Employees' Retirement System of Georgia Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2012 E RSGA Serving those who serve Georgia Employees' Retirement System of Georgia A component unit of the State of Georgia Our Mission Our mission is to be guardian of the retirement plans on behalf of the State of Georgia for the ultimate benefit of the members, retirees and beneficiaries. Our vision is to use our passion for excellence to become the "Best Managed" retirement system in the country, utilizing state-of-the-art technology, and knowledgeable, customer-focused staff to best serve customers and to protect the retirement system for all of our current and future members. Our Values Our Core Values are: Quality execution Accurate results Continuous improvement Knowledgeable and customer focused staff Sound and secure investment of funds E RSGA Serving those who serve Georgia Employees' Retirement System of Georgia Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2012 E RSGA Serving those who serve Georgia Employees' Retirement System of Georgia James A. Potvin Executive Director A component unit of the State of Georgia Table of Contents Introductory Section Boards of Trustees 4 Letter of Transmittal 5 Certificate of Achievement in Financial Reporting 8 PPPC Recognition Award 9 Administrative Staff and Organization 10 Organizational Chart 11 Financial Section Independent Auditors' Report 13 Management's Discussion and Analysis (Unaudited) 15 Basic Financial Statements: Combined Statement of Net Assets as of June 30, 2012 21 (With Comparative Totals as of June 30, 2011) Combined Statement of Changes in Net Assets for the Year Ended June 30, 2012 22 (With Comparative Totals for the Year Ended June 30, 2011) Combining Statement of Net Assets as of June 30, 2012 23 Defined Benefit Plans 24 Combining Statement of Net Assets as of June 30, 2012 Combining Statement of Changes in Net Assets for the Year Ended June 30, 2012 25 Defined Benefit Plans 26 Combining Statement of Changes in Net Assets for the Year Ended June 30, 2012 Notes to Financial Statements 27 Required Supplementary Schedules (Unaudited) Schedules of Funding Progress 43 Schedules of Employer Contributions 45 Notes to Required Supplementary Schedules 46 Additional Information Administrative Expenses Schedule 48 Contributions and Expenses for the Year Ended June 30, 2012 (With Comparative Amounts for the Year Ended June 30, 2011) Schedule of Investment Expenses 49 For the Year Ended June 30, 2012 (With Comparative Amounts for the Year Ended June 30, 2011) Investment Section Investment Overview 51 Pooled Investment Fund/Rates of Return 52 Asset Allocation/Investment Summary 53 Schedule of Fees and Commissions/Equity Holdings 54 Fixed Income Holdings 55 Actuarial Section Actuary's Certification Letters 57 Summary of Actuarial Assumptions 64 Active Members 75 Member and Employer Contribution Rates 77 Schedule of Retirees Added to and Removed from Rolls 79 Analysis of Change in Unfunded Accrued Liability 81 Solvency Test Results 83 Statistical Section Introduction 86 Additions by Source - Contribution/Investment Income 87 Deductions by Type 89 Changes in Net Assets 92 Number of Retirees 93 Average Monthly Payments to Retirees 94 Annual Benefit 95 Withdrawal Statistics 96 Average Monthly Benefit Payment for New Retirees 97 Retired Members by Retirement Type 102 Retired Members by Optional Form of Benefit 104 Top Participatory Employers 107 Statistical Data at June 30, 2012 109 Introductory Section Introductory Section Boards of Trustees Employees' Retirement System, Legislative Retirement System, Georgia Defined Contribution Plan, and Georgia Military Pension Fund Harold Reheis Chair Frank F. Thach Jr. Vice-Chair Michael D. Kennedy Steven N. McCoy Lonice Barrett Sid Johnson Public School Employees Retirement System* Greg S. Griffin State Employees' Assurance Department** Samuel B. Kellett J. Sammons Pearson Georgia Judicial Retirement System* Mark Butler H. Phillip Bell Daniel J. Craig Dennis Sanders Open Position *The PSERS and GJRS boards are comprised of the members of the ERS board and additional members shown under each plan. **SEAD -- ERS Board Members Greg S. Griffin, Harold Reheis, Steven N. McCoy, and Sid Johnson serve in addition to the two members shown above. 4 Introductory Section E RSGA Serving those who serve Georgia Employees' Retirement System of Georgia Two Northside 75 Atlanta, GA 30318 Letter of Transmittal December 21, 2012 I am pleased to present the Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012 of the retirement systems and programs administered by the Employees' Retirement System of Georgia (the System). The management for the System is responsible for the accuracy, completeness and fairness of the presentation including all disclosures. It is to the best of our knowledge and belief that the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the System. Profile of the System The Employees' Retirement System was established to provide benefits for all State employees in 1949. Plans administered by the System include the Employees' Retirement System (ERS), the Legislative Retirement System (LRS) established in 1979, the Public School Employees Retirement System (PSERS) established in 1969, the Georgia Defined Contribution Plan (GDCP) established in 1992, the Georgia Judicial Retirement System (GJRS) established in 1998, and the Georgia Military Pension Fund (GMPF) established in 2002. In addition, the Board of Trustees is responsible for a Group Term Life Insurance Plan (SEAD), the 457 Plan established in 1974 and the 401(k) Plan which began in 1994. A summary of each plan can be found on pages 27 through 35 of this report. The investments of all plans are pooled together into one fund except for the three defined contribution plans, which are maintained individually. The ERS, LRS, GDCP, GMPF, 401(k) and 457 plans are administered by a 7-member Board made up of 3 ex-officio members, 1 governor-appointed member, and 3 Boardappointed members. PSERS has the same Board as ERS with 2 additional governor-appointed members. GJRS has the same Board as ERS with 3 additional governor-appointed members. As of June 30, 2012, the System's defined benefit plans served a total of 132,300 active members and 58,330 retirees/ beneficiaries from 921 employers around the state. There were 37,397 participants in the 401(k) plan with a total account balance of $445 million. The 457 plan had 13,889 participants with a balance of $534 million. There are 582 participating employers from around the state in the 457 and 401(k) plans. Legislation In the 2012 Session, ERS sponsored legislation to assist us in maintaining the security and soundness of all of the plans we administer, while striving to protect the members, retirees, and beneficiaries in these plans. A total of eight Acts impacting ERS and its Systems were passed by the General Assembly and signed by the Governor: Acts 603, 629, 646, 649, 650, 685, 728, and 763. Act 603 amended provisions relating to the Public Retirement Systems Investment Authority Law by defining the term "alternative investments" and allowing eligible large retirement systems (other than the Teachers Retirement System of Georgia) to make certain alternative investments. Investment of up to 1% of the fund per year may be made in alternative investments, up to a total of no more than 5% of the fund at any time, and subject to certain conditions and protections for the fund. Act 646 allowed members of the General Assembly who had not already elected to become members of the Legislative Retirement System (LRS) the opportunity to make such an election at the beginning of each legislative term. It also allowed a one-time election for those who may have previously opted out of LRS to opt in and purchase prior service credit. The Judicial Retirement System (JRS) was amended by Act 649, which allowed new JRS members after July 1, 2012 to elect spousal coverage at the time of retirement, rather than at the beginning of their employment. Those who were members of JRS prior to July 1, 2012 who had previously declined spousal coverage were also given the opportunity to retroactively elect spousal coverage, provided they pay the full actuarial cost of the coverage. Act 650 prevented any public retirement system from having an insurable interest in its active or retired members unless all benefits are paid to the beneficiary(ies) or to the member's estate. Under the terms of Act 728, new county tax commissioners and their staffs may elect to become members of ERS provided they are not members of a local retirement plan and the county pays any associated required employer contributions. In addition, Act 728 regulated the transfer of service between the Teachers Retirement System of Georgia and the GSEPS members within ERS. The Public School Employees Retirement Systems (PSERS) was amended by Act 763 to require new members after July 1, 2012 to pay an employee contribution of $10 per month; in addition, the maximum retirement benefit was increased 5 Introductory Section from $15 per month per year of service to $16.50 (subject to funding by the General Assembly). Act 629 removes references to the State Personnel Administration throughout O.C.G.A. Title 47 and provides for the transfer of certain functions to the Department of Administrative Services. Finally, Act 685 made certain corrections to keep our plans in compliance and correct typos, stylistic, and other errors and omissions. It is anticipated that similar legislation will be presented each year to maintain our federal compliance. Summary of Financial Information The Management of the System is charged with the responsibility of maintaining a sound system of internal accounting controls. The objectives of such a system are to provide management with reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations, and that they are recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The concept of reasonable assurance recognizes that first, the cost of a control should not exceed the benefits likely to be derived, and second, the valuation of the cost and benefits requires estimates and judgments by management. Even though there are inherent limitations in any system of internal control, the management of the System makes every effort to ensure that through systematic reporting and internal reviews, errors or fraud would be quickly detected and corrected. Please refer to the Management's Discussion and Analysis starting on page 15 of this report for an overview of the financial status of the System, including a summary of the System Net Assets, Changes in Net Assets, and Asset Allocations. In FY2012, the pooled fund generated a return of 2.19%. The fund continues to invest in a mix of high quality bonds and stocks which allows the System to participate in rising markets while controlling the downside risks. This has proven to be a successful strategy for other markets and for our System. For further information on investments of the pooled fund, please refer to pages 51 through 55 of this report. The objective of ERS pension trust funds is to meet longterm benefit promises through contributions that remain approximately level as a percent of member payroll over time while maintaining an actuarially sound system. Historical information relating to the progress in meeting this objective is presented on pages 43-44. The latest actuarial valuations conducted as of June 30, 2011 show the funded ratio of most systems decreasing except for the smaller fund, GMPF. The decrease is primarily due to unfavorable investment experience. The following table shows the change in funding percentage for each of the pension systems: FY2010 FY2011 ERS 80.1% 76.0% PSERS 84.2% 81.2% LRS 118.3% 116.0% GJRS 113.7% 112.7% GMPF 31.8% 32.5% Further information regarding the funding condition of the pension plans can be found in the Actuarial Section of this report. Excellence in Financial Reporting For the second consecutive year, the Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Employees' Retirement System of Georgia for its comprehensive annual financial report for the fiscal year ended June 30, 2011. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Initiatives Our focus in FY2012 was on the following key areas: Enhanced Member and Employer Experience andTechnology Enhancements. Member and Employer Experience ERS continues to make use of new tools and technology to provide updated, easy-to-use resources for our members. Our website continues to be updated with new information and materials, including new plan handbooks for the ERS and PSERS plans, updated forms, and enhanced self-service functionality. We also produced and distributed personalized Benefit Statements to all active members of two of our smaller systems (LRS and JRS), and hope to do the same for our active PSERS members in FY2013. ERS has long held a seminar at our offices for our members who are planning to retire, known as the Workshop for Retirement Application Processing (WRAP). In FY2012, we expanded our reach throughout the state by offering similar information via online webinars for ERS and PSERS members. These webinars have proven to be very popular 6 Introductory Section and will be continued throughout FY2013. Also in FY2013, we will begin again to send out employee and retiree newsletters to help our membership stay up-to-date with the latest news from ERS. For our employers, we rolled out a new web-based module to allow them to see where we are missing key data elements (in particular, member date of termination) for certain members and provide us updates in real time, rather than once per month. This can allow for faster processing of benefit applications. We are also creating an online employer manual which they will be able to use as a resource for all processes where ERS relies on employer support and information. In keeping with our other communication enhancements, we will send employer newsletters out periodically throughout the year. Technology Enhancements In addition to their support of many of the business processes and projects noted above, the Information Technology division completed a number of significant upgrades in FY2012. We underwent a significant infrastructure modernization effort, wherein we upgraded our internet connection, replaced internal networking components, installed a number of new servers, and greatly expanded the level of virtualization we utilize. We also enhanced our disaster recovery data transfer to enable 15-minute backups of critical business data. Finally, we completed our upgrade to our new document management and retrieval system, which included the migration of more than five million documents from one version to the other. Acknowledgements This report reflects the combined effort of our staff under the Board's leadership. Copies of this report, along with other valuable plan information, can be downloaded from the System's website. I would like to express my sincere thanks to the Boards of Trustees for their leadership and support. Many thanks are also extended to the offices of the Governor, Lieutenant Governor, members of the House and Senate Retirement Committees and their staff, members of the House and Senate, and the department officials whose support and assistance have helped ERS accomplish its mission over the years. Respectfully submitted, James A. Potvin, Executive Director Employees' Retirement System of Georgia 7 Introductory Section 8 Introductory Section P P CC Public Pension Coordinating Council Recognition Award for Funding 2012 Presented to Employees' Retirement System of Georgia In recognition of meeting professional standards for plan funding as set forth in the Public Pension Standards. Presented by the Public Pension Coordinating Council, a confederation of National Association of State Retirement Administrators (NASRA) National Conference on Public Employee Retirement Systems (NCPERS) National Council on Teacher Retirement (NCTR) Alan H. Winkle Program Administrator 9 Introductory Section Administrative Staff and Organization James A. Potvin Executive Director Charles W. Cary, Jr. CIO - Investment Services Gregory J. Rooks Controller Chris Hackett Director Information Technology Nicole Paisant Director Human Resources Susan Anderson Chief Operating Officer Carlton Lenoir Chief Financial Officer Angie Surface Director Peach State Reserves Quality Assurance Consulting Services Cavanaugh Macdonald Consulting, LLC - Actuary KPMG LLP - Auditor JPMorgan Chase Bank, N. A. - Defined Contribution Custodian Aon Hewitt - Defined Contribution Consultant Investment Advisors* Albritton Capital Management Mondrian Investment Partners Limited Munder Capital Management Barrow, Hanley, Mewhinney & Strauss Cooke & Bieler Denver Investment Advisors Medical Advisors Harold E. Sours, M.D., Atlanta, GA Benjamin B. Okel, M.D., Decatur, GA G. Lee Cross, M.D., Atlanta, GA Douglas Smith, M.D., Smyrna, GA Richard Tyler, M.D., Atlanta, GA William H. Biggers, M.D., Atlanta, GA Jeffrey T. Nugent, M.D., Atlanta, GA Pedro F. Garcia, M.D., Atlanta, GA Keith A. Caruso, M.D., Brentwood, TN PENN Capital Management Ridgeworth Capital Management Sands Capital Management Fisher Investments Mesirow Financial Investment Management *See page 54 in the Investment Section for a summary of fees paid to Investment Advisors. 10 Introductory Section Organizational Chart Board of Trustees Executive Director Chief Operating Officer Executive Support Chief Financial Officer Investment Services Division Member Services Division Office Administration Financial Management Group Accounting Division Information Technology Division Peach State Reserves 11 Financial Section Financial Section Independent Auditors' Report KPMG LLP Suite 2000 303 Peachtree Street, NE Atlanta, GA 30308-3210 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, 2012 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, 2011 financial statements and, in our report dated September 29, 2011, we expressed an unqualified 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 financial position as of June 30, 2012, and the changes in financial position 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 28, 2012 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. U.S. generally accepted accounting principles require that the management's discussion and analysis, schedules of funding progress and schedules of employer contributions on pages 1520 and 43-45 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 13 Financial Section Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the System's basic financial statements. The schedules of administrative expenses and investment expenses are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of managment and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The schedules of administrative expenses and investment expenses have been subjected to the auditing procedures applied in the audit of the basic financial statments and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules of administrative expenses and investment expenses are fairly stated in all material respects in relation to the baisc financial statments taken as a whole. The introductory, investment, actuarial, and statistical sections are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. December 21, 2012 14 Financial Section Management's Discussion and Analysis (Unaudited) June 30, 2012 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, 2012.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 six other defined benefit pension plans, two defined other postemployment benefit plans, and three 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) Superior Court Judges Retirement Fund (SCJRF) District Attorneys Retirement Fund (DARF) The defined other post-employment benefit plans include: State Employees' Assurance Department Active Members Trust Fund (SEAD-Active) State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB) The defined contribution retirement plans include: Georgia Defined Contribution Plan (GDCP) 401(k) Deferred Compensation Plan (401(k)) 457 Deferred Compensation Plan (457) Financial Highlights The following highlights are discussed in more detail later in this analysis: The net assets of the System decreased by $727 million, or 4.7%, from $15.5 billion at June 30, 2011 to $14.8 billion at June 30, 2012. The decrease in net assets from 2011 to 2012 was primarily due to benefit payments exceeding investment income, coupled with flat returns in the equities market in 2012. For the year ended June 30, 2012, the total additions to net assets were an increase of $712 million compared to an increase of $3.2 billion for the year ended June 30, 2011. For the year ended June 30, 2012, the additions consisted of employer and member contributions totaling $420 million, insurance premiums of $6.3 million, net investment income of $285 million, and participant fees of $0.8 million. For the year ended June 30, 2011, the total additions to net assets were an increase of $3.2 billion compared to an increase of $1.8 billion for the year ended June 30, 2010. For the year ended June 30, 2011, the additions consisted of employer and member contributions totaling $420 million, insurance premiums of $7.3 million, net investment income of $2.8 billion, and participant fees of $0.8 million. Net investment income of $285 million in 2012 (comprised of interest and dividend income, the change in fair value of investments, and other, reduced by investment expenses) represents a $2.5 billion decrease, compared to the net investment income of $2.8 billion for the year ended June 30, 2011. The decrease in net investment income from 2011 to 2012 is due primarily to flat returns in the equities market in 2012, contrasting robust equity returns in 2011. The total deductions were $1.44 billion and $1.40 billion for the years ended June 30, 2012 and 2011, respectively. For the year ended June 30, 2012, the deductions consisted of benefit payments of $1.4 billion, refunds of $21 million, death benefits of $31 million, and administrative expenses of $19 million. For the year ended June 30, 2011, the deductions consisted of 15 Financial Section Management's Discussion and Analysis (Unaudited) benefit payments of $1.3 billion, refunds of $19 million, death benefits of $28 million, and administrative expenses of $21 million. Benefit payments paid to retirees and beneficiaries increased by $41 million, or 3.1%, from $1.32 billion in 2011 to $1.37 billion in 2012.This increase was the result of increases in the number of retirees and beneficiaries receiving benefits across all plans. Overview of the Financial Statements The basic financial statements include (1) the combined statement 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 Benefits. The investments of the System in this statement are presented at fair value. This statement is presented on page 21. 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 net 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 22. The Combining Statement of Net Assets and the 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 23. 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 27. There are two Required Supplementary Schedules included in this report. These required schedules are applicable to five of the defined benefit pension plans and the two other postemployment benefit plans: ERS, PSERS, LRS, GJRS, GMPF, SEAD-Active, and SEAD-OPEB. 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 43. 16 Financial Section Management's Discussion and Analysis (Unaudited) 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 46. Additional information is presented, beginning on page 48. 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. The Schedule of Investment Expenses presents more detailed information on investment expense. Financial Analysis of the System A summary of the System's net assets at June 30, 2012 and 2011 is as follows: Assets: Cash, cash equivalents, and receivables Investments Capital assets, net Total assets Liabilities: Due to brokers and accounts payable Net assets Net Assets (in thousands) 2012 2011 Amount Change Percentage Change $ 226,207 14,567,075 3,954 14,797,236 562,755 14,953,673 4,185 15,520,613 (336,548) (386,598) (231) (723,377) (59.8) % (2.6) (5.5) (4.7) 44,535 $ 14,752,701 40,899 15,479,714 3,636 (727,013) 8.9 (4.7) % 17 Financial Section Management's Discussion and Analysis (Unaudited) The following table presents the investment allocation at June 30, 2012 and 2011: Asset allocation at June 30 (in percentages): Equities: Domestic International Domestic obligations: U.S. Treasuries U.S. Agencies Corporate and other bonds International obligations: Governments Corporates Mutual and common collective trust funds and separate accounts Asset allocation at June 30 (in thousands): Equities: Domestic International Domestic obligations: U.S. Treasuries U.S. Agencies Corporate and other bonds International obligations: Governments Corporates Mutual and common collective trust funds and separate accounts 2012 2011 50.3 % 15.6 15.7 0.1 9.9 1.0 0.6 6.8 50.5 % 16.7 15.8 0.2 8.1 1.5 0.6 6.6 $ 7,320,797 2,279,125 2,286,690 13,182 1,439,459 151,527 81,180 995,115 $ 14,567,075 7,556,866 2,503,496 2,361,012 22,272 1,212,752 218,352 87,213 991,710 14,953,673 The total investment portfolio decreased by $387 million from 2011, which is primarily due to flat returns in the equities market in 2012. The investment rate of return in fiscal year ended June 30, 2012 was 2.2% with a (0.2)% return on equities and a 7.9% return on fixed income investments. The five-year annualized rate of return on investments at June 30, 2012 was 2.9%, with a (0.5)% return on equities and a 7.4% return on fixed income investments. 18 Financial Section Management's Discussion and Analysis (Unaudited) A summary of the changes in the System's net assets for the year ended June 30, 2012 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 (decrease) in net assets Changes in Net Assets (in thousands) 2012 2011 Amount Change Percentage Change $ 299,719 120,267 800 6,303 285,296 7 712,392 297,763 121,742 785 7,284 2,770,095 7 3,197,676 1,956 (1,475) 15 (981) (2,484,799) -- (2,485,284) 0.7 % (1.2) 1.9 (13.5) (89.7) -- (77.7) 1,368,511 21,085 30,873 18,936 1,439,405 $ (727,013) 1,327,325 19,492 28,257 21,465 1,396,539 1,801,137 41,186 1,593 2,616 (2,529) 42,866 (2,528,150) 3.1 8.2 9.3 (11.8) 3.1 (140.4) % Additions The System accumulates resources needed to fund benefit payments through contributions and returns on invested funds. In fiscal year 2012, total contributions increased 0.11%, primarily because of an increase in employer contribution rates offset by a prior year appropriation of state funds from the Department of Revenue that was statutorily required to cover employer contributions for a group of local tax commissioners, along with a decrease in active contributing members. Net investment income decreased by $2.5 billion, due to flat returns in the equities market in 2012, in sharp contrast to the robust returns in the equities market in 2011. Deductions For fiscal year 2012, total deductions increased 3.1%, primarily because of a 3.1% increase in benefit payments. This was due to an increase of approximately 4.3% in the number of retirees receiving benefit payments across all defined benefit pension plans. Refunds increased by 8.2%, which was primarily due to an increase in the number of refunds processed during 2012. Death benefits increased by 9.3%, which was primarily due to a increase in the number of death claims processed during 2012. Administrative expenses decreased by 11.8% over the prior year, primarily due to a decrease in depreciation expense related to computer software that had fully depreciated in the prior year. 19 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, 2011 and 2010 actuarial valuations, the latest valuations available, indicate the actuarial value of assets and funding ratios for the five applicable defined benefit pension plans and two defined other post employment benefit plans were as follows: ERS PSERS LRS GJRS GMPF SEAD - Active SEAD - OPEB Actuarial value of plan assets (in thousands) Funding ratio June 30, 2011 $ 12,667,557 719,601 29,278 327,483 8,702 184,783 807,893 June 30, 2010 $ 13,046,193 737,406 29,581 320,050 7,558 156,132 680,449 June 30, 2011 76.0 % 81.2 116.0 112.7 32.5 460.3 119.1 June 30, 2010 80.1 % 84.2 118.3 113.7 31.8 385.3 98.5 In management's opinion, the System continues to operate on an actuarially sound basis, 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. GMPF is a relatively new plan that was established in 2002 and is being increasingly funded over time in accordance with contribution amounts recommended by the actuary. 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. 20 Financial Section Combined Statement of Net Assets June 30, 2012 (with comparative totals as of June 30, 2011) (In thousands) ASSETS CASH AND CASH EQUIVALENTS RECEIVABLES: Employer and member contributions Interest and dividends Due from brokers for securities sold Other Total receivables INVESTMENTS - AT FAIR VALUE: Domestic obligations: U.S. Treasuries U.S. Agencies Corporate and other bonds International obligations: Governments Corporates Equities: Domestic International Mutual funds, common collective trust funds, and separate accounts Total investments CAPITAL ASSETS, NET Total assets LIABILITIES Accounts payable and other Due to brokers for securities purchased Total liabilities NET ASSETS HELD IN TRUST FOR BENEFITS See accompanying notes to financial statements. 2012 2011 $ 148,250 $ 489,758 20,978 47,373 7,870 1,736 77,957 19,469 45,676 6,460 1,392 72,997 2,286,690 13,182 1,439,459 151,527 81,180 7,320,797 2,279,125 995,115 14,567,075 3,954 14,797,236 2,361,012 22,272 1,212,752 218,352 87,213 7,556,866 2,503,496 991,710 14,953,673 4,185 15,520,613 34,546 9,989 44,535 25,309 15,590 40,899 $ 14,752,701 $ 15,479,714 21 Financial Section Combined Statement of Changes in Net Assets Year ended June 30, 2012 (with comparative totals for the year ended June 30, 2011) (In thousands) NET ASSETS HELD IN TRUST FOR 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 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 (decrease) in net assets NET ASSETS HELD IN TRUST FOR BENEFITS END OF YEAR 2012 2011 $ 15,479,714 $ 13,678,577 299,719 120,267 800 6,303 7 297,763 121,742 785 7,284 7 (37,779) 330,769 1,496 294,486 (9,190) 285,296 712,392 2,437,741 340,400 1,797 2,779,938 (9,843) 2,770,095 3,197,676 1,368,511 21,085 30,873 18,936 1,439,405 (727,013) 1,327,325 19,492 28,257 21,465 1,396,539 1,801,137 $ 14,752,701 $ 15,479,714 See accompanying notes to financial statements. 22 Combining Statement of Net Assets June 30, 2012 (In thousands) 23 Assets Cash and cash equivalents Receivables: Employer and member contributions Interest and dividends Due from brokers for securities sold Other Unremitted insurance premiums Total receivables Investments - at fair value: Domestic obligations: U.S. Treasuries U.S. Agencies Corporate and other bonds International obligations: Governments Corporates Equities: Domestic International Mutual funds, common collective trust funds, and separate accounts Equity in pooled investment fund Total investments Capital assets, net Total assets Liabilities Accounts payable and other Due to brokers for securities purchased Insurance premiums payable Due to participating systems Total liabilities Net assets held in trust for benefits Defined Benefit Plans $ 9,302 17,955 1,244 2,953 22,152 Pooled Investment Fund 70,807 Defined Contribition Plans Georgia Defined Contribution Plan 68,095 401(k) Plan 23 457 Plan 23 1,137 1,430 456 47,219 154 7,870 327 165 55,089 1,291 1,757 621 Eliminations (2,953) (2,953) 13,646,824 13,646,824 3,954 13,682,232 21,644 2,953 24,597 $ 13,657,635 2,279,618 1,425,269 146,458 81,180 7,320,797 2,279,125 13,532,447 13,658,343 1,530 9,989 13,646,824 13,658,343 7,072 13,182 14,190 5,069 39,513 108,899 457,289 457,289 459,069 537,826 537,826 538,470 565 565 108,334 10,064 10,064 449,005 743 743 537,727 (13,646,824) (13,646,824) (13,649,777) (2,953) (13,646,824) (13,649,777) See accompanying notes to financial statements. Total 148,250 20,978 47,373 7,870 1,736 77,957 2,286,690 13,182 1,439,459 151,527 81,180 7,320,797 2,279,125 995,115 14,567,075 3,954 14,797,236 34,546 9,989 44,535 14,752,701 Financial Section Defined Benefit Plans - Combining Statement of Net Assets June 30, 2012 (In thousands) 24 Assets Cash and cash equivalents Receivables: Employer and member contributions Interest and dividends Due from brokers for securities sold Other Unremitted insurance premiums Total receivables Investments - at fair value: Domestic obligations: U.S. Treasuries U.S. Agencies Corporate and other bonds International obligations: Governments Corporates Equities: Domestic International Mutual funds, common collective trust funds, and separate accounts Equity in pooled investment fund Total investments Capital assets, net Total assets Liabilities Accounts payable and other Due to brokers for securities purchased Insurance premiums payable Due to participating systems Total liabilities Net assets held in trust for benefits Employees' Retirement System $ 8,559 Public School Employees Retirement System 58 Defined Benefit Pension Plans Legislative Retirement System 101 Georgia Judicial Retirement System 407 Georgia Military Pension Fund 47 Superior Court Judges Retirement Fund 30 District Attorneys Retirement Fund 2 Defined Benefit OPEB Plans State Employees' Assurance Department Active 76 State Employees' Assurance Department OPEB 22 17,250 2 34 669 1,244 103 2,850 18,494 2 34 669 103 2,850 11,620,599 671,369 27,355 319,058 9,820 183,211 815,412 11,620,599 671,369 27,355 319,058 9,820 183,211 815,412 3,954 11,651,606 671,429 27,490 320,134 9,867 30 2 183,390 818,284 20,165 1,041 50 351 10 27 2,934 2 17 23,099 1,041 52 368 10 27 $ 11,628,507 670,388 27,438 319,766 9,857 3 2 183,390 818,284 Defined Benefit Plans Total 9,302 17,955 1,244 2,953 22,152 13,646,824 13,646,824 3,954 13,682,232 21,644 2,953 24,597 13,657,635 See accompanying notes to financial statements. Financial Section Combining Statement of Changes in Net Assets Year ended June 30, 2012 (In thousands) 25 Net assets held in trust for benefits - beginning of year Additions: Contributions: Employer Member Participant fees Insurance premiums Administrative expense allotment Investments income: Net increase (decrease) in fair value of investments Interest and dividends Other Less investment expenses Allocation of investment income Net investment income Total additions Deductions: Benefit payment Refunds of member contributions and interest Death benefits Administrative expenses Total deductions Transfers to (from) other plans Net increase (decrease) in net assets Net assets held in trust for benefits - end of year See accompanying notes to financial statements. Defined Benefit Plans $ 14,382,665 Defined Contribution Plans Pooled Investment Fund Georgia Defined Contribution Plan 104,409 401(k) Plan 439,504 457 Plan 553,136 Total 15,479,714 295,364 43,214 6,303 7 (1,526) 275,273 273,747 618,635 1,289,679 8,336 30,873 14,777 1,343,665 (725,030) $ 13,657,635 (48,907) 329,800 (5,620) (275,273) 17,171 (242) 950 (56) 652 17,823 4,355 40,331 800 3,804 14 589 (1,295) 3,112 48,598 19,551 7,566 5 907 (693) 7,785 27,336 299,719 120,267 800 6,303 7 (37,779) 330,769 1,496 (9,190) 285,296 712,392 11 12,749 1,138 13,898 3,925 108,334 36,986 2,111 39,097 9,501 449,005 41,835 910 42,745 (15,409) 537,727 1,368,511 21,085 30,873 18,936 1,439,405 (727,013) 14,752,701 Financial Section Defined Benefit Plans - Combining Statement of Changes in Net Assets Year ended June 30, 2012 (In thousands) 26 Net assets held in trust for 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 income Net investment income Total additions Employees' Retirement System Defined Benefit Plans 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 Benefit OPEB Plans State Employees' Assurance Department Active State Employees' Assurance Department OPEB $ 12,335,410 696,096 28,483 321,080 8,827 91 2 184,783 807,893 274,034 15,884 76 2,083 1,521 1,686 80 36,561 1,426 323 4,904 771 5,532 6 1 (1,526) 233,308 231,782 542,377 13,554 13,554 30,864 550 6,571 550 6,571 949 13,558 221 221 1,742 1,692 3,876 17,193 3,876 17,193 81 4,647 22,725 Deductions: Benefit payments Refunds of member contributions and interest Death benefits Administrative expenses Total deductions Transfers to (from) other plans Net increase (decrease) in net assets 1,216,738 7,767 12,051 1,236,556 (12,724) (706,903) 54,183 349 2,040 56,572 (25,708) 1,810 74 110 1,994 (1,045) 14,416 146 310 14,872 (1,314) 678 34 712 1,030 1,774 6 1,780 (88) 80 6,018 24,855 1 22 203 81 6,040 25,058 12,724 (1,393) 10,391 Net assets held in trust for benefits - end of year $ 11,628,507 670,388 27,438 319,766 9,857 3 2 183,390 818,284 See accompanying notes to financial statements. Financial Section Defined Benefit Plans Total 14,382,665 295,364 43,214 6,303 7 (1,526) 275,273 273,747 618,635 1,289,679 8,336 30,873 14,777 1,343,665 (725,030) 13,657,635 Financial Section Notes to Financial Statements June 30, 2012 (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 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), Georgia Defined Contribution Plan (GDCP), 401(k) Deferred Compensation Plan (401(k) Plan), and the 457 Deferred Compensation Plan (457 Plan). 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, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units. 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 Board of Trustees, comprised of active and retired members, ex-officio state employees, and appointees by the Governor, 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, 2012, 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 42,053 76,736 63,963 182,752 723 Benefits 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. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members, subject to the modified plan provisions. Effective January 1, 2009, newly hired state employees, as well as rehired state employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to the GSEPS plan. 27 Financial Section Notes to Financial Statements Under the old plan, the new plan, and GSEPS, 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 may also be made to members' benefits, provided the members were hired prior to July 1, 2009. 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 and GSEPS are 1.25% of annual compensation. The state is required to contribute at a specified percentage of active member payrolls, 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 2012 were based on the June 30, 2009 actuarial valuation for the old plan, new plan, and GSEPS as follows: Employer: Normal Employer paid for member Accrued liability Total Old plan 2.21 % 4.75 4.67 11.63 % New plan 6.96 % 4.67 11.63 % GSEPS 2.75 % -- 4.67 7.42 % 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 30 years, based upon the actuarial valuation at June 30, 2011, on the assumption that the total payroll of active members will increase by 1.00% 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. 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 129 members eligible to participate in this portion of ERS for the year ended June 30, 2012. Employer contributions of $1,880,000 and benefit payments of $1,827,120 under the SRBP are included in the combined statements of changes in net assets for the year ended June 30, 2012. Cash of $53,388 under the SRBP is included in the combined statements of net assets as of June 30, 2012. 28 Financial Section Notes to Financial Statements (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, 2012, 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 15,106 74,672 38,659 128,437 189 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 $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic costof-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, 2012 were $391.42 per active member and were based on the June 30, 2009 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. (c) LRS is a cost-sharing multiple-employer defined benefit pension 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, 2012, participation in LRS is as follows: Retirees and beneficiaries currently receiving benefits 244 Terminated employees entitled to benefits but not yet receiving benefits 146 Active plan members 220 Total 610 Employers 1 29 Financial Section Notes to Financial Statements 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, 2012 based on the June 30, 2009 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 judges and solicitors generals of the state courts and juvenile court judges in Georgia, and their survivors and other beneficiaries, superior court judges of the state of Georgia, and district attorneys of the state of Georgia. Membership As of June 30, 2012, participation in GJRS is as follows: Retirees and beneficiaries currently receiving benefits 235 Terminated employees entitled to benefits but not yet receiving benefits 64 Active plan members 505 Total 804 Employers 96 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% of state paid salary at retirement for district attorneys and superior court judges and 66% 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. 30 Financial Section Notes to Financial Statements 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. Employer contributions required for fiscal year 2012 were based on the June 30, 2009 actuarial valuation as follows: Employer: Normal Accrued liability Total 12.06 % (8.16) 3.90 % 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 10 years, based upon the actuarial valuation at June 30, 2011, assuming that the total payroll of active members 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. Membership As of June 30, 2012, GMPF had 660 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, 2012 were $126.57 per active member and were based on the June 30, 2009 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 20 years, based upon the actuarial valuation at June 30, 2011. 31 Financial Section Notes to Financial Statements (f) SEAD-Active is a cost-sharing multiple-employer defined other post employment benefit plan 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, LRS, and GJRS. Effective July 1, 2009, no newly hired members of any Georgia public retirement system are eligible for term life insurance under SEAD. The SEAD-Active trust fund accumulates in the fund the premiums received from the aforementioned retirement systems, including interest earned on deposits and investments of such payments from active members. As of June 30, 2012, participation in SEAD-Active is as follows: Retirees and beneficiaries Terminated employees Active plan members Total Employers N/A 1,023 49,212 50,235 815 Employee contribution rates of 0.05% and 0.02% of members' salaries for old plan members and new plan members, respectively, were appropriated for the fiscal year ending June 30, 2012. There were no employer contribution rates required for the fiscal year ended June 30, 2012. Old plan members were hired prior to July 1, 1982, and new plan members were hired on or after July 1, 1982, but prior to January 1, 2009. According to the 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 are held as a reserve for payment of death benefits under existing policies. (g) SEAD-OPEB is a cost-sharing multiple-employer defined other post employment benefit plan 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, LRS, and GJRS. Effective July 1, 2009, no newly hired members of any Georgia public retirement system are eligible for term life insurance under SEAD. The SEAD-OPEB trust fund accumulates 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. As of June 30, 2012, participation in SEAD-OPEB is as follows: Retirees and beneficiaries Terminated employees Active plan members Total Employers 37,243 1,023 49,212 87,478 815 Employee contribution rates of 0.45% and 0.23% of members' salaries for old plan members and new plan members, respectively, were appropriated for the fiscal year ending June 30, 2012. Based on the actuarial valuation as of June 30, 2009, an employer rate of 0.61% of members salaries was required for fiscal year ending June 30 2012. The ERS Board ofTrustees voted and approved that employer contributions would be paid from existing assets of the Survivors Benefit Fund instead of requiring payment by employers. This payment is reflected on the Defined Benefit Plans Combining Statement of Changes in Net Assets as a transfer between plans. Old plan members were hired prior to July 1, 1982, and new plan members were hired on or after July 1, 1982, but prior to January 1, 2009. According to the 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 are held as a reserve for payment of death benefits under existing policies. 32 Financial Section Notes to Financial Statements (h) 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. Membership As of June 30, 2012, SCJRF had 24 retirees and beneficiaries currently receiving benefits and no active members. No new members are allowed into SCJRF. 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 Employer contributions are not actuarially determined, but are provided on an as-needed basis to fund current benefits. (i) DARF is a defined benefit pension plan established by theGeorgiaGeneralAssembly 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, 2012, DARF had 7 retirees and beneficiaries currently receiving benefits and no active members. No new members are allowed into DARF. 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 Employer contributions are not actuarially determined, but are provided on an as-needed basis to fund current benefits. (j) 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 and do not participate in Social Security. GDCP is administered by the ERS Board of Trustees. Membership As of June 30, 2012, participation in GDCP is as follows: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active plan members Total Employers 1 110,456 16,535 126,992 217 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 adopted by the ERS Board of Trustees. If a terminated member has less than $5,000 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. 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. 33 Financial Section Notes to Financial Statements (k) The 401(k) Plan was established by the State of Georgia Employee Benefit Plan Council (the Council) in accordance with Georgia Law 1985, 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 (GLC). On July 1, 2005, the Plan became available to employees of Fayette County Board of Education; on July 1, 2006, the Plan became available to employees of Walton County Board of Education; and on January 1, 2010, the Plan became available to employees of Henry County Board of Education. 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. 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. Participant contributions are invested according to the participant's investment election. If the participant does not make an election, investments are automatically defaulted to a Lifecycle fund based on the participant's date of birth. Effective July 1, 2005 (HB275), ERS became the trustee of the 401(k) Plan. Aon Hewitt and JPMorgan Chase hold, administer, and invest the assets of the Master Trust. Contributions and Vesting Participating CSBs, the GLC and Fayette, Walton and Henry County Boards of Education offer employer contributions to eligible employees of up to 7.5% of base salary (limited to a maximum of $245,000 base salary for 2011 and $250,000 base salary for 2012) as either a contribution matching employee elective contributions or an automatic contribution regardless of employee participation. As of January 1, 2009 individual participants may defer up to 80% of eligible compensation, or up to limits prescribed by the IRC (whichever is less). Effective January 1, 2009, in accordance with O.C.G.A. 47-2-350 through 47-2-360, newly hired state employees, as well as rehired state employees who did not maintain eligibility for the ERS "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). The GSEPS plan includes automatic enrollment in the 401(k) plan at a contribution rate of 1% of salary, along with a matching contribution from the state. The state will match 100% of the employee's initial 1% contribution. Employees can elect to contribute up to an additional 4% and the state will match 50% of the additional 4% of salary. Therefore, the state will match 3% against the employee's 5% total savings. Employee contributions greater than 5% of salary do not receive any matching funds. Employees who are not participants of the GLC, CSB, or GSEPS plans do not receive any employer contributions in their 401(k) plan. All employer contributions are subject to a vesting schedule, which determines eligibility to receive all or a portion of the employer contribution balance at the time of any distribution from the account after separation from all state service. Vesting is determined based on the following schedule: Less than 1 year 1 2 3 4 5 or more years --% 20 40 60 80 100 For CSB/GLC participants whose services terminated prior to January 1, 2012 but after December 31, 2001, the following vesting schedule applies: Less than 2 years 2 3 4 5 6 or more years --% 20 40 60 80 100 34 Financial Section Notes to Financial Statements For CSB/GLC participants whose services terminated prior to January 1, 2002, the following vesting schedule applies: Less than 3 years 3 4 5 6 7 or more years --% 20 40 60 80 100 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 59.5, qualifying financial hardship, or retirement or other termination of service (employer contribution balances are only eligible for distribution upon separation from service). Upon the death of a participant, his or her beneficiary shall be entitled to the vested value of his or her accounts. Distributions are made in installments or in a lump sum. (l) 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. 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. Participant contributions are invested according to the participant's investment election. If the participant does not make an election, investments are automatically defaulted to a Lifecycle fund based on the participant's date of birth. Effective July 1, 2005 (HB275), ERS became the trustee of the 457 Plan. Aon Hewitt and JPMorgan Chase 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. Upon the death of a participant, his or her beneficiary shall be entitled to the vested value of his or her accounts. Distributions are made in installments or in a lump sum. (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 when due, pursuant to formal commitments, as well as statutory or contractual requirements. Retirement benefits and refund payments are recognized as deductions when due and payable. During fiscal year 2012, the System adopted the provisions of GASB Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions--an amendment of GASB Statement No. 53. The objective of this Statement is to clarify whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty's credit support provider and to establish when hedge accounting should continue to be applied. There are no applicable reporting or disclosure requirements for the System in fiscal year 2012. 35 Financial Section Notes to Financial Statements (b) Cash and Cash Equivalents Cash and cash equivalents, reported at cost, include cash on deposit at banks, cash on deposit with the investment custodian earning a credit to offset fees and short-term highly liquid financial securities with original maturities of three months or less from the date of acquisition. (c) Investments Investments are reported at 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. There are no investments in, loans to, or leases with parties related to the System. 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. (d) 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 five 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 combined statements of changes in net assets in the period of disposal. (e) 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. (4) Investment Program The System maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested as directed by the Board of Trustees. All investments are held by agent custodial banks in the name of the System. State statutes and the System's investment policy authorize the System to invest in a variety of short-term and long-term securities as follows: (a) Cash and Cash Equivalents The carrying amount of the System's deposits totaled $133,250,361 at June 30, 2012 with actual bank balances of $141,751,340. The System's bank balances of $140,418,232 are fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. Government. The remaining bank deposits of $1,333,108 are uninsured and uncollateralized. Short-term highly liquid financial securities 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 obligations unconditionally guaranteed by 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 $15,000,000 at June 30, 2012. Other short-term securities authorized, but not currently used, are as follows: U.S. Treasury obligations. 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. 36 Financial Section Notes to Financial Statements 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 $500 million in any one name. (b) Investments Fixed income investments are authorized in the following instruments: U.S. and foreign government obligations. At June 30, 2012, the System held U.S. Treasury bonds of $2,286,690,130 and international government bonds of $151,527,840. Obligations unconditionally guaranteed by agencies of the U.S. Government. At June 30, 2012, the System held agency bonds of $13,181,630. Corporate bonds with at least an "A" rating by a national rating agency. At June 30, 2012, the System held U.S. corporate bonds of $1,439,458,720 and international corporate bonds of $81,180,000. Private placements are authorized under the same general restrictions applicable to corporate bonds. At June 30, 2012, the System did not hold private placements. Mortgage investments are authorized to the extent that they are secured by first mortgages on improved real property located in the state of Georgia. 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 75% of the total invested assets on a historical cost basis may be placed in equities. 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 matters as yield, growth, and sales statistics, and analysis of independent market research. Equity trades are approved and executed by the Division's staff. Common stocks eligible for investment are approved by the Investment Committee of the Board of Trustees before being placed on an approved list. Equity investments are authorized in the following instruments: Domestic equities are those securities considered by The Official Code of Georgia Annotated (O.C.G.A.) to be domiciled in the United States. At June 30, 2012, the System held domestic equities of $7,320,797,337. International equities, including American Depository Receipts (ADR), will be a diversified portfolio including both developed and emerging countries. These securities are not considered by the O.C.G.A to be domiciled in the United States. At June 30, 2012, the System held international equities of $129,116,577 and ADRs of $2,150,008,234. The State of Georgia Employee's Deferred Compensation Group Trust (Master Trust) invests in various mutual funds, common collective trust funds, and separate accounts, as selected by participants. Each participant is allowed to select and invest contributions into investment options that own one or more of 2 mutual funds, 8 common collective trust funds, and 3 separate accounts, as authorized by the Board of Trustees. Mutual funds, common collective trust funds, and separate accounts are reported at the fair value of participant balances. Substantially all of the investments of ERS, PSERS, LRS, GJRS, GMPF, and SEAD are pooled into one 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. . 37 Financial Section Notes to Financial Statements The units and fair value of each plan's equity in the pooled common investment fund at June 30, 2012 were as follows (dollars in thousands): Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department - Active State Employees' Assurance Department - OPEB Georgia Military Pension Fund Fair value $ 11,620,599 671,369 27,355 319,058 183,211 815,412 9,820 $ 13,646,824 Units 4,035,837 233,167 9,500 110,809 63,629 283,193 3,411 4,739,546 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. Obligations of the U.S. Government or obligations explicitly guaranteed by the U.S. Government are not considered to have credit risk and do not require disclosure of credit quality. The notation NR represents those securities that are not rated. The quality ratings of investments in fixed income securities as described by Standard & Poor's and by Moody's Investors Service, which are nationally recognized statistical rating organizations, at June 30, 2012 are shown in the following chart: Quality Ratings of Fixed Income Investments Held at June 30, 2012 Investment Type Domestic obligations: U.S. Treasuries U.S. Agencies Corporates Total Corporates International obligations: Governments Total Governments Corporates Total Fixed Income Investments Standard & Poor's/ Moody's Quality Rating June 30,2012 Fair Value AA/Aaa AAA/Aaa AA/Aa AA/A A/A $ 2,286,690,130 13,181,630 166,974,780 371,295,680 529,317,520 371,870,740 1,439,458,720 AAA/Aaa AAA/NR AA/Aa AA/Aa 64,093,740 5,069,200 82,364,900 151,527,840 81,180,000 $ 3,972,038,320 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, 2012, the System held repurchase agreements included in cash and cash equivalents of $15,000,000. 38 Financial Section Notes to Financial Statements Mutual funds, common collective trust funds, and separate accounts 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. On June 30, 2012, the System did not have debt or equity investments in any one organization, other than those issued or guaranteed by the U. S. Government or its agencies, which represented greater than 5% of plan net assets. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. While the System has no formal interest rate risk policy, active management of the bond portfolio incorporates interest rate risk to generate improved returns. 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 Domestic obligations: U.S. Treasuries U.S. Agencies Corporates International obligations: Governments Corporates Repurchase agreements Total Fair Value June 30, 2012 $ 2,286,690,130 13,181,630 1,439,458,720 151,527,840 81,180,000 15,000,000 $ 3,987,038,320 Percent of All Fixed Income Assets and Repurchase Agreements 57.4 % 0.3 36.1 3.8 2.0 0.4 100.0 % Effective Duration (Years) 5.2 1.2 4.8 3.3 3.0 -- 5.0* *Total Effective Duration (Years) does not include Repurchase Agreements. Mutual funds, common collective trust funds, and separate investments of the deferred compensation plans are not considered to have interest rate risk and do not require disclosure of interest rate risk. (5) Investment 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, corporate bonds, and equities. The collateral value must be equal to at least 102% to 115% of the loaned securities' value, depending on the type of collateral security. Securities loaned totaled $4,054,541,857 at fair value at June 30, 2012. The collateral value was equal to 104.1% of the loaned securities' value at June 30, 2012. The System's lending collateral was held in the System's name by the tri-party custodian. 39 Financial Section Notes to Financial Statements Loaned securities are included in the accompanying combined statement of net assets since the System maintains ownership. The related collateral securities are not recorded as assets on the System's combined statement 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) Operating Leases The System leases copier machines and mailing equipment under long-term, noncancelable operating lease agreements. The leases expire at various dates through 2017 and provide for renewal options ranging from one year to five years. Lease expense totaled $8,642 during 2012. The following is a schedule by years of future minimum rental payments required under operating leases in excess of one year as of June 30, 2012. Fiscal Year ending June 30: 2013 2014 2015 2016 2017 Total minimum payments required $ 3,691 2,424 2,424 2,424 2,323 $ 13,286 (7) Capital Assets The following is a summary of capital assets and depreciation information as of and for the year ended June 30, 2012: Capital assets: Land Building Equipment Vehicles Computer software Balance at June 30, 2011 Balance at Additions Disposals June 30, 2012 $ 944,225 2,800,000 2,020,930 13,381 14,344,610 20,123,146 114,140 114,140 944,225 2,800,000 2,135,070 13,381 14,344,610 20,237,286 Accumulated depreciation for: Building Equipment Vehicles Computer software (490,000) (1,126,100) (8,455) (14,313,795) (15,938,350) (70,000) (257,584) (1,915) (15,429) (344,928) (560,000) (1,383,684) (10,370) (14,329,224) (16,283,278) Capital assets, net $ 4,184,796 (230,788) 3,954,008 During fiscal year 2012, 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. 40 Financial Section Notes to Financial Statements (8) Funded Status and Funding Progress The funded status of each plan as of June 30, 2011, the most recent actuarial valuation date, is as follows (dollar amounts in thousands): ERS PSERS LRS GJRS GMPF Actuarial value of plan assets (a) $ 12,667,557 719,601 29,278 327,483 8,702 Actuarial accrued liability (AAL) entry age (b) 16,656,905 885,927 25,245 290,486 26,767 Unfunded AAL/(funded excess) (b-a) 3,989,348 166,326 (4,033) (36,997) 18,065 Funded ratio (a/b) 76.0 % 81.2 116.0 112.7 32.5 Annual covered payroll (c) $ 2,486,780 N/A 3,780 52,331 N/A Unfunded AAL/ (funded excess) as percentage of covered payroll [(b-a)/c] 160.4 % N/A (106.7) (70.7) N/A Actuarial value of plan assets (a) SEAD - Active $ SEAD - OPEB 184,783 807,893 Actuarial accrued liability (AAL) projected unit credit (b) 40,145 678,421 Unfunded AAL/(funded excess) (b-a) (144,638) (129,472) Funded ratio (a/b) 460.3 % 119.1 Annual covered payroll (c) $ 2,166,982 2,166,982 Unfunded AAL/ (funded excess) as percentage of covered payroll [(b-a)/c] (6.7) % (6.0) 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. The schedules of funding progress, presented as required supplementary information (RSI) following the notes to the financial statements, present multi-year trend information about whether the actuarial values of plans assets are increasing or decreasing over time relative to the AALs for benefits. 41 Financial Section Notes to Financial Statements Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Fiscal Year 2011 Fiscal Years 2012-2013 Fiscal Years 2014+ Postretirement cost-of-living adjustment ERS June 30, 2011 Entry age Level percent of pay, open 30 years 7-year smoothed market PSERS June 30, 2011 Entry age Level dollar, open 30 years 7-year smoothed market LRS June 30, 2011 Entry age Level dollar, open N/A 7-year smoothed market 7.50% 0.00% 2.725-4.625% 5.45-9.25% None 7.50% N/A 7.50% N/A 1.5% semi-annually 3.00% annually Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Fiscal Year 2011 Fiscal Years 2012-2013 Fiscal Years 2014+ Postretirement cost-of-living adjustment GJRS June 30, 2011 Entry age Level percent of pay, open 10 years 7-year smoothed market GMPF June 30, 2011 Entry age Level dollar, open 20 years 7-year smoothed market 7.50% 0.00% 3.00% 6.00% None 7.50% N/A None Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases ERS GJRS LRS Postretirement cost-of-living adjustment SEAD - Active June 30, 2011 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25% 6.00% 0.00% N/A SEAD - OPEB June 30, 2011 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25% 6.00% 0.00% N/A 1 Includes inflation rate of 3.00%. 42 Required Supplementary Schedules (UNAUDITED) Schedules of Funding Progress (In thousands) 43 Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Military Pension Fund Actuarial valuation date 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 Actuarial value of plan assets (a) $ 13,461,132 13,843,689 14,017,346 13,613,606 13,046,193 12,667,557 766,277 785,460 791,855 769,618 737,406 719,601 29,172 30,049 30,706 30,303 29,581 29,278 279,564 297,090 313,315 317,624 320,050 327,483 3,100 4,165 5,269 6,413 7,558 8,702 Actuarial accrued liablility (AAL) entry age (b) 14,242,845 14,885,179 15,680,857 15,878,022 16,295,352 16,656,905 691,651 746,078 770,950 823,232 875,396 885,927 23,407 24,357 24,454 23,523 25,003 25,245 229,837 249,278 268,516 282,474 281,496 290,486 17,625 19,887 19,124 21,021 23,773 26,767 Unfunded AAL/ (funded excess) (b-a) 781,713 1,041,490 1,663,511 2,264,416 3,249,159 3,989,348 (74,626) (39,382) (20,905) 53,614 137,990 166,326 (5,765) (5,692) (6,252) (6,780) (4,578) (4,033) (49,727) (47,812) (44,799) (35,150) (38,554) (36,997) 14,525 15,722 13,855 14,608 16,215 18,065 Funded ratio (a/b) 94.5 % 93.0 89.4 85.7 80.1 76.0 110.8 105.3 102.7 93.5 84.2 81.2 124.6 123.4 125.6 128.8 118.3 116.0 121.6 119.2 116.7 112.4 113.7 112.7 17.6 20.9 27.6 30.5 31.8 32.5 Annual covered payroll (c) $ 2,630,167 2,680,972 2,809,199 2,674,155 2,571,042 2,486,780 N/A N/A N/A N/A N/A N/A 3,602 3,688 3,778 3,780 3,745 3,780 45,308 48,621 51,102 52,083 51,293 52,331 N/A N/A N/A N/A N/A N/A Unfunded AAL/ (funded excess) as percentage of covered payroll [(b-a)/c] 29.7 % 38.8 59.2 84.7 126.4 160.4 N/A N/A N/A N/A N/A N/A (160.0) (154.3) (165.5) (179.4) (122.2) (106.7) (109.8) (98.3) (87.7) (67.5) (75.2) (70.7) N/A N/A N/A N/A N/A N/A (continued) Financial Section Required Supplementary Schedules (UNAUDITED) cont'd Schedules of Funding Progress (In thousands) 44 State Employees' Assurance DepartmentActive State Employees' Assurance DepartmentOPEB Actuarial valuation date 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 Actuarial value of plan assets (a) $ 185,335 172,595 144,161 156,132 184,783 778,048 737,114 628,199 680,449 807,893 Actuarial accrued liability (AAL) projected unit credit (b) 59,509 62,171 61,351 40,523 40,145 642,530 699,884 733,671 691,001 678,421 Unfunded AAL/ (funded excess) (b-a) (125,826) (110,424) (82,810) (115,609) (144,638) (135,518) (37,230) 105,472 10,552 (129,472) Funded ratio (a/b) 311.4 % 277.6 235.0 385.3 460.3 121.1 105.3 85.6 98.5 119.1 Annual covered payroll (c) $ 2,720,772 2,850,850 2,653,527 2,401,974 2,166,982 2,720,772 2,850,850 2,653,527 2,401,974 2,166,982 This data, except for annual covered payroll, was provided by the System's actuary. No statistics regarding covered payroll are available. Contributions are not based on members' salaries, but are simply $4.00 per member for nine months each fiscal year. No statistics regarding covered payroll are available. Active and inactive plan member information is maintained by the Department of Defense. This plan was started in 2007, therefore data for five years is presented. See accompanying notes to required supplementary schedules and accompanying independent auditors' report. Unfunded AAL/ (funded excess) as percentage of covered payroll [(b-a)/c] (4.6) % (3.9) (3.1) (4.8) (6.7) (5.0) (1.3) 4.0 0.4 (6.0) Financial Section Financial Section Required Supplementary Schedules (UNAUDITED) Schedules of Employer Contributions (In thousands) Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System Georgia Military Pension Fund State Employees' Assurance Department-Active State Employees' Assurance Department-OPEB Year ended June 30 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 State annual required contribution $ 258,482 270,141 286,256 282,103 263,064 261,132 3,634 6,484 2,866 5,529 5,529 7,509 1,683 1,778 2,395 1,703 2,600 1,932 891 1,005 1,103 1,323 1,434 1,282 -- -- -- -- -- -- -- -- -- -- Percentage contributed 100.0 % 100.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N/A N/A N/A N/A N/A N/A 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A This data was provided by the System's actuary. During the 2009 valuation it was determined that an employer group within ERS did not contribute the full ARC every year. The amount has been revised to reflect the difference between the ARC and the actual contributions made. This plan was started in 2007, therefore data for five years is presented. See accompanying notes to required supplementary schedules and accompanying independent auditors' report. 45 Financial Section Notes to Required Supplementary Schedules June 30, 2012 (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 unfunded actuarial accrued liability Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Fiscal Year 2011 Fiscal Years 2012-2013 Fiscal Years 2014+ Postretirement cost-of-living adjustment June 30, 2011 Entry age Level percent of pay, open June 30, 2010 Entry age Level percent of pay, open 30 years 7-year smoothed market 30 years 7-year smoothed market 7.50% 7.50% 0.00% 2.725 - 4.625% 5.45 - 9.25% None 0.00% 2.725 - 4.625% 5.45 - 9.25% None Public School Employees Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the unfunded actuarial accrued liability Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Postretirement cost-of-living adjustment Legislative Retirement System: Valuation date Actuarial cost method Amortization method Remaining amortization period of the funding excess Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Postretirement cost-of-living adjustment June 30, 2011 Entry age Level dollar, open 30 years 7-year smoothed market 7.50% N/A 1.50% semi-annually June 30, 2010 Entry age Level dollar, open 30 years 7-year smoothed market 7.50% N/A 3% annually June 30, 2011 Entry age Level dollar, open N/A 7-year smoothed market 7.50% N/A 3% annually June 30, 2010 Entry age Level dollar, open N/A 7-year smoothed market 7.50% N/A 3% annually 46 Financial Section Notes to Required Supplementary Schedules 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 return Projected salary increases Fiscal Year 2011 Fiscal Years 2012-2013 Fiscal Years 2014+ Postretirement cost-of-living adjustment June 30, 2011 Entry age Level percent of pay, open June 30, 2010 Entry age Level percent of pay, open 10 years 7-year smoothed market 16 years 7-year smoothed market 7.50% 7.50% 0.00% 3.00% 6.00% None 0.00% 3.00% 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 return Projected salary increases Postretirement cost-of-living adjustment June 30, 2011 Entry age Level dollar, open 20 years 7-year smoothed market 7.50% N/A None SEAD - Active: Valuation date Actuarial cost method Amortization method Remaining amortization period of the funding excess Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases ERS GJRS LRS June 30, 2011 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25% 6.00% 0.00% SEAD - OPEB: Valuation date Actuarial cost method Amortization method Remaining amortization period of the funding excess Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases ERS GJRS LRS June 30, 2011 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25% 6.00% 0.00% Includes inflation rate of 3.00% in the 2011 valuation and 3.00% in the 2010 valuation. 47 June 30, 2010 Entry age Level dollar, open 20 years 7-year smoothed market 7.50% N/A None June 30, 2010 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25 % 6.00% 0.00% June 30, 2010 Projected unit credit Level dollar, open 30 years Market value of assets 7.50% 5.45-9.25 % 6.00% 0.00% Financial Section Additional Information Administrative Expenses Schedule - Contributions and Expenses Year ended June 30 2012 (with comparative amounts for the year ended June 30, 2011) (In thousands) Contributions: Employees' Retirement System Public School Employees Retirement System Legislative Retirement System Georgia Judicial Retirement System State Employees' Assurance Department - Active State Employees' Assurance Department - OPEB Georgia Defined Contribution Plan 401(k) Plan 457 Plan Georgia Military Pension Fund Superior Court Judges Retirement Fund District Attorneys 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 2012 $ 12,051 2,040 110 310 22 203 1,138 2,111 910 34 6 1 18,936 5,139 560 365 1,549 49 7,662 173 11 80 12 276 5,791 667 2,321 281 167 158 32 9,417 Management fees: Building maintenance 636 Other services and charges: Temporary services Supplies and materials Repairs and maintenance Courier services Depreciation Miscellaneous Office equipment Total expenses Net income 419 103 22 3 345 49 4 945 18,936 $ See accompanying independent auditors' report. 2011 14,431 2,046 131 290 22 203 1,180 2,054 1,064 37 6 1 21,465 5,067 498 357 1,265 49 7,236 197 11 74 16 298 5,433 784 2,591 321 223 147 46 9,545 636 512 45 23 9 3,109 48 4 3,750 21,465 48 Financial Section Additional Information Schedule of Investment Expenses Year ended June 30, 2012 (with comparative amounts for the year ended June 30, 2011) Investment Advisory and Custodial Fees Miscellaneous Total Investment Expenses See accompanying independent auditors' report. 2012 2011 $ 5,622,239 6,350,398 3,566,649 3,493,496 $ 9,188,888 9,843,894 49 Investment Section Investment Section Investment Overview It is dj vu with respect to our comments on the economy versus last year. We are still dealing with the European financial crises and a problematic employment situation. Global economic growth remains tepid, but the US has been a relative bright spot. Unfortunately, improvements in this scenario are likely to be slow as we deal with a global deleveraging cycle. It is difficult not to get caught up in the headlines, but as a pension plan it is more important to stay focused on the longterm. The System continues to invest in a mix of liquid, high quality bonds and stocks. These types of investments allow the System to participate in rising markets while moderating the risks on the downside. A high quality balanced fund has proven to be a successful strategy in a variety of markets over a long period of time. As in previous years, the bias to quality was a primary goal and was successfully met. "Conservation of Capital" and "Conservatism" continue to be the principal guides in investment decisions. The Board of Trustees continues to use a diversified portfolio to accomplish these objectives. The economy grew during the past fiscal year, although at a slow pace. Housing is beginning to improve due to low mortgage rates and a reduction of supply, as banks work through their book of bad loans. Growth in employment, or rather the lack thereof, remains the largest single factor plaguing the economy. While employment has improved some, it has been at a painfully slow rate. On the other hand corporations have a lot of cash on their balance sheets, are buying back stock and increasing dividends. Profits at S&P 500 companies increased 10.6% during the past year. Studies undertaken to evaluate the investment returns of pension funds over very long time horizons indicate that the asset allocation decision has the most impact on the fund's returns. Although the returns for the various asset categories vary from year to year, over the long term equities usually outperform fixed income and cash by a very wide margin. For that reason, the System has generally maintained a significant equity exposure with the remainder of the fund in fixed income securities designed to generate income and preserve capital. Returns for one, three, five, ten and twenty year periods are presented in this section. The longer time periods, such as the twenty-year period, allow for more valid evaluation of returns, both in absolute terms and relative to an asset class index, by reducing emphasis on the short-term volatility of markets. The Daily Valuation Method was used to calculate rates of return which is in accordance with the CFA Institute's objectives as stated in its publication "Global Investment Performance Standards Handbook," second edition. While the economy improved some over the past year, the domestic equity markets were mixed and foreign indexes were decidedly negative. The return for the S&P 500 was 5.4% and the Dow Jones Industrial Average rose 6.6%. Among individual companies, returns varied depending upon the company's size, industry, and exposure to global markets. The MSCI EAFE Index had a -13.8% return and the MSCI Emerging Market Index had a return of -15.9%. Large cap stocks had the best performance domestically last year. In a flip flop from last year, the S&P 400 Mid Capitalization Index underperformed both the S&P 500 and S&P 600 with a return of -2.3%. The S&P 600 Small Capitalization Index rose 1.4%. Equity returns were the result of a confluence of events ranging from the problems in Europe to the positive effects of quantitative easing. Domestic corporate profits improved due primarily to continued cost cutting and uneven, but positive consumer demand. The cause of weak foreign returns can be attributed to the slowdown in world economic growth due to the European crisis. Fixed income had good returns this year as bonds reacted favorably to quantitative easing and tightening credit spreads. Yields on long-term Treasury bonds began the period at 4.4% and ended the year at 2.8%. Overall the ten-year U.S. Treasury note returned 17.4% and the thirty-year U.S. Treasury bond returned 38.8%. The return on short-term Treasury bills was negligible. Our primary benchmark, the Barclays Government / Credit Index rose 8.8%. It is a broad index containing higher yielding corporate bonds as well as Treasuries. Higher quality bonds underperformed lower quality bonds as evidenced by the 8.0% return for AAA & AA rated bonds versus 10.4% for BBB rated bonds. In summary, the investment status of the System is excellent. The high quality of the System's investments is in keeping with the continued policy of "Conservatism" and "Conservation of Capital." Prepared by the Division of Investment Services 51 Investment Section Pooled Investment Fund As of June 30, 2012 Employees' Retirement System (ERS) Public School Employees Retirement System (PSERS) Legislative Retirement System (LRS) Georgia Judicial Retirement System (GJRS) State Employees' Assurance Department (SEAD) - Active State Employees' Assurance Department (SEAD) - OPEB Georgia Military Pension Fund (GMPF) Total $ 11,620,598.541 671,368,706 27,354,539 319,057,532 183,211,411 815,412,948 9,820,377 $ 13,646,824,054 Rates of Return 18 16 14 12 10 8 6 4 2 (2) 1 Year Equities S&P 500 3 Year 5 Year 10 Year 20 Year 12 10 8 6 4 2 - 1 Year Total Portfolio CPI 3 Year 5 Year 10 Year 20 Year 10 9 8 7 6 5 4 3 2 1 1 Year Fixed Income Barclays Govt/Credit 3 Year 5 Year 10 Year 20 Year 1 year 3 year 5 year 10 year 20 year Equities (0.18)% 14.43 % (0.46)% 5.17 % 7.94 % S&P 500 5.45 % 16.40 % 0.22 % 5.33 % 8.34 % Fixed Income 7.46 % Barclay's Govt/ Credit 8.78 % Total Portfolio 2.19 % 6.33 % 7.34 % 11.22 % 7.15 % 6.90 % 2.93 % 5.79 % 5.79 % 5.70 % 7.27 % 6.57 % 7.78 % CPI 1.66 % 2.09 % 1.95 % 2.46 % 2.49 % Note: Rates of return are calculated using the Daily Valuation Method, a time-weighted rate of return, based on market rates of return. 52 Investment Section Asset Allocation at Fair Value 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2012 2011 2010 2009 2008 2007 Equies Fixed Income Short-term Securies Mutual funds, etc Investment Summary Asset Allocation as of June 30 (in percentages) Equities Fixed Income Short-Term Securities Mutual and Common Collective Trust Funds and Separate Accounts Total 2012 65.9% 27.3 -- 6.8 2011 67.2 26.2 -- 6.6 2010 59.4 34.1 -- 6.5 2009 52.3 39.8 1.8 6.1 2008 55.6 37.2 1.5 5.7 2007 59.5 31.0 4.0 5.5 100% 100 100 100 100 100 Asset Allocation as of June 30 (in millions) Equities Fixed Income Short-Term Securities Mutual and Common Collective Trust Funds and Separate Accounts 2012 $ 9,600 3,972 -- 995 2011 10,060 3,902 -- 992 2010 7,870 4,506 -- 867 2009 6,857 5,212 236 799 2008 8,947 6,000 244 915 2007 10,307 5,374 700 953 Total $ 14,567 14,954 13,243 13,104 16,106 17,334 53 Investment Section Schedule of Fees and Commissions For the Year Ended June 30, 2012 Investment Advisors' Fees:* U.S. Equity International Equity Fixed Income Investment Commissions: U.S. Equity International Equity SEC Fees: Miscellaneous:* Total Fees and Commissions $ 3,683,184 1,537,573 -- 3,235,607 877,841 232,069 3,968,131 $ 13,534,405 *Amount included in total investment expenses shown on page 49. Twenty Largest Equity Holdings As of June 30, 2012 Shares 449,748 2,035,713 3,436,094 934,819 500,161 4,424,070 2,585,119 147,920 2,526,743 1,229,860 3,332,656 945,945 828,780 1,149,988 1,789,788 2,239,424 710,400 1,266,257 801,914 244,091 Company Apple Inc. Exxon Mobil Corp. Microsoft Corp. Chevron Corp. International Business Machines Corp. General Electric Co. AT&T Inc. Google Inc. Wells Fargo & Co. Johnson & Johnson Pfizer Inc. Coca Cola Co. Philip Morris International Inc. Procter & Gamble Co. JPMorgan Chase & Co. Intel Corp. Berkshire Hathaway Inc. Verizon Communications Inc. Wal-Mart Stores Inc. Amazon.Com Inc. Fair Value $ 262,652,832 174,195,961 105,110,115 98,623,404 97,821,488 92,197,619 92,185,344 85,803,954 84,494,286 83,089,342 76,651,088 73,963,440 72,319,343 70,436,765 63,949,125 59,680,650 59,197,632 56,272,461 55,909,444 55,738,180 Top 20 Equities Remaining Equities $ 1,820,292,473 7,779,629,675 Total Equities $ 9,599,922,148 A complete listing is available upon written request, subject to restrictions of O.C.G.A. Section 47-1-14. 54 Investment Section Fixed Income Holdings* As of June 30, 2012 Issuer US TREAS. NOTE US TREAS. BOND US TREAS. NOTE US TREAS. NOTE US TREAS. NOTE US TREAS. NOTE GENERAL ELECTRIC CAP CORP US TREAS. NOTE US TREAS. NOTE US TREAS. NOTE PFIZER INC US TREAS. NOTE US TREAS. NOTE UNITED PARCEL SERVICE US TREAS. BOND GENERAL ELECTRIC CAP CORP GENERAL ELECTRIC CAP CORP US TREAS. NOTE MICROSOFT CORP UNITED PARCEL SERVICE AT&T INC BERKSHIRE HATHAWAY FIN CORP ONTARIO (PROVINCE OF) WALT DISNEY COMPANY ROYAL BANK OF CANADA VERIZON COMMUNICATIONS INC WAL-MART STORES INC INTEL CORP SCHLUMBERGER INVESTMENT EUROPEAN INVESTMENT BANK JOHNSON & JOHNSON JOHNSON & JOHNSON Year of Maturity 2017 2028 2014 2013 2013 2013 2020 2021 2014 2016 2015 2018 2017 2019 2036 2026 2017 2021 2015 2021 2015 2012 2015 2017 2015 2014 2016 2021 2021 2016 2014 2017 Interest Rate 1.8750 5.2500 1.0000 1.0000 0.7500 0.5000 5.5500 2.1250 2.3750 2.1250 5.3500 2.7500 3.1250 5.1250 4.5000 5.5500 2.4500 3.1250 1.6250 3.1250 2.5000 5.1250 0.9500 1.1250 1.9200 1.9500 2.8000 3.3000 3.3000 2.1250 1.2000 5.5500 ERS Fixed Income Securities Defined Contribution Fixed Income Securities Total ERS and Defined Contribution Fixed Income Securities Par Value $ 271,000,000 183,000,000 211,000,000 195,000,000 178,000,000 176,000,000 154,000,000 165,000,000 158,000,000 144,000,000 124,000,000 124,000,000 114,000,000 103,000,000 91,000,000 99,000,000 103,000,000 83,000,000 88,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 82,000,000 72,000,000 62,000,000 62,000,000 62,000,000 62,000,000 51,000,000 20,000,000 Fair Value $ 285,883,320 257,543,220 213,217,610 196,485,900 179,007,480 176,501,600 175,904,960 173,429,850 165,209,540 152,291,520 138,640,680 136,855,080 126,477,300 124,204,610 122,224,830 106,548,750 104,181,410 94,490,520 91,005,200 87,802,320 85,362,820 82,753,580 82,364,900 81,684,300 81,180,000 73,587,600 66,387,120 66,279,240 64,956,780 64,093,740 51,692,580 24,277,000 $ 3,647,000,000 $ 3,932,525,360 39,000,000 39,512,960 $ 3,686,000,000 $ 3,972,038,320 *A complete listing is available upon written request, subject to restrictions of O.C.G.A. Section 47-1-14. 55 Actuarial Section Actuarial Section ERS April 10, 2012 Board of Trustees Employees' Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attn: Mr. James Potvin, 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, 2011. The report indicates that annual employer contributions at the rate of 13.71% of compensation for Old Plan Members, 18.46% of compensation for New Plan Members, and 15.18% for GSEPS Members for the fiscal year ending June 30, 2014 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. The valuation takes into account the effect of all amendments to the System enacted through the 2011 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 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 30-year period. 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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 System and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM:bdm Cathy Turcot Principal and Managing Director 57 Actuarial Section PSERS April 10, 2012 Board of Trustees Georgia Public School Employees Retirement System Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attn: Mr. James Potvin, Executive Director 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, 2011. Based on a monthly benefit accrual rate of $14.75, the valuation indicates that annual employer contributions of $27,160,000 or $692.00 per active member for the fiscal year ending June 30, 2014 are sufficient to support the benefits of the System. The results of the valuation reflect that the Board did not grant the anticipated cost-of-living increases (COLAs) to retired members July 1, 2011 and January 1, 2012. 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. The valuation takes into account the effect of all amendments to the System enacted through the 2011 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 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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 being amortized as a level dollar per active member within a 30-year period. The System is currently 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 currently 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. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM:mjn Cathy Turcot Principal and Managing Director 58 Actuarial Section GJRS April 10, 2012 Board of Trustees Georgia Judicial Retirement System Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attn: Mr. James Potvin, Executive Director Members of the Board: Section 47-23-21 of the law governing the operation of the Georgia Judicial Retirement System 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, 2011. The report indicates that annual employer contributions at the rate of 4.23% of compensation for the fiscal year ending June 30, 2014 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. The valuation takes into account the effect of all amendments to the System enacted through the 2011 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 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 a 10-year period. 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com The System is being funded in conformity with the minimum funding standard set forth in Code Section 7-20-10 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. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM/CT:dmw Cathy Turcot Principal and Managing Director 59 Actuarial Section LRS April 10, 2012 Board of Trustees Legislative Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attn: Mr. James Potvin, Executive Director 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, 2011. The report indicates that no annual employer contributions for the fiscal year ending June 30, 2014 are required to support the benefits of the System. The results of the valuation reflect that the Board did not grant the anticipated cost-of-living increases (COLAs) to retired members July 1, 2011 and January 1, 2012. 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. The valuation takes into account the effect of all amendments to the System enacted through the 2011 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 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM/CT:dmw 60 Cathy Turcot Principal and Managing Director Actuarial Section GMPF April 10, 2012 Board of Trustees Georgia Military Pension Fund Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attn: Mr. James Potvin, Executive Director 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, 2011. The report indicates that annual employer contributions of $1,891,720 or $137.32 per active member for the fiscal year ending June 30, 2014 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. The valuation takes into account the effect of all amendments to the Fund enacted through the 2011 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 20-year period. 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM:mjn 61 Cathy Turcot Principal and Managing Director Actuarial Section SEAD Pre-Retirement April 10, 2012 Board of Trustees Employees' Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attention: Mr. James Potvin, 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 this report, we have determined liabilities for life insurance benefits payable upon death in active service (Pre-Retirement). We have submitted the report giving the results of the valuation of the Plan prepared as of June 30, 2011. The report indicates that employee contributions at the rate of 0.05% of active payroll for Old Plan members, and 0.02% 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 preretirement benefits of the Plan. No employer contribution is required for the fiscal year ending June 30, 2014 for pre-retirement benefits. 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. 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. 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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 Plan. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM/CT:mjn 62 Cathy Turcot Principal and Managing Director Actuarial Section SEAD Post-Retirement April 10, 2012 Board of Trustees Employees' Retirement System of Georgia Two Northside 75, Suite 300 Atlanta, GA 30318-7701 Attention: Mr. James Potvin, 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 this report, we have determined liabilities for life insurance benefits payable upon death after retirement (Post-Retirement). In accordance with GASB 43 and 45, we have determined the liabilities for life insurance benefits payable upon death after retirement. We have submitted the report giving the results of the valuation of the Plan prepared as of June 30, 2011. The report indicates, for post-retirement benefits, there is no employer annual required contribution for the fiscal year ending June 30, 2014 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. 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 assuming future annual required contributions (ARC) are contributed when due. 3550 Busbee Pkwy, Suite 250 Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.CavMacConsulting.com 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 Plan. Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Sincerely yours, Edward A. Macdonald, ASA, FCA MAAA President EAM/CT:mjn 63 Cathy Turcot Principal and Managing Director Actuarial Section The laws governing the Employees' Retirement System and the plans it administers requires an actuary to perform an annual valuation of the soundness of the system. In addition, the actuary must perform at least once every five years an actuarial investigation of the mortality, service and compensation experience of the members and beneficiaries of the System. The latest valuation was performed as of June 30, 2011 based on actuarial assumptions approved by the Board during the last experience study on December 16, 2010. The more pertinent facts and significant assumptions underlying the computations included in the June 30, 2011 reports are as follows: Summary of Actuarial Assumptions Valuation Date Actuarial Cost Method Amortization Method Amortization Period ERS June 30, 2011 Entry age Level percent of pay, open 30 years PSERS June 30, 2011 Entry age Level dollar, open 30 years GJRS June 30, 2011 Entry age Level percent of pay, open 10 years LRS June 30, 2011 Entry age Level dollar, open N/A GMPF June 30, 2011 Entry age Level dollar, open 20 years Actuarial Asset Valuation Method Investment Rate of Return Inflation Rate Projected Salary Increases Fiscal Year 2011 Fiscal Years 2012-2013 Fiscal Years 2014+ COLA Based on the total fair value income of investments with the excess or shortfall of actual investment income over or under the expected investment return smoothed over 7 years. One-seventh of the excess or shortfall is recognized each year for seven years. 7.50% 3.00% 0.00% 2.725-4.625% 5.45-9.25% None 7.50% 3.00% n/a 1.50% Semi-annually 7.50% 3.00% 0.00% 3.00% 6.00% None 7.50% 3.00% n/a 3.0% Annually 7.50% 3.00% n/a None Valuation Date Actuarial Cost Method Amortization Method Amortization Period SEAD (Active & OPEB) June 30, 2011 Projected unit credit Level dollar, open 30 years Actuarial Asset Valuation Method Investment Rate of Return Inflation Rate Projected Salary Increases ERS GJRS LRS COLA Market Value 7.50% 3.00% 5.45-9.25% 6.00% 0.00 n/a 64 Actuarial Section Rates of Withdrawal Prior to Retirement (Withdrawal, Death, Disability) ERS Representative values of the assumed annual rates of separation other than retirement for non-law enforcement officers are as follows. Special rates of separation apply to law enforcement officers. Annual Rates of Death Annual Rates of Disability Age Men Women Men Women 20 .035 % .019 % .05 % .02 % 25 .038 .021 .05 .02 30 .044 .026 .05 .02 35 .077 .048 .05 .02 40 .108 .071 .25 .10 45 .151 .112 .50 .25 50 .214 .168 .75 .50 55 .362 .272 1.10 .82 60 .675 .506 -- -- 65 1.274 .971 -- -- 69 1.980 1.486 -- -- Annual Rates of Withdrawal Years of Service 0-4 5-9 10 & over Age Men Women Men Women Men Women 20 31.00 % 31.00 % --% --% --% --% 25 26.00 24.00 17.00 19.00 -- -- 30 22.50 21.00 12.00 13.00 7.50 7.75 35 21.00 19.50 10.00 10.50 7.00 6.75 40 19.00 17.50 9.50 9.00 5.00 4.50 45 18.00 15.50 9.00 8.00 3.75 3.50 50 15.50 15.00 7.00 7.00 3.75 3.50 55 13.00 12.50 6.50 6.50 4.00 4.00 60 15.00 12.50 7.00 6.50 -- -- 65 15.00 17.00 9.50 10.00 -- -- 65 Actuarial Section PSERS Annual Rates of Death Annual Rate of Disability Age Men Women Both 20 .036 % .019 % 25 .038 .021 --% -- 30 .050 .026 -- 35 .084 .048 -- 40 .114 .071 .01 45 .162 .112 .04 50 .245 .168 .09 55 .420 .272 .23 60 .778 .506 .35 65 1.441 .971 -- Annual Rates of Withdrawal Years of Service 0-4 5-9 10 & over Age Men Women Men Women Men Women 20 35.00 % 34.00 % --% --% --% --% 25 30.00 29.00 17.00 19.00 -- -- 30 27.00 24.00 16.00 15.00 14.00 11.00 35 24.00 20.00 14.00 13.00 9.00 10.00 40 21.00 17.00 12.00 12.00 7.00 8.00 45 20.00 16.00 11.00 10.00 6.50 7.00 50 18.00 14.00 11.00 9.00 6.50 6.50 55 15.00 12.00 9.00 8.00 6.00 6.00 60 13.00 11.00 9.00 7.00 -- -- 66 Actuarial Section GJRS Annual Rates of Withdrawal Death Disability Age Both Men Women Both 20 8.0 % .035 % .019 % .05 % 25 8.0 .038 .021 .05 30 8.0 .044 .026 .10 35 8.0 .077 .048 .15 40 8.0 .108 .071 .20 45 4.0 .151 .112 .35 50 3.0 .214 .168 .50 55 3.0 .362 .272 .90 60 3.0 .675 .506 1.45 65 3.0 1.274 .971 2.35 LRS Annual Rates of Withdrawal Death Disability Age Both Men Women Both 20 6.0 % .035 % .019 % .1 % 25 6.0 .038 .021 .1 30 6.0 .044 .026 .2 35 6.0 .077 .048 .3 40 6.0 .108 .071 .4 45 7.5 .151 .112 .7 50 8.5 .214 .168 1.0 55 10.0 .362 .272 1.8 60 10.0 .675 .506 2.9 65 10.0 1.274 .971 -- GMPF Rates of Withdrawal from Active Service Service Rates 10 or less 17.5 % 11-13 15.0 14-19 9.5 20 or more 14.5 Age Rates of Death Men Women 25 .038 % .021 % 30 .044 .026 35 .077 .048 40 .108 .071 45 .151 .112 50 .214 .168 55 .362 .272 60 .675 .506 67 Actuarial Section SEAD-Active and SEAD-OPEB All Groups ERS LRS GJRS Annual Rates of Annual Rates of Annual Rates of Annual Rates of Death Disability Disability Disability Age Men Women Men Women Both Both 20 .035 % .019 % .05 % .02 % .1 % .05 % 25 .038 .021 .05 .02 .1 .05 30 .044 .026 .05 .02 .2 .10 35 .077 .048 .05 .02 .3 .15 40 .108 .071 .25 .10 .4 .20 45 .151 .112 .50 .25 .7 .35 50 .214 .168 .75 .50 1.0 .50 55 .362 .272 1.10 .82 1.8 .90 60 .675 .506 -- -- 2.9 1.45 65 1.274 .971 -- -- -- 2.35 69 1.980 1.486 -- -- -- -- ERS Annual Rates of Withdrawal Years of Service LRS Annual Rates of Withdrawal GJRS Annual Rates of Withdrawal 0-4 5-9 10 & over Age Men Women Men Women Men Women 20 31.00 % 31.00 % --% --% --% --% 25 26.00 24.00 17.00 19.00 -- -- 30 22.50 21.00 12.00 13.00 7.50 7.75 35 21.00 19.50 10.00 10.50 7.00 6.75 40 19.00 17.50 9.50 9.00 5.00 4.50 45 18.00 15.50 9.00 8.00 3.75 3.50 50 15.50 15.00 7.00 7.00 3.75 3.50 55 13.00 12.50 6.50 6.50 4.00 4.00 60 15.00 12.50 7.00 6.50 0.00 0.00 65 15.00 17.00 9.50 10.00 0.00 0.00 Both 6.00 % 6.00 6.00 6.00 6.00 7.50 8.50 10.00 10.00 10.00 Both 8.00 % 8.00 8.00 8.00 8.00 4.00 3.00 3.00 3.00 3.00 68 Actuarial Section Annual Rates of Retirement ERS Old Plan Early Retirement Age 60 or 30 years 34 years Age Men Women Men Women Men Women 55 3.0 % 4.0 % 11.5 % 9.0 % 100.0 % 100.0 % 56 3.5 6.0 12.0 11.0 100.0 100.0 57 4.0 6.0 12.0 13.0 100.0 100.0 58 5.0 6.0 13.0 15.0 95.0 95.0 59 6.0 6.0 16.0 16.0 95.0 95.0 60 -- -- 17.0 20.0 95.0 95.0 62 -- -- 37.0 40.0 90.0 90.0 64 -- -- 20.0 30.0 90.0 90.0 66 -- -- 30.0 35.0 30.0 35.0 68 -- -- 20.0 25.0 20.0 25.0 70 -- -- 45.0 35.0 45.0 35.0 75 -- -- 100.0 100.0 100.0 100.0 More than 34 years Men Women 90.0 % 90.0 % 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 50.0 60.0 50.0 60.0 15.0 60.0 30.0 35.0 20.0 25.0 45.0 35.0 100.0 100.0 Age 55 56 57 58 59 60 62 64 66 68 70 75 New Plan and GSEPS Early Retirement Men Women Normal Retirement* Men Women 10.0 % 8.0 % 50.0 % 40.0 % 10.0 8.0 50.0 40.0 10.0 9.0 50.0 40.0 10.0 10.0 30.0 40.0 10.0 15.0 30.0 40.0 -- -- 17.0 20.0 -- -- 38.0 36.0 -- -- 25.0 28.0 -- -- 35.0 35.0 -- -- 20.0 25.0 -- -- 20.0 25.0 -- -- 100.0 100.0 *An additional 10% of active New Plan and GSEPS members less than age 65 are expected to retire in the year in which they attain 30 years of service. 69 Actuarial Section PSERS GJRS LRS GMPF Age Annual Rate Age Annual Rate 60 15 % 68 25 % 61 15 69 25 62 22 70 25 63 18 71 25 64 18 72 25 65 28 73 25 66 25 74 25 67 25 75 & over 100 Age 60 61-64 65-66 67-69 70-74 75 Annual Rates of Retirement 12 % 12 15 20 30 100 Age Annual Rate Age Annual Rate 60 - 69 70 10 % 35 73 25 % 74 40 71 15 75 100 72 15 Age 60 61 62 63 64 65 & over Annual Rates of Retirement 65.0 % 65.0 65.0 65.0 65.0 100.0 70 Actuarial Section SEAD-Active and SEAD-OPEB ERS Members Old Plan Early Retirement Age 60 or 30 years 34 years More than 34 years Age Men Women Men Women Men Women Men Women 55 3.0 % 4.0 % 11.5 % 9.0 % 100.0 % 100.0 % 90.0 % 90.0 % 56 3.5 6.0 12.0 11.0 100.0 100.0 70.0 70.0 57 4.0 6.0 12.0 13.0 100.0 100.0 70.0 70.0 58 5.0 6.0 13.0 15.0 95.0 95.0 70.0 70.0 59 6.0 6.0 16.0 16.0 95.0 95.0 70.0 70.0 60 -- -- 17.0 20.0 95.0 95.0 50.0 60.0 62 -- -- 37.0 40.0 90.0 90.0 50.0 60.0 64 -- -- 20.0 30.0 90.0 90.0 15.0 60.0 66 -- -- 30.0 35.0 30.0 35.0 30.0 35.0 68 -- -- 20.0 25.0 20.0 25.0 20.0 25.0 70 -- -- 45.0 35.0 45.0 35.0 45.0 35.0 Age 55 56 57 58 59 60 62 64 66 68 70 New Plan and GSEPS Early Retirement Normal Retirement* Men Women Men Women 10.0 % 8.0 % 50.0 % 40.0 % 10.0 8.0 50.0 40.0 10.0 9.0 50.0 40.0 10.0 10.0 30.0 40.0 10.0 15.0 30.0 40.0 -- -- 17.0 20.0 -- -- 38.0 36.0 -- -- 25.0 28.0 -- -- 35.0 35.0 -- -- 20.0 25.0 -- -- 20.0 25.0 *An additional 10% of active New Plan and GSEPS members less than age 65 are expected to retire in the year in which they attain 30 years of service. LRS Members Age Annual Rate Age Annual Rate 60 - 69 70 10 % 35 73 25 % 74 40 71 15 75 100 72 15 -- -- 71 Actuarial Section SEAD-Active and SEAD-OPEB GJRS Members Age 60 61-64 65-66 67-69 70-74 75 Annual Rates of Retirement 12 % 12 15 20 30 100 72 Actuarial Section Annual Rates of Death After Retirement For all plans except PSERS, the RP-2000 Combined Mortality Table is used for the period after retirement and for dependent beneficiaries. The RP-2000 Disabled MortalityTable set back eleven years for males is used for the period after disability retirement, as applicable. For PSERS, the RP-2000 Combined Table set forward one year for males is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disability Mortality Table set back two years for males and set forward one year for females is used for the period after disability retirement, as applicable. ERS Age Men Women Age Men Women 40 .108 % .071 % 65 1.274 % .971 % 45 .151 .112 70 2.221 1.674 50 .214 .168 75 3.783 2.811 55 .362 .272 80 6.437 4.588 60 .675 .506 85 11.076 7.745 PSERS Age Men Women Age Men Women 40 .114 % .071 % 65 1.441 % .971 % 45 .162 .112 70 2.457 1.674 50 .245 .168 75 4.217 2.811 55 .420 .272 80 7.204 4.588 60 .768 .506 85 12.280 7.745 GJRS Age Men Women Age Men Women 40 .108 % .071 % 65 1.274 % .971 % 45 .151 .112 70 2.221 1.674 50 .214 .168 75 3.783 2.811 55 .362 .272 80 6.437 4.588 60 .675 .506 85 11.076 7.745 LRS Age Men Women Age Men Women 40 .108 % .071 % 65 1.274 % .971 % 45 .151 .112 70 2.221 1.674 50 .214 .168 75 3.783 2.811 55 .362 .272 80 6.437 4.588 60 .675 .506 85 11.076 7.745 73 Actuarial Section GMPF SEAD-OPEB Age Men Women Age Men Women 40 .108 % .071 % 65 1.274 % .971 % 45 .151 .112 50 .214 .168 70 2.221 75 3.783 1.674 2.811 55 .362 .272 80 6.437 4.588 60 .675 .506 85 11.076 7.745 Age Men Women Age Men Women 40 .108 % .071 % 65 1.274 % .971 % 45 .151 .112 50 .214 .168 70 2.221 75 3.783 1.674 2.811 55 .362 .272 80 6.437 4.588 60 .675 .506 85 11.076 7.745 74 Actuarial Section Active Members ERS Year 2006 2007 2008 2009 2010 2011 Annual Payroll Active Members (in thousands) Average Pay 74,089 73,985 75,293 71,272 68,566 66,081 $ 2,630,167 $ 35,500 2,680,972 36,237 2,809,199 37,310 2,674,155 37,520 2,571,042 37,497 2,486,780 37,632 Change 2.7 % 2.1 3.0 0.6 (0.1) 0.4 PSERS PSERS is not a compensation based plan. Year 2006 2007 2008 2009 2010 2011 Active Members 37,587 39,086 40,121 40,581 39,962 39,249 GJRS Year 2006 2007 2008 2009 2010 2011 Annual Payroll Active Members (in thousands) Average Pay 478 $ 45,308 $ 94,787 480 48,621 101,294 482 51,102 106,021 502 52,083 103,751 495 51,293 103,622 507 52,331 103,216 Change 3.4 % 6.9 4.7 (2.1) (0.1) (0.4) LRS LRS is not a compensation based plan. Year 2006 2007 2008 2009 2010 2011 Active Members 218 218 218 218 216 218 GMPF GMPF is not a compensation based plan. Year 2006 2007 2008 2009 2010 2011 Active Members 10,320 12,017 11,623 12,019 13,032 13,776 75 Actuarial Section SEAD-Active and SEAD-OPEB Year 2008 2009 2010 2011 Active Members 75,859 69,745 62,305 55,516 76 Actuarial Section Member and Employer Contribution Rates ERS Year 2006 2007 2008 2009 2010 2011 2012 Member 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% Employer Rates Old Plan* New Plan GSEPS** 10.41% 10.41% 10.41% 10.41% 10.41% 10.41% 11.63% 10.41% 10.41% 10.41% 10.41% 10.41% 10.41% 11.63% n/a n/a n/a 6.54% 6.54% 6.54% 7.42% * Old Plan Rate includes an employer pick-up of employee contributions. ** GSEPS Plan began on January 1, 2009 PSERS Year 2006 2007 2008 2009 2010 2011 2012 Member $ 36 a year $ 36 a year $ 36 a year $ 36 a year $ 36 a year $ 36 a year $ 36 a year Employer $ 3,634,000 6,484,000 2,866,000 5,680,000 5,529,000 7,509,000 15,884,000 GJRS Year 2006 2007 2008 2009 2010 2011 2012 Member 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% Employer 3.85% 3.85% 3.85% 3.85% 3.85% 3.85% 3.90% LRS Year 2006 2007 2008 2009 2010 2011 2012 Member 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% Employer $ 54,000 62,000 73,000 71,000 75,000 75,000 75,000 GMPF Year 2006 2007 2008 2009 2010 2011 2012 Member n/a n/a n/a n/a n/a n/a n/a Employer $ 891,000 1,005,000 1,103,000 1,323,000 1,434,000 1,282,000 1,521,000 77 Actuarial Section SEAD-Active SEAD-OPEB Year 2008 2009 2010 2011 Member - Old Plan 0.05% 0.05% 0.05% 0.05% Member - New Plan, LRS, GJRS 0.02% 0.02% 0.02% 0.02% Employer 0% 0% 0% 0% Year 2008 2009 2010 2011 Member - Old Plan 0.45% 0.45% 0.45% 0.45% Member - New Plan, LRS, GJRS 0.23% 0.23% 0.23% 0.23% Employer 0% 0% 0% 0% 78 Actuarial Section Schedule of Retirees Added to and Removed from Rolls ERS Added to Rolls Removed from Rolls Roll End of Year Year Ended Number 2006 2007 2008 2009 2010 2011 2,338 2,410 2,422 2,444 2,665 2,797 Annual Allowances (in thousands) Number $ 84,982 854 114,719 1,075 82,644 1,017 85,329 1,055 70,383 1,051 69,031 1,170 Annual Allowances (in thousands) Number $ 16,270 32,839 20,598 34,174 21,299 35,579 20,194 36,968 22,413 38,582 25,347 40,209 Annual Allowances (in thousands) $ 842,157 936,278 997,623 1,062,758 1,110,728 1,154,412 % Increase Average in Annual Annual Allowance Allowances 8.9 11.2 % $ 25,645 27,397 6.6 28,040 6.5 28,748 4.5 28,789 3.9 28,710 PSERS Added to Rolls Removed from Rolls Roll End of Year Year Ended 2006 2007 2008 2009 2010 2011 Number 870 816 899 886 1,001 1,174 Annual Allowances (in thousands) Number $ 4,835 na 4,749 531 4,514 637 5,290 605 4,494 575 3,168 642 Annual Allowances (in thousands) Number $ 1,885 13,014 2,353 13,193 2,371 13,487 2,260 13,798 2,666 14,157 3,072 14,600 Annual Allowances (in thousands) $ 44,266 46,662 48,805 51,835 53,663 53,759 % Increase in Annual Allowance 7.1 % 5.4 4.6 6.2 3.5 0.2 Average Annual Allowances $ 3,401 3,537 3,619 3,757 3,791 3,682 GJRS Added to Rolls Removed from Rolls Roll End of Year Year Ended 2006 2007 2008 2009 2010 2011 Number 5 13 14 29 16 15 Annual Allowances (in thousands) Number $ 144 14 853 7 902 7 2,238 6 933 10 1,168 2 Annual Allowances (in thousands) Number $ 687 165 297 171 410 178 191 201 508 207 105 220 Annual Allowances (in thousands) $ 8,917 9,473 9,965 12,012 12,437 13,500 % Increase in Annual Allowance -5.7 % 6.2 5.2 20.5 3.5 8.5 Average Annual Allowances $ 54,042 55,398 55,983 59,761 60,082 61,364 LRS Added to Rolls Removed from Rolls Roll End of Year Year Ended 2006 2007 2008 2009 2010 2011 Number 13 17 13 10 10 18 Annual Allowances (in thousands) Number $ 103 21 151 9 130 11 117 7 106 3 104 10 Annual Allowances (in thousands) Number $ 165 216 74 224 100 226 54 229 36 236 86 244 Annual Allowances (in thousands) $ 1,532 1,609 1,639 1,702 1,772 1,790 % Increase in Annual Allowance -3.9 % 5.0 1.9 3.8 4.1 1.0 Average Annual Allowances $ 7,093 7,183 7,252 7,432 7,508 7,336 79 Actuarial Section GMPF Added to Rolls Removed from Rolls Roll End of Year Year Ended 2006 2007 2008 2009 2010 2011 Number 61 73 71 85 92 94 Annual Allowances (in thousands) Number $ 69 1 83 1 76 2 91 3 100 1 101 3 Annual Allowances (in thousands) Number $ 1 163 1 235 2 304 4 386 1 477 4 568 Annual Allowances (in thousands) $ 178 260 334 421 520 617 % Increase in Annual Allowance 61.8 % 46.1 28.5 26.0 23.5 18.7 Average Annual Allowances $ 1,092 1,106 1,099 1,091 1,090 1,086 80 Actuarial Section Analysis of Change in Unfunded Accrued Liability (UAL) ERS Interest (7.50) added to $ previous UAL Accrued liability contribution Experience: Valuation asset growth Pensioners' mortality Turnover and retirements New entrants Salary increases Method changes Amendments (COLAs) Assumption changes Lawsuit System changes Data changes Misc. changes Total $ PSERS Interest (7.50) added to $ previous UAL Accrued liability contribution Experience: Valuation asset growth Pensioners' mortality Turnover and retirements New entrants Salary increases Method changes Amendments (COLAs) Assumption changes Lawsuit Data changes Allotment for expenses Misc. changes Total $ GJRS Interest (7.50) added to $ previous UAL Accrued liability contribution Experience: Valuation asset growth Pensioners' mortality Turnover and retirements New entrants Salary increases Method changes Amendments (COLAs) Assumption changes Lawsuit Data changes Misc. changes Total $ 2011 243.7 $ (122.9) 433.6 16.4 91.4 28.4 49.0 0.0 0.0 0.0 0.0 (28.7) 9.1 20.2 740.2 $ 10,349.3 $ 4,022.8 24,002.0 (3,000.5) 3,403.6 3,167.0 0.0 0.0 (16,603.6) 0.0 0.0 0.0 2,122.7 872.4 28,335.7 $ (2,891.5) $ 4,079.8 9,404.0 2,076.8 (276.3) 750.1 1,265.9 0.0 0.0 0.0 0.0 0.0 (12,852.1) 1,556.7 $ 2010 2009 2008 Amount of Increase (Decrease) (in Millions) 2007 169.8 $ 124.8 $ 78.1 $ (89.4) (99.7) (86.3) 710.1 49.2 118.4 15.0 (259.2) 0.0 0.0 250.7 0.0 0.0 (2.4) 22.5 984.7 $ 609.1 65.4 107.3 16.7 (296.9) 0.0 (358.6) 0.0 75.9 0.0 270.5 86.4 600.9 $ 129.3 51.3 103.0 22.9 (22.7) 0.0 188.8 0.0 0.0 0.0 0.0 157.6 622.0 $ Amount of Increase (Decrease) (in Thousands) 58.6 $ (35.3) (59.5) 51.0 115.7 35.7 (33.2) 0.0 5.9 0.0 0.0 0.0 0.0 120.9 259.8 $ 4,021.0 $ 6,403.4 (1,567.9) $ 5,026.0 (2,953.7) $ 7,267.0 (5,596.9) $ 4,729.2 39,729.0 (828.9) 12,375.8 3,047.8 0.0 0.0 (14,121.2) 33,717.7 0.0 (2,192.3) 2,029.0 195.0 84,376.3 $ 34,015.0 973.7 6,201.3 3,267.7 0.0 0.0 0.0 0.0 2,168.0 24,199.5 433.0 (197.3) 74,519.0 $ 6,623.0 420.3 3,381.4 4,021.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (281.8) 18,477.2 $ Amount of Increase (Decrease) (in Thousands) (3,737.0) (320.5) 1,053.3 3,556.9 0.0 0.0 36,404.3 0.0 0.0 0.0 0.0 (846.1) 35,243.2 $ (2,636.2) $ 4,592.1 (3,360.0) $ 3,596.2 (3,585.9) $ 4,498.3 (3,729.5) $ 3,953.2 16,228.0 560.9 2,290.6 0.0 (10,213.5) 0.0 0.0 (14,826.5) 0.0 579.1 21.3 (3,404.2) $ 13,941.0 1,102.3 1,982.9 967.2 (10,561.2) 0.0 (2,359.4) 0.0 0.0 4,581.2 (240.6) 9,649.6 $ 81 3,164.0 409.3 1,243.3 354.2 (3,432.4) 0.0 1,265.0 0.0 0.0 0.0 (903.4) 3,102.3 $ (1,026.0) (154.4) (1,614.7) 659.5 369.8 0.0 24.1 0.0 0.0 0.0 3,433.5 1,915.5 $ 2006 28.4 7.4 40.2 50.1 28.1 34.4 (84.2) (69.0) 245.2 0.0 0.0 0.0 0.0 22.8 403.4 (6,204.6) 6,961.2 7,359.0 1,146.2 (1,717.5) 4,151.6 0.0 (3,594.0) 0.0 0.0 0.0 0.0 0.0 0.0 8,101.9 (3,889.8) 6,928.7 3,464.0 709.7 1,649.8 322.6 (3,293.9) (1,738.0) 2,383.8 0.0 0.0 0.0 (4,400.5) 2,136.4 Actuarial Section 2011 2010 2009 2008 2007 2006 Amount of Increase (Decrease) (in Thousands) LRS Interest (7.50) added to $ previous UAL Accrued liability contribution Experience: Valuation asset growth Pensioners' mortality Turnover and retirements New entrants Salary increases Method changes Amendments (COLAs) Assumption changes Lawsuit Data changes Misc. changes Total $ (343.4) $ 107.1 906.2 (18.7) 254.5 74.0 0.0 0.0 (481.8) 0.0 0.0 0.0 46.9 544.9 $ (508.5) $ (32.5) 1,534.0 339.2 105.1 98.8 0.0 0.0 (465.3) 975.2 0.0 114.8 41.6 2,202.4 $ (468.9) $ (21.1) 1,307.4 240.7 (5.7) 0.0 0.0 0.0 0.0 0.0 0.0 (1,529.1) (51.7) (528.4) $ (426.9) $ (26.3) 241.7 (2.2) (429.8) 35.9 0.0 0.0 0.0 0.0 0.0 0.0 47.4 (560.2) $ (432.3) $ (31.1) (155.0) 119.4 423.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 147.9 72.7 $ (369.8) (43.1) 289.0 (412.7) (154.7) 0.0 0.0 (142.0) 0.0 0.0 0.0 0.0 0.0 (833.3) GMPF* Interest (7.50) added to $ previous UAL Accrued liability contribution Experience: Valuation asset growth Pensioners' mortality Turnover and retirements New entrants Method changes Assumption changes Expense Deficit Misc. changes Total $ 1,216.1 (1,173.3) 113.8 58.5 205.4 1469.6 0.0 0.0 37.0 (77.0) 1,850.1 *Note: Data prior to 2011 is not available for GMPF. SEAD-Active and SEAD-OPEB: Data is not available. 82 Actuarial Section Solvency Test Results Dollar amounts in thousands ERS Actuarial Accrued Liability for: Actuarial Valuation as of 7/1 2006 2007 2008 2009 2010 2011 Active Member Contributions (1) $ 672,679 645,907 616,177 589,012 551,607 503,867 Active Member Retirants & (Employer Beneficiaries Funded Portion) (2) $ 8,462,884 9,020,890 9,756,529 10,034,939 10,652,040 11,058,344 (3) $ 5,107,282 5,218,382 5,308,151 5,254,071 5,091,705 5,094,694 Valuation Assets Portion of Aggregate Accrued Liabilities Covered by Assets $ 13,461,132 13,843,689 14,017,346 13,613,606 13,046,193 12,667,557 (1) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (2) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (3) 84.7% 80.0% 68.7% 56.9% 36.2% 21.7% PSERS Actuarial Accrued Liability for: Actuarial Valuation as of 7/1 2006 2007 2008 2009 2010 2011 Active Member Contributions (1) $ 14,321 14,796 15,285 15,862 16,361 16,627 Active Member Retirants & (Employer Beneficiaries Funded Portion) (2) $ 428,543 456,868 469,601 506,659 528,808 532,509 (3) $ 248,787 274,414 286,064 300,711 330,227 336,790 Valuation Assets Portion of Aggregate Accrued Liabilities Covered by Assets $ 766,277 785,460 791,855 769,618 737,406 719,601 (1) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (2) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (3) 100.0% 100.0% 100.0% 82.2% 58.2% 50.6% GJRS Actuarial Accrued Liability for: Actuarial Valuation as of 7/1 2006 2007 2008 2009 2010 2011 Active Member Contributions (1) $ 48,896 52,707 59,838 61,188 67,293 71,047 Active Member Retirants & (Employer Beneficiaries Funded Portion) (2) $ 86,194 87,333 90,601 108,923 117,730 128,991 (3) $ 94,747 109,238 118,077 112,363 96,473 90,440 Valuation Assets Portion of Aggregate Accrued Liabilities Covered by Assets $ 279,564 297,090 313,315 317,624 320,050 327,483 (1) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (2) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (3) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 83 Actuarial Section LRS Actuarial Accrued Liability for: Actuarial Valuation as of 7/1 2006 2007 2008 2009 2010 2011 Active Member Contributions (1) $ 2,507 2,484 2,853 2,908 3,166 2,921 Active Member Retirants & (Employer Beneficiaries Funded Portion) (2) $ 18,734 19,847 19,366 18,465 19,208 19,759 (3) $ 2,166 2,026 2,235 2,150 2,629 2,564 Valuation Assets $ 29,172 30,049 30,706 30,303 29,581 29,278 Portion of Aggregate Accrued Liabilities Covered by Assets (1) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (2) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (3) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% GMPF Actuarial Accrued Liability for: Actuarial Valuation as of 7/1 2006 2007 2008 2009 2010 2011 Active Member Contributions (1) $ 0 0 0 0 0 0 Active Member Retirants & (Employer Beneficiaries Funded Portion) (2) $ 6,392 7,655 9,449 12,742 14,015 15,379 (3) $ 11,233 12,232 9,675 8,279 9,758 11,388 Valuation Assets $ 3,100 4,165 5,269 6,413 7,558 8,702 Portion of Aggregate Accrued Liabilities Covered by Assets (1) (2) (3) N/A 48.5% 0.0% N/A 54.4% 0.0% N/A 55.8% 0.0% N/A 50.3% 0.0% N/A 53.9% 0.0% N/A 56.6% 0.0% SEAD-Active and SEAD-OPEB: Data is not available. 84 Statistical Section Statistical Section Statistical Section Introduction The objective of the statistical section is to provide a historical perspective, context and relevant details to assist readers in evaluating the condition of the plans. All nonaccounting data is taken from ERSGA's internal sources except for information which is derived from the actuarial valuations. FY2010 was the first year ERSGA added this information in their Annual Financial Report. Therefore, historical detail may not be complete for some schedules. Financial Trends The following schedules have been included to help the reader understand how the System's financial position has changed over the past 10 years: Additions by Source Deductions by Type Change in Net Assets Operational Trends The following schedules have been included to help the readers understand how the System's financial report relates to the services provided by the System and the activities it performs: Retiree Information Withdrawal (Refund) Data New Retiree Elections Overall Plan Statistics 86 Additions by Source - Contribution/Investment Income (in thousands) 87 2003 ERS Employee Contributions $ Employer Contributions Investment Earnings Other Total Additions to (Deductions from) Plan Net Assets $ 55,456 246,172 488,611 -- 790,239 PSERS Employee Contributions $ Employer Contributions Investment Earnings Other Total Additions to (Deductions from) Plan Net Assets $ 1,298 3,555 29,649 594 35,096 GJRS Employee Contributions $ Employer Contributions Investment Earnings Other Total Additions to (Deductions from) Plan Net Assets $ 3,814 373 9,340 175 13,702 LRS Employee Contributions $ Employer Contributions Investment Earnings Other Total Additions to (Deductions from) Plan Net Assets $ 297 43 1,074 110 1,524 GMPF Employer Contributions $ 591 Investment Earnings 41 Total Additions to (Deductions from) Plan Net Assets $ 632 2004 54,166 245,388 1,115,798 -- 1,415,352 1,317 836 66,149 588 68,890 3,848 1,558 21,315 175 26,896 293 52 2,444 110 2,899 617 86 703 2005 49,973 243,074 930,287 -- 1,223,334 1,352 840 53,970 588 56,750 4,779 1,826 18,422 175 25,202 302 54 2,034 110 2,500 891 103 994 2006 50,963 258,482 774,724 -- 1,084,169 1,380 3,638 44,561 588 50,167 4,221 1,683 15,665 175 21,744 324 54 1,684 110 2,172 891 131 1,022 2007 49,250 270,141 1,869,113 90,333 2,278,837 1,420 6,490 106,833 588 115,331 4,040 1,778 39,324 175 45,317 320 62 4,072 110 4,564 1,005 503 1,508 2008 2009 48,324 286,256 (482,679) -- 43,978 281,206 (1,726,302) -- (148,099) (1,401,118) 1,451 2,869 (27,052) 588 (22,144) 1,472 5,096 (97,156) 588 (90,000) 4,698 2,395 (10,702) 175 (3,434) 4,612 1,703 (38,164) 175 (31,674) 320 73 (1,051) 110 (548) 320 71 (3,772) 110 (3,271) 1,103 (191) 912 1,323 (657) 666 2010 42,052 263,064 1,176,741 -- 1,481,857 1,483 5,530 66,404 -- 73,417 5,018 3,369 27,378 175 35,940 318 75 2,610 110 3,113 1,434 565 1,999 2011 39,480 261,132 2,269,270 -- 2,569,882 1,451 7,509 128,096 -- 137,056 4,721 1,163 57,330 -- 63,214 320 75 5,194 -- 5,589 1,282 1,465 2,747 Statistical Section 2012 36,561 274,034 233,308 (1,526) 542,377 1,426 15,884 13,554 -- 30,864 4,904 2,083 6,571 -- 13,558 323 76 550 -- 949 1,521 221 1,742 2003 SEAD - Active* Employee Contributions $ -- Employer Contributions -- Investment Earnings -- Insurance Premiums -- Total Additions to (Deductions from) Plan Net Assets $ -- SEAD - OPEB* Employee Contributions $ -- Employer Contributions -- Investment Earnings -- Insurance Premiums -- Total Additions to (Deductions from) Plan Net Assets $ -- 2004 -- -- -- -- -- -- -- -- -- -- 2005 -- -- -- -- -- -- -- -- -- -- 2006 -- -- -- -- -- -- -- -- -- -- 2007 -- -- -- -- -- -- -- -- -- -- 2008 -- -- (6,321) 864 (5,457) -- -- (27,032) 7,756 (19,276) 2009 -- -- (22,656) 880 (21,776) -- -- (96,424) 7,551 (88,873) 2010 -- -- 15,910 900 16,810 -- -- 69,340 6,755 76,095 2011 -- -- 33,023 847 33,870 -- -- 144,270 6,437 150,707 2012 -- -- 3,876 771 4,647 -- -- 17,193 5,532 22,725 88 *Plans began in 2008. Statistical Section Statistical Section Deductions by Type (in thousands) ERS Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Benefit Payments Service Partial Lump-Sum Option $ 497,634 549,545 605,688 664,891 721,869 797,052 889,669 878,482 921,136 964,485 6,289 14,360 17,821 24,792 22,011 23,480 30,946 31,963 Disability 92,433 101,887 111,902 120,315 127,091 131,709 135,743 146,031 140,849 143,317 Survivor Benefits 47,176 50,882 54,584 58,294 61,873 66,397 69,735 82,676 75,891 76,973 Total Benefit Payments $ 637,243 702,314 778,463 857,860 928,654 1,019,950 1,117,158 1,130,669 1,168,822 1,216,738 Net Administrative Expenses 8,509 8,474 9,587 10,596 14,901 18,805 16,809 14,505 14,431 12,051 Refunds 5,253 5,819 6,510 6,978 6,696 7,815 6,597 6,483 7,515 7,767 Total Deductions from Plan Assets $ 651,005 716,607 794,560 875,434 950,251 1,046,570 1,140,564 1,151,657 1,190,768 1,236,556 PSERS Benefit Payments Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Service $ 31,926 34,207 35,278 37,505 40,070 41,607 45,159 45,741 46,548 46,911 Disability 3,913 4,142 4,341 4,534 4,814 4,956 5,232 5,402 5,369 5,369 Survivor Benefits 1,182 1,297 1,397 1,465 1,580 1,682 1,806 2,052 2,063 1,903 Total Benefit Payments $ 37,021 39,646 41,016 43,504 46,464 48,245 52,197 53,195 53,980 54,183 Net Administrative Expenses 594 588 588 588 588 588 588 1,956 2,046 2,040 Refunds 233 294 287 316 319 308 261 251 267 349 Total Deductions from Plan Assets $ 37,848 40,528 41,891 44,408 47,371 49,141 53,046 55,402 56,293 56,572 GJRS Benefit Payments Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Service $ 5,688 6,047 6,827 7,663 7,908 8,259 9,453 10,633 11,245 12,608 Disability 47 48 76 103 106 110 112 114 112 113 Survivor Benefits 748 947 1,069 1,136 1,285 1,498 1,546 1,618 1,654 1,695 Total Benefit Payments $ 6,483 7,042 7,972 8,902 9,299 9,867 11,111 12,365 13,011 14,416 Net Administrative Expenses 175 175 175 175 175 175 175 270 290 310 Refunds 70 307 93 379 76 14 263 139 260 146 Total Deductions from Plan Assets $ 6,728 7,524 8,240 9,456 9,550 10,056 11,549 12,774 13,561 14,872 89 Statistical Section LRS Benefit Payments Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Service $ 920 986 1,169 1,210 1,187 1,228 1,265 1,308 1,309 1,364 Survivor Benefits 326 337 384 381 401 406 425 436 452 446 Total Benefit Payments $ 1,246 1,323 1,553 1,591 1,588 1,634 1,690 1,744 1,761 1,810 Net Administrative Expenses 110 110 110 110 110 110 110 120 131 110 Refunds 20 14 69 18 33 65 49 47 60 74 Total Deductions from Plan Assets $ 1,376 1,447 1,732 1,719 1,731 1,809 1,849 1,911 1,952 1,994 GMPF Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Benefit Payments Service* $ 6 49 93 150 225 303 382 489 579 678 Total Benefit Payments $ 6 49 93 150 225 303 382 489 579 678 Net Administrative Expenses 43 37 34 Total Deductions from Plan Assets $ 6 49 93 150 225 303 382 532 616 712 *The only type of retirement in GMPF is a service retirement. SEAD-Active Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Benefit Payments Death Benefits** $ - - - - - 7,261 6,636 4,817 5,197 6,018 Total Benefit Payments $ - - - - - 7,261 6,636 4,817 5,197 6,018 Net Administrative Expenses 22 22 22 22 22 Total Deductions from Plan Assets $ - - - - - 7,283 6,658 4,839 5,219 6,040 **The only type of benefit in SEAD-Active is a death benefit. Plan began in 2008. 90 Statistical Section SEAD-OPEB Benefit Payments Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Death Benefits** $ - - - - - 21,455 19,839 23,642 23,060 24,855 Total Benefit Payments Net Administrative Expenses - - - - - - - - - - 21,455 203 19,839 203 23,642 203 23,060 203 24,855 203 Total Deductions from Plan Assets 21,658 20,042 23,845 23,263 25,058 **The only type of benefit in SEAD-OPEB is a death benefit. Plan began in 2008. 91 Changes in Net Assets (in thousands) 92 ERS Total Additions $ Total Deductions Transfer In (Out) of Net Assets Changes in Plan Net Assets PSERS Total Additions Total Deductions Changes in Plan Net Assets GJRS Total Additions Total Deductions Changes in Plan Net Assets LRS Total Additions Total Deductions Changes in Plan Net Assets GMPF Total Additions Total Deductions Changes in Plan Net Assets SEAD - Active* Total Additions Total Deductions Changes in Plan Net Assets SEAD - OPEB* Total Additions Total Deductions Transfer In (Out) of Net Assets Changes in Plan Net Assets * Plans began in 2008. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 790,239 651,005 -- 139,234 1,415,352 716,607 -- 698,745 1,223,334 794,560 -- 428,774 1,084,169 875,434 -- 208,735 2,278,837 950,251 -- ,328,586 (148,099) 1,046,570 -- (1,194,669) (1,401,118) 1,140,564 -- (2,541,682) 1,481,857 1,151,657 -- 330,200 2,569,882 1,190,768 -- 1,379,114 542,377 1,236,556 (12,724) (706,903) 35,096 37,848 (2,752) 68,890 40,528 28,362 56,750 41,891 14,859 50,167 44,408 5,759 115,331 47,371 67,960 (22,144) 49,141 (71,285) (90,000) 53,046 (143,046) 73,417 55,402 18,015 137,056 56,293 80,763 30,864 56,572 (25,708) 13,702 6,728 6,974 26,896 7,524 19,372 25,202 8,240 16,962 21,744 9,456 12,288 45,317 9,550 35,767 (3,434) 10,056 (13,490) (31,674) 11,549 (43,223) 35,940 12,774 23,166 63,214 13,561 49,653 13,558 14,872 (1,314) 1,524 1,376 148 2,899 1,447 1,452 2,500 1,732 768 2,172 1,719 453 4,564 1,731 2,833 (548) 1,809 (2,357) (3,271) 1,849 (5,120) 3,113 1,911 1,202 5,589 1,952 3,637 949 1,994 (1,045) 632 703 994 1,022 1,508 912 666 1,999 2,747 1,742 6 49 93 150 225 303 382 532 616 712 626 654 901 872 1,283 609 284 1,467 2,131 1,030 -- -- -- -- -- (5,457) (21,776) 16,810 33,870 4,647 -- -- -- -- -- 7,283 6,658 4,839 5,219 6,040 -- -- -- -- -- (12,740) (28,434) 11,971 28,651 (1,393) -- -- -- -- -- (19,276) (88,873) 76,095 150,707 22,725 -- -- -- -- -- 21,658 20,042 23,845 23,263 25,058 -- -- -- -- -- -- -- -- -- 12,724 -- -- -- -- -- (40,934) (108,915) 52,250 127,444 10,391 Statistical Section Statistical Section Number of Retirees 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 0 PSERS Rerees 15,106 14,613 13,995 13,804 13,558 13,189 12,786 12,703 12,353 12,078 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 GMPF Rerees 2012 660 2011 568 2010 480 2009 386 2008 305 2007 236 2006 159 2005 104 2004 61 2003 17 0 100 200 300 400 500 600 700 93 Statistical Section Average Monthly Payments to Retirees 94 Statistical Section Annual Benefit (in thousands) 95 Statistical Section Withdrawal Statistics Note: The GMPF Plan does not have a refund feature. 96 Statistical Section Average Monthly Benefit Payment for New Retirees - ERS 2003 Average Monthly Benefit Average Final Average Salary Number of Retirees 2004 Average Monthly Benefit Average Final Average Salary Number of Retirees 2005 Average Monthly Benefit Average Final Average Salary Number of Retirees 2006 Average Monthly Benefit Average Final Average Salary Number of Retirees 2007 Average Monthly Benefit Average Final Average Salary Number of Retirees 2008 Average Monthly Benefit Average Final Average Salary Number of Retirees 2009 Average Monthly Benefit Average Final Average Salary Number of Retirees 2010 Average Monthly Benefit Average Final Average Salary Number of Retirees 2011 Average Monthly Benefit Average Final Average Salary Number of Retirees 2012 Average Monthly Benefit Average Final Average Salary Number of Retirees 10-15 Years of Credited Service 16-20 21-25 26-30 Over 30 Total $673.29 $2,675.88 299 $1,099.73 $3,307.90 233 $1,570.92 $3,133.09 234 $1,756.82 $7,027.30 261 $3,444.12 $4,268.39 1,009 $2,337.32 $4,147.79 2,036 $661.26 $2,729.52 336 $999.80 $2,840.39 271 $1,616.46 $3,390.17 202 $1,901.33 $3,561.77 290 $3,486.20 $4,404.67 991 $2,309.02 $3,717.68 2,090 $704.19 $2,979.35 309 $991.76 $2,858.79 312 $1,440.14 $3,219.54 254 $1,816.69 $3,553.20 299 $3,440.48 $4,321.38 1,091 $2,291.20 $3,711.85 2,265 $632.54 $2,867.00 281 $1,022.68 $2,971.73 299 $1,347.20 $3,087.80 219 $1,789.67 $3,587.30 298 $3,458.78 $4,345.99 1,011 $2,281.17 $3,715.95 2,108 $655.86 $2,935.70 307 $961.27 $3,071.63 303 $1,317.36 $3,265.26 247 $1,789.83 $3,745.37 292 $3,423.26 $4,373.83 1,022 $2,229.02 $3,778.07 2,171 $701.03 $3,025.39 309 $1,068.51 $3,181.44 306 $1,457.03 $3,408.23 280 $1,899.48 $3,767.28 290 $3,576.69 $4,489.73 1,032 $2,342.60 $3,873.97 2,217 $717.65 $3,109.07 344 $1,059.22 $3,179.28 320 $1,458.18 $3,483.90 301 $1,910.75 $3,875.27 324 $3,627.21 $4,548.96 949 $2,272.58 $3,891.02 2,238 $694.23 $3,023.45 391 $1,086.00 $3,345.36 324 $1,502.32 $3,555.21 332 $1,849.65 $3,802.65 375 $3,653.29 $4,588.73 981 $2,247.01 $3,900.93 2,403 $734.74 $3,228.07 437 $1,107.16 $3,205.88 322 $1,504.51 $3,478.73 389 $1,995.24 $3,762.88 461 $3,575.54 $4,532.07 885 $2,143.95 $3,825.88 2,494 $729.60 $3,040.00 518 $1,247.16 $3,275.37 385 $1,624.82 $3,388.85 414 $2,125.35 $3,807.26 486 $3,708.26 $4,702.47 776 $2,109.84 $3,775.94 2,578 97 Statistical Section Average Monthly Benefit Payment for New Retirees - PSERS 2003 Average Monthly Benefit Number of Retirees 2004 Average Monthly Benefit Number of Retirees 2005 Average Monthly Benefit Number of Retirees 2006 Average Monthly Benefit Number of Retirees 2007 Average Monthly Benefit Number of Retirees 2008 Average Monthly Benefit Number of Retirees 2009 Average Monthly Benefit Number of Retirees 2010 Average Monthly Benefit Number of Retirees 2011 Average Monthly Benefit Number of Retirees 2012 Average Monthly Benefit Number of Retirees 10-15 Years of Credited Service 16-20 21-25 26-30 Over 30 Total $137.89 292 $201.29 148 $258.92 124 $328.44 88 $419.56 97 $229.32 749 $138.46 357 $202.25 182 $273.64 145 $324.25 112 $421.35 89 $225.69 885 $140.98 322 $203.00 197 $269.23 131 $325.73 113 $422.95 93 $229.90 856 $137.90 347 $206.87 206 $265.04 127 $324.20 84 $413.20 115 $226.26 879 $143.42 323 $208.47 174 $265.12 106 $331.55 89 $426.70 93 $229.16 785 $149.91 362 $219.81 199 $279.58 116 $349.05 99 $439.31 98 $238.04 874 $156.52 391 $224.92 200 $289.93 157 $357.58 91 $460.04 90 $242.89 929 $157.66 448 $224.92 200 $300.93 162 $359.24 76 $464.07 105 $243.41 1001 $158.67 463 $227.68 200 $297.01 126 $374.01 79 $479.42 114 $245.04 982 $159.25 480 $236.46 182 $303.66 136 $362.36 74 $476.51 87 $238.59 958 Note: PSERS is not a final average pay plan. 98 Statistical Section Average Monthly Benefit Payment for New Retirees - GJRS 2003 Average Monthly Benefit Average Final Average Salary Number of Retirees 2004 Average Monthly Benefit Average Final Average Salary Number of Retirees 2005 Average Monthly Benefit Average Final Average Salary Number of Retirees 2006 Average Monthly Benefit Average Final Average Salary Number of Retirees 2007 Average Monthly Benefit Average Final Average Salary Number of Retirees 2008 Average Monthly Benefit Average Final Average Salary Number of Retirees 2009 Average Monthly Benefit Average Final Average Salary Number of Retirees 2010 Average Monthly Benefit Average Final Average Salary Number of Retirees 2011 Average Monthly Benefit Average Final Average Salary Number of Retirees 2012 Average Monthly Benefit Average Final Average Salary Number of Retirees 10-15 16-20 Years of Credited Service 21-25 26-30 Over 30 Total 0 $6,770.75 $4,531.83 $7,140.57 $5,439.24 $5,970.60 0 $8,460.17 $6,376.87 $9,564.12 $7,285.35 $7,921.63 0 6 2 4 1 13 $4,748.43 $9,137.11 1 $2,916.48 $5,997.81 3 $7,084.78 $9,564.12 1 $7,140.57 $9,564.12 1 0 $5,472.57 0 $8,565.79 0 6 $4,918.69 $9,420.45 2 $5,972.47 $8,785.09 8 $6,854.45 $9,481.56 10 $5,422.44 $7,262.55 3 0 $5,792.01 0 $8,737.41 0 23 $1,648.42 0 $7,018.67 0 0 $4,333.55 $3,680.42 0 $8,421.30 0 0 $6,050.86 1 0 1 0 0 2 $4,635.56 $7,888.25 4 $1,821.81 $8,213.52 3 $5,338.65 $7,150.62 3 $7,603.57 $10,184.26 1 0 $4,849.90 0 $8,359.16 0 11 $2,485.43 $6,662.15 4 0 $7,368.55 $4,735.08 0 $9,934.33 $6,342.20 0 2 2 0 $4,863.02 0 $7,646.23 0 8 $4,874.28 $9,519.58 8 $5,883.17 $8,825.88 5 $7,366.55 $10,071.58 7 $6,630.61 $8,881.08 5 $7,639.64 $10,232.57 2 $6,478.85 $9,506.14 27 $6,337.43 $10,490.01 1 $4,563.90 $7,018.08 5 $7,643.86 $10,490.01 2 $6,422.80 $8,602.74 4 0 $6,242.00 0 $9,150.21 0 12 $4,632.24 $9,211.23 4 $10,170.24 $14,910.13 2 $9,799.81 $13,052.66 2 $8,428.40 $11,264.63 3 0 $7,614.02 0 $11,505.85 0 11 $4,204.95 $7,788.39 5 $6,610.26 $9,887.17 4 $7,565.84 $10,361.29 4 $8,791.96 $11,714.95 7 $7,831.84 $10,490.01 1 $6,915.64 $10,035.77 20 99 Statistical Section Average Monthly Benefit Payment for New Retirees - LRS 2003 Average Monthly Benefit Number of Retirees 2004 Average Monthly Benefit Number of Retirees 2005 Average Monthly Benefit Number of Retirees 2006 Average Monthly Benefit Number of Retirees 2007 Average Monthly Benefit Number of Retirees 2008 Average Monthly Benefit Number of Retirees 2009 Average Monthly Benefit Number of Retirees 2010 Average Monthly Benefit Number of Retirees 2011 Average Monthly Benefit Number of Retirees 2012 Average Monthly Benefit Number of Retirees 8 - 14 Years of Credited Service 15 - 19 20 - 24 25 - 29 30 & over Total $321.39 8 $459.05 5 $625.33 6 0 $945.96 $587.93 0 3 22 $258.71 $553.70 0 0 0 $406.21 6 2 0 0 0 8 $358.41 $456.84 0 0 $981.11 $598.79 9 2 0 0 8 19 $355.63 $517.30 0 0 0 $436.47 3 3 0 0 0 6 $256.96 5 $476.39 5 $762.02 2 $939.00 $1,195.52 1 1 $725.98 14 $324.74 $604.63 $698.86 0 0 $542.74 4 4 2 0 0 10 $425.39 2 $650.99 1 0 $921.00 $1,203.00 $800.10 0 2 3 8 $372.93 $558.00 0 0 0 $465.47 8 1 0 0 0 9 $341.79 12 $589.12 1 0 $843.26 $934.73 $456.99 0 2 1 16 $363.66 $549.08 0 0 $1,286.43 $548.46 4 2 0 0 1 7 Note: LRS is not a final average pay plan. 100 Statistical Section Average Monthly Benefit Payment for New Retirees - GMPF 2003 Average Monthly Benefit Number of Retirees 2004 Average Monthly Benefit Number of Retirees 2005 Average Monthly Benefit Number of Retirees 2006 Average Monthly Benefit Number of Retirees 2007 Average Monthly Benefit Number of Retirees 2008 Average Monthly Benefit Number of Retirees 2009 Average Monthly Benefit Number of Retirees 2010 Average Monthly Benefit Number of Retirees 2011 Average Monthly Benefit Number of Retirees 2012 Average Monthly Benefit Number of Retirees Years of Credited Service 20-25 26 - 30 Over 30 Total $57.50 4 $90.00 4 $100.00 12 $89.50 20 $59.44 9 $81.54 13 $100.00 23 $86.56 45 $54.00 5 $83.57 7 $100.00 28 $91.37 40 $61.25 4 $85.00 13 $100.00 44 $94.26 61 $60.83 6 $83.46 13 $100.00 54 $93.84 73 $55.63 8 $83.61 18 $100.00 47 $91.10 73 $59.50 20 $87.63 19 $100.00 53 $88.64 92 $63.82 17 $85.83 18 $100.00 56 $90.44 91 $63.16 19 $91.47 17 $100.00 52 $90.40 88 $61.54 13 $90.33 15 $100.00 63 $92.83 90 Note: GMPF is not a final average pay plan. 101 Statistical Section Retired Members by Retirement Type ERS June 30, 2012 Amount of Monthly Benefit $ 1 - 500 501 - 1,000 1,001 - 1,500 1,501 - 2,000 2,001 - 2,500 2,501 - 3,000 3,001 - 3,500 3,501 - 4,000 4,001 - 4,500 4,501 - 5,000 over 5,000 Totals Retirement Type Service Disability Survivor 2,070 85 1,599 5,665 748 1,198 4,432 916 800 3,434 759 566 2,743 668 351 2,449 564 234 2,172 399 141 1,910 317 105 1,608 221 62 1,499 181 37 3,769 272 79 31,751 5,130 5,172 PSERS June 30, 2012 Amount of Monthly Benefit $ 1 - 100 101 - 200 201 - 300 301 - 400 401 - 500 over 500 Totals Retirement Type Service Disability Survivor 23 0 206 3,936 4 322 3,932 194 168 2,395 387 81 1,593 312 36 1,302 199 16 13,181 1,096 829 102 Statistical Section Retired Members by Retirement Type GJRS June 30, 2012 Amount of Monthly Benefit $ 1 - 1000 1,001 - 2,000 2,001 - 3,000 3,001 - 4,000 4,001 - 5,000 5,001 - 6,000 6,001 - 7,000 7,001 - 8,000 over 8,000 Totals Retirement Type Service Disability Survivor 7 0 10 14 0 9 6 0 10 5 0 23 11 2 5 16 0 0 25 0 0 66 0 0 26 0 0 176 2 57 LRS June 30, 2012 GMPF June 30, 2012 Amount of Monthly Benefit $ 1 - 250 251 - 500 501 - 750 751 - 1,000 over 1,000 Totals Retirement Type Service Disability Survivor 6 0 10 79 0 16 53 0 13 27 0 15 19 0 6 184 0 60 Amount of Monthly Benefit $ 1 - 49 50 - 100 over 100 Retirement Type Service 0 660 0 Totals 660 103 Statistical Section Retired Members by Optional Form of Benefit ERS June 30, 2012 Amount of Monthly Benefit $ 1 - 500 501 - 1,000 1,001 - 1,500 1,501 - 2,000 2,001 - 2,500 2,501 - 3,000 3,001 - 3,500 3,501 - 4,000 4,001 - 4,500 4,501 - 5,000 over 5,000 Maximum Plan 1,260 3,682 2,875 2,136 1,617 1,358 972 735 579 465 831 Option 1 336 999 883 810 610 488 364 251 178 116 267 Form of Benefit Option 2 Option 3 1,212 422 1,562 566 1,051 571 676 486 473 416 367 310 275 320 226 225 152 190 126 188 252 458 Option 4 383 414 370 308 347 484 588 703 662 714 2,102 Option 5A Option 5B 91 50 229 159 222 176 145 198 138 161 91 149 76 117 71 121 27 103 32 76 60 150 Totals 16,510 5,302 6,372 4,152 7,075 1,182 1,460 Maximum Plan Single life annuity Option 1 Reduced single life annuity with a guarantee of the remainder of the annuity savings fund account (contributions and interest), if any, to be paid upon the retiree's death Option 2 100% joint and survivor annuity with a popup option upon divorce Option 3 50% joint and survivor annuity with a popup option upon divorce Option 4 Various options, including a specified monthly amount payable to a beneficiary upon the retiree's death, several period certain annuities of varying length, and a five-year accelerated benefit Option 5A 100% joint and survivor annuity with a popup option upon divorce or the death of the beneficiary before the retiree Option 5B 50% joint and survivor annuity with a popup option upon divorce or the death of the beneficiary before the retiree 104 Statistical Section Retired Members by Optional Form of Benefit PSERS June 30, 2012 Amount of Monthly Benefit $ 1 - 100 101 - 200 201 - 300 301 - 400 401 - 500 over 500 Form of Benefit Maximum Plan Option AA Option AB Option AC Option AD 0 34 177 10 2 3,205 621 251 8 13 3,694 346 134 4 7 2,577 186 44 8 4 1,801 88 29 3 0 1,449 38 10 6 0 Option B 6 164 109 44 20 14 Totals 12,726 1,313 645 39 26 357 Maximum Plan Single life annuity Option AA 100% joint and survivor annuity Option AB 50% joint and survivor annuity Option AC Joint and survivor annuity with a specified monthly amount payable to a beneficiary Option AD Joint and survivor annuity with the amount payable to a beneficiary limited by the age difference between the retiree and the beneficiary Option B Annuity for a guaranteed period of time (5, 10,15, or 20 years). If retiree outlives guarantee period, there is no benefit due after retiree's death 105 Statistical Section Retired Members by Optional Form of Benefit GJRS June 30, 2012 Amount of Monthly Benefit $ 1 - 1000 1,001 - 2,000 2,001 - 3,000 3,001 - 4,000 4,001 - 5,000 5,001 - 6,000 6,001 - 7,000 7,001 - 8,000 over 8,000 Form of Benefit Maximum Plan Spousal Coverage 1 16 2 21 0 16 2 26 4 14 7 9 4 21 12 54 4 22 Totals 36 199 Maximum Plan Single life annuity Spousal Coverage Indicates the member elected at enrollment that a survivor annuity be paid to a surviving spouse LRS June 30, 2012 Amount of Monthly Benefit $ 1 - 250 251 - 500 501 - 750 751 - 1,000 over 1,000 Totals Form of Benefit Maximum Plan Option B1 Option B2 0 13 3 36 51 8 34 20 12 10 25 7 8 12 5 88 121 35 Maximum Plan Single life annuity Option B1 100% joint and survivor annuity Option B2 50% joint and survivor annuity GMPF and SEAD-Active and SEAD-OPEB June 30, 2012 The GMPF Plan provides a benefit only in one form, a life annuity. All 660 current retirees, therefore, have this same form of benefit. The SEAD-Active and SEAD-OPEB plans provide only a lump sum death benefit to a member's beneficiary(ies). 106 Statistical Section Top Participatory Employers FY10 ERS Department of Corrections Department of Behavioral Health and Developmental Disability Department of Transportation Department of Labor Department of Juvenile Justice Department of Natural Resources Department of Human Resources Department of Driver Services Department of Community Health Department of Revenue Total top Employers Total ERS Member Count PSERS Gwinnett County Schools Cobb County Schools Dekalb County Schools Clayton County Schools Muscogee County Schools Henry County Schools Cherokee County Schools Forsyth County Schools Richmond County Schools Paulding County Schools Total top Employers Total PSERS Member Count GJRS Council of Superior Court Judges Council of State Court Judges Prosecuting Attorney's Council Council of Juvenile Judges Total top Employers Total GJRS Member Count Member Count % of total plan 12,527 6,869 4,846 3,867 3,679 2,079 1,942 1,674 1,351 1,154 39,988 68,567 18.2% 10.0% 7.1% 5.7% 5.4% 3.0% 2.8% 2.4% 2.0% 1.7% 58.3% 3,931 2,471 2,234 1,382 970 909 902 894 877 715 15,285 39,962 9.8% 6.2% 5.6% 3.4% 2.4% 2.3% 2.3% 2.2% 2.2% 1.8% 38.2% 203 41.0% 108 21.8% 96 19.4% 71 14.4% 478 96.6% 495 Data from 9 years prior is unavailable. FY10 data is the first available. 107 Statistical Section Top Participatory Employers FY12 ERS Department of Corrections Department of Behavioral Health and Developmental Disability Department of Transportation Department of Juvenile Justice Department of Labor Department of Human Services Department of Natural Resources Department of Public Safety Department of Revenue Department of Public Health Total top Employers Total ERS Member Count PSERS Gwinnett County Schools Cobb County Schools Dekalb County Schools Clayton County Schools Muscogee County Schools Cherokee County Schools Henry County Schools Forsyth County Schools Richmond County Schools Houston County Schools Total top Employers Total PSERS Member Count GJRS Superior Courts of Georgia Prosecuting Attorney's Council Georgia Department of Law Cobb County Board of Commissioners Total top Employers Total GJRS Member Count SEAD-Active and SEAD-OPEB Department of Corrections Department of Transportation Department of Behavioral Health and Developmental Disability Department of Labor Department of Juvenile Justice Department of Natural Resources Department of Human Services Department of Public Safety Department of Revenue Department of Public Health Total top Employers Total SEAD Member Count Member Count % of total plan 11,927 5,628 4,437 3,520 3,441 2,013 1,807 1,701 1,115 969 36,558 63,963 18.6% 8.8 % 6.9 % 5.5 % 5.4 % 3.1 % 2.8 % 2.7 % 1.7 % 1.5 % 57.2% 3,922 2,507 2,344 1,085 920 911 866 860 829 756 15,000 38,659 10.1 % 6.5 % 6.1 % 2.8 % 2.4 % 2.4 % 2.2 % 2.2 % 2.1 % 2.0 % 38.7 % 204 40.4 % 116 23.7 % 93 18.4 % 77 15.2 % 490 97.0 % 505 8,624 4,194 3,601 2,763 2,386 1,620 1,578 1,375 757 682 27,580 49,212 17.5% 8.5% 7.3% 5.6% 4.8% 3.3% 3.2% 2.8% 1.5% 1.4% 56.0% 108 Statistical Data at June 30, 2012 109 System ERS PSERS GJRS LRS GDCP SCJRF Net Assets $ 11.6 billion $ 670.4 million Employer Contributions Old Plan: 11.63% New Plan: 11.63% GSEPS 7.42% ($274 mil) Employee Contributions Old Plan: 6% (with 4.75% pickup) New Plan: 1.25% GSEPS: 1.25% ($36.6 mil) Active Members Old Plan: (2%) 1,241 New Plan: (74%) 47,472 GSEPS: (24%) 15,250 Total: 63,963 Retirees Total: 42,053 Service: 31,018 Beneficiary: 5,172 Disability: 5,130 Inv. Sep.: 599 Law. Enf.: 134 $15.9 million $36 yr ($1.4 million) 38,659 15,106 $ 319.8 million 3.9% ($2.1 million) 7.5% +2.5% Spousal ($4.9 million) 505 235 8.5% $ 27.4 million $76 thousand (with 4.75% pickup) 220 244 ($323 thousand) $ 108.3 millon None 7.5% ($17.2 million) 16,535 1 $ 3 thousand $1.7 million None None 24 Annual Payment $1.2 billion Average Monthly Benefit $2,382 $54.2 million $14.4 million $1.8 million N/A $1.8 million $300 $5,283 $607 N/A $5,846 DARF SEAD GMPF $ 2 thousand $80 thousand None $1 billion None New Plan: 0.25% Old Plan: 0.50% $ 9.9 million $1.5 million None None No. Insured: 49,212 13,539 7 $80 thousand $952 No. Insured: 37,243 No. of Claims: 977 Amt.Pd: $30.8 mil Average Claim: $31,523 660 $678 thousand $91 Statistical Section