2007 annual report [2007]

2007 Annual Report
FFiissccaall YYeeaar Ended June 3300,, 22000077

INTRODUCTORY SECTION
TABLE OF CONTENTS

INTRODUCTORY SECTION

Boards of Trustees

2

Letter of Transmittal

3

Legislation

4

ACTUARIAL SECTION

Employees' Retirement System

6

Public School Employees Retirement System

9

Legislative Retirement System

12

Georgia Judicial Retirement System

15

Group Term Life Insurance Plan

18

Georgia Military Pension Fund

21

INVESTMENT SECTION

Pooled Investment Fund/Structural Analysis/Short-Term Investments

24

Bonds

25

Equity Holdings

26

FINANCIAL SECTION

Independent Auditors' Report

27

Management's Discussion and Analysis (Unaudited)

28

Basic Financial Statements:



Combined Statement of Net Assets as of June 30, 2007

33

(With Comparative Totals as of June 30, 2006)



Combined Statement of Changes in Net Assets for the Year Ended June 30, 2007

34

(With Comparative Totals for the Year Ended June 30, 2006)



Combining Statement of Net Assets as of June 30, 2007

35

Defined Benefit Plans



Combining Statement of Net Assets as of June 30, 2007

36



Combining Statement of Changes in Net Assets for the Year Ended June 30, 2007

37

Defined Benefit Plans



Combining Statement of Changes in Net Assets for the Year Ended June 30, 2007 38



Notes to Financial Statements

39

Required Supplementary Schedules (Unaudited)



Schedules of Funding Progress

53



Schedules of Employer Contributions

54



Notes to Required Supplementary Schedules

55

Additional Information



Administrative Expenses Schedule



Contributions and Expenses for the Year Ended June 30, 2007

57

(With Comparative Totals for the Year Ended June 30, 2006)

2007 - Employees' Retirement System of Georgia

1

INTRODUCTORY SECTION

BOARDS OF TRUSTEES

Russell W. Hinton, ex-officio Chairman
State Auditor Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan Georgia Military Pension Fund Georgia Deferred Compensation Plans State Employees' Assurance Department State Social Security Trust Fund
Dan Ebersole, ex-officio Director
Office of Treasury and Fiscal Services Employees' Retirement System
Public School Employees Retirement System Legislative Retirement System
Georgia Judicial Retirement System Georgia Defined Contribution Plan
Georgia Military Pension Fund Georgia Deferred Compensation Plans State Employees' Assurance Department
State Social Security Trust Fund
Michael D. Kennedy Korn/Ferry International Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan Georgia Military Pension Fund Georgia Deferred Compensation Plans State Social Security Trust Fund

Ned J. Winsor Vice Chairman Assistant Treasurer United Parcel Service Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan Georgia Military Pension Fund Georgia Deferred Compensation Plans State Employees' Assurance Department State Social Security Trust Fund
Steve Stevenson, ex-officio Commissioner
Georgia Merit System Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan Georgia Military Pension Fund Georgia Deferred Compensation Plans State Employees' Assurance Department State Social Security Trust Fund
Daniel J. Craig District Attorney Augusta Judicial Circuit Georgia Judicial Retirement System
William D. Ray Superior Court Judge
Gwinnett County Georgia Judicial Retirement System

Celeste Osborn Deputy Chief Financial Officer
Office of the Governor Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Defined Contribution Plan Georgia Military Pension Fund Georgia Deferred Compensation Plans State Social Security Trust Fund
Marsha H. Moore Commissioner
Department of Early Care and Learning Employees' Retirement System
Public School Employees Retirement System Legislative Retirement System
Georgia Judicial Retirement System Georgia Defined Contribution Plan
Georgia Military Pension Fund Georgia Deferred Compensation Plans
State Social Security Trust Fund
2

Karlton Van Banke Presiding Judge
Juvenile Court of Clayton County Georgia Judicial Retirement System
Samuel B. Kellett President
Kangaroo Bob's LLC Public School Employees Retirement System
J. Sammons Pearson Account Vice President/Financial Advisor
UBS Financial Services, Inc. Public School Employees Retirement System
Michael Thurmond, ex-officio Commissioner of Labor
State Employees' Assurance Department
H. Phillip Bell Owner
Phillip Bell State Farm Insurance Agency State Employees' Assurance Department
2007 - Employees' Retirement System of Georgia

INTRODUCTORY SECTION
LETTER OF TRANSMITTAL

The Boards of Trustees and staff are pleased to present the 2007 Annual Report of the retirement systems and programs administered by the Employees' Retirement System of Georgia (ERS).
ERS administers separate and distinct cost-sharing, multiple employer defined benefit pension plans for various employer agencies of the State of Georgia, as well as defined contribution plans, a life insurance plan and a Social Security trust fund, as follows:
Defined Benefit Plans Employees' Retirement System of Georgia Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Military Pension Fund Superior Court Judges Retirement Fund District Attorneys Retirement Fund
Defined Contribution Plans Georgia Defined Contribution Plan 401(k) Deferred Compensation Plan 457 Deferred Compensation Plan 403(b) Deferred Compensation Plan
Life Insurance Plan State Employees' Assurance Department
Other State Social Security Trust Fund
Categories of information provided in this annual report include: Legislation Actuary's reports Investment information Auditors' report Financial information
During fiscal year 2007, the net assets of the System increased by $1.6 billion, or 10%, to $17.5 billion by June 30, 2007. This improvement was primarily due to the increase in the fair value of investments.
The mission of ERS is to be the guardian of the plans for the ultimate benefit of the members, retirees, and beneficiaries of the plans. In so doing, the ERS core responsibilities include pension administration; the collection, reconciliation and disbursement of contributions for the welfare of the members, retirees and beneficiaries of the plans; and the sound and secure investment of the retirement funds. We believe that the information found within this report properly reflects the dedication of the Boards of Trustees, staff and consultants in carrying out ERS' mission.
We express our sincere thanks to the Boards of Trustees for their leadership and support. Many thanks are extended to the offices of the Governor, Lieutenant Governor, members of the House and Senate Retirement Committees and their staff, members of the House of Representatives and Senate, and the department officials whose support and assistance have helped ERS accomplish its mission over the years. With continued support along with the dedication of our staff, we represent to our members, retirees, beneficiaries and the general public ERS' continuing efforts to properly administer the responsibilities of the retirement systems.

Michael J. Nehf, Executive Director

2007 - Employees' Retirement System of Georgia

3

INTRODUCTORY SECTION
LEGISLATION
EMPLOYEES' RETIREMENT SYSTEM Act No. 24 (Senate Bill 162) Amends 47-2-123(c) for those persons first or again becoming a member of ERS on or after July 1, 2007, removing the projected service and compensation calculation to age 60 or 65. The disability retirement allowance will be calculated on the actual years of creditable service at the effective date of retirement. A member who is eligible for an equivalent service retirement shall not be eligible to apply for disability retirement. The projected disability retirement allowance calculation is still applicable to any person who maintains a current ERS membership date before July 1, 2007.
Act No. 61 (House Bill 448) Amends 47-2-54, 47-2-334, 47-19-10, and 47-23-29 and 30 in compliance with Governmental Accounting Standards Board (GASB) 43 and 45 requiring two separate trust funds be maintained by the retirement system for the group term life insurance for eligible members of ERS, LRS, and GJRS. Effective June 30, 2007, the trust funds shall be known as the (1) "the retired and vested inactive members trust fund" and (2) "the active members fund". This compliance legislation does not impact the amount of coverage for members/retirees, such coverage being provided through contract with the State Employees' Assurance Department.
LEGISLATIVE RETIREMENT SYSTEM Act No. 61 (House Bill 448) Amends 47-2-54, 47-2-334, 47-19-10, and 47-23-29 and 30 in compliance with GASB 43 and 45 requiring two separate trust funds be maintained by the retirement system for the group term life insurance for eligible members of ERS, LRS, and GJRS. Effective June 30, 2007, the trust funds shall be known as the (1) "the retired and vested inactive members trust fund" and (2) "the active members fund". This compliance legislation does not impact the amount of coverage for members/retirees, such coverage being provided through contract with the State Employees' Assurance Department.
GEORGIA JUDICIAL RETIREMENT SYSTEM Act No. 61 (House Bill 448) Amends 47-2-54, 47-2-334, 47-19-10, and 47-23-29 and 30 in compliance with GASB 43 and 45 requiring two separate trust funds be maintained by the retirement system for the group term life insurance for eligible members of ERS, LRS, and GJRS. Effective June 30, 2007, the trust funds shall be known as the (1) "the retired and vested inactive members trust fund" and (2) "the active members fund". This compliance legislation does not impact the amount of coverage for members/retirees, such coverage being provided through contract with the State Employees' Assurance Department.

4

2007 - Employees' Retirement System of Georgia

INTRODUCTORY SECTION
LEGISLATION
PUBLIC RETIREMENT SYSTEMS Act No. 23 (Senate Bill 156) Amends 47-20-10 by adding 47-20-10.1 to authorize political subdivisions to create retiree health benefit plans to provide for payment of covered post-employment health care expenses for eligible present and future retirees and other related expenses for compliance to GASB 43 and 45.
Act No. 43 (House Bill 318) Amends 47-20-83 to allow a large retirement system to invest 15% of the retirement system assets in corporations or in obligations of corporations organized in a country other than the United States or Canada subject to the provisions of paragraph (1) of subsection (a) of 47-20-83. This is retirement system investment legislation.
OTHER LEGISLATION OF INTEREST Act No. 26 (Senate Bill 172) Amends code sections 20-2 and 45-18 to provide that the previously created Georgia Retiree Health Benefit Fund is a fund available and dedicated for all funds relating to the coverage of health care expenses and administrative costs and to further Georgia's compliance with GASB 43 and 45.
Act No. 58 (House Bill 213) Amends 45-18-2 by repealing in its entirety 45-18-37, relating to a special pay plan for deferred payment of special compensation to reduce federal tax burden for state employees. According to the Internal Revenue Service the payment of annual leave pay at termination of State employment is not eligible for rollover and thus the original enacted law was invalid based on federal statutes. This does not affect the ability of retiring and separating state employees to make a deduction from their annual leave final payout into the Peach State Reserves 457 and/or 401(k) Plan. This is housekeeping legislation.

2007 - Employees' Retirement System of Georgia

5

June 28, 2007

ACTUARIAL SECTION
ACTUARY'S CERTIFICATION LETTER
Employees' Retirement System

Board of Trustees Employees' Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7778
Attention: Mr. Michael Nehf, Executive Director
Members of the Board:
Section 47-2-26 of the law governing the operation of the Employees' Retirement System of Georgia provides that the actuary shall make annual 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 actuarial valuation of the System prepared as of June 30, 2006. The report indicates that annual employer contributions at the rate of 5.66% of compensation for Old Plan Members and 10.41% of compensation for New Plan Members for the fiscal year ending June 30, 2009 are sufficient to support the benefits of the System.
In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report.
In our opinion, the valuation is complete and accurate, and the methodology and assumptions are reasonable as a basis for the valuation. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to a method that recognizes asset gains or losses over a seven-year period. The valuation takes into account the effect of all amendments to the System enacted through the 2006 session of the General Assembly as well as all 1.5% Ad Hoc COLAs effective through January 1, 2009.
The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a percent of payroll. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a level percent of payroll. Gains and losses are reflected in the unfunded accrued liability which is being amortized as a level percent of payroll within a 10-year period.
The 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. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President
EAM:sh/kc

Cathy Turcot Managing Director

6

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Employees' Retirement System

- As of June 30, 2006 -
DOLLAR AMOUNTS 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
(3) TOTAL ACTUARIAL LIABILITIES

$ 7,809,909 540,135 112,840

$ 8,462,884
7,368,232 $ 15,831,116

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 normal contributions
(7) Prospective unfunded accrued liability contributions = (5)-(6)
(8) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 2,369,984

$ 13,461,132

1,588,271

781,713 $ 15,831,116

2007 - Employees' Retirement System of Georgia

7

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Employees' Retirement System

DOLLAR AMOUNTS IN THOUSANDS

Valuation Date
Number of active members Annual earnable compensation
Number of retired members and beneficiaries Annual allowances
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability
Amortization period (years)

June 30, 2006
74,089 $ 2,630,167
32,839 $ 842,157

June 30, 2005
72,716 $ 2,514,430
31,355 $ 773,445

$ 13,033,861 13,461,132
$ 781,713
10

$ 12,825,126 13,134,472
$ 378,301
6

For Fiscal Year Ending
Annual Required Employer Contribution Rates (ARC): Old Plan Initial Normal Rate Employer Paid on Behalf of Employee Normal Rate Accrued Liability Rate Total
New Plan Normal Rate Accrued Liability Rate
Total

June 30, 2009

June 30, 2008

6.77% (4.75) 2.02% 3.64% 5.66%
6.77% 3.64%
10.41%

7.16% (4.75) 2.41% 3.25% 5.66%
7.16% 3.25%
10.41%

8

2007 - Employees' Retirement System of Georgia

June 28, 2007

ACTUARIAL SECTION
ACTUARY'S CERTIFICATION LETTER
Public School Employees Retirement System

Board of Trustees Georgia Public School Employees' Retirement System Two Northside 75, Suite 300 Atlanta, GA 30318
Members of the Board:
Section 47-4-60 of the law governing the operation of the Georgia Public School Employees' Retirement System provides that the employer contribution shall be actuarially determined and approved by the Board of Trustees. We have submitted the report giving the results of the actuarial valuation of the System prepared as of June 30, 2006. Based on a monthly benefit accrual rate of $14.00, the valuation indicates that annual employer contributions of $1,534,302 or $40.82 per active member for the fiscal year ending June 30, 2009 are sufficient to support the benefits of the System.
In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report.
In our opinion, the valuation is complete and accurate, and the methodology and assumptions are reasonable as a basis for the valuation. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to a method that recognizes asset gains or losses over a seven-year period. The valuation takes into account the effect of all amendments to the System enacted through the 2006 session of the General Assembly.
The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a dollar per active member. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a dollar per active member. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level dollar per active member within a 20-year period.
The 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. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President
EAM:mjn/kc

Cathy Turcot Managing Director

2007 - Employees' Retirement System of Georgia

9

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Public School Employees Retirement System

- As of June 30, 2006 -

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
(3) TOTAL ACTUARIAL LIABILITIES

$ 385,659,485 16,616,547 26,266,960

$ 428,542,992

315,444,822 $ 743,987,814

PRESENT AND PROSPECTIVE ASSETS

(4) Actuarial value of assets

$ 766,277,000

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

$ (22,289,186)

(6) Present value of future member contributions

6,885,360

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

$ (29,174,546)

(8) Employer normal contribution rate

$237.64

(9) Present value of future membership service

191,260

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

45,451,026

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

(74,625,572)

(12) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 743,987,814

10

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Public School Employees Retirement System

Valuation Date Number of active members
Retired members and beneficiaries: Number Annual allowances1
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability Amortization period (years)

June 30, 2006 37,587

June 30, 2005 36,704

13,014 $ 44,266,003

12,675 $ 41,316,366

$ 743,689,000 766,277,000
$ (74,625,572)
20

$ 737,930,000 753,767,000
$ (82,727,435)
30

For Fiscal Year Ending
Employer contribution rate per active member: Normal Accrued liability
Total
Annual Required Employer Contribution (ARC)2: Normal Accrued liability
Total

June 30, 2009

$

237.64

(196.82)

$

40.82

$ 8,932,175 (7,397,873)
$ 1,534,302

June 30, 2008

$

232.64

(190.84)

$

41.80

$ 8,538,819 (7,004,591)
$ 1,534,228

1 Does not include increases in benefit accrual rate effective after the valuation date. The results of the valuation have been adjusted to include these increases.
2 The ARC is in addition to any administrative expense allotments that are contributed to the System.

2007 - Employees' Retirement System of Georgia

11

June 26, 2007

ACTUARIAL SECTION
ACTUARY'S CERTIFICATION LETTER
Legislative Retirement System

Board of Trustees, Legislative Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318
Members of the Board:
Section 47-6-22 of the law governing 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 actuarial valuation of the System prepared as of June 30, 2006. The report indicates that no annual employer contributions for the fiscal year ending June 30, 2009 are required to support the benefits of the System.
In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report.
In our opinion, the valuation is complete and accurate, and the methodology and assumptions are reasonable as a basis for the valuation. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to a method that recognizes asset gains or losses over a seven-year period. The valuation takes into account the effect of all amendments to the System enacted through the 2006 session of the General Assembly.
The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a dollar per active member. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a level dollar per active member. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level dollar per active member.
The 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. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President

Cathy Turcot Managing Director

EAM:mjn/kc 12

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Legislative Retirement System

- As of June 30, 2006 -

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
(3) TOTAL ACTUARIAL LIABILITIES

$ 10,974,105 3,142,852 4,617,069

$ 18,734,026
6,475,266 $ 25,209,292

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

$ (3,962,708) $ (5,512,176)

$ 29,172,000 1,549,468 252,333

(5,764,509) $ 25,209,292

2007 - Employees' Retirement System of Georgia

13

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Legislative Retirement System

Valuation Date Number of active members
Retired members and beneficiaries: Number Annual allowances
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability Amortization period (years)
For Fiscal Year Ending Employer contribution rate per active member:
Normal Accrued liability
Total Annual Required Employer Contribution Rates (ARC):
Normal Accrued liability
Total

June 30, 2006 218

June 30, 2005 217

216 $ 1,531,685

224 $ 1,594,405

$ 28,288,000 29,172,000
$ (5,764,509)
N/A*

$ 27,835,000 28,462,000
$ (4,931,241)
N/A*

June 30, 2009

$

228.77

(228.77)

$

0.00

$

49,872

(49,872)

$

0

June 30, 2008

$

215.42

(215.42)

$

0.00

$

46,746

(46,746)

$

0

* If the annual required employer contribution (ARC) is based on 30 year amortization of the unfunded accrued liability as of June 30, 2006 or a 40 year period as of June 30, 2005, the ARC is less than $0, which is not allowed under GASB 25/27. Therefore, the accrued liability contribution has been set to such that the total ARC equals $0.

14

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION

June 28, 2007

ACTUARY'S CERTIFICATION LETTER
Georgia Judicial Retirement System

Board of Trustees, Georgia Judicial Retirement System Suite 400, Two Northside 75 Atlanta, GA 30318
Members of the Board:
Section 47-23-21 of the law governs the operation of the Georgia Judicial Retirement System. The actuary makes annual 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 actuarial valuation of the System prepared as of June 30, 2006. The report indicates that annual employer contributions at the rate of 3.85% of compensation for the fiscal year ending June, 30, 2009 are sufficient to support the benefits of the System.
In preparing the valuation, the actuary relied on data provided by the System. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report.
In our opinion, the valuation is complete and accurate, and the methodology and assumptions are reasonable as a basis for the valuation. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to a method that recognizes asset gains or losses over a seven-year period. The valuation takes into account the effect of all amendments to the System enacted through the 2006 session of the General Assembly as well as 1.5% Ad Hoc COLAs effective through January 1, 2009.
The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the System and to reasonable expectations of anticipated experience under the System. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a percent of payroll. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a level percent of payroll. Gains and losses are reflected in the unfunded accrued liability which is negative and being amortized as a level percent of payroll within an 18-year period.
The 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. Assuming that contributions to the System are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the System may be safely anticipated.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President
EAM:mjn/kc

2007 - Employees' Retirement System of Georgia

15

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Georgia Judicial Retirement System

- As of June 30, 2006 -

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

$ 71,622,621 9,630,881 4,940,331

(2) Present value of prospective benefits payable on account of present active members

(3) TOTAL ACTUARIAL LIABILITIES

$ 86,193,833
216,221,645 $ 302,415,478

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 (10) Prospective normal contributions = (8) x (9) (11) Prospective unfunded accrued liability
contributions = (7)-(10) (12) TOTAL PRESENT AND PROSPECTIVE ASSETS

$ 22,851,478
$ (6,582,620) 12.26%
$ 351,912,943

$ 279,564,000 29,434,098
43,144,527 (49,727,147)

$ 302,415,478

16

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Georgia Judicial Retirement System

Valuation Date
Number of active members Annual compensation
Retired members and beneficiaries: Number Annual allowances
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability
Amortization period (years)

June 30, 2006
478 $ 45,307,981

June 30, 2005
468 $ 42,916,253

165 $ 8,916,617

174 $ 9,460,350

$ 269,207,000 279,564,000
$ (49,727,147)
18

$ 256,919,000 264,924,000
$ (51,863,586)
20

For Fiscal Year Ending
Annual Required Employer Contribution Rates (ARC): Normal Accrued liability
Total

June 30, 2009
12.26% (8.41) 3.85%

June 30, 2008
12.41% (8.56) 3.85%

2007 - Employees' Retirement System of Georgia

17

ACTUARIAL SECTION
ACTUARY'S CERTIFICATION LETTER
Group Term Life Insurance Plan

August 9, 2007
Board of Trustees Employees' Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7778
Attention: Mr. Michael Nehf, Executive Director
Members of the Board:
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. In addition, Governmental Accounting Standards Board Statements No. 43 and 45 require actuarial valuations of post-employment benefit plans. In accordance with GASB 43 and 45, we have determined liabilities separately for life insurance benefits payable upon death in active service and those payable upon death after retirement.
We have submitted the report giving the results of the valuation of the Plan prepared as of June 30, 2006. The report indicates that employee contributions at the rate of 0.50% of active payroll for Old Plan members, and 0.25% of active payroll for New Plan members, members of the Legislative Retirement System and members of the Judicial Retirement System are sufficient to support the pre-retirement benefits of the Plan. No employer contributions are required for the fiscal year ending June 30, 2009 for pre-retirement benefits. For post-retirement benefits, since no assets are currently held in a trust exclusively for these benefits and no employee contributions are statutorily dedicated, the employer annual required contribution is 1.68% of active members' payroll for the fiscal year ending June 30, 2009 based on a 30-year amortization period of the unfunded accrued liability.
The funding method used for this valuation is the unit credit actuarial cost method with projected benefits. Gains and losses are reflected in the unfunded accrued liability. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to market value. Once the assets are split into separate trusts for pre-retirement and post-retirement benefits the asset method will change to a method that recognizes asset gains or losses over a seven-year period. 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. 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.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President
EAM:sh

Cathy Turcot Managing Director

18

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Group Term Life Insurance Plan

- As of June 30, 2006 -

POST EMPLOYMENT (1) ACTUARIAL ACCRUED LIABILITY:

Present value of benefits payable on account of present retired

members

$

Present value of benefits payable on account of present active members

TOTAL ACTUARIAL ACCRUED LIABILITY

$

369,220,374
199,255,149 568,475,523

(2) PRESENT ASSETS FOR VALUATION PURPOSES:

$

(3) UNFUNDED ACTUARIAL ACCRUED LIABILITY: (1)-(2)

$

(4) EMPLOYER NORMAL CONTRIBUTION RATE:

(5) ACCRUED LIABILITY CONTRIBUTION RATE:

(6) TOTAL EMPLOYER CONTRIBUTION RATE: (4)+(5)

0 568,475,523
0.50% 1.18 1.68%

PRE RETIREMENT

(1) ACTUARIAL ACCRUED LIABILITY:

Present value of benefits payable on account of present retired

members

$

Present value of benefits payable on account of present active members

TOTAL ACTUARIAL ACCRUED LIABILITY

$

0
57,747,250 57,747,250

(2) PRESENT ASSETS FOR VALUATION PURPOSES:

$

933,945,000

(3) UNFUNDED ACTUARIAL ACCRUED LIABILITY: (1)-(2)

$

(876,197,750)

(4) EMPLOYER NORMAL CONTRIBUTION RATE:

0.00%

(5) ACCRUED LIABILITY CONTRIBUTION:

0.00%

(6) TOTAL EMPLOYER CONTRIBUTION: (4)+(5) 2007 - Employees' Retirement System of Georgia

0.00% 19

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Group Term Life Insurance Plan

Valuation Date Active members:
Number Annual compensation Retired members: Number Insurance amount
Actuarial Accrued Liability Market Value of Assets
Unfunded Actuarial Accrued Liability
For Fiscal Year Ending Annual Required Contribution rates:
Old Plan Members Employee Employer Total
New Plan, LRS Members and JRS Members Employee Employer Total
* 0.25%* paid0b.2y5%emppaliodybeyr.employer.

June 30, 2006 Post-Retirement
74,647 $ 2,667,158,543
27,154 $ 1,065,925,933

$ 568,475,523

$

0

$ 568,475,523

June 30, 2006 Pre-Retirement
74,647 $ 2,667,158,543
N/A N/A
$ 57,747,250 $ 933,945,000
$ (876,197,750)

June 30, 2009
0.00% 1.68 1.68%
0.00% 1.68 1.68%

June 30, 2009
0.50%* 0.00 0.50%
0.25% 0.00 0.25%

20

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
ACTUARY'S CERTIFICATION LETTER
Georgia Military Pension Fund
June 29, 2007
Board of Trustees Georgia Military Pension Fund Two Northside 75, Suite 300 Atlanta, GA 30318
Members of the Board:
Section 47-24-22 of the law governing the operation of the Georgia Military Pension Fund provides that the actuary shall make periodic valuations of the contingent assets and liabilities of the Pension 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 actuarial valuation of the Fund prepared as of June 30, 2006. The report indicates that annual employer contributions of $1,323,024 or $128.20 per active member for the fiscal year ending June 30, 2009 are sufficient to support the benefits of the Fund. In preparing the valuation, the actuary relied on data provided by the Fund. While not verifying data at the source, the actuary performed tests for consistency and reasonableness. Our firm, as actuary, is responsible for all of the actuarial trend data in the financial section of the annual report and the supporting schedules in the actuarial section of the annual report.
In our opinion, the valuation is complete and accurate, and the methodology and assumptions are reasonable as a basis for the valuation. Since the previous valuation, the method for determining the actuarial value of assets has been changed from a method that recognizes asset gains or losses over a five-year period to a method that recognizes asset gains or losses over a seven-year period. The valuation takes into account the effect of all amendments to the Fund enacted through the 2006 session of the General Assembly.
The Fund is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are in the aggregate reasonably related to the experience under the Fund and to reasonable expectations of anticipated experience under the Fund. The assumptions and methods used for funding purposes meet the parameters set for the disclosures presented in the financial section by Governmental Accounting Standards Board (GASB) Statement Nos. 25 and 27. The funding objective of the plan is that contribution rates over time will remain level as a percent dollar per active member. The valuation method used is the entry age normal cost method. The normal contribution rate to cover current cost has been determined as a level dollar per active member. Gains and losses are reflected in the unfunded accrued liability which is being amortized as a level dollar per active member within a 30-year period.
The Fund 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 Fund is operating on an actuarially sound basis. Assuming that contributions to the Fund are made by the employer from year to year in the future at the rates recommended on the basis of the successive actuarial valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the Fund may be safely anticipated.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience is performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the Fund.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President
EAM:sh/kc

Cathy Turcot Managing Director

2007 - Employees' Retirement System of Georgia

21

ACTUARIAL SECTION
VALUATION BALANCE SHEET
Georgia Military Pension Plan

- As of June 30, 2006 -

ACTUARIAL LIABILITIES Present value of prospective benefits payable on account of:
(1) Present retired members (2) Former members entitled to deferred benefits (3) Present active members (4) Total Actuarial Liabilities
PRESENT AND PROSPECTIVE ASSETS (5) Actuarial Value of Assets: (6) Present value of total future contributions = (4) (5) (7) Employer normal contribution rate (8) Present value of future membership service (9) Prospective normal contributions = (7) x (8) (10) Prospective unfunded actuarial accrued liability contributions = (6) (9) (11) Total Present and Prospective Assets

$ 1,719,098 4,673,244
11,717,826 $ 18,110,168

$ 15,010,168

$

9.03

$ 53,693

$ 3,100,000 484,848

14,525,320 $ 18,110,168

22

2007 - Employees' Retirement System of Georgia

ACTUARIAL SECTION
SUMMARY OF PRINCIPAL RESULTS
Georgia Military Pension Fund

Valuation Date
Number of active members
Retired members: Number Annual pensions
Former members entitled to deferred vested pensions: Number Annual deferred pensions
Assets: Market Value Actuarial Value
Unfunded actuarial accrued liability
Amortization Period
For Fiscal Year Ending Employer contribution rate per active member:
Normal Accrued liability
Total
Annual Required Employer Contribution Rates (ARC): Normal Accrued liability
Total

June 30, 2006 10,320

June 30, 2005 8,870

163 $ 178,320
937 $ 846,144
$ 3,053,000 3,100,000
$ 14,525,320 30 years

103 $ 109,920
497 $ 474,492
$ 2,181,000 2,176,000
$ 12,277,668 30 years

June 30, 2009

$

9.03

119.17

$

128.20

June 30, 2008

$

7.16

117.20

$

124.36

$

93,190

1,229,834

$ 1,323,024

$

63,509

1,039,564

$ 1,103,073

2007 - Employees' Retirement System of Georgia

23

INVESTMENT SECTION
POOLED INVESTMENT FUND
- As of June 30, 2007 -
Dollar Amounts in Thousands Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department
Georgia Military Pension Fund Superior Court Judges Retirement Fund Georgia Defined Contribution Plan

$ 14,236,051 811,859 31,073 304,944
1,052,142 4,318 1,446 52,553
$ 16,494,386

STRUCTURAL ANALYSIS OF INVESTMENTS AT FAIR VALUE

- As of June 30, 2007 -

Type of Investment Short-term Investments Bonds Common Stock Mutual and common collective trust funds*

Total

June 30, 2007 4.0%
31.0% 59.5%
5.5% 100.00%

*Investments of state Deferred Compensation 401(k) and 457 Plans and Reserve Trust

Face Amount

SHORT-TERM INVESTMENTS
- As of June 30, 2007 -
Issuer

Fair Value

$699,613,000*

United States Government, Agency and Corporate Obligations
(subject to repurchase agreements due 7/01/07)

*Consists of Pooled Investment Fund $688,098,000 and Georgia Defined Contribution Plan $11,515,000.

$ 699,613,000*

24

2007 - Employees' Retirement System of Georgia

INVESTMENT SECTION
US GOVERNMENT, AGENCY AND CORPORATE BONDS
- As of June 30, 2007 -

Issuer US TREAS. NOTE US TREAS. NOTE US TREAS. BOND US TREAS. NOTE US TREAS. NOTE US TREAS. BOND US TREAS. NOTE GENERAL ELECTRIC CAP CORP US TREAS. NOTE GENERAL ELECTRIC CAP CORP FNMA US TREAS. NOTE FHLMC FHLMC FHLMC FHLMC FNMA-CALLABLE CITIGROUP INC US TREAS. NOTE GENERAL ELECTRIC CAP CORP FNMA-CALLABLE FNMA FNMA FNMA US TREAS. NOTE FNMA-CALLABLE FNMA US TREAS. NOTE US TREAS. BOND FNMA FNMA US TREAS. NOTE US TREAS. NOTE FHLB FHLMC

Year of Maturity 2017 2016 2036 2008 2007 2028 2010 2009 2008 2020 2008 2010 2016 2008 2011 2011 2022 2013 2008 2026 2020 2011 2016 2016 2008 2017 2011 2009 2029 2011 2009 2008 2009 2009 2009

Interest Rate % 4.500 4.625 4.500 4.625 4.250 5.250 3.625 3.500 4.625 5.550 3.750 3.875 5.500 5.125 5.125 4.750 5.780 5.850 4.875 5.550 5.550 4.500 5.250 5.375 3.250 5.600 5.000 4.750 5.250 4.680 4.570 2.625 4.500 4.750 4.750

ERS Fixed Income Securities

Georgia Defined Contribution Plan Fixed Income Securities Total ERS and Georgia Defined Contribution Plan Fixed Income Securities

Par Value $ 548,000,000
479,000,000 464,000,000 247,000,000 225,000,000 210,000,000 204,000,000 191,000,000 180,000,000 179,000,000 174,000,000 165,000,000 147,000,000 143,000,000 140,000,000 140,000,000 125,000,000 120,000,000 120,000,000 115,000,000 106,000,000 105,000,000 100,000,000 98,000,000 96,000,000 96,000,000 95,000,000 91,000,000 77,000,000 78,000,000 71,000,000 61,000,000 37,000,000 35,000,000 32,000,000
$ 5,494,000,000
15,000,000
$ 5,509,000,000

Fair Value

$

525,395,000

464,218,060

420,138,080

245,997,180

224,401,500

211,444,800

197,880,000

185,785,700

179,199,000

173,409,830

171,282,120

160,076,400

147,505,680

142,739,740

139,475,000

137,943,400

122,187,500

121,263,600

119,812,800

107,617,000

102,703,400

102,670,050

98,500,000

97,479,620

94,200,000

94,137,600

94,020,550

90,722,450

77,529,760

76,440,000

70,179,240

59,761,090

36,748,400

34,726,650

31,760,000

$ 5,359,351,200

14,965,940 $ 5,374,317,140

2007 - Employees' Retirement System of Georgia

25

Shares 3,635,300 1,555,882 4,064,800
192,530 1,956,140 1,607,255 1,075,700 1,845,952 2,974,000 1,717,300 1,989,568 1,147,360 1,159,820 2,678,645 1,503,209
544,000 945,633 1,521,800 1,067,100 750,006

INVESTMENT SECTION
EQUITY HOLDINGS
- As of June 30, 2007 -

Company General Electric Co. Exxon Mobil Corp. Microsoft Corp. Google Inc. Citigroup Inc. Procter & Gamble Co. Schlumberger Ltd. Bank of America Corp. Cisco Systems Inc. Wal-Mart Stores Inc. AT&T Inc. Pepsico Inc. Johnson & Johnson Pfizer Inc. Hewlett-Packard Co. Apple Inc. American International Group Inc. QUALCOMM Inc. American Express Co. Chevron Corp.
Total - 20 Largest Holdings
Total - All Holdings

Fair Value

$

$139,159,284

$130,507,382

$119,789,656

$100,635,431

$100,330,421

$98,347,933

$91,369,958

$90,248,593

$82,825,900

$82,619,303

$82,567,072

$74,406,296

$71,468,108

$68,492,953

$67,073,186

$66,389,760

$66,222,679

$66,030,902

$65,285,178

$63,180,505

$

$1,726,950,500

$

$10,306,659,392

A complete listing is available upon written request, subject to restrictions of O.C.G.A. Section 47-1-14.

26

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
INDEPENDENT AUDITOR'S REPORT

Independent Auditors' Report

KPMG LLP Suite 2000 303 Peachtree Street, NE Atlanta, GA 30308

The Board of Trustees Employees' Retirement System of Georgia:
We have audited the accompanying financial statements of the Employees' Retirement System of Georgia (the System), a component unit of the state of Georgia, as of and for the year ended June 30, 2007 as listed in the table of contents. 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 audit. The prior year summarized comparative information has been derived from the System's June 30, 2006 financial statements and, in our report dated September 22, 2006, we expressed an unqualifed opinion on those financial statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the System's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the System's net assets as of June 30, 2007 and the changes in net assets for the year then ended in conformity with U.S. generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued our report dated September 27, 2007 on our consideration of the System's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The management's discussion and analysis, the schedules of funding progress, and schedules of employer contributions on pages 28 through 32 and pages 53 through 54, respectively, are not a required part of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information, and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in the administrative expenses schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects, in relation to the financial statements taken as a whole. The introductory, investment and actuarial sections have not been subjected to the auditory procedures applied by us in the audit of the basic financial statements, and accordingly, we express no opinion on them.

September 27, 2007

2007 - Employees' Retirement System of Georgia

27

FINANCIAL SECTION

MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)

This section provides a discussion and analysis of the financial performance of the Employees' Retirement System of Georgia (the "System") for the year ended June 30, 2007. The discussion and analysis of the System's financial performance is within the context of the accompanying basic financial statements, notes to the financial statements, required supplementary schedules, and additional information following this section.
The System is responsible for administering a cost sharing, multiple employer defined benefit pension plan for various employer agencies of Georgia, along with nine other defined benefit pension plans and four defined contribution plans.
The defined benefit pension plans include: Employees' Retirement System (ERS) Public School Employees Retirement System (PSERS) Legislative Retirement System (LRS) Georgia Judicial Retirement System (GJRS) Georgia Military Pension Fund (GMPF) State Employees' Assurance Department (SEAD) State Employees' Assurance Department Active Members Trust Fund (SEAD-Active) State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB) Superior Court Judges Retirement Fund (SCJRF) District Attorneys Retirement Fund (DARF)
The defined contribution retirement plans include: Georgia Defined Contribution Plan (GDCP) 401(k) Deferred Compensation Plan (401(k)) 457 Deferred Compensation Plan (457) 403(b) Deferred Compensation Plan (403(b))

Financial Highlights
The following highlights are discussed in more detail later in this analysis:
The net assets of the System increased by $1.6 billion, or 10.0%, from $15.9 billion at June 30, 2006 to $17.5 billion at June 30, 2007. The improvement was primarily due to the increase in the fair value of investments.
For the year ended June 30, 2007, the total additions to net assets were $2.7 billion compared to $1.4 billion for the year ended June 30, 2006. For year ended June 30, 2007, the additions consisted of employer and member contributions totaling $429 million, insurance premiums of $9 million, net investment income of $2.3 billion, participant fees of $1.2 million, and other income of $1 million. For year ended June 30, 2006, the additions consisted of employer and member contributions totaling $417 million, insurance premiums of $8 million, net investment income of $957 million, participant fees of $0.4 million, and other income of $1 million.
Net investment income of $2.3 billion (comprised of interest and dividend income, the change in fair value of investments, and other reduced by investment expenses) represents a $1.3 billion increase, compared to the net investment income of $957 million for the year ended June 30, 2006. The increase was primarily due to improved equity and bond market performance in 2007, compared to 2006.
The total deductions were $1.1 billion and $1.0 billion for years ended June 30, 2007 and 2006, respectively. For the year ended June 30, 2007, the deductions consisted of benefit payments of $1.0 billion, refunds of $20 million, death benefits of $25 million, and administrative expenses of $18 million. For the year ended June 30, 2006, the deductions consisted of benefit payments of $966 million, refunds of $21 million, death benefits of $23 million, and administrative expenses of $15 million.
Benefit payments paid to retirees and beneficiaries increased by $102 million, or 10.6% from $966 million in 2006 to $1.0 billion in 2007. This increase was the result of increases in the number of retirees and beneficiaries receiving benefits across all plans and postretirement cost of living increases in benefits.
(continued)

28

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
Overview of the Financial Statements
The basic financial statements include (1) the combined statements of net assets and changes in net assets, (2) the combining statements of net assets and changes in net assets, and (3) notes to the financial statements. The System also includes in this report additional information to supplement the financial statements.
In addition, the System presents two types of required supplementary schedules, which provide historical trend information about the plans' funding. The two types of schedules include (1) a schedule of funding progress and (2) a schedule of employer contributions.
The System prepares its financial statements on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. These statements provide information about the System's overall financial status.
Description of the Financial Statements
The Combined Statement of Net Assets is the statement of financial position presenting information that includes all of the System's assets and liabilities, with the balance representing the Net Assets Held in Trust for Pension Benefits. The investments of the System in this statement are presented at fair value. This statement is presented on page 33.
The Combined Statement of Changes in Net Assets reports how the System's net assets changed during the fiscal year. The additions and deductions to net assets are summarized in this statement. The additions include contributions to the retirement plans from employers and members, group life insurance premiums, participant fees, and investment income, which includes interest and dividends and the net increase in the fair value of investments. The deductions include benefit payments, life insurance death benefit payments, refunds of member contributions and interest, and administrative expenses. This statement is presented on page 34.
The Combining Statement of Net Assets and Combining Statement of Changes in Net Assets present the financial position and change in financial position for each of the funds administered by the System, including the Pooled Investment Fund that holds and invests funds from each of the participating plans and funds. These statements begin on page 35.
Notes to the Financial Statements are presented to provide the information necessary for a full understanding of the financial statements. The notes to the financial statements begin on page 39.
There are two Required Supplementary Schedules included in this report. These required schedules are applicable to five of the defined benefit plans: ERS, PSERS, LRS, GJRS, and GMPF. The Schedule of Funding Progress presents historical trend information about the actuarially determined funded status of the plans from a long term, ongoing plan perspective, and the progress made in accumulating sufficient assets to fund benefit payments as they become due. The Schedule of Employer Contributions presents historical trend information about the annual required contributions of employers and percentage of such contributions in relation to actuarially determined requirements for the years presented. The required supplementary schedules begin on page 53.
Notes to Required Supplementary Schedules are presented to provide the information necessary for a full understanding of the supplementary schedules. The notes to required supplementary schedules begin on page 55.
Additional information is presented, beginning on page 57. This section includes the Administrative Expenses Schedule. The Administrative Expenses Schedule presents the expenses incurred in the administration of these plans and funds, and the contributions from each plan and fund to provide for these expenses.

2007 - Employees' Retirement System of Georgia

(continued)
29

FINANCIAL SECTION
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)

Financial Analysis of the System A summary of the System's net assets at June 30, 2007 and 2006 is as follows:

Net assets (in thousands) June 30

Assets: Cash and receivables $ Investments Capital assets, net
Total assets Liabilities:
Due to brokers and accounts payable
Net assets $

2007
205,023 $ 17,334,129
15,340 17,554,492
37,589 17,516,903 $

2006
181,010 $ 15,802,360
11,311 15,994,681
64,150 15,930,531 $

Amount change
24,013 1,531,769
4,029 1,559,811
(26,561) 1,586,372

Percentage change
13.3% 9.7% 35.6% 9.8%
(41.4)% 10.0%

The following table presents the investment allocation at June 30, 2007 and 2006:

Asset allocation at June 30 (in percentages): Equities U.S. Treasuries U.S. Agencies Corporate and other bonds Mutual and common collective trust funds Short-term securities
Asset allocation at June 30 (in thousands): Equities U.S. Treasuries U.S. Agencies Corporate and other bonds Mutual and common collective trust funds Short-term securities

2007

2006

59.5% 18.0%
9.6% 3.4% 5.5% 4.0%

58.6% 24.3%
5.8% 5.2% 5.3% 0.8%

$

10,306,659 $

3,122,490

1,663,751

588,076

953,540

699,613

9,252,645 3,843,470
921,796 819,648 843,522 121,279

$ 17,334,129 $ 15,802,360

The total investment portfolio increased $1.53 billion from 2006, which is due primarily to an increase in the fair value of investments.

(continued)

30

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)

The investment rate of return in fiscal year ended June 30, 2007 was 14.7%, with a 20.6% return on equities and a 5.5% return on fixed income investments. The five year annualized rate of return on investments at June 30, 2007 was 8.5%, with an 11.2% return on equities and a 4.4% return on fixed income investments.
A summary of the changes in the System's net assets for the years ended June 30, 2007 and 2006 is as follows:

Additions: Employer contributions Member contributions Participant fees Insurance premiums Net investment income Other
Total additions
Deductions: Benefit payments Refunds Death benefits Administrative expenses
Total deductions
Net increase in net assets

Changes in net assets (in thousands)

2007

2006

Amount change

Percentage change

$ 296,277 $ 133,169 1,211 9,107
2,276,431 903

282,126 $ 135,276
449 7,699 956,794
903

14,151 (2,107)
762 1,408 1,319,637
--

2,717,098

1,383,247

1,333,851

5.0% (1.6)% 169.7% 18.3% 137.9% 0.0%
96.4%

1,067,604 19,588 25,223 18,311
1,130,726

965,626 20,907 22,772 14,561
1,023,866

101,978 (1,319) 2,451 3,750
106,860

10.6% (6.3)% 10.8% 25.8%
10.4%

$ 1,586,372 $ 359,381 $ 1,226,991

341.4%

Additions The System accumulates resources needed to fund benefit payments through contributions and returns on invested funds. In fiscal year 2007, total contributions increased 2.9%, reflecting a contribution percentage that remained unchanged with a modest overall salary increase. Net investment income increased by $1.3 billion. The increase was primarily due to improved equity and bond market performance in 2007, compared to 2006.
Deductions For fiscal year 2007, total deductions increased 10.4%, primarily because of a 10.6% increase in benefit payments. This was due to an increase of approximately 3.3% in the number of retirees receiving benefit payments across all defined benefit plans and to postretirement cost of living increases in benefits. Refunds decreased 6.3%, which was primarily due to a decrease in the number of refunds processed during 2007. Administrative expenses increased 25.8% over the prior year, due primarily to increases in salaries, accounting and investment services, and computer services.

2007 - Employees' Retirement System of Georgia

(continued)
31

FINANCIAL SECTION
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)

Funding Status
The schedules of funding progress and employer contributions provide information regarding how the plans are performing and funded from an actuarial perspective. The information is based upon actuarial valuations conducted by certified actuaries. The funding ratio, which is presented on the schedule of funding progress, indicates the ratio of the actuarial value of assets and the actuarial accrued liabilities. The higher this ratio, the better position the System is in with regards to its funding requirements. The June 30, 2006 and 2005 actuarial valuations, the latest valuations available, indicate the actuarial value of assets and funding ratios for the five applicable defined benefit retirement plans were as follows:

ERS PSERS LRS GJRS GMPF

Actuarial value of plan

assets (in thousands)

June 30, 2006

June 30, 2005

$ 13,461,132 $ 13,134,472

766,277

753,767

29,172

28,462

279,564

264,924

3,100

2,176

Funding ratio

June 30, 2006

June 30, 2005

94.5% 110.8% 124.6% 121.6%
17.6%

97.2% 112.3% 121.0% 124.3%
15.1%

The System continues to be in a sound financial position, as evidenced by the funding ratios. A funding ratio over 100% indicates the plans, from an actuarial perspective, have more assets available than will be necessary to satisfy the obligations of the plans.
Requests for Information
This financial report is designed to provide a general overview of the System's finances for all those with interest in the System's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Employees' Retirement System of Georgia, Two Northside 75, Suite 300, Atlanta, GA 30318.

32

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION

COMBINED STATEMENT OF NET ASSETS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia)
(A Component Unit of the State of Georgia)

COMBINED STATEMENT OF NET ASSETS
DJuRneA3F0,T200172/10/2007 8:06 AM
(With Comparative Totals as of June 30, 2006) (In thousands)
ASSETS CASH RECEIVABLES:
Employer and member contributions Interest and dividends Due from brokers for securities sold Other
Total receivables
INVESTMENTS AT FAIR VALUE: Short-term U.S. Treasuries U.S. Agencies Corporate and other bonds Common stocks Mutual and common collective trust funds Total investments
CAPITAL ASSETS, NET Total assets
LIABILITIES Accounts payable and other Due to brokers for securities purchased
Total liabilities

2007

2006

$

7,977 $

4,429

37,072 79,320 80,202
452
197,046

35,200 82,317 58,919
145
176,581

699,613 3,122,490 1,663,751
588,076 10,306,659
953,540 17,334,129
15,340 17,554,492

121,279 3,843,470
921,796 819,648 9,252,645 843,522 15,802,360
11,311 15,994,681

20,446 17,143 37,589

17,437 46,713 64,150

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS

$

17,516,903 $

15,930,531

(A schedule of funding progress is presented on page 53.) See accompanying notes to financial statements.

2007 - Employees' Retirement System of Georgia

33

FINANCIAL SECTION
COMBINED STATEMENT OF CHANGES IN NET ASSETS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
COMBINED STATEMENT OF CHANGES IN NET ASSETS Year Ended June 30, 2007 (With Comparative Totals for the Year Ended June 30, 2006)
D(IRn tAhoFuTsand1s)2/10/2007 8:40 AM

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS

BEGINNING OF YEAR

$

ADDITIONS: Contributions: Employer Member Participant fees Insurance premiums Administrative expense allotment

2007
15,930,531 $
296,277 133,169
1,211 9,107
903

2006
15,571,150
282,126 135,276
449 7,699
903

Investment income: Net increase in fair value of investments Interest and dividends Other
Total investment income
Less investment expenses Net investment income Total additions

DEDUCTIONS: Benefit payments Refunds of member contributions and interest Death benefits Administrative expenses Total deductions Net increase

NET ASSETS HELD IN TRUST FOR PENSION BENEFITS

END OF YEAR

$

1,769,567 523,686 1,467
2,294,720 (18,289)
2,276,431 2,717,098
1,067,604 19,588 25,223 18,311
1,130,726 1,586,372
17,516,903 $

535,488 435,713
731 971,932 (15,138) 956,794 1,383,247
965,626 20,907 22,772 14,561
1,023,866 359,381
15,930,531

See accompanying notes to financial statements.

34

2007 - Employees' Retirement System of Georgia

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
COMBINING STATEMENT OF NET ASSETS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
DRAFT 11/27/2007 8:00 AM
COMBINING STATEMENT OF NET ASSETS June 30, 2007 (In thousands)

Assets

Defined Benefit Plans

Pooled Investment
Fund

Georgia Defined Contribution
Plan

Defined Contribution Plans

401(k)

457

Plan

Plan

Cash Receivables:
Employer and member contributions Interest and dividends Due from brokers for securities sold Other Unremitted insurance premiums

$

6,817 $

33,446 -- --
1,053,716 1,373

--$
-- 79,146 80,197
-- --

140 $
1,422 145 5 -- --

468 $
1,017 13 --
247 --

552 $
1,187 16 --
205 --

Total receivables

1,088,535

159,343

1,572

1,277

1,408

Investments at fair value: Short-term U.S. Treasuries U.S. Agencies Corporate and other bonds Common stocks Mutual and common collective trust funds Equity in pooled investment fund

-- -- -- -- --
-- 16,441,833

688,098 3,107,524 1,663,751
588,076 10,306,659
-- --

11,515 14,966
-- -- --
-- 52,553

-- -- -- -- --
334,794 --

-- -- -- -- --
618,746 --

Total investments

16,441,833

16,354,108

79,034

334,794

618,746

Capital assets, net

15,340

--

--

--

--

Total assets

17,552,525

16,513,451

80,746

336,539

620,706

Liabilities

Accounts payable and other Due to brokers for securities purchased Insurance premiums payable

1,071,748 --
1,373

1,922 17,143
--

92

160

240

--

--

--

--

--

--

Total liabilities

1,073,121

19,065

92

160

240

Net assets held in trust for pension benefits

$ 16,479,404 $ 16,494,386 $

80,654 $

336,379 $

620,466 $

(A schedule of funding progress is presented on page 53.)

403(b) Plan

Eliminations

--$

--$

Total 2007
7,977

--

--

--

--

--

--

--

(1,053,716)

--

(1,373)

--

(1,055,089)

37,072 79,320 80,202
452 --
197,046

--

--

--

--

--

--

--

--

--

--

--

--

--

(16,494,386)

--

(16,494,386)

--

--

--

(17,549,475)

699,613 3,122,490 1,663,751
588,076 10,306,659
953,540 --
17,334,129
15,340
17,554,492

--

(1,053,716)

--

--

--

(1,373)

--

(1,055,089)

20,446 17,143
--
37,589

-- $ (16,494,386) $ 17,516,903

See accompanying notes to financial statements.

35

11

36

FINANCIAL SECTION
DEFINED BENEFIT PLANS COMBINING STATEMENT OF NET ASSETS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
DRDAEFFITNED1/B3E/N20EF0I8T PL1A:2N9S -PCMOMBINING STATEMENT OF NET ASSETS
June 30, 2007 (In thousands)
Defined Benefit Plans

Assets
Cash Receivables:
Employer and member contributions Interest and dividends Due from brokers for securities sold Other Unremitted insurance premiums
Total receivables

Employees' Retirement
System

Public School Employees Retirement System

Legislative Retirement
System

Georgia Judicial Retirement System

State Employees' Assurance Department

State Employees' Assurance Department
Active

State Employees' Assurance Department
OPEB

Georgia Military Pension
Fund

Superior Court Judges
Retirement Fund

District Attorneys Retirement
Fund

Defined Benefit Plans Total

$

5,950 $

347 $

36 $

149 $

203 $

--$

--$

18 $

111 $

3$

6,817

33,094 -- --
90,333 --
123,427

27

35

290

--

--

--

--

--

--

33,446

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

185,335

778,048

--

--

--

1,053,716

--

--

--

1,373

--

--

--

--

--

1,373

27

35

290

1,373

185,335

778,048

--

--

--

1,088,535

Investments at fair value: Short-term U.S. Treasuries U.S. Agencies Corporate and other bonds Common stocks Mutual and common collective trust funds Equity in pooled investment fund

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

14,236,051

811,859

31,073

304,944

1,052,142

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

4,318

1,446

--

--

--

--

--

--

--

--

--

--

--

--

--

16,441,833

Total investments

14,236,051

811,859

31,073

304,944

1,052,142

--

--

4,318

1,446

--

16,441,833

Capital assets, net Total assets

15,340 14,380,768

-- 812,233

-- 31,144

-- 305,383

-- 1,053,718

-- 185,335

-- 778,048

-- 4,336

-- 1,557

--

15,340

3

17,552,525

Liabilities

Accounts payable and other Due to brokers for securities purchased Insurance premiums payable
Total liabilities

16,971 --
1,350
18,321

584

18

391

1,053,718

--

--

--

--

--

--

--

5

18

--

--

584

23

409

1,053,718

--

--

--

65

1

1,071,748

--

--

--

--

--

--

--

--

--

1,373

--

--

65

1

1,073,121

Net assets held in trust for pension benefits $

14,362,447 $

811,649 $

31,121 $

304,974 $

--$

185,335 $

778,048 $

4,336 $

1,492 $

2 $ 16,479,404

(A schedule of funding progress is presented on page 53.)

See accompanying notes to financial statements.

2007 - Employees' Retirement System of Georgia

12

FINANCIAL SECTION
COMBINING STATEMENT OF CHANGES IN NET ASSETS

2007 - Employees' Retirement System of Georgia

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia)
(A Component Unit of the State of Georgia)

CDORMABFINTIN1G1S/T2A7T/E2M00E7NT 1O2F:C0H8APNMGES IN NET ASSETS
Year ended June 30, 2007 (In thousands)

Defined Benefit Plans

Pooled Investment
Fund

Georgia Defined Contribution
Plan

Defined Contribution Plans

401(k)

457

Plan

Plan

Net assets held in trust for pension benefits beginning of year

$

15,013,343 $

15,027,994 $

70,430 $

272,883 $

573,406 $

Additions: Contributions: Employer Member Participant fees Insurance premiums Administrative expense allotment

281,503 55,037
-- 9,107
903

--

--

14,774

--

--

15,060

34,956

28,116

--

--

674

537

--

--

--

--

--

--

--

--

Investment income: Net increase (decrease) in fair value of investments Interest and dividends Other Less investment expenses Allocation of investment earnings

-- 283 -- (1,963) 2,157,823

1,712,854 466,282 -- (14,569) --

35 1,200
-- (41) 6,744

19,946 20,315
525 (859)
--

36,734 35,606
942 (857)
--

Net investment income

2,156,143

2,164,567

7,938

39,927

72,425

Total additions

2,502,693

2,164,567

22,998

90,331

101,078

Deductions: Benefit payments Refunds of member contributions and interest Death benefits Administrative expenses

988,256
7,124 25,223 16,029

--

--

25,785

53,097

--

12,464

--

--

--

--

--

--

--

310

1,050

921

Total deductions

1,036,632

--

12,774

26,835

54,018

Transfers to systems from pooled investment fund
Transfers to (from) other pension plans

--

(698,175)

--

--

--

--

--

--

--

--

Net increase (decrease) in net assets

1,466,061

1,466,392

10,224

63,496

47,060

Net assets held in trust for pension benefits end of year

$

16,479,404 $

16,494,386 $

80,654 $

336,379 $

620,466 $

403(b) Plan

Eliminations

Total 2007

469 $

(15,027,994) $ 15,930,531

--

--

296,277

--

--

133,169

--

--

1,211

--

--

9,107

--

--

903

(2)

--

1,769,567

--

--

523,686

--

--

1,467

--

--

(18,289)

--

(2,164,567)

--

(2)

(2,164,567)

2,276,431

(2)

(2,164,567)

2,717,098

466

--

1,067,604

--

--

19,588

--

--

25,223

1

--

18,311

467

--

1,130,726

-- --
(469)

698,175 --
(1,466,392)

-- --
1,586,372

--$

(16,494,386) $ 17,516,903

37

See accompanying notes to financial statements.

38

FINANCIAL SECTION
DEFINED BENEFIT PLANS COMBINING STATEMENT OF CHANGES IN NET ASSETS

DERAMFPTL1O1Y/2E7/E20S0'7RE1:T39IRPMEMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)

DEFINED BENEFIT PLANS - COMBINING STATEMEENMT POLFOCYHEAENSG' RESETINIRNEEMTEANSTSESTYSSTEM OF GEORGIA

Year ended June 30, 2007

(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia)

(In thousands)

(A Component Unit of the State of Georgia)

Defined Benefit Plans

Net assets held in trust for pension benefits beginning of year
Additions: Contributions: Employer Member Participant fees Insurance premiums Administrative expense allotment
Investment income: Net increase (decrease) in fair value of investments Interest and dividends Other Less investment expenses Allocation of investment earnings
Net investment income
Total additions
Deductions: Benefit payments Refunds of member contributions and interest Death benefits Administrative expenses
Total deductions
Transfers to systems from pooled investment fund
Transfers to (from) other pension plans
Net increase (decrease) in net assets
Net assets held in trust for pension benefits end of year

Employees' Retirement
System

Public School Employees Retirement System

Legislative Retirement
System

Georgia Judicial Retirement System

State Employees' Assurance Department

State Employees' Assurance Department
Active

State Employees' Assurance Department
OPEB

Georgia Military Pension
Fund

Superior Court Judges
Retirement Fund

District Attorneys Retirement
Fund

Defined Benefit Plans Total

$

13,033,861 $

743,689 $

28,288 $

269,207 $

933,945 $

--$

--$

3,053 $

1,300 $

-- $ 15,013,343

270,141 49,250 -- -- --

6,490

62

1,778

--

--

--

1,005

1,938

89

281,503

1,420

320

4,040

--

--

--

--

7

--

55,037

--

--

--

--

--

--

--

--

--

--

--

--

--

9,107

--

--

--

--

--

9,107

588

110

175

--

--

--

--

30

--

903

-- 283 -- (1,963) 1,870,793
1,869,113
2,188,504

928,654
6,696 --
14,901 950,251

-- 90,333
1,328,586

$

14,362,447 $

-- -- -- -- 106,833 106,833 115,331
46,464
319 -- 588 47,371
-- -- 67,960
811,649 $

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

--

4,072

39,324

136,112

--

--

4,072

39,324

136,112

--

--

4,564

45,317

145,219

--

--

1,588

9,299

--

--

--

33

76

--

--

--

--

--

25,223

--

--

110

175

225

--

--

1,731

9,550

25,448

--

--

-- --
2,833

-- --
35,767

-- (1,053,716)
(933,945)

-- 185,335
185,335

-- 778,048
778,048

31,121 $

304,974 $

--$

185,335 $

778,048 $

-- -- -- -- 503 503 1,508
225
-- -- -- 225
-- -- 1,283
4,336 $

-- -- -- -- 186 186 2,161
1,939
-- -- 30 1,969
-- -- 192
1,492 $

--

--

--

283

--

--

--

(1,963)

--

2,157,823

--

2,156,143

89

2,502,693

87

988,256

--

7,124

--

25,223

--

16,029

87

1,036,632

--

--

--

--

2

1,466,061

2 $ 16,479,404

See accompanying notes to financial statements.

2007 - Employees' Retirement System of Georgia

14

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

June 30, 2007

(1) General
The accompanying basic financial statements of the Employees' Retirement System of Georgia, including all plans and funds administered by the Employees' Retirement System of Georgia (collectively, the System), is comprised of the Employees' Retirement System of Georgia (ERS), Public School Employees Retirement System (PSERS), Legislative Retirement System (LRS), Georgia Judicial Retirement System (GJRS), Georgia Military Pension Fund (GMPF), State Employees' Assurance Department (SEAD), Superior Court Judges Retirement Fund (SCJRF), District Attorneys Retirement Fund (DARF), Georgia Defined Contribution Plan (GDCP), 401(k) Deferred Compensation Plan (401(k) Plan), 457 Deferred Compensation Plan (457 Plan), and 403(b) Deferred Compensation Plan (403(b) Plan). Effective June 30, 2007, the State Employees' Assurance Department Active Members Trust Fund (SEAD-Active) and the State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB) replaces the State Employees' Assurance Department (SEAD). All significant accounts and transactions among the various systems, departments, 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 No. 14, as amended by GASB Statement No. 39. Based on these criteria, the System has not included any other entities in its reporting entity.
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. The Boards of Trustees, comprised of active and retired members and ex-officio state employees, are ultimately responsible for the administration of the System.
(2) Authorizing Legislation and Plan Descriptions
Each plan and fund, including benefit and contribution provisions, was established and can be amended by state law. The following summarizes authorizing legislation and the plan description of each retirement fund:
(a) ERS is a cost-sharing multiple employer 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, 2007, participation in ERS is as follows:

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



Total

Employers

33,871 66,964 72,961
173,796
583

2007 - Employees' Retirement System of Georgia

(continued)
39

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Benefits
The benefit structure of ERS 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 of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, 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 and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. 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. The state contributions are not at any time refundable to the member or his/her beneficiary.

Employer contributions required for fiscal year 2007 were based on the June 30, 2004 actuarial valuation as follows:

Old plan

New plan

Employer: Normal Employer paid for member Accrued liability

4.33% 4.75 1.33

9.08% --
1.33

Total

10.41%

10.41%

Members become vested after ten years of membership 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.
The employer contributions are projected to liquidate the unfunded actuarial accrued liability within 10 years, based upon the actuarial valuation at June 30, 2006, on the assumption that the total payroll of active members will increase by 3.75% each year.

On November 20, 1997, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan of ERS (SRBP). SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC 415) as a portion of ERS. The purpose of the SRBP is to provide
retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.

(continued)

40

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in this plan whenever their benefits under ERS exceed the limitation on benefits imposed by IRC 415.
There were 83 members eligible to participate in this portion of ERS for the year ended June 30, 2007. Employer contributions of $950,000 and benefit payments of $1,016,821 under the SRBP are included in the combined statements of changes in net assets for the year ended June 30, 2007. Cash of $37,422 under the SRBP is included in the combined statements of net assets as of June 30, 2007.

(b) PSERS is a cost-sharing multiple employer 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. The ERS Board of Trustees, plus two additional trustees, administers PSERS.
Membership
As of June 30, 2007, 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



Total

Employers

13,189 64.248 39,449
116,886
185

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 ten years of service.
Upon retirement, the member will receive a monthly benefit of $14.00, multiplied by the number of years of creditable service. Death and disability 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 each fiscal year. 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 PSERS Board of Trustees.
Employer contributions required for the year ended June 30, 2007 were $101.12 per active member and were based on the June 30, 2004 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. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits.
The employer contributions are projected to liquidate the actuarial accrued funding excess within 20 years, based upon the actuarial valuation at June 30, 2006.

2007 - Employees' Retirement System of Georgia

(continued)
41

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

(c) LRS is a cost-sharing multiple employer 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, 2007, participation in LRS is as follows:

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



Total

Employers

220 138
232
590
1

Benefits
A member's normal retirement is after eight years of creditable service and attainment of age 65, or eight years of membership service (four legislative terms) and attainment of age 62. A member may retire early and elect to receive a monthly retirement benefit after completion of eight 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 $36, multiplied by the number of years of creditable service, reduced by age reduction factors, if applicable. Death 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 of 4.75% of annual compensation. Employer contributions are actuarially determined and approved and certified by the ERS Board of Trustees.
There were no employer contributions required for the year ended June 30, 2007 based on the June 30, 2004 actuarial valuation.
Members become vested after eight 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.
(d) The GJRS is a system created to serve the members and beneficiaries of the Trial Judges and Solicitors Retirement Fund, the Superior Court Judges Retirement System, and the District Attorneys Retirement System (collectively, the Predecessor Retirement Systems). As of June 30, 1998, any person who was an active, inactive, or retired member or beneficiary of the Predecessor Retirement Systems was transferred to GJRS in the same status effective July 1, 1998. All assets of the Predecessor Retirement Systems were transferred to GJRS as of July 1, 1998. The ERS Board of Trustees and three additional trustees administer GJRS.
GJRS is a cost sharing multiple employer defined benefit pension plan established by the Georgia General Assembly for the purpose of providing retirement allowances for trial judges and solicitors of certain courts in Georgia, and their survivors and other beneficiaries, superior court judges of the state of Georgia, and district attorneys of the state of Georgia.

(continued)

42

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Membership As of June 30, 2007, participation in GJRS is as follows:

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



Total

Employers

170 64
485
719
93

Benefits
The normal retirement for GJRS 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.
Annual retirement benefits paid to members are computed as 66-2/3% of state paid salary at retirement for district attorneys and superior court judges and 66-2/3% of the average over 24 consecutive months for trial judges and solicitors, plus 1% for each year of credited service over 16 years, not to exceed 24 years. Early retirement benefits paid to members are computed as the pro rata portion of the normal retirement benefit, based on service not to exceed 16 years. Death, disability, and spousal benefits are also available.

Contributions and Vesting
Members are required to contribute 7.5% of their annual salary plus an additional 2.5% of their annual salary if spousal benefit is elected. Employer contributions are actuarially determined and approved and certified by the GJRS Board of Trustees.
DRAFT 11/13/20E0m7ploy2e:r2c9onPtrMibutions required for fiscal year 2007 were based on the June 30, 2004 actuarial valuation as
follows:

Employer: Normal Accrued liability
Total

19.25% (15.40)
3.85%

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 his/her member contributions, the member forfeits all rights to retirement benefits.
The employer contributions are projected to liquidate the actuarial accrued funding excess within 18 years, based upon the actuarial valuation at June 30, 2006, assuming that the amount of accrued liability payment increases 3.75% each year.
(e) The GMPF is a single employer defined benefit pension plan established on July 1, 2002 by the Georgia General Assembly for the purpose of providing retirement allowances and other benefits for members of the Georgia National Guard (National Guard). The ERS Board of Trustees administers the GMPF.

2007 - Employees' Retirement System of Georgia

(continued)
43

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Membership
As of June 30, 2007, GMPF had 236 retirees and beneficiaries currently receiving benefits. Active and inactive plan member information is maintained by one employer, the Georgia Department of Defense.
Benefits
A member becomes eligible for benefits upon attainment of age 60, with 20 or more years of creditable service (including at least 15 years of service as a member of the National Guard), having served at least 10 consecutive years as a member of the National Guard immediately prior to discharge, and having received an honorable discharge from the National Guard.
The retirement allowance is payable for life in the amount of $50 per month, plus $5 per month for each year of creditable service in excess of 20 years. The maximum benefit is $100 per month.
Contributions and Vesting
Employer contributions are actuarially determined and approved and certified by the ERS Board of Trustees. There are no member contributions required.
Employer contributions required for the year ended June 30, 2007 were $117.24 per active member and were based on the June 30, 2004 actuarial valuation.
A member becomes vested after 20 years of creditable service (including at least 15 years of service as a member of the National Guard), having served at least 10 consecutive years as a member of the National Guard immediately prior to discharge, and having received an honorable discharge from the National Guard.
The employer contributions are projected to liquidate the unfunded actuarial accrued liability within 30 years, based upon the actuarial valuation at June 30, 2006.
(f) SEAD was created in 1953 by the Georgia General Assembly to furnish survivors' benefits for eligible members of ERS. SEAD contracts with ERS, LRS, GJRS, and SCJRF to provide group term life insurance coverage for their participants. Death benefit payments are payable to the beneficiary or estate of the insured individual. Effective June 30, 2007, the SEAD fund was split into two separate trusts referred to as SEADActive and SEAD-OPEB. Additionally, the Survivors Benefit Fund was maintained for the purpose of accumulating contributions and is combined with ERS. At June 30, 2007, no amounts had been transferred and are reflected in other receivables.
(g) SEAD-Active was created in 2007 by the Georgia General Assembly to amend Title 47 of the Official Code of Georgia Annotated, relating to retirement, so as to establish a fund for the provision of term life insurance to active members of ERS, JRS, and SCJRF. The SEAD-Active trust fund shall accumulate in the fund the premiums received from the aforementioned retirement systems, including interest earned on deposits and investments of such payments from active members.
(h) SEAD-OPEB was created in 2007 by the Georgia General Assembly to amend Title 47 of the Official Code of Georgia Annotated, relating to retirement, so as to establish a fund for the provision of term life insurance to retired and vested inactive members of ERS, JRS, and SCJRF. The SEAD-OPEB trust fund shall accumulate in the fund the premiums received from the aforementioned retirement systems, including interest earned on deposits and investments of such payments from retired and vested inactive members.
(i) SCJRF is a single employer 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.

(continued)

44

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Membership
As of June 30, 2007, SCJRF had 28 retirees and beneficiaries currently receiving benefits and no active members.
Benefits The normal 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, with a minimum of 10 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.

(j) 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. 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, 2007, DARF had 7 retirees and beneficiaries currently receiving benefits and no active members.
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 annual 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. Employer contributions are not actuarially determined, but are provided on an as needed basis to fund current benefits.

(k) GDCP is a defined contribution plan established by the Georgia General Assembly in July 1992 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, 2007, participation in GDCP is as follows:

Terminated employees entitled to benefits but not yet receiving benefits 91,672

Active plan members

19,689

Total

111,361

Employers

315

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 ERS Board of Trustees. If a mem-

ber has less than $50,000 credited to his/her account, the ERS Board of Trustees 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 his/her account will be paid to the member's designated beneficiary.

(continued)

2007 - Employees' Retirement System of Georgia

45

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Contributions
Members are required to contribute 7.5% of their annual salary. There are no employer contributions. Earnings will be credited to each member's account as adopted by the ERS Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.

(l) The 401(k) Plan was established by the State of Georgia Employee Benefit Plan Council (the "Council") in accordance with Georgia Law 1985, page 441, as amended, Official Code of Georgia, Sections 45-18-50 through 45-18-58, and Section 401(k) of the Internal Revenue Code ("IRC"). On October 1, 1994, activity commenced when the 401(k) Plan became available to employees of the State of Georgia Community Service Boards ("CSBs"). On December 1, 1998, the 401(k) Plan became available to employees of the Georgia Lottery Corporation (the "GLC").

Effective July 1, 1998, the State of Georgia Employee's Deferred Compensation Group Trust ("Master Trust") was formed for the State of Georgia Deferred Compensation Program to serve as the funding medium for the 401(k) Plan. At that time, the 401(k) Plan began operating on an employee elective deferral basis for all state employees working at least 1,000 hours in a 12-month period. The Master Trust is also the funding medium for other State sponsored employee benefit plans. All assets of the 401(k) Plan are held in trust for the exclusive benefit of the participants and their beneficiaries. The assets of the 401(k) Plan and the State of Georgia Employees' Deferred Compensation 457 Plan are commingled in the Master Trust with the respective trusts owning units of the Master Trust.

Great-West Life & Annuity Insurance Company ("Great West") was appointed by the council to hold, administer, and invest the assets of the Master Trust. Effective July 1, 2005, ERS became the trustee of the 401(k) Plan. ERS contracted with CitiStreet LLC and State Street Bank and Trust Company, effective December 15, 2006, to hold, administer, and invest the assets of the Master Trust.

Contributions and Vesting

The 401(k) Plan requires participating CSBs and the GLC to annually contribute 7.5% of all eligible employees' base salary (limited to a maximum of $170,000 base salary for 2006). Through December 31, 2001, the 401(k) Plan allowed individual participants to defer up to the lesser of 15% of eligible gross compensation earned (increased to 100% of eligible compensation as of January 1, 2002) or up to limits prescribed by the IRC. A maximum 50% matching contribution of participant deferrals may be made by the employer, subject to appropriation by the State Legislature. No appropriations by the State Legislature were made during 2007. The aggregate of employer contributions, employee contributions, and any matching contributions cannot exceed the lesser of 25% of eligible gross compensation earned or up to limits prescribed by the IRC.

Employer contributions vest according to the following schedule:

Less than 2 years 2 3 4 5 6 or more

0% 20% 40% 60% 80% 100%

For participants whose services terminated prior to January 1, 2002, the following schedule applies:

Less than 3 years 3 4 5 6 7 or more

0% 20% 40% 60% 80% 100%

(continued)

46

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Employee contributions and earnings thereon are 100% vested at all times. The 401(k) Plan also allows participants to roll over amounts from other qualified plans to their respective account in the 401(k) Plan on approval by the 401(k) Plan administrator. Such rollovers are 100% vested at the time of transfer.
Distributions The participant may receive the value of their vested accounts upon attaining age 59 , qualifying financial hardship, or retirement or other termination of service. Upon death of a participant, his or her beneficiary shall be entitled to the full value of his or her accounts. Distributions are made in installments or in a lump sum.
(m) The 457 Plan was established by the State Personnel Board in accordance with Georgia laws 1974, page 198 as amended, Official Code of Georgia, Sections 45-18-30 through 45-18-36, and Section 457 of the Internal Revenue Code ("IRC"). The 457 Plan is available to employees of the State of Georgia and county health departments and permits such employees to defer a portion of their annual salary until future years. Employee contributions and earnings thereon are 100% vested at all times.
Effective July 1, 1998, the State of Georgia Employee's Deferred Compensation Group Trust ("Master Trust") was formed for the State of Georgia Deferred Compensation Program to serve as the funding medium for the 457 Plan. The Master Trust is also the funding medium for other State sponsored employee benefit plans. All assets of the 457 Plan are held in trust for the exclusive benefit of the participants and their beneficiaries. The assets of the 457 Plan and the State of Georgia Employees' Deferred Compensation 401(k) Plan are commingled in the Master Trust with the respective trusts owning units of the Master Trust.
Great-West Life & Annuity Insurance Company ("Great West") was appointed by the council to hold, administer, and invest the assets of the Master Trust. Effective July 1, 2005, ERS became the trustee of the 457 Plan. ERS contracted with CitiStreet LLC and State Street Bank and Trust Company, effective December 15, 2006, to hold, administer, and invest the assets of the Master Trust.
Distributions
The balance in the employee's account in the 457 Plan is not available to the employee until termination, retirement, death, or unforeseeable emergency as defined in the 457 Plan.
(n) The 403(b) Plan was established by the State of Georgia Employee Benefit Plan Council (the "Council") in accordance with Georgia Laws 1985, page 441, as amended, Official Code of Georgia, Sections 45-18-50 through 45-18-58, and Section 403(b) of the Internal Revenue Code ("IRC"). On May 22, 2002, the 403(b) Plan was adopted by the Council and became operational on July 1, 2004 for employees of the Fayette County Board of Education.
Effective July 1, 1998, the State of Georgia Employees' Deferred Compensation Group Trust ("Master Trust") was formed for the State of Georgia Deferred Compensation Program to serve as the funding medium for the state-sponsored 457 and 401(k) Plans. The Trust was amended on July 1, 2003 to also include the 403(b) Plan. All assets of the 403(b) Plan are held in trust for the exclusive benefit of the participants and their beneficiaries. The assets of the 403(b) Plan and the State of Georgia Deferred Compensation 457 and 401(k) Plans are commingled in the Master Trust with the respective trusts owning units of the Master Trust.
Great-West Life & Annuity Insurance Company ("Great-West") has been appointed to hold, administer and invest the assets of the Master Trust. The 403(b) Plan was dissolved and distributed to participants during fiscal year 2007.
Distributions
In accordance with the 403(b) Plan, a participant may receive the value of their account upon attaining age 59, qualifying financial hardship, retirement or other termination of state service, or via an IRC 90-24 Transfer to another 403(b) Plan. Upon death of a participant, his or her beneficiary shall be entitled to the full value of the account. Distributions are made in installments or in a lump sum.

2007 - Employees' Retirement System of Georgia

(continued)
47

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

(3) Significant Accounting Policies and System Asset Matters
(a) Basis of Accounting
The System's basic financial statements are prepared on the accrual basis of accounting. Contributions from the employers and 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.
During fiscal year 2007, the System adopted the provisions of GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The objective of this Statement is to establish uniform standards of financial reporting by state and local governmental entities for other postemployment benefit plans (OPEB plans). This statement provides standards for measurement, recognition and display of the assets, liabilities, and, where applicable, net assets and changes in net assets of such funds and for related disclosures. Effective June 30, 2007, the SEAD fund was split into two separate trusts referred to as SEADActive and SEAD-OPEB in response to GASB 43. The balances and related activity for SEAD-Active and SEAD-OPEB are reflected in the accompanying Defined Benefit Plan-Combining Statement of Net Assets and Defined Benefit Plan-Combining Statement of Changes in Net Assets as of and for the year ended June 30, 2007.
(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. Investment income is recognized as earned by the System. No investment in any one organization except the U.S. Government or its agencies 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) Capital Assets
Capital assets, including software development costs, are stated at cost less accumulated depreciation. The capitalization thresholds are $100,000 for buildings and building improvements and $5,000 for equipment and vehicles. Depreciation on capital assets is computed using the straight line method over estimated useful lives of three to forty years. Depreciation expense is included in administrative expenses. Maintenance and repairs are charged to administrative expenses when incurred. When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the statements of changes in plan net assets in the period of disposal.
During the fiscal year ended June 30, 2005, the System contracted with a consulting firm for the development of a new pension administration system. The new pension administration system was fully operational during the fiscal year ended June 30, 2007 at which time depreciation on the capitalized costs has begun.
(d) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets and changes therein. Actual results could differ from those estimates. The System utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. (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 the Board of Trustees. All investments are held by agent custodial banks in the name of the System.

(continued)

48

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

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.
Investments
State statutes authorize the System 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. The System held repurchase agreements of $699,613,000 at June 30, 2007.

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-l 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-l and/or A-l by national credit rating agencies.
Investments in commercial paper or master notes are limited to no more than $100 million in any one name.

(b) Long -Term
Fixed income investments are authorized in the following instruments: U.S. and foreign government obligations with terms up to 30 years. The System held U.S. Treasuries of
$3,122,490,460 at June 30, 2007.
Obligations unconditionally guaranteed by agencies of the U.S. Government with terms up to 30 years. The System held agency bonds of $1,663,750,550 at June 30, 2007.
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 any one name. Maturities of these securities vary up to a period of 40 years. The System held corporate bonds of $588,076,130 at June 30, 2007.
Private placements are authorized under the same general restrictions applicable to corporate bonds.
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 any one 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 60% of the total invested assets on a historical cost basis may be placed in equities and no more than 5% in any one corporation. Equity holdings in any one corporation may not exceed 5% of the outstanding equity of the issuing corporation. The equity portfolio is managed by the Division of Investment Services (the 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

2007 - Employees' Retirement System of Georgia

(continued)
49

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

stocks eligible for investment are approved by the Investment Committee of the Board of Trustees before being placed on an approved list. The System held common stocks totaling $10,306,659,000 at June 30, 2007.

The State of Georgia Employee's Deferred Compensation Group Trust ("Master Trust") invests in various mutual and common collective trust funds as selected by participants. Each participant is allowed to select and invest contributions into 8 mutual funds and 5 common collective trust funds as authorized by the Board of Trustees. Mutual and common collective trust funds are reported at the fair value of participant balances.

Substantially all of the investments of ERS, PSERS, LRS, SCJRF, GJRS, GMPF, and SEAD, and certain investments of GDCP are pooled into one common investment fund. Investments of approximately $26,481,000 at June 30, 2007 held by GDCP, are not included in the common investment fund. Units in the pooled common investment fund are allocated to the respective plans, based upon the cost of assets contributed, and additional units are allocated to the participating plans, based on the market value of the pooled common investment fund at the date of contribution. Net income of the pooled common investment fund is allocated monthly to the participating plans, based upon the number of units outstanding during the month.

The units and fair value of each plan's equity in the pooled common investment fund at June 30, 2007 were as follows (dollars in thousands):

2007

Fair value

Units

Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department Georgia Military Pension Fund Superior Court Judges Retirement Fund Georgia Defined Contribution Plan

$ 14,236,051 811,859 31,073 304,944
1,052,142 4,318 1,446 52,553

5,706,172 325,414 12,455 122,229 421,725 1,731 579 21,065

$ 16,494,386

6,611,370

Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the Employees' Retirement System. State law limits investments to investment grade securities.
It is the System's investment policy to require that the bond portfolio be of high quality and chosen with respect to maturity ranges, coupon levels, refunding characteristics and marketability. The System's policy is to require that new purchases of bonds be restricted to high grade bonds rated no lower than "A" by any nationally recognized statistical rating organization. The System's investment in U.S. Agencies was 31.1% of total fixed income securities and was rated AAA by Standard & Poor's and Aaa by Moody's Investors Service. The System's investment in corporate bonds was 10.9% of total fixed income securities which consisted of 8.7% rated AAA/Aaa and 2.2% rated AA/Aa.
The investment policy requires that repurchase agreements be limited to the purchase of U.S. Treasury or Agency obligations or corporate bonds rated no lower than "A" by any nationally recognized statistical rating organization with a market value in excess of funds advanced. As of June 30, 2007, the System held repurchase agreements of $699,613,000.
Mutual and common collective trust fund investments of the deferred compensation plans are not considered to have credit risk and do not require disclosure of credit risk rating.
Concentration of Credit Risk. Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government's investment in a single issue. State statutes and the System's investment policy limit investments to no more than 5% of total System net assets in any one corporation. On June 30, 2007, the System did not have debt or equity investments in any one organization, other than those issued by the U. S. Government or its agencies, which represented greater than 5% of plan net assets.

(continued)

50

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. This risk is managed within the portfolio using the effective duration method. This method is widely used in the management of fixed income portfolios and quantifies to a much greater degree the sensitivity to interest rate changes when analyzing a bond portfolio with call options, prepayment provisions, and any other cash flows. Effective duration makes assumptions regarding the most likely timing and amounts of variable cash flows and is best utilized to gauge the effect of a change in interest rates on the fair value of a portfolio. It is believed that the reporting of effective duration found in the table below quantifies to the fullest extent possible the interest rate risk of the System's fixed income assets

Effective Duration of Fixed Income Assets and Repurchase Agreements by Security Type

Fixed income and repurchase agreements security type

Market value June 30, 2007

Percent of all fixed income assets and repurchase agreements

Effective duration (years)

U.S. Treasuries

$

3,122,490,460

51.4%

6.3

U.S. Agencies

1,663,750,550

27.4%

4.2

Corporate Bonds

588,076,130

9.7%

6.2

Repurchase Agreements

699,613,000

11.5%

0.0

Total

$

6,073,930,140

100.0%

5.0

Mutual and common collective trust fund investments of the deferred compensation plans are not considered to have interest rate risk and do not require disclosure of interest rate risk.
(5) Investments Lending Program State statutes and Board of Trustees policies permit the System to lend its securities to broker dealers with a simultaneous agreement to return the collateral for the same securities in the future. 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. Government and agency securities, mortgage-backed securities issued by a U.S. Government agency, and 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 $5,354,615,000 at fair value at June 30, 2007. The collateral value was equal to 105.2% of the loaned securities' value at June 30, 2007. The System's lending collateral was held in the System's name by the tri-party custodian.
Loaned securities are included in the accompanying statements of net assets since the System maintains ownership. The related collateral securities are not recorded as assets on the System's statements of net assets, and a corresponding liability is not recorded, since the System is deemed not to have the ability to pledge or trade the collateral securities. The System is deemed not to have the ability to pledge or sell the collateral securities, since the System's lending contracts do not address whether the lender can pledge or sell the collateral securities without a borrower default, the System has not previously demonstrated that ability, and there are no indications of the System's ability to pledge or sell the collateral securities.
(6) Capital Assets
The following is a summary of capital assets and depreciation information as of June 30, 2007 and for the year then ended:

2007 - Employees' Retirement System of Georgia

(continued)
51

FINANCIAL SECTION
NOTES TO FINANCIAL STATEMENTS

Capital assets: Land Building Equipment Vehicles Computer Software

Balance at June 30, 2006

$

944,225 $

2,800,000

773,886

20,551

7,188,181

Accumulated depreciation for: Building Equipment Vehicles Computer Software

11,726,843
(140,000) (255,223)
(20,549) --

Capital assets, net $

(415,772) 11,311,071 $

Additions
-- $ -- 15,907 13,381 7,079,292 7,108,580
(70,000) (155,621)
(812) (2,853,495) (3,079,928) 4,028,652 $

Disposals

Balance at June 30, 2007

-- $ --
(20,551) --
(20,551)

944,225 2,800,000
789,793 13,381
14,267,473
18,814,872

-- -- 20,551 --
20,551
-- $

(210,000) (410,844)
(810) (2,853,495)
(3,475,149)
15,339,723

During fiscal year 2007, the System did not experience any capital asset impairment loss with respect to the provisions of GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries.

(7) 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, 2006. The valuation indicated that the employee contribution rates of 0.50% and 0.25% of members' salaries for old plan members and new plan members, respectively, were appropriate as of June 30, 2006. There were no employer contributions required for the year ended June 30, 2006 and 2007. Old plan members were hired prior to July 1, 1982, and new plan members were hired on or after July 1, 1982.
(8) Commitments and Contingencies
In January 2007, multiple retirees filed a civil action in Fulton County Superior Court seeking additional benefits retroactive to the time of their retirement dates for a class of those retirees who elected survivorship options and who retired during the preceding twenty year period. Plaintiffs alleged that the System did not use updated mortality tables in the calculation of their benefits. Because these claims are identical to those brought against the Teachers Retirement System of Georgia (TRS), by the same attorneys, in which the Court ruled that TRS had breached its contract with the TRS class, ERS must concede liability on the breach of contract claim. The case has been transferred to the Fulton County Superior Court's Business Case Division (the Court) for resolution.

The ultimate liability to the System is impacted by certain variables that are uncertain until the final decision by the Court, most notably the applicable statute of limitations and any applicable interest rates on such liability. The System anticipates a decision from the Court within the calendar year. Due to the uncertainty surrounding the variables that will be used to calculate the ultimate liability, management cannot reasonably estimate the potential possible outcomes and therefore has not recorded a potential liability in the accompanying statement of plan net assets as of June 30, 2007. Although the ultimate liability cannot be estimated at this time, management believes that it will not have a material adverse impact on the financial statements of the System.

The System is subject to legal actions in the ordinary course of its business. In the opinion of management, the System has adequate legal defenses and insurance coverage with respect to such actions and their final outcome will not have a material adverse effect upon the financial status of the System.

52

2007 - Employees' Retirement System of Georgia

53

2007 - Employees' Retirement System of Georgia

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) D(ARCAoFmTpon1e/n3t/U20ni0t8of t2he:2S8taPteMof Georgia)
REQUIRED SUPPLEMENTARY SCHEDULES (Unaudited) SCHEDULES OF FUNDING PROGRESS (In thousands)

Employees' Retirement System Public School Employees Retirement System 1

Actuarial valuation
date
6/30/2001 6/30/2002 6/30/2003 6/30/2004 6/30/2005 6/30/2006
6/30/2001 6/30/2002 6/30/2003 6/30/2004 6/30/2005 6/30/2006

Actuarial value of plan
assets (a)

Actuarial accrued liability (AAL) entry age
(b)

Unfunded AAL/(funding
excess) (b-a)

$

11,750,624 $

11,557,255 $

12,124,414

11,994,850

12,428,736

12,370,563

12,797,389

13,106,648

13,134,472

13,512,773

13,461,132

14,242,845

(193,369) (129,564)
(58,173) 309,259 378,301 781,713

708,391 727,529 734,879 743,815 753,767 766,277

613,347 630,295 664,207 666,883 671,040 691,651

(95,044) (97,234) (70,672) (76,932) (82,727) (74,626)

Funding ratio (a/b)
101.7% $ 101.1% 100.5%
97.6% 97.2% 94.5%
115.5% 115.4% 110.6% 111.5% 112.3% 110.8%

Legislative Retirement System

6/30/2001 6/30/2002 6/30/2003 6/30/2004 6/30/2005 6/30/2006

26,034 26,637 27,157 27,892 28,462 29,172

21,610 21,779 21,898 22,023 23,531 23,407

(4,424) (4,858) (5,259) (5,869) (4,931) (5,765)

120.5% 122.3% 124.0% 126.6% 121.0% 124.6%

Georgia Judicial Retirement System

6/30/2001 6/30/2002 6/30/2003 6/30/2004 6/30/2005 6/30/2006

219,288 228,417 237,683 250,313 264,924 279,564

156,083 175,154 185,825 196,502 213,060 229,837

(63,205) (53,263) (51,858) (53,811) (51,864) (49,727)

Georgia Military Pension Fund 2

6/30/2002 6/30/2003 6/30/2004 6/30/2005 6/30/2006

-- 609 1,250 2,176 3,100

8,322 11,098 12,343 14,454 17,625

8,322 10,489 11,093 12,278 14,525

This data, except for annual covered payroll, was provided by the System's actuary. Information is shown only for the years available in accordance with the parameters of GASB Statement No. 25. Additional years will be added as data become available.
1 No 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 each fiscal year. 2 No statistics regarding covered payroll are available. Active and inactive plan member information is maintained by the Georgia Department of Defense.

See accompanying notes to required supplementary schedules.

140.5% 130.4% 127.9% 127.4% 124.3% 121.6%
-- 5.5% 10.1% 15.1% 17.6%

Annual covered payroll
(c)
2,397,169 2,408,306 2,489,490 2,445,619 2,514,430 2,630,167

Unfunded AAL/(funding excess) as
percentage of covered payroll [(b-a)/c]
(8.1)% (5.4)% (2.3)% 12.6% 15.0% 29.7%

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

3,567 3,413 3,434 3,402 3,586 3,602

(124.0)% (142.3)% (153.1)% (172.5)% (137.5)% (160.0)%

37,688 38,630 38,867 40,908 42,916 45,308

(167.7)% (137.9)% (133.4)% (131.5)% (120.9)% (109.8)%

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

FINANCIAL SECTION
REQUIRED SUPPLEMENTARY SCHEDULES (UNAUDITED)

FINANCIAL SECTION
REQUIRED SUPPLEMENTARY SCHEDULES (UNAUDITED)

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
REQUIRED SUPPLEMENTARY SCHEDULES (Unaudited)
DSCRHAEFDUTLES11O/F2E6M/2P0LO0Y7ER1C0O:N3T7RIABMUTIONS
(In thousands)

Employees' Retirement System

Year ended June 30
2001 2002 2003 2004 2005 2006

State annual required
contribution

$

315,505

233,229

246,172

245,388

243,074

258,482

Percentage contributed
100% 100% 100% 100% 100% 100%

Public School Employees Retirement System Legislative Retirement System

2001 2002 2003 2004 2005 2006
2001 2002 2003 2004 2005 2006

12,874 11,623
4,121 833 833
3,634
-- -- -- -- -- --

132% 100%
86% 100% 100% 100%
N/A N/A N/A N/A N/A N/A

Georgia Judicial Retirement System

2001 2002 2003 2004 2005 2006

1,741 -- --
1,558 1,594 1,683

11% N/A N/A 100% 100% 100%

Georgia Military Pension Fund

2003 2004 2005 2006

591

100%

617

100%

891

100%

891

100%

This data was provided by the System's actuary.

Information is shown only for the years available in accordance with the parameters of GASB Statement No. 25. Additional years will be added as data become available.

See accompanying notes to required supplementary schedules.

54

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES (UNAUDITED)

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES (Unaudited) June 30, 2007

(1) Schedule of Funding Progress The actuarial value of assets recognizes a portion of the difference between the fair value of assets and the expected actuarial value of assets, based on the assumed valuation rate of return. The amount recognized each year is 1/7th of the difference between fair value and expected actuarial value.

(2) Schedule of Employer 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 from the actuarial valuations for the most recent two year period is as follows:

Employees' Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return1
Projected salary increases1 Postretirement cost-of-living
adjustment

June 30, 2006 Entry age Level percent of pay, open
10 years 7-year smoothed market
7.50% 5.45-9.25%
None

June 30, 2005 Entry age Level percent of pay, open
6 years 5-year smoothed market
7.50% 5.45-9.25%
None

Public School Employees Retirement System:
Valuation date Actuarial cost method Amortization method Remaining amortization period of the
Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return1 Projected salary increases Postretirement cost-of-living adjustment

June 30, 2006 Entry age Level dollar, open
20 years 7-year smoothed market
7.50% N/A
3% annually

June 30, 2005 Entry age Level dollar, open
30 years 5-year smoothed market
7.50% N/A
3% annually

2007 - Employees' Retirement System of Georgia

(continued)
55

FINANCIAL SECTION
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES (UNAUDITED)

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
NOTES TO REQUIRED SUPPLEMENTARY SCHEDULES (Unaudited) June 30, 2007

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 return1 Projected salary increases Postretirement cost-of-living adjustment

June 30, 2006 Entry Age Level dollar, open
N/A 7-year smoothed market
7.50% N/A
3% annually

Georgia Judicial Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the Funding Excess Asset valuation method Actuarial assumptions:
Investment rate of return1
Projected salary increases1 Postretirement cost-of-living
adjustment

June 30, 2006 Entry age Level percent of pay, open
18 years 7-year smoothed market
7.50% 6.00%
None

Georgia Military Pension Fund: Valuation date Actuarial cost method Amortization method Remaining amortization period of the unfunded actuarial accrued liability Asset valuation method Actuarial assumptions: Investment rate of return1

June 30, 2006 Entry age Level dollar, open
30 years 7-year smoothed market
7.50%

Projected salary increases Postretirement cost-of-living
adjustment

N/A None

1Incl1uIdnecsliunfdlaetsioinnrfaltaetoiof n3.7r5a%teionf2030.755an%d 3in/752%00in52a0n06d 3.75% in 2006.

June 30, 2005 Entry Age Level dollar, open
N/A 5-year smoothed market
7.50% N/A
3% annually
June 30, 2005 Entry age Level percent of pay, open
20 years 5-year smoothed market
7.50% 6.00%
None
June 30, 2005 Entry age Level dollar, open
30 years 5-year smoothed market
7.50% N/A None

56

2007 - Employees' Retirement System of Georgia

FINANCIAL SECTION

ADDITIONAL INFORMATION

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
ADMINISTRATIVE EXPENSES SCHEDULE CONTRIBUTIONS AND EXPENSES Year Ended June 30, 2007
D(WRiAth FCoTmpa1ra1ti/v2e6To/2ta0ls0fo7r the1Y1e:a0r E0ndAedMJune 30, 2006)
(In thousands)

Contributions: Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department Georgia Defined Contribution Plan 401(k) Plan 403(b) Plan 457 Plan Superior Court Judges Retirement Fund
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 Contracts Actuarial services Medical services Professional fees Legal services

2007

$

14,901 $

588

110

175

225

310

1,050

1

921

30

18,311

4,218 438 303 707 25
5,691
235 99 77 32
443
4,020 1,042 1,576
523 180 152
51
7,544

2006
10,596 588 110 175 225 310
1,305 --
1,222 30
14,561
4,235 441 304 607 23
5,610
221 92 76 24
413
3,697 1,387 1,294
420 193 186
37
7,214

2007 - Employees' Retirement System of Georgia

(Continued)
(continued) 57

FINANCIAL SECTION

ADDITIONAL INFORMATION

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
(Including All Plans and Funds Administered by the Employees' Retirement System of Georgia) (A Component Unit of the State of Georgia)
ADMINISTRATIVE EXPENSES SCHEDULE CONTRIBUTIONS AND EXPENSES Year Ended June 30, 2007
D(WRitAh CFoTmpa1ra1tiv/2e 6To/t2al0s 0fo7r the1Y2ea:r0E7ndPedMJune 30, 2006)
(In thousands)

Expenses, Continued: Management fees: Building maintenance
Other services and charges: Temporary services Supplies and materials Repairs and maintenance Courier services Depreciation Miscellaneous Office equipment
Total expenses
Net income
Balance: Beginning of year
End of year

2007

$

636 $

683 106
60 15 3,080 47
6
3,997
18,311
--

--

$

--$

See accompanying independent auditors' report.

2006
568
283 121
61 13 228 50 -- 756 14,561 --
-- --

58

2007 - Employees' Retirement System of Georgia

NOTES

2007 - Employees' Retirement System of Georgia

59