i 'soF\ E400 ,/\1 l~~~ of (jeorgia Annual i o-=--=- ,.. . .!.! -=- ) f ,.~._ 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 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