court Judges Retirement System is operating on an actuarially sound basis, and assets are sufficient to provide benefits 0!1 an on-going plan basis. We have not calculated the liabilities on a plan termination and settlement basis, although it appears that assets would be sufficient.

Sincerely,

~~
Mark Rich Actuarial Analyst
Employees' Retirement System of Georgia 26

~'UftZh
Bonnie Seals, F.S.A. Actuary

ACTUARIAL SECTION ANNUAL COSTS AND VALUATION RESULTS

- as oEJune ;0, I997-

A. Participant Information

1. Participating Employees 2. Participant Compensation 3. Terminated Vested ParticipantsA 4. Terminated Non-vested ParticipantsAA 5. Retirees and Beneficiaries 6. Retiree and Beneficiary Annual Benefit Payments

152 $ 13,678,024
5 4 63 $ 2,785,872

B. Actuarial Value of Assets (AVA)

$ 81,291,142

C. Actuarial Present Value of Accumulated Benefits

1. Retirees and Beneficiaries 2. Terminated Participants 3. Active Participants
Total As a Percentage of AVA

$ 20,005,082 1,168,881
32,067,509 $ 53,241,472
152.7%

D. Funded Status

Unfunded Actuarial Accrued Liability (Surplus)

($ 25,158,755)

E. Cash Contribution

1. Minimum Required ContributionAAA a) Normal Cost b) Unfunded Accrued Liability Total

$ 1,694,023 (2,071,200)
($ 377,177)

2. With Interest to End of Year As a Percentage of Compensation

($ 405,465) (2.96%)

Due a deferred monthly benefit "" Due a refund, not a deferred monthly benefit """ Per OCGA 47-20-13, since the actuarial value of assets exceeds 150% of the actuarial present value of the accumulated
retirement system benefits, the System is exempt from the minimum funding standards specified by OCGA 47-20-10.

These figures are for the Superior Court JUdges Retirement System. The Superior Court Judges Retirement Fund was closed on December 31, 1976. As of June 30, 1997 there were three active members remaining in the Fund with retirement payments funded through Department of Administrative Services appropriations.

Employees' Retirement System of Georgia 27

INVESTMENT SECTION STATUS OF INVESTMENTS
- Fiscal Year 1998-
POOLED INVESTMENT FUND

$

11,264,487,344 Employees' Retirement System

703,932,727 State Employees' Assurance Department

696,414,934 Public School Employees Retirement System

55,309,649 Trial Judges and Solicitors Retirement Fund

26,455,530 Legislative Retirement System

113,944,740 Superior Court Judges Retirement System

30,922,848 District Attorneys' Retirement System

1,043,059 Superior Court Judges Retirement Fund

11,784,061 Georgia Defined Contribution Plan

$

12,904,294,892 Total Pooled Investments at Fair Value

Employees' Retirement System of Georgia 28

INVESTMENT SECTION STATUS OF INVESTMENTS
STRUCTURAL ANALYSIS OF INVESTMENTS AT FAIR VALUE

TYPE OF INVESTMENT SHORT TERM INVESTMENTS BONDS COMMON STOCKS MORTGAGES AND REAL ESTATE

June 30,1998 1% 38% 61% Nil
100%

RATE OF RETURN ON AVERAGE AMOUNT INVESTED FISCAL YEARS 1988 -1998

FISCAL YEAR ENDING
JUNE 30 1988 1989 1990 1991 1992 1993 1994 1995
1996
1997
1998

AVERAGE BOOK VALUE (MILLIONS OF DOLLARS)
$2,439 $2,863 $3,299 $3,774 $4,272 $4,771 $5,285 $5,842 $6,551
$7,386
$8,461

INVESTMENT INCOME (MILLIONS OF DOLLARS)
$264.5 $296.6 $349.6 $343.3 $423.2 $428.7 $509.8 $538.9 $837.5
$837.1
$1,368.3

YIELD
10.84% 10.36% 10.60% 9.10% 9.91% 8.99% 9.65% 9.22% 12.78% 11.33% 16.17%

Employees' Retirement System of Georgia 29

Face Amount $ 121,614,000

INVESTMENT SECTION STATUS OF INVESTMENTS TEMPORARY INVESTMENTS
- as oEJane JO, 1998-
United States Government and Corporate Obligations
(subject to repurchase agreements due 7/1/98)

Fair Value $ 121,614,000

u.s. GOVERNMENT, CORPORATE AND OTHER BONDS
- as oEJane JO, 1998-

Face Amount

$

1,720,000

10,095,627

135,000,000

220,000,000

261,000,000

288,000,000

160,000,000

355,000,000

312,000,000

335,000,000

106,000,000

915,000,000

794,000,000

115,000,000

208,000,000

160,000,000

$ 4,375,815,627

JsaIw:
Synovus Financial General Electric US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Bond US Treas. Note US Treas. Note US Treas. Note US Treas. Note

Interest Rate %
8.750 8.350 7.500 8.750 8.875 8.125 8.125 7.250

Year of Maturity
2004 2004 2016 2017 2017 2019 2021 2022

6.250

2023

6.875

2025

6.625

2027

6.125

2027

6.125

2007

6.250

2002

5.500

2003

5.625

2008

Fair Value $ 1,962,090
10,202,843 162,085,050 296,313,600 355,938,750 371,701,440 208,550,400 424,892,400 333,936,720 388,077,400 119,747,140 980,477,400 826,506,360 117,983,100 207,871,040 162,200,000

$ 4,968,445,733

Employees' Retirement System of Georgia 30

INVESTMENT SECTION STATUS OF INVESTMENTS

SHAREs
2,226,100 1,341,700 1,495,740 2,454,812 2,056,900 1,636,100 3,356,000 1,787,500 1,253,400 1,929,000 1,331,400 2,093,600 1,185,700 2,375,618 1,199,600 3,298,800
905,400 2,272,600 2,198,800
983,400

COMMON STOCK HOLDINGS
- as oEJune 30, 1998-
COMPANY
PFIZER INC
MERCK & Co INC
BRISTOL MYERS SQUIBB Co ELI liLLY AND COMPANY
JOHNSON & JOHNSON
SCHERING PLOUGH CORP PEPSICO INC EXXON CORP XEROX CORP HEWLED-PACKARD Co COCA COLA Co AMERICAN HOME PRODUCTS CORP GENERAL ELECTRIC Co BOEING CORP CHEVRON CORP NORFOLK SOUTHERN CORP MICROSOFT CORP ABBOD LABORATORIES AMOCO CORP UNITED TECHNOLOGIES CORP
TOTAL20 LARGEST HOLDINGS
TOTAL ALL HOLDINGS

FAIR VALUE
$ 241,949,244
179,452,375 171,916,616 162,631,295 152,210,600 149,907,662 138,225,250 127,582,813 127,376,775 115,498,875 113,834,700 108,343,800 107,750,488 105,863,477 100,466,500
98,345,475 98,122,725 93,176,600 91,799,900 90,964,500
$ 2,575,419,670
$ 7,809,822,874

A complete listing of all stock holdings will be available upon written request.

Employees' Retirement System of Georgia 31

INVESTMENT SECTION STATUS OF INVESTMENTS

Borrower and Mortgaged Property
WEST &ABBITT BENT CREEK COL APTS

MORTGAGE - as ofJune 30,1998-

Interest Rate %

Year Last Pmt. Due

Balance Outstanding on Loan

9.5

2004

$

667,518

$

667518

REAL ESTATE INVESTMENT - as ofjune 30,1998-

Description of Property

Fair Value

Comments

BETA BUILDING TWO NORTHSIDE 75 ATL (Constitutes one-half interest in property)

$

3,744,225

Presently houses the offices of Employees' and Teachers Retirement Systems. The Employees' Retirement System on 7/1/76 acquired a 50% interest in the building.

Employees' Retirement System of Georgia 32

AUDITOR'S REpORT TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT

34

COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1998 AND 1997:

COMBINED STATEMENTS OF PLAN NET ASSETS

35

COMBINED STATEMENTS OF CHANGES IN PLAN IN NET ASSETS

36

NOTES TO COMBINED FINANCIAL STATEMENTS

37 - 48

REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 1998:

49

SCHEDULE OF FUNDING PROGRESS

50

SCHEDULE OF EMPLOYER CONTRIBUTIONS

51

NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

52 - 54

ADDITIONAL INFORMATION FOR THE YEARS ENDED JUNE 30, 1998 AND 1997:

55

COMBINING STATEMENTS OF PLAN ASSETS

56

SUPERIOR COURT JUDGES & DISTRICT AnORNEYS' RETIREMENT PLANS

COMBINING STATEMENTS OF PLAN NET ASSETS

57

COMBINING STATEMENTS OF CHANGES IN PLAN NET ASSETS

58

SUPERIOR COURT JUDGES & DISTRICT AnORNEYS' RETIREMENT PLANS

COMBINING STATEMENTS OF CHANGES IN PLAN NET ASSETS

59

ADMINISTRATIVE EXPENSE FUND - CONTRIBUTIONS AND EXPENSES

60 - 61

Employees' Retirement System of Georgia 33

Deloitte & Touche

Deloitte & Touche LLP Suite 1500 191 Peachtree Street, N. E. Atlanta, Georgia 30303-1924

Telephone: (404) 220-1500 Facsimile: (404) 220-1583

INDEPENDENT AUDITORS' REPORT

Board of Trustees Employees' Retirement System of Georgia:
We have audited the accompanying combined statements of plan net assets of the Employees' Retirement System of Georgia (the "System"), including all funds administered by the Employees' Retirement System of Georgia, as of June 30, 1998 and 1997 and the related combined statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
OpInIOn.
In our opinion, such combined financial statements present fairly, in all material respects, the combined financial status of the System, including all funds administered by the System, as of June 30, 1998 and 1997 and the combined changes in their financial status for the years then ended in confonnity with generally accepted accounting principles.
Our audits were conducted for the purpose of fonning an opinion on the basic combined financial statements taken as a whole. The required supplementary schedules and additional infonnation listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic combined financial statements. These required supplementary schedules and additional infonnation are the responsibility of the System's management. Such infonnation has been subjected to the auditing procedures applied in the audits of the basic combined financial statements and, in our opinion, is fairly presented in all material respects when considered in relation to the basic combined financial statements taken as a whole.

October 30, 1998

Employees' Retirement System of Georgia 34

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
COMBINED STATEMENTS OF PLAN NET ASSETS JUNE 30,1998 AND 1997 (In Thousands)

ASSETS
CASH
RECEIVABLES: Interest and dividends Employee and employer contributions
Total receivables
INVES1MENTS - at fair value: Short-term Obligations of the U.S. government and its agencies, corporate, and other bonds Common stocks Mortgage loans and real estate
Total investments
Total assets

1998

1997

$ 3,382

$ 93,409 29.289
122,698

87,699 27,994
115,693

124,559

137,072

4,978,994 7,809,823
4.411
12,917,787
13,040,485

3,986,638 6,419,080
3,207
10,545,997
10,655,072

LIABILITIES
Cash overdrafts Accounts payable and other
Total liabilities
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS

611 6,639
7,250
$13,033,235

5,727 5,727 $10,659.345

See notes to combined financial statements.

Employees' Retirement System of Georgia 35

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

COMBINED STATEMENTS OF CHANGES IN PLAN NET ASSETS YEARS ENDED JUNE 30,1998 AND 1997 (In Thousands)

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - Beginning ofyear
ADDITIONS: Contributions: Employer Employee Insurance premiums Administrative expense allotment Investment income: Net appreciation in fair value of investments Interest and dividends Total investment income
Less investment expense
Net investment income
Total additions
DEDUCTIONS: Retirement payments Refunds of employee contributions and interest Death benefits Administrative expenses
Total deductions
NET INCREASE
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End of year
See notes to combined financial statements.

1998
$10,659,345
305,829 68,911 11,162 737
2,004,774 420,786
2,425,560 10,999
2.414,561 2,801.200
388,412 18,829 15,178 4,891
427,310 2,373,890
$13,033.235

1997
$ 8,657,349
300,250 70,503 10,859 737
1,624,057 391.526
2,015,583 8,916
2,006,667 2.389,016
349,123 17,708 15,871 4.318
387,020 2,001.996
$10,659,345

Employees' Retirement System of Georgia 36

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
NOTES TO COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED JUNE 30,1998 AND 1997
1. GENERAL
Employees' Retirement System of Georgia ("ERS") is a single-employer, public employee retirement system. On November 20, 1997, the Board of Trustees created the Supplemental Retirement Benefit Plan ("SRBP") of the Employees' Retirement System of Georgia. SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code ("IRC 4l5") as a portion of the System. The purpose of the SRBP is to provide retirement benefits to employees covered by the System whose benefits are otherwise limited by IRC 4l5. Although the System is a component unit of the State of Georgia's financial reporting entity, it is accountable for its own fiscal matters and presentation of its separate financial statements. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of the System. ERS is also the administrator of the following seven retirement funds (the "System"):
a. Public School Employees Retirement System ("PSERS") - single employer;
b. Legislative Retirement System ("LRS") - single employer;
c. Trial Judges and Solicitors Retirement Fund ("TJSRF") - multiple employer cost-sharing.
d. Superior Court Judges Retirement System ("SCJRS")
e. Superior Court Judges Retirement Fund ("SCJRF")
f. District Attorneys' Retirement System ("DARS")
g. District Attorneys Retirement Fund ("DARF")
The accompanying combined financial statements, in addition to including the accounts of the foregoing retirement systems and funds, include the accounts of the SRBP, the State Employees' Assurance Department ("SEAD"), and the Georgia Defined Contribution Plan ("GDCP"). All significant accounts and transactions among the systems and funds have been eliminated.
In evaluating how to define the System for financial reporting purposes, the management of the System has considered all potential component units. The decision to include a potential component unit in the reporting entity is made by applying the criteria set forth by Governmental Accounting Standards Board ("GASB") Statement 14. The concept underlying the definition of the reporting entity is that elected officials are accountable. Based on these criteria, the System has not included any other entities in its reporting entity. ERS is a component unit of the State of Georgia.
Employees' Retirement System of Georgia 37

2. AUTHORIZING LEGISLATION AND PLAN DESCRIPTIONS

Each fund, including benefit and contribution provisions, was established by State law. The following summarizes authorizing legislation of the System and the plan description of each retirement fund:

a. ERS is a defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation.

Membership - As of June 30, 1998, participation in the System is as follows:

Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet
receiving benefits Active plan members

22,011
64,176 71,161

Total

157,348

Employers

94

Benefits - The benefit structure ofERS was significantly modified on July 1, 1982. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982 is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.
Under both the old and new plans, a member may retire and receive normal retirement benefits after completion of 10 years creditable service and attainment of age 60. Additionally, there are some provisions allowing for retirement after 25 years of service regardless of age.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar quarters multiplied by the number of years of creditable service. Postretirement cost-of-living adjustments are also made to members' benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions and Vesting - Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the State pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these State contributions are included in the members' accounts for refund purposes. Member contributions under the new plan are 1.25% of annual compensation. The State is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation.
Members become vested after ten years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member.

Employees' Retirement System of Georgia 38

However, if an otherwise vested member terminates and withdraws hislher member contributions, the member forfeits all rights to retirement benefits.

The employer contributions are projected to liquidate the unfunded actuarial accrued liability within eight years based upon the actuarial valuation at June 30, 1997.

b. PSERS is a defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. PSERS is administered by the ERS Board of Trustees plus two other trustees not on the ERS Board.

Membership - As of June 30, 1998, participation in PSERS is as follows:

Retirees and beneficiaries currently receiving benefits
Terminated employees entitled to benefits but not yet receiving benefits Active plan members

10,864
77,878 33,998

Total

122,740

Employers

182

Benefits - A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of 10 years of service. Members retiring before age 65 will receive a reduced benefit.
Upon retirement, the member will receive a monthly benefit of $1 0 multiplied by the number of years of creditable service. Death, disability, and spousal benefits are also available through PSERS. Additionally, PSERS makes periodic cost-of-living adjustments to the monthly benefits.
Contributions and Vesting - Members contribute $4 per month for nine months. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the Board.
Members become vested after ten years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws hislher member contributions, the member forfeits all rights to retirement benefits.
The employer contributions are projected to liquidate the unfunded actuarial accrued liability within 20 years based upon the actuarial valuation at June 30, 1997.

Employees' Retirement System of Georgia 39

c. LRS is a defined benefit plan established by the Georgia General Assembly in 1979 for the purpose of providing retirement allowances for all members of the Georgia General Assembly. LRS is administered by the ERS Board of Trustees.

Membership - As of June 30, 1998, participation in the System is as follows:

Retirees and beneficiaries currently receiving benefits

178

Terminated employees entitled to benefits but not yet

receiving benefits

362

Active plan members

206

Total

746

Employers

1

Benefits - A member's normal retirement is after 8 years of creditable service and attainment of age 65 or 8 years of membership service (4 legislative terms) and attainment of age 62. A member may retire early and elect to receive a monthly retirement benefit after completion of 8 years of membership service and attainment of age 60; however, the retirement benefit is reduced by 5% for each year the member is under age 62.
Upon retirement, the member will receive a monthly service retirement allowance of $28 multiplied by the number of years of creditable service reduced by age reduction factors, if applicable. Death, disability, and spousal benefits are also available through the plan.
Contributions and Vesting - Member contributions are 8.5% of annual salary. The State pays member contributions in excess of4% of annual compensation. Employer contributions are actuarially determined and approved and certified by the Board.
Members become vested after 8 years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits.
Based on the June 30, 1997 actuarial valuation ofLRS (the latest actuarial valuation; present Board policy requires a biennial valuation), LRS does not have an unfunded accrued liability.
d. TJSRF is a defined benefit pension plan established by the Georgia General Assembly in 1968 for the purpose of providing retirement allowances for trial judges and solicitors of certain courts of Georgia, and their survivors and other beneficiaries. TJSRF is administered by the ERS Board of Trustees and three other trustees not on the ERS Board. Any person who on June 30, 1998 was an active, inactive, or retired member or beneficiary of this retirement system shall be transferred to the Georgia Judicial Retirement System in the same status effective July 1, 1998. The Georgia Judicial Retirement System is a newly created system that will serve the members and beneficiaries ofTJSRF, SCJRS, and DARS.

Employees' Retirement System of Georgia 40

Membership - As of June 30, 1998, participation in TJSRF is as follows:
Retirees and beneficiaries currently receiving benefits Tenninated employees entitled to benefits but not yet
receiving benefits Active plan members
Total
Employers

36
121 174
331 =
83

Benefits - The nonnal retirement for TJSRF is age 60 with 16 years of creditable service; however, a member may retire at age 60 with a minimum of 10 years of creditable service. Additionally, a member must retire at age 70 or forfeit all retirement and disability benefits. Members holding office on July 1, 1980 are exempt from this provision.
Retirement benefits paid to members are computed as 4% of the average annual compensation multiplied by the total years of creditable service not to exceed 16 years. The average annual compensation is the average salary of a member during the two consecutive years of creditable service producing the highest such average but excluding any salary increases exceeding 5% over the previous year during the two-year period. Death, disability, and spousal benefits are also available.
Contributions and Vesting - Members are required to contribute 7.5% of their salary plus an additional 2.5% if spousal benefit is elected. Employer contributions are actuarially detennined and approved and certified by the Board.
Members become vested after ten years of creditable service. Upon tennination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member tenninates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits.
Based on the June 30, 1997 actuarial valuation (the latest actuarial valuation; present Board policy requires a biennial valuation), TJSRF does not have an unfunded accrued liability.
e. SCJRS is a defined benefit pension plan established by the Georgia General Assembly in 1976 for the purpose of providing retirement benefits to the superior court judges of the State of Georgia. SCJRS is directed by its own Board of Trustees. The Boards of Trustees for ERS and SCJRS entered into a contract for ERS to administer the plan effective July 1, 1995. Any person who on June 30, 1998 was an active, inactive, or retired member or beneficiary of this retirement system shall be transferred to the Georgia Judicial Retirement System in the same status effective July 1, 1998.

Employees' Retirement System of Georgia 41

Membership - As of June 30, 1998, participation in SCJRS is as follows:

Retirees and beneficiaries currently receiving benefits

57

Tenninated employees entitled to benefits but not yet

receiving benefits

24

Active plan members

154

Total

235

Employers

1

Benefits - The nonnal retirement for SCJRS is age 60 with 16 years of creditable service with a benefit of two-thirds of the state salary paid to superior court judges at the time of the member's retirement, plus 1% for each year of creditable service over 16 up to a maximum of 24 years. Additionally, a member may retire with reduced benefits at age 60 with a minimum of 10 years of creditable service. A member must retire at age 75, or at the end of the tenn in which the member becomes 75, or forfeit all retirement and disability benefits. Death, disability, and spousal benefits are also available.

Contributions and Vesting - Member contributions are 7.5% of their salary plus an additional 2.5% for the spousal coverage benefit or 2.75% for the spouse plus benefit if elected. The State pays member contributions of 4.75% of the member's annual salary. Employer contributions are actuarially detennined and approved and certified by the Board.

Members become vested after ten years of creditable service. Upon tennination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if a member later holds office as a superior court judge, the member shall be reinstated as if never before a member and may re-establish prior service by repaying the amount withdrawn, plus interest, within 60 days of certification of such amount.

f. SCJRF is a defined benefit pension plan established by the Georgia General Assembly in 1945 for the purpose of providing retirement benefits to the superior court judges of the State of Georgia. SCJRF is directed by its own Board of Trustees. The Boards of Trustees for ERS and SCJRF entered into a contract for ERS to administer the Plan effective July 1, 1995.

Membership - As of June 30, 1998, participation in SCJRF is as follows:

Retirees and beneficiaries currently receiving benefits

33

Tenninated employees entitled to benefits but not yet

receiving benefits

3

Active plan members

3

Total

39

Employers

1

Benefits - The nonnal retirement for SCJRF is age 68 with 19 years of creditable service with a benefit of two-thirds the salary paid to superior court judges. A member may also retire at age 65

Employees' Retirement System of Georgia 42

with a minimum of 1 years of creditable service with a benefit of one-half the salary paid to
superior court judges. Death, disability, and spousal benefits are also available.

Contributions and Vesting -Member contributions are 5.0% of their salary plus an additional 2.5% for the spousal coverage benefit if elected. The State pays member contributions of 5.0% of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an as-needed basis to fund current benefits.

g. DARS is a defined benefit pension plan established by the Georgia General Assembly in 1978 for the purpose of providing retirement benefits to the district attorneys of the State of Georgia. DARS is directed by its own Board of Trustees. The Boards of Trustees for ERS and DARS entered into a contract for ERS to administer the plan effective July 1, 1995. Any person who on June 30, 1998 was an active, inactive, or retired member or beneficiary of this retirement system shall be transferred to the Georgia Judicial Retirement System in the same status effective July 1, 1998.

Membership - As of June 30, 1998, participation in DARS is as follows:

Retirees and beneficiaries currently receiving benefits

9

Terminated employees entitled to benefits but not yet

receiving benefits

8

Active plan members

54

Total

71

Employers

1

Benefits -The normal retirement for DARS is age 60 with 10 years of creditable service with a benefit of 4% of the member's average annual compensation for each year of creditable service. If service exceeds 16 years, the benefit is 4% for each year of creditable service plus 1% for each year served after 16, not to exceed 24 years (72%). "Average annual compensation" is the highest average of two consecutive years of creditable service, except no increase during such period in excess of 5% may be used. Death, disability, and spousal benefits are also available. Early retirement benefits are not available.
Contributions and Vesting - Member contributions are 7.5% of their salary plus an additional 2.5% for the spousal coverage benefit if elected. The State pays member contributions of 4.75% of the member's annual salary. Employer contributions are actuarially determined and approved and certified by the Board.
Members become vested after ten years of creditable service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if a member later holds office as a district attorney, the member shall be reinstated as if never before a member and may re-establish prior service by repaying the amount withdrawn, plus interest.
h. DARF is a defined benefit pension plan established by the Georgia General Assembly in 1949 for the purpose of providing retirement benefits to the district attorneys of the State of Georgia.

Employees' Retirement System of Georgia 43

DARF is directed by its own Board of Trustees. The Boards of Trustees for ERS and DARF entered into a contract for ERS to administer the plan effective July 1, 1995.

Membership - As of June 30, 1998, DARF had 12 retirees and beneficiaries currently receiving benefits.

Benefits - Persons appointed as district attorney emeritus shall receive an annual benefit of $15,000 or one-half of the state salary received by such person as a district attorney for the calendar year immediately prior to the person's retirement, whichever is greater.

Contributions and Vesting - Member contributions were 5.0% of their salary plus an additional 2.5% for the spousal coverage benefit if elected. The State paid member contributions of 5.0% of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an as-needed basis to fund current benefits.

1. GDCP is a defined contribution plan established by the Georgia General Assembly in July 1993 for the purpose of providing retirement allowances for state employees who are not members of a public retirement or pension system. GDCP is administered by the ERS Board of Trustees.

Membership - As of June 30, 1998, participation in GDCP is as follows:

Terminated employees entitled to benefits but not yet receiving benefits Active plan members

61,570 61.103

Total Employers

122,673 263

Benefits - A member may retire and elect to receive periodic payments after attainment of age 65. The payments will be based upon mortality tables and interest assumptions to be adopted by the Board. If a member has less than $3,500 credit to hislher account, the Board has the option of requiring a lump sum distribution to the member. Upon the death of a member, a lump sum distribution equaling the amount credited to hislher account will be paid to the member's designated beneficiary.

Contributions - Members are required to contribute 7,5% of their gross salary. There are no employer contributions. Earnings will be credited to each member's account as adopted by the Board. Upon termination of employment, the amount of the member's account is refundable upon request by the member.

J. SEAD was created in 1953 by the Georgia General Assembly to furnish survivors' benefits for eligible members ofERS. SEAD contracts with ERS and LRS to provide group term life insurance coverage for their participants. Death benefit payments are payable to the beneficiary or estate of the insured individual.
k. SRBP - Beginning January 1, 1998, all members and retired former members in the System are eligible to participate in this Plan whenever their benefits under the System exceed the limitation on benefits imposed by IRC 415. At June 30, 1998, there were 164 members eligible to participate in this portion of the System. Employer contributions of $626,000 and retirement

Employees' Retirement System of Georgia 44

payments of $480,000 under the SRBP are included in the Statement of Changes in Plan Net Assets for the year ended June 30, 1998. Cash of $30,000 and employer receivable of $116,000 under the SRBP are included in the Statement of Plan Net Assets for the year ended June 30, 1998.
3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the System:
a. Basis ofAccounting - The System's financial statements are prepared using the accrual basis of accounting. Contributions from the employers and the members are recognized as additions in the period in which the members provide services. Retirement and refund payments are recognized as deductions when due and payable. Investment income is recognized as earned by the System.
b. Investments - Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Mortgage loans and real estate investments are reported at fair value.
No investment in anyone organization except the U.S. Government represents 5% or more of the net assets available for pension benefits.
There are no investments in, loans to, or leases with parties related to the System.
c. Real Estate Investments - An office building which is included in mortgage loans and real estate investments is owned equally by the System and the Teachers Retirement System of Georgia. The System incurred approximately $306,000 in rental expense for each of the years ended June 30, 1998 and 1997. The expense is included in administrative expenses. The remainder of the building is leased to outsIde parties, and this revenue is included in investment income.
d. Use ofEstimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
e. Reclassifications - Certain 1997 balances have been reclassified to conform with 1998 presentation.
4. INVESTMENT PROGRAM
The System maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested in either short-term or long-term investment securities as directed by management. All investments are held by agent custodial banks in the name of the System.
Cash - Cash balances are fully insured through the Federal Deposit Insurance Corporation, an agency of the U.S. Government. Fiduciary accounts, such as those of the System, are granted $100,000 of insurance coverage per participant in the System. Temporary cash on hand not committed for a specific purpose is invested overnight.
Employees' Retirement System of Georgia 45

Investments - GASB 3 requires governmental entities to categorize investments as an indication of the level of custodial credit risk assumed by the System at year-end. Category I includes investments that are insured or registered or for which the securities are held by the System or its agent in the System's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent in the System's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent but not in the System's name. All of the securities held by the System at June 30, 1998 and 1997 are of Category 1 risk level. The System is authorized by its Board of Trustees (through statutes) to invest in a variety of short-term and long-term securities, as follows:
(a) Short-Term:
Short-term investments are authorized in the following instruments:
Repurchase and reverse repurchase agreements, whereby the System and a broker exchange cash for direct obligations of the U.S. Government or in obligations unconditionally guaranteed by the agencies of the U.S. Government or U.S. corporations. The System or broker promises to repay the cash received plus interest at a specific date in the future in exchange for the same securities.
U.S. Treasury obligations with varying terms up to 360 days.
Other short-term securities authorized, but not currently used, are:
Commercial paper, with a maturity of 180 days or less. Commercial paper is an unsecured promissory note issued primarily by corporations for a specific amount and maturing on a specific day. The System considers for investment only commercial paper of the highest quality, rated P-l and/or A-I by national credit rating agencies.
Master notes, an overnight security administered by a custodian bank and an obligation of a corporation whose commercial paper is rated P-I and/or A-I by national credit rating agencies.
Investments in commercial paper or master notes are limited to no more than $25 million in any one name.
(b) Long-Term:
Fixed income investments are authorized in the following instruments:
Corporate bonds with at least an "A" rating by a national rating agency and limited to no more than 5% of total System assets in anyone name. Maturities of these securities vary up to a period of 40 years to provide the System with flexibility necessary to meet changing market conditions.
U.S. and foreign government obligations with terms up to 30 years. Quality and call requirements of corporate bonds are applicable.
Private placements are authorized under the same general restrictions applicable to corporate bonds.
Employees' Retirement System of Georgia 46

Mortgage investments are authorized to the extent that they are secured by first mortgages on improved real property located in the State of Georgia having a loan-to-value ratio no higher than 75%. Mortgages as a group cannot exceed 10% of total assets or 1% for anyone loan.
Equity securities are also authorized (in statutes) for investment as a complement to the System's fixed income portfolio and as a long-term inflation hedge. By statute, no more than 50% of the total invested assets may be placed in equities and no more than 5% in anyone corporation. Equity holdings in anyone corporation may not exceed 5% of the outstanding equity of the issuing corporation. The equity portfolio is managed by the Investment Services Division in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the Board of Trustees, in-house research considering such things as yield, growth, and sales statistics, and analysis of independent market research. Equity trades are approved and executed by the Division's staff. Common stocks eligible for investment are approved by the Investment Committee of the Board of Trustees before being placed on an approved list.
Substantially all of the investments ofERS, PSERS, LRS, TJSRF, SCJRS, SCJRF, DARS, SEAD, and certain investments of GDCP are pooled into one common investment fund. Investments of approximately $13,492,000, held by the Georgia Defined Contribution Plan, are not included in the investment pool. Units in the pooled investment fund are allocated to the respective funds based upon the cost of assets contributed and additional units are allocated to the participating funds based on the market value of the pooled investment fund at the date of contribution. Net income of the pooled investment fund is allocated monthly to the participating funds based upon the number of units outstanding during the month.
The units of the pooled investment fund at June 30, 1998 and 1997 were allocated as follows (in thousands):

1998'

1997

Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Trial Judges and Solicitors Retirement Fund State Employees' Assurance Department Superior Court Judges Retirement System Superior Court Judges Retirement Fund District Attorneys' Retirement System Georgia Defined Contribution Plan

7,317 453 17 36 457 74 1 20 8

7,336 458 18 35 460 74 1 20

8,383

8.402

5. INVESTMENTS LENDING PROGRAM
The System is presently involved in a securities lending program with major brokerage firms. The System lends equity and fixed income securities for varying terms and receives a fee based on the loaned securities' value. During a loan, the System continues to receive dividends and interest as the owner of the loaned securities. The brokerage firms pledge collateral securities consisting of U.S.

Employees' Retirement System of Georgia 47

Government and agency securities, mortgage-backed securities issued by a U.S. Government agency, and U.S. corporate bonds. The collateral value must be equal to at least 102% to 110% of the loaned securities' value, depending on the type of collateral security. Securities loaned totaled $5,357,921,000 and $4,360,679,000 at market value at June 30, 1998 and 1997, respectively. The collateral value was equal to 103.8% and 102.9% of the loaned securities' value at June 30, 1998 and 1997, respectively. The loaned securities are classified as Category 1 investments (see Note 4) based on the custodial arrangements for the collateral securities. Loaned securities are included in the accompanying Statements of Plan Net Assets since the System maintains ownership. The related collateral securities are not recorded as assets on the System's Statement of Plan Net Assets, and a corresponding liability is not recorded since the System does not pledge or trade the collateral securities. 6. SEAD ACTUARIAL VALUATION According to the SEAD policy terms covering the lives of members, insurance coverage is provided on a monthly renewable term basis and no return premiums or cash value are earned. The net assets represent the excess accumulation of investment income and premiums over benefit payments and expenses and is held as a reserve for payment of death benefits under existing policies. The most current actuarial valuation of SEAD is as of June 30, 1997. The valuation indicated that the employee contribution rate of .25% and the employer contribution rate of .50% of members' salaries as of June 30, 1997 was appropriate.
Employees' Retirement System of Georgia 48

REQUIRED SUPPLEMENTARY SCHEDULES (See Independent Auditors' Report)
Employees' Retirement System of Georgia 49

trl

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

.~g

(Including All Funds Administered)

"(1').

REQUIRED SUPPLEMENTARY SCHEDULES

g;;

(Thousands of Dollars)

"@".

~g

Unfunded AAU

C/l

~

~

Schedule of Funding Progress

:3

o...,.,

~.o... 03.
~

VI
o Employees' Retirement System

Actuarial Valuation
Date

Actuarial Value of Plan Assets
(a)

Actuarial Accrued Liability ("AAL") -
Entry Age (b)

Unfunded AAU(Funding
Excess) (b - a)

Funding Ratio (alb)

Annual Covered Payroll
(c)

(Funding Excess) as a Percentage of Covered Payroll
[(b-a)/c]

6/30196

$ 6,140,080

$ 7,243,105

$ 1,103,025

84.8%

$1,968,714

56.0 %

6/30/97

7,432,306

8,159,345

727,039

91.1%

1,977,928

36.8 %

Public School Employees Retirement System! Legislative Retirement System2 Trial Judges and Solicitors Retirement Fund2

6/30/96 6/30/97
6/30/95 6/30/97
6/30/95 6/30197

377,490 462,639
13,137 18,197
25,925 35,613

401,222 465,764
13,860 18,086
21,953 26,308

23,732 3,125
723 (III)
(3,972) (9,305)

94.1% 99.3%
94.8% 100.6%
118.1% 135.4%

N/A N/A
2,186 2,340
5,991 7,305

N/A N/A
33.1 % (4.7)%
(66.3)% (127.4)%

Superior Court Judges Retirement System

6/30196 6/30/97

72,642 81,921

50,753 56,132

(21,889) (25,159)

143.1% 144.8%

13,294 13,678

(164.7)% (183.9)%

District Attorneys' Retirement System

6/30/96 6/30/97

19,277 21,816

12,669 14,068

(6,608) (7,748)

152.2% 155.1%

3,737 4,113

(176.8)% (188.4)%

Information is shown only for the years available in accordance with the parameters ofGASB 25. Additional years will be added as data become available.

INo statistics regarding covered payroll are available. Contributions are not based upon members' salaries, but are simply $4.00 per member per month for nine months.

2Actuarial valuations are performed biennially.

See notes to required supplementary schedules.

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
REQUIRED SUPPLEMENTARY SCHEDULES (Thousands of Dollars)

Schedule of Employer Contributions

Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Trial Judges and Solicitors Retirement Fund Superior Court Judges Retirement System District Attorneys' Retirement System

Year Ended June 30,
1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997

State Annual Required Contribution
$271,342 282,249 12,750 13,645 164 159 472 809

Percentage Contributed
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Information is shown only for the years available in accordance with the parameters of GASB 25. Additional years will be added as data becomes available.

See notes to required supplementary schedules.

Employees' Retirement System of Georgia 51

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

1. Schedule ofFunding Progress - The actuarial value of assets recognizes a portion of the difference between the market value of assets and the expected actuarial value of assets, based on the assumed valuation rate of return. The amount recognized each year is 20% of the difference between market value and expected actuarial value. The actuarial value of assets is limited to a range between 80% and 120% of market value.

2. Schedule ofEmployee Contributions - The required employer contributions and percent of those contributions actually made are presented in the schedule.

3. Actuarial Assumptions - The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows:

Employees' Retirement System
Public School Employees Retirement System

Valuation date Actuarial cost method Amortization method Remaining amortization period of the Unfunded Actuarial Accrued Liability ("Unfunded
AAL") Asset valuation method Actuarial assumptions:
Investment rate of returnI Projected salary increasesI Postretirement cost-of-living adjustment IIncludes inflation rate of 3.50%
Valuation date Actuarial cost method Amortization method Remaining amortization period
of the Unfunded AAL Asset valuation method Actuarial assumptions:
Investment rate of returnI Projected salary increases Postretirement cost-of-living adjustment IIncludes inflation rate of3.50%

6/30/97 Entry age Level percent of pay, open
8 years 5-year smoothed market
7% 5.20-9.00%
None
6/30/97 Entry age level dollar open
20 years 5-year smoothed market
7% N/A
3% annually
(Continued)

Employees' Retirement System of Georgia 52

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

Legislative Retirement System

Valuation date Actuarial cost method Amortization method Remaining amortization period
of the Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return) Projected salary increases Postretirement cost-of-living adjustment )Includes inflation rate of 3.50%

6/30/97 Unit credit Level dollar, open
40 years 5-year smoothed market
7% N/A 3% annually

Trial Judges and Solicitors Retirement Fund
Superior Court Judges Retirement System

Valuation date Actuarial cost method Amortization method Remaining amortization period
of the Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return ) Projected salary increases) Postretirement cost-of-living adjustment IIncludes inflation rate of 3.50%

6/30/97 Entry age Level percent of pay, open
26 years 5-year smoothed market
7% 5.50% None

Valuation date

6/30/97

Actuarial cost method

Entry age normal

Amortization method

Level payment, closed

Remaining amortization period

of the Funding Excess

26 years

Asset valuation method

Market-related value

Actuarial assumptions:

Investment rate of return)

7.50%

Projected salary increases)

5.50%

Postretirement cost-of-living adjustmene None

)Includes inflation rate of3.00%

2Certain members retired from other systems who are due death benefits

from this system are assumed to receive 5.50% cost-of-living

adjustments.

(Continued)

Employees' Retirement System of Georgia 53

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES

District Attorneys' Retirement System

Valuation date Actuarial cost method Amortization method Remaining amortization period
of the Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return! Projected salary increases! Postretirement cost-of-living adjustment !Includes inflation rate of 3.00%

6/30/97 Entry age normal Level payment, closed
26 years Market-related value
7.50% 5.50%
None
(Concluded)

Employees' Retirement System of Georgia 54

ADDITIONAL INFORMATION (See Independent Auditors' Report)
Employees' Retirement System of Georgia 55

.gt'1

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

~

(Including All Funds Administered)

"(D'.

COMBINING STATEMENTS OF PLAN NET ASSETS

~

JUNE 3D, 1998 WITH COMPARATIVE TOTALS FOR 1997

.O....

(In Thousands)

(D

i3
(D

Pension Trust Funds

I:l

.-t

Superior Court

en ~

Judges and

.-t (D

Public School

Trial Judges

State

District

Georgia

i3

Employees' Employees Legislative and Solicitors Employees' Attorneys

Pooled

Defined Eliminations

Total

0.....

Retirement Retirement Retirement Retirement Assurance Retirement Investment Contribution

and

All Systems

(l

ASSETS

(D

0....

03.

CASH

OJ

System 30

System

System 85

Fund 87

Department Plans 80

Fund

Plan Reclassifications

70

(352)

1998

1997 3.382

U1

0\

RECEIVABLES:

Employee and employer contributions

27.782

6

33

251

235

982

29.289

27.994

Interest and dividends

93.182

227

93,409

87.699

Unremitted insurance premiums

LJQll.

(600)

Total receivables

27.782

33

251

600

235

93.182

1,209

(600)

122,698

115.693

INVESTMENTS - at fair value: Short-te"" Obligations of the U.S. government and its agencies, corporale. and other bonds Common stocks Mortgage loans and real estate Equity in pooled investment fund

3,744
...ll...H.l..il

...lQZJ.12.

...l2.ill.

~

~ -ill.lli.

121.615
4.968,446 7.809,823
667

2.944 10.548
-U..122.

(2993733)

124,559
4.978.994 7,809,823
4,411

137.072
3.986.638 6,419.080
3,207

Total investments

II 345171

...lQZJ.12.

...l2.ill.

~

~ -ill.lli.

12900551

...22.m.

02 993733)

12917787

10545997

Total assets

11,372,983

702.155

26,470

56,138

708,960

147,564

12,993.733

27,167

( 12,994,685)

13,040,485

10,665,072

LIABILITIES

Cash overdrafts Aounts payable and other Insurance premiums payable
Total liabilities

772 6,260
------.lli.
7606

38 267
~

13
-li
--li

--1-

153 90
--.W.

--.2.

(352) (600) (952)

611 6,639
7250

5,727 5727

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS (A schedule of funding progress is presented on page 17.)

$!I 3653?7 m.wll. ~

~

~

WlJlI.

$12 293733

ll1.W.

$ () 2993 733)

$ \3 033 235

$)Q 659 345

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
Superior Court Judges and District Attorneys Retirement Plans COMBINING STATEMENTS OF PLAN NET ASSETS JUNE 30, 1998 WITH COMPARATIVE TOTALS FOR 1997 (In Thousands)
ASSETS
CASH RECEIVABLES:
Employee and employer contributions
INVESTMENTS - at fair value: Equity in pooled investment fund Total assets
LIABILITIES
OVERDRAFTS ACCOUNTS PAYABLE AND OTHER
Total liabilities NET ASSETS HELD IN TRUST FOR PENSION
BENEFITS

Pension Trust Funds

Superior Court Superior Court District

Judges

Judges Attorneys'

Retirement System

Retirement Retirement

Fund

System

District Attorneys
Retirement Fund

Total

All Systems

1998

1997

$ 187

$ 60

$ 17 47

$3

$

80

235

$ 124 230

.-l.H.1Ql 114,888

--l..ID
1,608

.JLQQ.l 31,065

147,249

--ll2...21l

3

147,564

120,325

153
--..4i
~
~

~ ~
~

----2. ----2.
$31.059

--l --l
$-

153 90 243
$ 147,321

-----8l. -----8l.
$120,238

.gtTl

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)

0'

'(g

(l)

COMBINING STATEMENTS OF CHANGES IN PLAN NET ASSETS

Cft

~

YEAR ENDED JUNE 3D, 1998 WITH COMPARATIVE TOTALS FOR 1997 (In Thousands)

O......

(l)

S
...(l)
i:j

Pension Trust Funds

Superior Court

CIl
~... (l)

Public School

Trial Judges

Slate

Judges and District

Georgia

S

Employees' Employees Legislative and Solicitors Employees' Attorneys

Pooled

Defined

Tolal

.0.....

Retirement

Retirement Retirement Retirement Assurance Retirement Investment Contribution

All Systems

c;:l

(l)

0.0.3....

NET ASSETS HELD IN TRUST FOR PENSION

~

BENEFITS - Beginning of year

CIl

OJ

System

System

System

Fund

Department

Plans

Fund

Plan

Eliminations

1998

1997

$ 9,290,383

$578,299

$ 22,746

$ 44,516

$581,589

$120.238

$ 10,61 0,681

$21,574

$(10,610.681) $ 10.659,345

$ 8,657,349

ADDITIONS:

Contributions:

Employer

286,794

14,547

206

955

3,327

305.829

300,250

Employee

54,829

1,152

200

715

1,542

10,473

68,911

70,503

Insurance premiums

11,162

11,162

10,859

Administrative expense allObnent

575

68

70

24

737

737

Investtnent Income:

Net appreciation in fair value of investments

1,221

2,003,382

171

2,004,774

1,624,057

Interest and dividends

206

419,843

737

420,786

391,526

Less broker and invesbnent agent fees

(409)

(10,588)

(2)

(10,999)

(8,916)

Allocation of investment earnings

2103770

-ill.lli..

-Jill.

-.l.Q.lli.

J.ll.ill.

~

......2J22.

(2412637)

Net investment income Tolal additions

2 104788 2446411

-ill..lli.
..lli,Q2l

~
---!.ill.

---lQ.W. .....lUll

-.ill.lli. -l.4M22.

---l.UQl
~

-MU.ill. -l.ill.ill.

--UQl
...u.m.

(2412 637\ (2412637)

~ ~

2006667 2389016

DEDUCTIONS: Retirement payments Refunds of employee contributions and interest Death benefits Administrative expenses
Total deductions
TRANSFERS TO SYSTEMS FROM POOLED INVESTMENT FUND
NET INCREASE

357,434 10,221
3762
371417

24,537 364
--ill.
~

2074994

--ill.lli.

977 18
_ _6_8 --l..QQ1.
--l.2!!i

591 II
_ _7_0
--.ll..

15,178
---'.1l
.....--U.ill.

4,873 276
--Z!
~

-------

7,939
-ill. -UM

-l..Lill. JlZJlL -.lLQU

(29 5851 2383052

-2.lli.

388,412 18,829 15,178
~
~

349,123 17,708 15,871 4,318
387020

29 585 (2383052)

----
~

200\.996

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End olyear

$ 11 365377

~

11Mll

~

~

wz.m

$12993733

~

$( 12 993 733)

$13 233 235

$10 659 345

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
Superior Court Judges and District Attorneys Retirement Plans COMBINING STATEMENTS OF CHANGES IN PLAN NET ASSETS YEAR ENDED JUNE 30,1998 WITH COMPARATIVE TOTALS FOR 1997 (In Thousands)
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - Beginning of year ADDITIONS:
Contributions: Employer Employee
Administrative expense allotment Allocation of investment eamings
Total additions DEDUCTIONS:
Retirement payments Refunds of employee contributions and interest Administrative expenses
Total deductions NET INCREASE NET ASSETS HELD IN TRUST FOR PENSION BENEFITS - End of year

Superior Court Judges
Retirement System

Pension Trust Funds

Superior Court District

Judges Attorneys'

Retirement Retirement

Fund

System

District Attorneys Retirement
Fund

Total

All Systems

1998

1997

$ 93,707

$1,268

$25,263

$ 120,238

$ 97,571

1,065 1,158
19 ~
23,692

1,877 16
2,lb1 1,877

206 368
5
--.2.ill.
6,204
380 23
----2.

$ 179
179 179

3,327 1,542
24 27363 32,256
4,873 276 24
5,173 27.083 $ 147321

3,388 1,543
24 ~
27,431
4,630 110
---.H
--A.1M
~ $ 120,238

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
Administrative Expense Fund
CONTRIBUTIONS AND EXPENSES YEARS ENDED JUNE 30,1998 AND 1997 (In Thousands)
Contributions: Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Trial Judges and Solicitors Retirement Fund State Employees' Assurance Department Georgia Defmed Contribution Plan Other
Total contributions
Expenses: Personal services: Salaries and wages Retirement contributions FICA Health insurance Miscellaneous
Communications: Postage Publications and printing Telecommunications Travel
Professional services: Accounting and investment services Computer services Actuarial services Medical services Professional fees Legal services

1998
$3,762 575 68 70 147 245
---1!
--..8.2l

1997
$3,189 575 68 70 147 245
---1!
--4.ill

1,484 261 102 182
----.1 2,067
155 35 58 _ _2_1 --l.Q2.
991 766 159 116 41
---1!
2,097

1,338 213 93 167
_ _1_9 --l...8.N
155 77 42 _ _1_6
--l2Q
906 430 146 138
34
---1! -l.ill.
(Continued)

Employees' Retirement System of Georgia 60

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA (Including All Funds Administered)
Administrative Expense Fund
CONTRIBUTIONS AND EXPENSES YEARS ENDED JUNE 30,1998 AND 1997 (In Thousands)
Rentals: Office space Office equipment
Other services and charges: Equipment Temporary services Supplies and materials Repairs and maintenance Courier services Board member expenses Miscellaneous
Total expenses
Net Income
Balance: Beginning of year
End of year

1998
$ 306 _ _1
--M!l.
41 74 19 3 5 7 _ _2
--l..ll
4,891

1997
$ 306 _ _1
--M!l.
16 159 22
3 5 7 _ _1
-ill
4.318

--
$-

--
$(Concluded)

Employees' Retirement System of Georgia 61