Comprehensive annual financial report, a component unit of the State of Georgia, fiscal year ended June 30, 2017

Introductory Section

3

TABLE OF CONTENTS

Introductory Section
Certificate of Achievement....................................................................................................3 Board of Trustees...................................................................................................................4 Letter of Transmittal ..............................................................................................................5 Your Retirement System........................................................................................................8 System Assets.........................................................................................................................9 Administrative Staff and Organization.................................................................................10 Summary of Plan Provisions................................................................................................11
Financial Section
Independent Auditors' Report.............................................................................................14 Management's Discussion & Analysis (Unaudited).............................................................16 Basic Financial Statements:
Statement of Fiduciary Net Position .........................................................................................20 Statement of Changes in Fiduciary Net Position.......................................................................21 Notes to Financial Statements...................................................................................................22 Required Supplementary Information (Unaudited): Schedule of Changes in Employers' and Nonemployers' Net Pension Liability........................36 Schedule of Employers' and Nonemployers' Net Pension Liability and Related Ratios...........36 Schedule of Employer and Nonemployer Contributions..........................................................37 Schedule of Investment Returns................................................................................................37 Schedule of the System's Proportionate Share of the Net Pension Liability to ERS.................37 Schedule of the System's Contributions to ERS.........................................................................37 Notes to Required Supplementary Information........................................................................38 Additional Information: Schedule of Administrative Expenses........................................................................................40 Schedule of Investment Expenses.............................................................................................40
Investment Section
Investment Overview...........................................................................................................41 Rates of Return....................................................................................................................42 Asset Allocation ...................................................................................................................43 Schedule of Fees and Commissions....................................................................................43 Investment Summary...........................................................................................................43 Portfolio Detail Statistics......................................................................................................44

1

Table of Contents

TABLE OF CONTENTS
Actuarial Section
Actuary's Certification Letter...............................................................................................45 Summary of Actuarial Assumptions and Methods:............................................................47
Service Retirement ....................................................................................................................49 Separation Before Service Retirement.......................................................................................49 Actuarial Valuation Data: Active Members.........................................................................................................................50 Retirees and Beneficiaries..........................................................................................................50 Solvency Test..............................................................................................................................51 Member & Employer Contribution Rates..................................................................................51 Schedule of Funding Progress....................................................................................................52 Analysis of Financial Experience................................................................................................53
Statistical Section
Statistical Section Overview.................................................................................................54 Financial Trends:
Additions by Source ..................................................................................................................54 Deductions by Type....................................................................................................................54 Changes in Fiduciary Net Position.............................................................................................55 Operating Information: Benefit Payment Statistics..........................................................................................................56 Member Withdrawal Statistics ..................................................................................................57 Average Monthly Benefit Payments for New Retirees..............................................................58 Retired Members by Type of Benefit.........................................................................................59 Retirement Payments by County of Residence.........................................................................60 Principal Participating Employers..............................................................................................62 Reporting Entities.......................................................................................................................63

Table of Contents

2

CERTIFICATE OF ACHIEVEMENT

3

Introductory Section

BOARD OF TRUSTEES
as of December 1, 2017**

Mr. J. Alvin Wilbanks* CHAIR
School Administrator Appointed by the Governor
Term Expires 6/30/19

Mr. Thomas W. Norwood* VICE-CHAIR
Investment Professional Elected by the Board of Trustees
Term Expires 6/30/20

Ms. Anne Cardella Classroom Teacher Appointed by the Governor Term Expires 6/30/20

Ms. Marion R. Fedrick TRS Member
Appointed by the Board of Regents Term Expires 6/30/18

Mr. Greg S. Griffin* State Auditor Ex-Officio

Mr. Steven N. McCoy* State Treasurer Ex-Officio

Ms. Deborah K. Simonds* Retired Teacher
Elected by the Board of Trustees Term Expires 6/30/18

Dr. William G. Sloan, Jr.* Member-at-Large
Appointed by the Governor Term Expires 6/30/20

Mr. Christopher M. Swanson Classroom Teacher
Appointed by the Governor Term Expires 3/31/18

* Investment Committee Member **There is one vacancy on the Board.

Introductory Section

4

LETTER OF TRANSMITTAL

Teachers Retirement System of Georgia
December 11, 2017 Board of Trustees Teachers Retirement System of Georgia Atlanta, Georgia

L.C. (Buster) Evans, Ed.D. Executive Director

I am pleased to present the Comprehensive Annual Financial Report of the Teachers Retirement System of Georgia (the System) for the fiscal year ended June 30, 2017. Responsibility for both the accuracy of the data, and completeness and fairness of the presentation, including all disclosures, rests with the management of the System. To the best of our knowledge and belief, 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. I trust that you will find this report helpful in understanding your retirement system.

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.
History and Overview
The System was created in 1943, by an act of the Georgia General Assembly to provide retirement security to those individuals who choose to dedicate their lives to educating the children of the State of Georgia, and began operations in 1945. A summary of the System's provisions is provided on pages 11-13 of this report.

Certificate of Achievement
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Teachers Retirement System of Georgia for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016. This was the 29th consecutive year that the System has achieved this prestigious award.
In order to be awarded a Certificate of Achievement, a government unit 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

The System is governed by a ten-member Board of Trustees which appoints the Executive Director who is responsible for the administration and operations of the System, which serves 447,071 active and retired members, and 310 employers.
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 the cost of a control should not exceed the benefits

5

Introductory Section

LETTER OF TRANSMITTAL

continued

likely to be derived. Therefore, the objective is to provide reasonable, rather than absolute assurance, that the financial statements are free of any material misstatements. 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 Management's Discussion and Analysis beginning on page 16 of this report for an overview of the financial status of the System, including a summary of the System's Fiduciary Net Position, Changes in Fiduciary Net Position, and Asset Allocations.
INVESTMENTS -- The System has continued to invest in a mix of liquid, high quality bonds and stocks as it historically has done. These types of investments have allowed 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. A combination of improving economic growth, low inflation and low interest rates combined to boost U.S. equity returns to over 18% for the fiscal year. A comparative analysis of rates of return is presented on page 42. For additional information and analysis pertaining to investment policies and strategies, asset allocations, and yield, see Management's Discussion and Analysis beginning on page 16 and the Investment Section beginning on page 41. The System addresses the safeguarding of investments by requiring that they be held by agent custodial banks in the name of the System and that deposits are insured by the Federal Deposit Insurance Corporation.
As in previous years, maintaining quality was a primary goal and was successfully met. "Conservation of Capital" and "Conservatism" continue to be the guiding principles for investment decisions. The System continued to use a diversified portfolio to accomplish these objectives.
FUNDING -- The System's funding policy provides for employee and employer contributions at rates, expressed as a percentage of annual covered payroll, that are sufficient to provide resources to pay benefits when due.
A useful indicator of the funded status of a retirement system is the relationship between the actuarial value of assets and the actuarial accrued liabilities. The System continues to remain strong as evidenced by the ratio of the actuarial value of assets to the actuarial accrued liabilities. This ratio was 74.3% for the fiscal year ended June 30, 2016. The ultimate test of the financial soundness

of a retirement system is its ability to pay all promised benefits when due. I am proud to say that through the continued wisdom and the support of Governor Nathan Deal and the Georgia General Assembly, the System has been and will continue to be funded on an actuarially sound basis, thus providing the membership the comfort and security they expect from their retirement system.
Initiatives
TRS continuously monitors and works to improve all aspects of public pension management. Our executive management team worked closely with the Georgia State Financing and Investment Commission providing detailed pension, financial, and actuarial information for disclosure in the State's bond offerings. TRS is pleased to work diligently with the State of Georgia to maintain the State's coveted AAA bond ratings.
Maintaining our financial security and stability remained a top priority. The dedicated experts with our Division of Investment Services achieved a 12.5% rate of return, enhancing the System's portfolio. The continued recovery in the financial markets is only one positive funding impact TRS monitored this last year. Actively contributing membership numbers increased, new retirement benefit payments and member withdrawals decreased slightly, and restored salary increases to public employees will have a positive impact on the System's future financial stability and security.
The reporting of the System's financial statements remained a priority, and I am pleased to report TRS received an unmodified opinion for both the financial statement audit as of June 30, 2017 and the audit of the Schedule of Employer and Nonemployer Allocations (GASB 68) as of June 30, 2016. The full report of the System's financial audit is available on pages 14-15. The GASB 68 audit is available on our website at http://www.trsga.com/ employer/pension-accounting-changes/gasb-68-audit-reports.
Knowing where an agency is heading in the future is vital to its success and TRS makes our future a priority. We successfully completed the Strategic Plan for FY 2017 - 2020 and developed an agency succession plan for implementation to maintain business continuity. TRS will welcome two new executives to our team this coming year: Randy Dennis, Chief Financial Officer and Brooke Lucas, Chief Operating Officer--both of whom will bring varying expertise and a number of years in state government administrative experience.
Security of the System's technology system and member data is a vital component of our work here at TRS. TRS successfully

Introductory Section

6

LETTER OF TRANSMITTAL
continued

passed two network security audits conducted by a private sector security firm and completed our annual IT audit with no issues identified. Network segmentation was designed and implemented to prevent access to resources and sensitive data and internal vulnerability scanning was implemented.
Customer access was enhanced with automated business processes, including improved response time and scalability on tablets and mobile devices. In an effort to increase communication with our members, TRS established a presence on social media via Twitter and Facebook. To continue our education efforts, we piloted two new programs: 1) group counseling and 2) mid-career counseling programs. Both programs were designed to effectively communicate with our members.
Other Information
INDEPENDENT AUDIT -- The Board of Trustees requires an annual audit of the financial statements of the System by independent, certified public accountants. The accounting firm of KPMG LLP was selected by the Board. The independent auditors' report on the statements of plan fiduciary net position and the related statements of changes in plan fiduciary net position is included in the Financial Section of this report.

ACKNOWLEDGMENTS -- The compilation of this report reflects the combined effort of the staff under the leadership of the Board of Trustees. It is intended to provide complete and reliable information as a basis for making management decisions, as a means of determining compliance with legal provisions, and as a means for determining responsible stewardship of the assets contributed by the System's members, their employers, and the State of Georgia.
Copies of this report can be obtained by contacting the System, or may be downloaded from the System's website.
I would like to take this opportunity to express my gratitude to Governor Nathan Deal, members of the Georgia General Assembly, the staff, the advisors, and to the many people who have worked so diligently to ensure the successful operation of the System.
Sincerely,
L.C. (Buster) Evans, Ed.D. Executive Director

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Introductory Section

YOUR RETIREMENT SYSTEM

Financial & Statistical Highlights

Financial Highlights Member Contributions Employer and Nonemployer Contributions Interest and Dividend Income Benefits Paid to Retired Members Member Withdrawals Interest Credited to Member Contributions

June 30,

2017

2016

$ 716,233,000 $ 1,654,844,000 $ 1,490,357,000 $ 4,461,124,000 $ 76,296,000

$ 685,626,000 $ 1,580,532,000 $ 1,442,252,000 $ 4,228,819,000 $ 79,334,000

$ 335,146,000 $ 320,388,000

% Change
+ 4.5 + 4.7 + 3.3 + 5.5 _ 3.8
+ 4.6

Statistical Highlights Active Membership Members Leaving the System Retired Members Average Monthly Benefit

222,918 7,296
122,629 $ 3,032

218,215
7,383 117,918 $ 2,989

+ 2.2 _ 1.2
+ 4.0 + 1.4

Introductory Section

8

SYSTEM ASSETS

Total System Assets at June 30 (dollars in thousands)

Equities Fixed Income Other(1)
Total System Assets

2012

2013

2014

2015

2016

2017

$ 37,190,400 $ 41,395,706 $ 47,126,335 $ 46,422,828 $ 43,651,536 $ 49,236,293 15,188,293 14,882,328 17,490,895 18,807,238 19,979,237 20,139,422 1,154,311 2,360,040 1,907,659 1,620,195 2,087,314 2,046,795

$ 53,533,004 $ 58,638,074 $ 66,524,889 $ 66,850,261 $ 65,718,087 $ 71,422,510

EQUITIES FIXED INCOME OTHER (1) Includes receivables, cash and cash equivalents, and capital assets, net.

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Introductory Section

ADMINISTRATIVE STAFF & ORGANIZATION

Dr. L.C. (Buster) Evans Executive Director

Stephen J. Boyers Chief Financial Officer

Charles W. Cary, Jr. Chief Investment Officer
Investment Services

R. Cory Buice Director
Retirement Services

K. Paige Donaldson Director
Employer Services and Contact Management

Lisa M. Hajj Director
Communications

Dina N. Jones Director
Member Services

Laura L. Lanier Controller
Financial Services

J. Gregory McQueen Director
Information Technology

Consulting Services
Actuary Cavanaugh Macdonald
Consulting, LLC
Auditor KPMG LLP

Medical Advisors
Gordon J. Azar, M.D. Atlanta, Georgia William Biggers, M.D. Atlanta, Georgia Marvin Bittinger, M.D.
Gainesville, Georgia Pedro Garcia, M.D.
Atlanta, Georgia Harold Sours, M.D.
Atlanta, Georgia Joseph W. Stubbs, M.D. Albany, Georgia

Investment Advisors*
Albritton Capital Management Baillie Gifford Overseas Limited Barrow, Hanley, Mewhinney & Strauss Cooke & Bieler Fisher Investments Mondrian Investment Partners Limited Sands Capital Management
* See page 43 in the Investment Section for a summary of fees paid to investment advisors.

The Director of Human Resources position was vacant at June 30, 2017.

Introductory Section

10

SUMMARY OF PLAN PROVISIONS

Our Purpose

The Teachers Retirement System of Georgia (the System) was established in 1943, by an act of the Georgia General Assembly for the purpose of providing retirement allowances and other benefits for teachers of the State, and began operations in 1945. The System has the power and privileges of a corporation and the right to bring and defend actions.
The major objectives of the System are (1) to pay monthly benefits due to retirees accurately and in a timely manner, (2) to soundly invest retirement funds to ensure adequate financing for future benefits due and for other obligations of the System, (3) to accurately account for the status and contributions of all active and inactive members, (4) to provide statewide educational and counseling services for System members, and (5) to process refunds due to terminated members.

one active member of the System who is not an employee of the Board of Regents
one member-at-large Board of Regents appointee:
one active member of the System who is an employee of the Board of Regents
Trustee appointees: one member who has retired under the System one individual who is a citizen of the State, not a member of the System, and experienced in the investment of money
A complete listing of the current Board of Trustees is included on page 4 of this report.

Administration
State statutes provide that the administration of the System be vested in a ten-member Board of Trustees comprised as follows:
Ex-officio members: the State Auditor the State Treasurer
Governor's appointees: two active members of the System who are classroom teachers and not employees of the Board of Regents one active member of the System who is a public school administrator

Management of the System is the responsibility of the Executive Director who is appointed by the Board and serves at its pleasure. On behalf of the Board, the Executive Director is responsible for the proper operation of the System, engaging such actuarial and other services as shall be necessary to transact business, and paying expenses necessary for operations. A listing of the administrative staff is included on page 10 of this report.
Membership
All personnel employed in a permanent status position, and not less than one-half time, with local boards of education, charter schools, universities and colleges, technical colleges, Board of Regents, county

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Introductory Section

SUMMARY OF PLAN PROVISIONS

continued

and regional libraries, RESAs, and certain State of Georgia agencies are required to be members as a condition of employment. Exceptions to TRS membership include employees required to participate in another Georgia retirement plan or employees who may elect the Board of Regents Optional Retirement Plan in lieu of TRS membership.
Eligibility
Service Retirement Active members may retire and elect to receive monthly retirement benefits after one of the following conditions: 1) completion of 10 years of creditable service and attainment of age 60, or 2) completion of 25 years of creditable service.
Disability Retirement Members are eligible to apply for monthly retirement benefits under the disability provision of the law if they are an active member, have at least 10 years of creditable service, and are permanently disabled.
The Formula
Normal Retirement Any member who has at least 30 years of creditable service or who has at least 10 years of creditable service and has attained age 60 will receive a benefit calculated by using the percentage of salary formula. Simply stated, two percent (2%) is multiplied by the member's years of creditable service established with the System, including partial years (not to exceed 40 years). The product is then multiplied by the average monthly salary for the two highest consecutive membership years of service. The resulting product is the monthly retirement benefit under the maximum plan of retirement.
Early Retirement Any member who has not reached the age of 60 and has between 25 and 30 years of creditable service will receive a reduced benefit. The benefit will be calculated using the percentage of salary formula explained above. It will then be reduced by the lesser of 1/12 of 7% for each month the member is below age 60 or 7% for each year or fraction thereof the member has less than 30 years of creditable service. The resulting product is the monthly retirement benefit under the maximum plan of retirement.
Disability Retirement Disability retirement benefits are also calculated using the percentage of salary formula explained above. The resulting product

is the monthly disability retirement benefit under the maximum plan. You must have at least 10 years of creditable service to qualify; however, there is no age requirement for disability retirement.
Plan A - Maximum Plan of Retirement
This plan produces the largest possible monthly benefit payable to the member only during his or her lifetime. There are no survivorship benefits under this plan.
Plan B - Optional Plans of Retirement
Upon retirement, a member of the System may elect one of six optional plans that provide survivorship benefits. The election of an optional form of payment is made upon application for retirement and it becomes irrevocable upon distribution of the first benefit check. The six options are as follows:
Option 1 The retiring member accepts a relatively small reduction from the maximum monthly benefit in order to guarantee to the estate, beneficiary, or beneficiaries named on the retirement application, a lump-sum refund of any remaining portion of member contributions and interest.
Option 2 This plan offers the retiring member a reduced monthly benefit, based on the ages of the member and the beneficiary, payable for life. It further provides a guarantee to the surviving named beneficiary that, at the death of the retired member, the beneficiary will receive the same basic monthly retirement allowance the member received at the date of retirement plus any cost-of-living increases the member received up to the time of death.
Option 2 Pop-Up Any member may elect a reduced retirement allowance to be designated "Option 2 Pop-Up" with the provision that if the beneficiary dies prior to the retiree that the basic benefit payable to the retiree shall increase to an amount the retiree would have received under Plan A - Maximum Plan.
Option 3 This plan of retirement offers a reduced monthly benefit that is based on the ages of the member and the beneficiary. The resulting benefit is paid to the retired member for life, with the guarantee to the surviving named beneficiary that at the time of the retired member's death, the beneficiary will receive a

Introductory Section

12

SUMMARY OF PLAN PROVISIONS
continued

payment for life of one-half of the initial monthly benefit received by the member at the time of retirement plus one-half of any costof-living increases the member received up to the time of death.
Option 3 Pop-Up Any member may elect a reduced retirement allowance to be designated "Option 3 Pop-Up" with the provision that if the beneficiary dies prior to the retiree, the basic benefit payable to the retiree shall increase to the amount the retiree would have received under Plan A - Maximum Plan.
Option 4 This option offers a reduced monthly lifetime benefit in exchange for the flexibility to designate a specific dollar amount or percentage of your monthly benefit to be paid to your beneficiary after your death. The beneficiary benefits you specify under this plan cannot cause your monthly benefit to be reduced below 50% of the maximum benefit available to you. If multiple beneficiaries predecease you, the dollar amounts for the percentages are not adjusted. Beneficiaries also receive a prorated share of any cost-of-living increases you received up to the date of death.
Partial Lump-Sum Option Plan
TRS offers a Partial Lump-Sum Option Plan (PLOP) at retirement. In exchange for a permanently reduced lifetime benefit, a member

may elect to receive a lump-sum distribution in addition to a monthly retirement benefit. The age of the member and plan of retirement are used to determine the reduction in the benefit.
A member is eligible to participate in the Partial Lump-Sum Option Plan if he or she meets the following criteria. A member must:
have 30 years of creditable service or 10 years of creditable service and attain age 60 (not early retirement).
not retire with disability benefits.
At retirement, a member may elect a lump-sum distribution in an amount between 1 and 36 months of his or her normal monthly retirement benefit. This amount will be calculated under Plan A - Maximum Plan of Retirement and will be rounded up or down to be a multiple of $1,000. If a PLOP distribution is elected, the monthly benefit is actuarially reduced to reflect the value of the PLOP distribution. The combination of both the PLOP distribution and the reduced benefit are the same actuarial value as the unreduced normal benefit alone.
Financing the System
The funds to finance the System come from member contributions, 6.00% of annual salary; employer contributions, 14.27% of annual salary; and investment income.

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Introductory Section

INDEPENDENT AUDITORS'REPORT

KPMG LLP Suite 2000, 303 Peachtree Street, NE Atlanta, GA 30308 www.kpmg.com

Report on the Financial Statements
We have audited the accompanying financial statements of the Teachers Retirement System of Georgia (the System), a component unit of the State of Georgia, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the System's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. 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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the fiduciary net position of the System as of June 30, 2017, and the changes in fiduciary net position for the year then ended in accordance with U.S. generally accepted accounting principles.
Other Matters
Required Supplementary Information
U.S. generally accepted accounting principles require that the management's discussion and analysis, schedule of changes in employers' and nonemployers' net pension liability, schedule of employers' and nonemployers' net pension liability and related ratios, schedule of employer and nonemployer contributions, schedule of investment returns, schedule of the System's proportionate share of the net pension liability to ERS, and schedule of the System's contributions to ERS on pages 16 19 and 36-37 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.
Supplementary and Other Information
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, and introductory, investment, actuarial, and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements.

Financial Section

14

INDEPENDENT AUDITORS'REPORT

continued

The schedules of administrative expenses and investment expenses are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements 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 basic 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 basic financial statements as a whole.
The introductory, investment, actuarial, and statistical sections have 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 an assurance on them.

Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2017 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the System's internal control over financial reporting and compliance.

Atlanta, Georgia September 29, 2017, except for the introductory, investment, actuarial and statistical sections and the schedule of investment expenses which are as of December 11, 2017

15

Financial Section

MANAGEMENT'S DISCUSSION & ANALYSIS
(Unaudited)

This section provides a discussion and analysis of the financial performance of the Teachers Retirement System of Georgia (the System) for the year ended June 30, 2017. The discussion and analysis of the System's financial performance is within the context of the accompanying financial statements and disclosures following this section.

Financial Highlights
At June 30, 2017, the System's assets exceeded its liabilities by $71.3 billion (reported as net position) as compared to the net position of $65.6 billion at June 30, 2016, representing an increase of $5.8 billion.
Contributions from members increased by $30.6 million or 4.5% from $685.6 million in 2016 to $716.2 million in 2017. Employer and nonemployer contributing entity (Nonemployer) contributions increased by $74.3 million or 4.7% from $1.6 billion in 2016 to $1.7 billion in 2017. The increase in member and employer contributions is primarily due to an increase in the number of active members and higher average payroll during the year.
Pension benefits paid to retirees and beneficiaries for the years ended June 30, 2017 and 2016 were $4.5 billion and $4.2 billion, respectively, representing an increase of 5.5%. This is due to an increase in the number of retirees and beneficiaries receiving benefit payments and postretirement benefit adjustments.

Overview of the Financial Statements
The basic financial statements include (1) the statement of fiduciary net position, (2) the statement of changes in fiduciary net position, and (3) notes to the financial statements. The System also includes in this report additional information to supplement the financial statements.
The System prepares its financial statements on an accrual basis in accordance with U.S. generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB). These statements provide information about the System's overall financial status.
In addition, the System presents six required supplementary schedules, which provide historical trend information about the plan. Four of these schedules are presented from the perspective of the System reporting as the plan and include (1) a schedule of changes in employers' and nonemployers' net pension liability;

Financial Section

16

MANAGEMENT'S DISCUSSION & ANALYSIS

(Unaudited) continued

Overview of the Financial Statements continued
(2) a schedule of employers' and nonemployers' net pension liability and related ratios; (3) a schedule of employer and nonemployer contributions; and (4) a schedule of investment returns. Two schedules are presented from the perspective of the System reporting as the employer for its employees who are participants in the Employees' Retirement System of Georgia (ERS) and include (1) a schedule of the System's proportionate share of the net pension liability to ERS and (2) a schedule of the System's contributions to ERS.
The Statement of Fiduciary Net Position
The Statement of Fiduciary Net Position presents information that includes all of the System's assets and liabilities, with the balance reported as and representing the Net Position Restricted for Pensions. The investments of the System in this statement are presented at fair value. This statement is presented on page 20.
The Statement of Changes in Fiduciary Net Position
The Statement of Changes in Fiduciary Net Position reports how the System's net position changed during the fiscal year. The additions and the deductions to net position are summarized in this statement. The additions include contributions and investment income, which includes the net increase (decrease) in the fair value of investments. The deductions include benefit payments, refunds of member contributions, and administrative expenses. This statement is presented on page 21.
Notes to the Financial Statements
The accompanying notes to the financial statements provide information essential to a full understanding of the System's financial statements. The notes to the financial statements begin on page 22 of this report.

liability, and the effects of certain changes on those items. This trend information will be accumulated to display a 10-year presentation.
Schedule of Employers' and Nonemployers' Net Pension Liability and Related Ratios: This schedule presents historical trend information about the net pension liability and includes total pension liability, the plan's fiduciary net position, net pension liability, coveredemployee payroll, and the ratios of fiduciary net position to total pension liability and net pension liability to coveredemployee payroll. This trend information will be accumulated to display a 10-year presentation.
Schedule of Employer and Nonemployer Contributions: This schedule presents historical trend information for the last ten consecutive fiscal years about the actuarially determined contributions of employers and nonemployers and the contributions made in relation to the requirement.
Schedule of Investment Returns: This schedule presents historical trend information about the annual moneyweighted rate of return on plan investments, net of plan investment expense. This trend information will be accumulated to display a 10-year presentation.
Schedule of the System's Proportionate Share of the Net Pension Liability to ERS: This schedule presents historical trend information about the System's proportionate share of the net pension liability for its employees who participate in the ERS plan. This trend information will be accumulated to display a 10-year presentation.
Schedule of the System's Contributions to ERS: This schedule presents historical trend information about the System's contributions for its employees who participate in the ERS plan. This trend information will be accumulated to display a 10-year presentation.

Required Supplementary Information

A brief explanation of the six required schedules found beginning on page 36 of this report follows:

Schedule of Changes in Employers' and Nonemployers'
Net Pension Liability: This schedule presents historical trend information about the changes in the net pension liability and includes the beginning and ending balances of the total pension liability and the plan's fiduciary net position, the net pension

17

Financial Section

MANAGEMENT'S DISCUSSION & ANALYSIS

Financial Analysis of the System

(Unaudited) continued

This table presents a summary of the System's net position at June 30, 2017 and 2016.
The $5.8 billion increase in net position from 2016 to 2017 is primarily due to the increase in equity markets.

Summary of TRS Net Position (dollars in thousands)

Net position June 30Net position JAunmeo3uN0nett positionPJeurcnAeemn3toa0ugnet

2017

20210617

cha2n0g1e67

chcah2na0gn1e6ge

Assets:

Assets:

Assets:

Cash and cash equivaCleansths and cash equiCvaalesnhtsand cash equivalents

and receivables and rec$eivable2s,039,1a5n7d rece$ivable2s,20,8003,91,41057 $

Investments

Investments 69,37In5v,e7s1t5ments 636,96,3307,57,77315

Capital assets, net Capital assets, net C7a,6p3it8al assets, net 7,71,76438

2(4,0083,9098,1345)07 56,7394,63437,9054,727135
476,1647348

2,0(248.00,)91%8430) 653,76943.400,974723
6.75,41674

Total assets

Tota7l 1a,s4s2e2t,s510 Tota6l5a7,s17s,14e82t,s20,85710

567,7510,74412,4822,0538170

65,7801.487,402837

Deferred outflows of reDseofeurrceedsoutflows ofDreesfeo8ru,r4erc8de3osutflows of res4o,u89r,7c48e8s3

3,5480,9457883

70.344,590758

Liabilities:

Liabilities:

Liabilities:

Net pension liability Net pension liability3N3e,0t 5p7ension liability273,37,00257

Due to brokers and acDcuoeuntotsbrokers and aDcuceotuontbsrokers and accounts

payable

payable

56,8p8a8yable

1405,67,38288

Total liabilities

Total liab8il9it,i9e4s5 Total lia1b6i8l8i,t94ie,3s9445

Deferred inflows of resDoeufrecreresd inflows of reDseofeurrcee7ds6inflows of reso2u,r2c2e0s76

Net position

$ Net 7p1o,s3it4io0n,972 $Net 6p5o7,s15i,5t3i2o4,n04,19172 $

523,3735,7050527
(81345,8064,78438)28 (71868,4898,49934)45
(2,124,2427) 06 567,7518,53854,5206,4911712

192.573,375052
(51(984.306,)874342) (41(67.86,)48394) (96(.26,)124240) 65,7585.828,54611

PeArmceonutangt e change
(40(2,9.08)3%) 5,7449,9.042
64.564 5,7048,4.723
730,5.405
159,3.355
(8(539,8.64)4) (7(486,4.68)9) ((926,1.64)4) 5,7888,5.861

This table presents the investment allocation at June 30, 2017 and 2016.

Investment Allocation

Asset allocation at JuAnses3e0t a(ilnlopceartcioenntaatgJeusn)e: 30 (in percentages):

Equities:

Equities:

Domestic

Domestic

International

International

Domestic obligations:Domestic obligations:

U.S. Treasuries U.S. Treasuries

Corporate and other bCoonrdpsorate and other bonds

International obligatioInnste: rnational obligations:

Governments

Governments

Corporates

Corporates

Asset allocation at JuAnses3e0t a((idlnlootclhlaotruisosniannatdthsoJ)u:nsean3d0s()i:n thousands):

Equities:

Equities:

Domestic

Domestic

$

International

International

Domestic obligations:Domestic obligations:

U.S. Treasuries U.S. Treasuries

Corporate and other bCoonrdpsorate and other bonds

International obligatioInnste: rnational obligations:

Governments

Governments

Corporates

Corporates

$

2017

20210617

53.2 % 17.7
16.2 11.2
0.5 1.2

525.37.2%% 151.79.7
151.62.2 141.15.2
0.05.5 1.12.2

36,932,301 $ 33,65,3903,25,43101

12,303,992

101,21,230,39,9592

11,243,449 7,757,487

91,16,9234,32,344 9 9,72,2785,75,14987

322,725 815,761
69,375,715

32342,21,17825 73831,53,676 1
$ 636,96,307,57,7315

2016
52.7 15.9
15.2 14.5
0.5 1.2
33,530,54 10,120,99
9,693,23 9,228,51
324,11 733,36 63,630,77

Financial Section

18

MANAGEMENT'S DISCUSSION & ANALYSIS

(Unaudited) continued

Financial Analysis of the System continued

The total investment portfolio at June 30, 2017 increased $5.7 billion from June 30, 2016, which is primarily due to the increase in equity markets.
Investment performance is calculated using a time-weighted rate of return using the Daily Valuation Method. The time-weighted rate of return in fiscal year 2017 was 12.5%, with a 19.2% return for equities and a (1.0)% return for fixed income. The fiveyear annualized rate of return at June 30, 2017 was 9.4% with a 12.8% return on equities and a 1.8% return on fixed income.

A money-weighted return is weighted by the amount of dollars in the fund at the beginning and end of the performance period. A money-weighted return is highly influenced by the timing of cash flows into and out of the fund and is a better measure of an entity or person who controls the cash flows into or out of the fund. The nondiscretionary cash flows for the plan, primarily contributions and benefit payments, have a considerable impact on the moneyweighted returns of the portfolio. The money-weighted rate of return for the fiscal year ended June 30, 2017 was 7.6%, compared to (2.9)% for the fiscal year ended June 30, 2016.

Changes in TRS Net Position (dollars in thousands)

Changes in net posCithioannges in net pAomCsihotiauonngt es in nePt peAorcsmeitnoiotuanngte

2017

22001167

ch2a0n1g67e

cchh2aa0nn1g6gee

Additions:

Additions:

Additions:

Employer contributioEnsmployer $contribu1t,i6oE4nm8s,p6l6o9yer c$ontribu11t,i5,o67n42s8,6,62649 $

Nonemployer contribNutoionnesmployer contribNuo6tin,o1en7ms5ployer contribu7t6i,o9,1n07s85

Member contributionsMember contributio7nM1s6e,m23b3er contributio6n78s156,6,22363

Net investment incomNeet investment in7c,o9mN7e1et,6in7v7estment inc7o8,m9170e1,5,67747

1,56774628,0,6426549 (176,7,91307385) 67381056,6,62023763
77,1,89617101,1,5607347

1,57624,.06842%54 (2(171,.7930) 38) 638054,.650276
7,18618103,.150734

Total additions

Total1a0d,d3i4ti2o,n7s54 Total a13d0,d0,3i7t4i6o2,n7,7s3524

1730,2,03674662,0,7235224

73,20267366,.072232

Deductions:

Deductions:

Deductions:

Benefit payments Benefit payments4,4B6e1n,1e2fi4t payments44,2,42681,8,11294

Refunds

Refunds

R7e6f,u2n9d6s

7796,3,23946

Administrative expenAsedsministrative expenA1sd6em,s7i7n3istrative expen1s15e6,s2,77793

42,24326281,3,81012594 (7396,0,32339846) 1156,4,2797493

4,232285,.3850159 7((393,.0383) 84) 1159,.4289749

Total deductions Total d4e,d5u5c4t,i1o9n3s Total d4e4,d3,5u25c34t,i4,o13n92s3

42,35325034,7,41639123

4,2332035,.7436312

Net increase

Net increase

Net increase

(decrease)

(decrease)

(decrease)

in net position $ in n5e,t7p8o8s,5it6io1n $ in n(1e5,t2,7p48o68s,7,i5t0i6o01n) $

7(15,0,27348568,2,75606101)

(71,025346564,.2736010)

This table

pPreAersmceenontutsanagt e

Percenta

sucmhmanargyeof

change

changes in the

System7'6s4,0n.84e5t%

4.

positio(n211,f7.o93r)3t)he

(21.

years e3n04,d6.e50d7June

4.

30,72,108618173,1a.50n3d

883.

20176,2. 26366,0.2 2

236.

2325,3.505

5.

(3(3,0.83)8)

(3.

19,4.894

9.

2305,7.361

5.

7,053654,2.361

564.

Additions
The System accumulates resources needed to fund benefits through contributions and returns on invested funds. Member contributions were higher with an increase of 4.5% and employer contributions were higher with an increase of 4.8% compared to 2016 primarily due to an increase in membership salary coupled with an increase in the number of active members in 2017. The net investment income was significantly higher in 2017 compared to 2016, primarily due to higher returns in equity markets.
Deductions
Deductions increased 5.3% in 2017, primarily because of the 5.5% increase in benefit payments. Regular pension benefit payments

increased due to an increase in the number of retirees and beneficiaries receiving benefit payments to 122,629 in 2017 from 117,918 in 2016 and postretirement benefit increases.
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 Teachers Retirement System of Georgia, Two Northside 75, Suite 100, Atlanta, GA 30318.

19

Financial Section

STATEMENT OF FIDUCIARY NET POSITION
June 30, 2017 (in thousands)
Assets

Deferred Outflows of Resources Liabilities
Deferred Inflows of Resources Net Position Restricted for Pensions
See accompanying notes to financial statements.

Financial Section

20

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
For the Year Ended June 30, 2017 (in thousands)

Additions:

Deductions:

Net Position Restricted for Pensions:
See accompanying notes to financial statements.

21

Financial Section

NOTES TO FINANCIAL STATEMENTS

1. Plan Description
Teachers Retirement System of Georgia (the System) was created in 1943 by an act of the Georgia Legislature (the Act) to provide retirement benefits for teachers who qualify under the Act. The System administers a costsharing, multipleemployer defined benefit pension plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans. A Board of Trustees comprising two appointees by the Board, two exofficio state employees, five appointees by the Governor, and one appointee of the Board of Regents is ultimately responsible for the administration of the System.
Eligibility and Membership
All teachers in the state public schools, the University System of Georgia (except those professors and principal administrators electing to participate in an optional retirement plan), and certain other designated employees in educationalrelated work are eligible for membership. There were 310 employers and 1 nonemployer contributing entity participating in the plan at June 30, 2017.
Retirement Benefits
As of June 30, 2017, participation in the System is as follows:

June 30, 2017
that certain costofliving adjustments, based on the Consumer Price Index, may be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the member's monthly pension, at a reduced rate, to a designated beneficiary on the member's death.
Death and Disability Benefits
Retirement benefits also include death and disability benefits, whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on the member's creditable service (minimum of 10 years of service) and compensation up to the time of disability.
The death benefit is the amount that would be payable to the member's beneficiary had the member retired on the date of death on either a service retirement allowance or a disability retirement allowance, whichever is larger. The benefit is based on the member's creditable service (minimum of 10 years of service) and compensation up to the date of death.

Inactive members and beneficiaries currently receiving benefits
Inactive members not yet receiving benefits, vested
Inactive members, nonvested Active plan members
Total

122,629
11,988 89,536 222,918 447,071

The System provides service retirement, disability retirement, and survivor's benefits. Title 47 of the Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the provisions of the System to the State Legislature. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of onetwelfth of 7% for each month the member is below age 60, or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed

Contributions
The System is funded by member, employer, and nonemployer contributions. The contribution rates are adopted and amended by the Board of Trustees. Pursuant to O.C.G.A. 47363, the employer contributions for certain fulltime public school support personnel are funded on behalf of the employers by the State of Georgia.
Contributions, as a percentage of covered payroll, required for fiscal year 2017 were based on the June 30, 2014 actuarial valuation as follows:

Member

Employer: Normal Unfunded accrued liability



Total

6.00 %
6.56 % 7.71 % 14.27 %

Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions with accumulated interest are reported as net position restricted for pensions.

Financial Section

22

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

2. Summary of Significant Accounting Policies and the benefits provided through the pension plan. The following was

Plan Asset Matters

the System's adopted asset allocation policy as of June 30, 2017:

Basis of Accounting
The System's financial statements are prepared on the accrual basis of accounting. Contributions from the employers, nonemployers, and the members are recognized when due, based on statutory requirements. Retirement and refund payments are recognized as deductions when due and payable.

Asset Class

Target Allocation

Fixed income Equities Cash and cash equivalents
Total

25% - 45% 55% - 75%
--
100%

Reporting Entity
The System is a component unit of the State of Georgia; however, it is accountable for its own fiscal matters and presentation of its separate financial statements. The System has considered potential component units under GASB Statements No. 80, Blending Requirements for Certain Component Units, GASB Statement No. 61, The Financial Reporting Entity's Omnibus An Amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, and determined there were no component units of the System.

Approximately 16.2% of the investments held for pension benefits are invested in debt securities of the U.S. government. The System has no investments in any one organization, other than those issued by the U.S. government, that represent 5% or more of the System's net position restricted for pensions.
For the fiscal year ended June 30, 2017, the annual moneyweighted rate of return on pension plan investments, net of pension plan investment expense, was 7.62%. The moneyweighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Cash and Cash Equivalents
Cash and cash equivalents, reported at cost, include cash in banks and cash on deposit with the investment custodian.
Investments
Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price. 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, foreign currency, 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.
The System's policy in regard to the allocation of invested assets is established on a cost basis in compliance with Georgia Statute. Plan assets are managed on a total return basis with a longterm objective of achieving and maintaining a fully funded status for

Capital Assets
Capital assets are stated at cost less accumulated depreciation. Capital assets costing $5,000 or more are capitalized. Depreciation on capital assets is computed using the straightline method over estimated useful lives of three to forty years. Depreciation expense is included in administrative expenses, net. 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 statement of changes in fiduciary net position in the period of disposal.
System Employee Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the ERS plan and additions to/deductions from the ERS fiduciary net position have been determined on the same basis as they are reported by ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires

23

Financial Section

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

2. Summary of Significant Accounting Policies and Plan Asset Matters, continued
management to make estimates and assumptions that affect the reported amounts of fiduciary net position and changes therein. Actual results could differ from those estimates.
New Accounting Pronouncements Pronouncements effective for the 2017 financial statements:
In June 2015, the GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This Statement improves the usefulness of other postemployment benefits (OPEB) information included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. Implementation of this Statement by organizations that provide OPEB will require extensive note disclosures and required supplementary information (RSI) related to the measurement of the OPEB liabilities. There are no applicable reporting requirements for the System related to this Statement.
In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures. This Statement defines tax abatement and provides disclosure guidance for governments that have granted tax abatements. There are no applicable reporting requirements for the System related to this Statement.
In December 2015, the GASB issued Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. The objective of this Statement is to amend the scope and applicability of Statement No. 68, Accounting and Financial Reporting for Pensions, to exclude pensions provided to employees of state or local governmental employers through certain multiple-employer defined benefit pension plans and to establish accounting and reporting requirements for those pensions. There are no applicable reporting requirements for the System related to this Statement.
In January 2016, the GASB issued Statement No. 80, Blending Requirements for Certain Component Units. The objective of this Statement is to improve financial reporting by clarifying the financial Statement presentation requirements for certain component units and to amend the blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. There are no applicable reporting requirements for the System related to this Statement.
In March 2016, the GASB issued Statement No. 82, Pension Issues an Amendment of GASB Statements No. 67, 68, and No. 73. The objective of this Statement is to address issues regarding

(1) the presentation of payroll related measures in the required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The implementation of GASB Statement No. 82 did not impact the amounts recorded or disclosures presented in the System's financial Statements.
Pronouncements issued, but not yet effective:
In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans effective for fiscal years beginning after June 15, 2017. This Statement addresses accounting and financial reporting for OPEB that is provided to the employees of state and local governmental employers. This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expenses. This Statement also establishes requirements for note disclosures and required supplementary information for defined benefit OPEB plans. The System is in process of evaluating the impact of this pronouncement on its financial statements.
In March 2016, the GASB issued Statement No. 81, Irrevocable Split-Interest Agreements effective for fiscal years beginning after December 15, 2016. The objective of this Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. There will be no applicable reporting requirements for the System related to this Statement.
In November 2016, the GASB issued Statement No. 83, Certain Asset Retirement Obligations effective for fiscal years beginning after June 15, 2018. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. The System does not anticipate this statement to impact its financial statements and related reporting.
In January 2017, the GASB issued Statement No. 84, Fiduciary Activities effective for fiscal years beginning after December 15, 2018. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The System is in process of evaluating the impact of this pronouncement on its financial statements.
In March 2017, the GASB issued Statement No. 85, Omnibus 2017 effective for fiscal years beginning after June 15, 2017. This Statement

Financial Section

24

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

2. Summary of Significant Accounting Policies and Plan Asset Matters, continued

commercial paper is rated P1 and/or A1 by national credit rating agencies.

addresses practice issues that have been identified during implementation and application of certain GASB Statements. A variety of topics are addressed including issues related to blending component units, goodwill, fair value measurement and application, and OPEB. The System is in process of evaluating the impact of this pronouncement on its financial statements.
In May 2017, the GASB issued Statement No. 86, Certain Debt Extinguishment Issues effective for fiscal years beginning after June 15, 2017. The primary objective of this Statement is to improve consistency in accounting and financial reporting for insubstance defeasance of debt. There will be no applicable reporting requirements for the System related to this Statement.
3. 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 shortterm and longterm securities as follows:

Investments in commercial paper or master notes are limited to no more than $500 million in any one name.
Investments
Fixed income investments, managed by the Division of Investment Services (the Division), are authorized in the following instruments:
U.S. and foreign government obligations. At June 30, 2017, the System held U.S. Treasury bonds of approximately $11.2 billion and international government bonds of approximately $322.7 million.
U.S. and foreign corporate obligations. At June 30, 2017, the System held U.S. corporate bonds of approximately $7.8 billion and international corporate bonds of approximately $815.8 million.
Obligations unconditionally guaranteed by agencies of the U.S. government. At June 30, 2017, the System did not hold agency bonds.
Private placements are authorized under the same general restrictions applicable to corporate bonds. At June 30, 2017, the System did not hold private placements.

Cash and Cash Equivalents
The carrying amount of the System's deposits totaled approximately $1.6 billion at June 30, 2017, with actual bank balances of approximately $1.6 billion. The System's cash balances are fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. government.
Shortterm securities authorized but not currently used are:
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.
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 P1 and/or A1 by national credit rating agencies.
Master notes, an overnight security administered by a custodian bank, and an obligation of a corporation whose

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 longterm 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 in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the Board of Trustees; inhouse 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 O.C.G.A. to be domiciled in the United States. At June 30, 2017, the System held domestic equities of approximately $36.9 billion.

25

Financial Section

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

3. Investment Program, continued
International equities, including American Depository Receipts (ADR), are not considered by the O.C.G.A. to be domiciled in the United States. At June 30, 2017, the System held ADRs of approximately $9.0 billion and international equities of approximately $3.3 billion.
Fair Value Measurements: The System categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the inputs used in valuation and gives the highest priority to unadjusted quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the hierarchy is based on whether the significant inputs into the valuations are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest level, Level 1, is given to unadjusted quoted prices in active markets and the lowest level, Level 3, to unobservable inputs.
Level 1 Valuations based on unadjusted quoted prices for identical instruments in active markets that the System has the ability to access.
Level 2 Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and modelderived valuations in which all significant inputs are observable.

Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
In instances where inputs used to measure fair value fall into different levels in the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The System's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each investment.
Equity securities classified in Level 1 are valued using prices quoted in active markets for those securities. Equity securities classified in Level 2 are valued using prices quoted for similar instruments in active markets. Equity securities classified in Level 3 are valued using thirdparty valuations not currently observable in the market.
Debt securities classified in Level 1 are valued using prices quoted in active markets. Debt securities classified in Level 2 are valued using either a bid evaluation or a matrix pricing technique. Bid evaluations may include market quotations, yields, maturities, call features, and ratings. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. These securities have nonproprietary information that was readily available to market participants, from multiple independent sources, which are known to be actively involved in the market.

Investments Measured at Fair Value as of June 30, 2017
(dollars in thousands)

Investments by fair value level

Fair value measures using

Quoted prices in active markets for identical assets
Level 1

Significant other observable inputs
Level 2

Significant unobservable inputs
Level 3

Total

Equities: Domestic International
Obligations: Domestic U.S. treasuries Corporate bonds International Governments Corporate bonds

$ 36,931,983 12,219,116
11,243,449 __
__ __

$

__

84,876

__ 7,757,487

322,725 815,761

$

318

$ 36,932,301

__

12,303,992

__

11,243,449

__

7,757,487

__

322,725

__

815,761

Total investments by fair value level

$ 60,394,548

$ 8,980,849

$

318

$ 69,375,715

This table shows the fair value leveling of the System's investments.

Financial Section

26

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued 3. Investment Program, continued

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the 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. If a bond is subsequently downgraded to a rating below "A," it is placed on a watch list. The System holds one bond, which was downgraded to a rating below "A." 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.

Quality Ratings of Fixed Income Investments held at June 30, 2017
(dollars in thousands)

_______Investment Type________ Domestic obligations:
U.S. treasuries Corporates
Total domestic corporates

Standard and Poor's/ _ Moody's Quality Rating_
AAA/Aaa AA/Aaa AA/Aa
AA/A A/A BBB/Baa

International obligations: Governments Corporates
Total international corporates Total fixed income investments

A/Aa
A/Aa A/A

June 30, 2017 Fair Value
$ 11,243,449 727,150 813,250
1,055,685 1,958,948 2,879,722
322,732 7,757,487
322,725 405,119 410,642
815,761 $ 20,139,422

The quality ratings of investments in fixed income securities as described by Standard & Poor's and by Moody's Investor Services, which are nationally recognized statistical rating organizations, at June 30, 2017, are shown in the chart.

Concentration of Credit Risk: Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a goverment's investment in a single issue. At June 30, 2017, 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 position.
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.

27

Financial Section

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

3. Investment Program, continued

It is believed that the reporting of effective duration found in this table quantifies to the fullest extent possible the interest rate risk of the System's fixed income assets.

Effective Duration of Fixed Income Assets by Security Type

(dollars in thousanEdfsfe)ctive duration of fixed income assets by security type

Percentage

Effective

Fair value

of all fixed

duration

Fixed income security type

June 30, 2017 income assets

(years)

Domestic obligations: U.S. Treasuries Corporates
International obligations: Governments Corporates

$ 11,243,449

55.8%

5.6

7,757,487

38.5

4.0

322,725

1.6

0.3

815,761

4.1

1.8

Total

$ 20,139,422

100.0%

4.7

Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates will adversely impact the fair value of an investment. The System's currency risk exposures, or exchange rate risks, primarily reside within the System's international equity investment holdings. The System's asset allocation and investment policies allow for active and passive investments in international securities. The System's Boardadopted foreign exchange risk management policy is to minimize risk and protect

the investments from negative impact by hedging foreign currency exposures with foreign exchange instruments when market conditions and circumstances are deemed appropriate. Foreign exchange instruments are used to protect the value of noncash investments from currency movements, through the use of foreign exchange instruments. The System's foreign exchange risk management policy does not quantify limitations on foreign currencydenominated investments.

International Investment Securities at Fair Value as of June 30, 2017
(dollars in thousands)

Currency
Australian Dollar Brazilian Real British Pound Canadian Dollar Czech Krone Danish Krone Euro Hong Kong Dollar Indian Rupee Indonesian Rupiah Japanese Yen Malaysian Peso Mexican Peso New Taiwan Dollar Philippine Peso Polish Zloty Singapore Dollar South African Rand South Korean Won Swedish Krona Swiss Franc Thailand Baht

Equities
$ 144,531 80,222
316,008 43,339 2,004 80,060
502,805 175,524 190,163
27,589 502,753
43,701 31,943 213,336 24,007 17,268 88,682 164,847 354,771 154,608 79,145 84,876

Fixed Income

$

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

__

Total

$

144,531

80,222

316,008

43,339

2,004

80,060

502,805

175,524

190,163

27,589

502,753

43,701

31,943

213,336

24,007

17,268

88,682

164,847

354,771

154,608

79,145

84,876

Total holdings subject to foreign currency risk

3,322,182

__

3,322,182

Investment securities payable in U.S. dollars
Total international investments at fair value

8,981,810 $ 12,303,992

1,138,486

10,120,296

$ 1,138,486 $ 13,442,478

As of June 30, 2017, the System's exposure to foreign currency risk in U.S. Dollars is highlighted in this table.

Financial Section

28

NOTES TO FINANCIAL STATEMENTS
June 30, 2017, continued

4. Securities 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, mortgagebacked securities issued by a U.S. government agency, corporate bonds, and equities. The collateral value must be equal to at least 102% to 109% of the loaned securities' value, depending on the type of collateral security.
Securities loaned totaled approximately $16.3 billion at June 30, 2017. The collateral value was equal to 104.8% of the loaned securities' value at June 30, 2017. The System's lending collateral was held in the System's name by the triparty custodian.

Loaned securities are included in the accompanying statement of fiduciary net position since the System maintains ownership. The related collateral securities are not recorded as assets on the System's statement of fiduciary net position, and a corresponding liability is not recorded, since the System is deemed not to have the ability to pledge or trade the collateral securities. In accordance with the criteria set forth in GASB Statement No. 28, Accounting and Financial Reporting for Securities Lending Transactions, the System is deemed not to have the ability to pledge or sell 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.

29

Financial Section

NOTES TO FINANCIAL STATEMENTS

5. Capital Assets

Summary of Capital Assets (dollars in thousands)

Balance at June 30,
2016

Additions

Capital assets: Land Building Furniture and fixtures Computer equipment Computer software

$$

4,342 2,800
403 2,497 14,980

$

--

--

--

998

--

25,022

998

Disposals

$

--

--

(6)

(601)

--

(607)

Accumulated depreciation for:

Building

$

Furniture and fixtures

Computer equipment

Computer software

(840) (310) (1,718) (14,980)

(17,848)

Capital assets, net $ $

7,174

(70) (22) (442) --
(534)
$ 464

-- 6 601 --

607

$

--

June 30, 2017, continued

Balance at June 30,
2017
$ 4,342 2,800 397 2,894
14,980 25,413
(910) (326) (1,559) (14,980) (17,775) $ 7,638

This table summarizes the capital assets and depreciation information as of June 30 and for the year then ended.

6. Net Pension Liability of Employers and Nonemployers

Components of Net Pension Liability (dollars in thousands)

Total pension liability Plan fiduciary net position

$ 89,926,280 71,340,972

Employers' and nonemployers'

net pension liability

$

18,585,308

Plan fiduciary net position as a percentage of the total pension liability

79.33 %

This table summarizes the
components of the net pension liability of the participating employers and nonemployers at June 30, 2017.

Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2016, using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation Salary increases Investment rate of return

2.75% 3.259.00%, including inflation 7.50%, net of pension plan investment
expense, including inflation

Financial Section

30

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

6. Net Pension Liability of Employers and Nonemployers, continued
Postretirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service retirements and dependent beneficiaries. The RP-2000 Disabled Mortality Table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on November 18, 2015, the numbers of expected future deaths are 811% less than the actual number of deaths that occurred during the study period for healthy retirees and 911% less than expected under the selected table for disabled retirees. Rates of mortality

in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.
The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.
The longterm expected rate of return on pension plan investments was determined using a lognormal distribution analysis in which bestestimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the longterm expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Target Allocation & Estimated Rates of Return by Asset Class

Asset class

Target allocation

Long-term expected real rate of return*

Fixed income Domestic large cap equities Domestic mid cap equities Domestic small cap equities International developed market equities International emerging market equities

30.00 % 39.80
3.70 1.50 19.40 5.60

(0.50)% 9.00 12.00 13.50 8.00 12.00

Total

100.00 %

* Net of inflation

Discount rate: The discount rate used to measure the total pension employers and nonemployers, calculated using the discount rate

liability was 7.50%. The projection of cash flows used to determine of 7.50%, as well as what the net pension liability would be if it

the discount rate assumed that plan member contributions will were calculated using a discount rate that is 1percentagepoint

be made at the current contribution rate and that employer and lower (6.50%) or 1percentagepoint higher (8.50%) than the

nonemployer contributions will be made at rates equal to the current rate.

difference between actuarially determined contribution rates

and the member rate. Based on those assumptions, the pension

Employers' and Nonemployers' Net Pension Liability

plan's fiduciary net position was projected to be available to make

1%

(dollarCsuinrre1th%not usands) C1u%1rr%ent

Cu1r%rent

all projected future benefit payments of current plan members.

Decr1e%ase

discCDouuerncrrteernatstee

Therefore, the longterm expected rate of return on pension

D(6e.c5r0e%a)se

dis(c7o.(56u0.n5%0t)%ra)te

plan investments was applied to aElml ppeloryioerdss' aonfdpnroonjeemcEtpmelodpylboeyresen'rsen'efiattnpdennsoinoEenmmppllooyyeerrss'' naen(td6p.n5eo0nn%sei)omnployers' ne(t7p.5e0n%si)on

payments

to

determine

the

total

pEemlnilaipsabliboioliiylntiyetyrlsia' bainldityn.onemplilaobyielirtsy'

net

pension

liab$ility $

30,500,671 30,500,671

$ 183,508,550,300,6871 18,585,308

dInisDccreoe1cu%arnseetarsaete I(n8.c(576r0.e5%a0)s%e) (8.50%)
$ 813,7806,5980,7502,3670781
8,769,727

disIncocruenatsreate (87.50%)
18,756895,732078

Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability of the

Actuarial valuation date: The total pension liability is based upon the June 30, 2016 actuarial valuation. An expected total pension liability is determined as of June 30, 2017 using standard

31

Financial Section

NOTES TO FINANCIAL STATEMENTS
June 30, 2017, continued

6. Net Pension Liability of Employers and Nonemployers, continued
rollforward techniques. The rollforward calculation adds the annual normal cost (also called service cost), subtracts the actual benefit payments and refunds for the plan year, and then applies the expected investment rate of return for the year.
7. System Employees' Retirement Benefits
The System's employees are members of the ERS plan. The notes to the financial statements that follow and required supplementary information on page 37 are presented from the perspective of the System as an employer.
General Information about the Employees' Retirement System of Georgia
Plan description: ERS is a costsharing multipleemployer 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. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/ formspubs/formspubs.html.

Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the Old Plan started membership prior to July 1, 1982 and are subject to 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 modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
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 costofliving 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

Financial Section

32

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

7. System Employees' Retirement Benefits, continued
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: 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 System's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2017 was 24.69% of annual covered payroll for Old and New Plan members and 21.69% for GSEPS members. The System's contributions to ERS for funding purposes totaled approximately $4.3 million for the year ended June 30, 2017. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2017, the System reported a liability of approximately $33.1 million for its proportionate share of the net pension liability for the ERS plan. The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2015. An expected total pension liability as of June 30, 2016 was determined using standard rollforward techniques. The System's proportion of the net pension liability was based on contributions to ERS during the fiscal year ended June 30, 2016. At June 30 2016, the System's proportion was 0.698825%, which is based on contributions, and an increase of 0.015062% from its proportion measured as of June 30, 2015.
For the year ended June 30, 2017, the System recognized pension expense of approximately $4.1 million. Pursuant to GASB Statement 67, approximately $2.1 million of the pension expense is included in investment expense as a reduction of investment income. At June 30, 2017, the System reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows and Inflows of Resources (dollars in thousands)

Deferred
outflows of resources

Differences between eDxifpfeercetnecdeasnbdeatwcteueanl expercietendceand actual exp$erience

--

Change of assumptioCnshange of assumptions

280

Net difference betweeNneptrdoijfefecrteendcaenbdeatwcteueanl eparornjeincgtesdoannd actual earnings on

pension plan investmepnetnssion plan investments

3,361

Changes in proportionCahnadngdeifsfeirnenpcroepsobrteiotwneaenndtdhieffeSreynscteems 'bsetween the System's

contributions and propcornttiorinbauteionsshaarnedopf rcoopnotrtibiountaiotnesshare of contributions 514

System's contributionSsysutebmse'squceont rtiobutthioenms esausbusreeqmuent dtoattehe measurement 4d,a3t2e8

Total

Total

$

8,483

DDeefeferrreredd
ionufltoflwoswosfof reresosouurcrecess

$

76--

2--80

3,3--61

5--14 4,3--28

$

8,74683

Deferred inflows of resources
76 --
--
-- -- 76

System contributions subsequent to the measurement date of related to pensions will be recognized in pension expense as follows

approximately $4.3 million are reported as deferred outflows of (dollars in thousands):

resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amountYseraerpeonrdteeddJune 30: as deferred outflows of resources and deferred inflows of re2s0o1u8rces
2019
2020
2021

YeaYreeanrdeenddJeudnJeu3n0e: 30:

20128018

$

20129019

20220020

20221021

$ 780 363
1,812 1,124

$$

780780

363363

1,8112,812

1,1214,124

33

Financial Section

NOTES TO FINANCIAL STATEMENTS

June 30, 2017, continued

7. System Employees' Retirement Benefits, continued
Actuarial assumptions: The total pension liability as of June 30, 2016 was determined by an actuarial valuation as of June 30, 2015 using the following actuarial assumptions, applied to all periods included in the measurement:

future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 912% less than the actual number of deaths that occurred during the study period for service retirements and beneficiaries and for disability retirements. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.

Inflation Salary increases Investment rate of return

2.75% 3.25 7.00%, including inflation 7.50%, net of pension plan investment
expense, including inflation

Post-retirement mortality rates were based on the RP-2000 Combined Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB and set forward 2 years for both males and females for service retirements and dependent beneficiaries. The RP-2000 Disabled Mortality Table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB and set back seven years for males and set forward three years for females was used for death after disability retirement. There is a margin for

The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.
The longterm expected rate of return on pension plan investments was determined using a lognormal distribution analysis in which bestestimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the longterm expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in this table:

Target Allocation & Estimated Rates of Return by Asset Class

Asset class
Fixed income Domestic large cap equities Domestic mid cap equities Domestic small cap equities International developed market equities International emerging market equities Alternatives
Total
* Net of inflation

Target allocation
30.00 % 37.20
3.40 1.40 17.80 5.20 5.00
100.00 %

Long-term expected real rate of return*
(0.50)% 9.00 12.00 13.50 8.00 12.00 10.50

Discount rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and

State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the ERS fiduciary net position was projected to be available to make all projected

Financial Section

34

NOTES TO FINANCIAL STATEMENTS
June 30, 2017, continued

7. System Employees' Retirement Benefits, continued
future benefit payments of current plan members. Therefore, the

calculated using a discount rate that is 1percentagepoint lower (6.50%) or 1percentagepoint higher (8.50%) than the current rate (dollars in thousands):

longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

System's Propotionate Share of the 1% 1% NetCPuerrneCsnui1torr%nenLtiability 1%Cu1r%rent
D(e6Dc.5reDe0c(e%a16rc%se.)5erae0s%aes)e disdc(7iods.ucC5isDno0uc(e%tu76rocrrn.)uea5rtne0ntre%tatars)taeete In(8cdI.rn5ieDsI0cnca(e%r1687ocsec%.)eru5areen0sa%atessr)eaete

Sensitivity of the System's proSpyosrtteSimoysn'staepmtreo'spsohprartoiropenoaortfieotnshSahetyaesnretseehotmafpr'tseehenporsfnoiteophtoenrtnioentSaytestsehma'rse porfot(ph6oe.r5tn0ioe%nt )ate share of t(h7e.5n0e%t )

(8.50%)

lSiyasbtielimty'stoprcohpaonrgtieosnianttehsehdairsecoouf ntpShetyenrspsaetnpeitnoeemesntn:i'ospslTinaiehopbnnleriioalsilfptbiioyaooilblirnlttioyliioltwiynaaibntieglitsppyhreaecnarsseelicoonunftltsalhiattehebindelietyt

p$ensio$n liab4i4lit,y79494,799 $

$

44,799

33,0534734,075979 $ 33,057

23,05423143,7095917 23,051

using the discount rate of 7.50%, as well as what the System's

Cu1rr%ent disIcnocurenat sreate
(78.50%)
323,0571

proportionate share of the net pension liability would be if it were Pension plan fiduciary net position: Detailed information about

the ERS plan's fiduciary net position is available in the separately

issued ERS financial report, which is publically available at

www.ers.ga.gov/formspubs/formspubs.html.

35

Financial Section

REQUIRED SUPPLEMENTARY INFORMATION
For the Year Ended June 30 (Unaudited)
Schedule of Changes in Employers' & Nonemployers' Net Pension Liability (dollars in thousands)

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. 1 The System is a participating employer in the Employees' Retirement System of Georgia. Pursuant to the requirements of GASB Statement No. 68, the fiscal year 2015 beginning Fiduciary Net Position was restated by $27,705,937 for reporting purposes to reflect the impact of recording the initial deferred outflows of resources and the net pension liability. For actuarial purposes, this adjustment is being recognized in fiscal year 2015 and beginning fiduciary net position was not restated.
Schedule of Employers' & Nonemployers' Net Pension Liability & Related Ratios (dollars in thousands)

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

Financial Section

36

REQUIRED SUPPLEMENTARY INFORMATION
For the Year Ended June 30 (Unaudited), continued

Schedule of Employer and Nonemployer Contributions (dollars in thousands)

Actuarially Determined Employer and Nonemployer Contribution
Contributions in Relation to Actuarially Determined Contribution
Contribution Deficiency (Excess) Covered-Empolyee Payroll Contributions as a Percentage of
Covered-Employee Payroll

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

$ 1,654,844 $ 1,580,532 $ 1,406,706 $ 1,279,963 $ 1,180,469 $ 1,082,224 $ 1,089,912 $ 1,057,416 $ 1,026,287 $ 986,759

1,654,844 1,580,532 1,406,706 1,279,963 1,180,469 1,082,224 1,089,912 1,057,416 1,026,287

986,759

$

___ $

___ $

___ $

___ $

___ $

___ $

___ $ ___ $

___ $

___

$ 11,596,664 $ 11,075,907 $ 10,697,384 10,349,862 $ 10,345,916 $ 10,527,471 $ 10,602,257 $ 10,856,427 $ 11,059,127 $ 10,633,179

14.27%

14.27%

13.15%

12.28%

11.41%

10.28%

10.28%

9.74%

9.28%

9.28%

Schedule of Investment Returns

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

Schedule of the System's Proportionate Share of the Net Pension Liability to ERS (dollars in thousands)

$

$

$

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
Schedule of the System's Contributions to ERS (dollars in thousands)

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

37

Financial Section

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2017 (Unaudited)

Required Supplementary Information for the System as the Plan
Schedule of Changes in the Employers' and Nonemployers' Net Pension Liability
The total pension liability contained in this schedule was provided by the System's actuary, Cavanaugh Macdonald Consulting, LLC. The net pension liability is measured as the total pension liability less the amount of the fiduciary net position of the System.
Schedule of Employer and Nonemployer Contributions The required employer and nonemployer contributions and percentage of those contributions actually made are presented in the schedule.
Actuarial Methods and Assumptions
Changes of assumptions: On November 18, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, withdrawal, and salary increases.
Method and assumptions used in calculations of actuarially determined contributions: The actuarially determined contribution rates in the schedule of employer and nonemployer contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported (June 30, 2017 employer contributions are based on June 30, 2014 valuation).

The following actuarial methods and assumptions were used to determine the most recent contribution rate reported in that schedule:

Valuation date:

June 30, 2014

Actuarial cost method:

Entry age

Amortization method:
Remaining amortization period:

Level percent of payroll, closed
29 Years

Asset valuation method:

Five-year smoothed market

Inflation rate:

3.00%

Salary increases:

3.75 to 7.00%, including inflation

Investment rate of return:

7.50%, net of pension plan investment expense, including inflation

Financial Section

38

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2017 (Unaudited)

Required Supplementary Information for the System as a Participating Employer in ERS
Schedule of the System's Proportionate Share of the Net Pension Liability to ERS
This schedule presents historical trend information about the System's proportionate share of the net pension liability for its employees who participate in the ERS plan. GASB Statement No. 68 was implemented in 2015. Information related to previous years is not available; therefore, trend information will be accumulated going forward to display a 10-year presentation.

Changes in Benefit Terms and Assumptions
Changes of benefit terms: There were no changes in benefit terms that affect the measurement of the total pension liability since the prior measurement date.
Changes of assumptions: On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal, and salary increases.

Schedule of the System's Contributions to ERS
This schedule presents historical trend information about the System's contributions for its employees who participate in the ERS plan. GASB Statement No. 68 was implemented in 2015. Information related to previous years is not available; therefore, trend information will be accumulated going forward to display a 10-year presentation.

39

Financial Section

ADDITIONAL INFORMATION
For the Year Ended June 30, 2017
Schedule of Administrative Expenses (dollars in thousands)
Personal Services:
Communications:
Professional Services:
Management Expenses: Other Services and Charges:

Schedule of Investment Expenses
Investment Advisory and Custodial Fees Miscellaneous Total Investment Expenses
See accompanying independent auditors' report.

$ 28,319,467 13,002,632
$ 41,322,099

Financial Section

40

INVESTMENT OVERVIEW

There has certainly been a lot of news and noise during the past year. Throughout it all, economic growth as measured by Real GDP improved modestly to a 2.2% pace. Global growth broadened out with Europe and Japan showing additional signs of improving health. A combination of improving economic growth, low inflation and low interest rates combined to boost U.S. equity returns to over 18% for the fiscal year.
We continually emphasize that the pension plan has a long-term investment horizon, and that short-term concerns should not drive the investment decisions. 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 long periods of time.
As in previous years, the bias to quality was a primary goal and was successfully met. "Conservation of Capital" and "Conservatism" remain the guiding principles for investment decisions. The Board of Trustees continues to use a diversified portfolio to accomplish these objectives.
The domestic economy continued to grow during the fiscal year. Employment growth averaged a healthy 185,000 new jobs per month. Industrial production rebounded, inflation was contained and housing prices improved. Although one can find exceptions, foreign economies continued to improve, in large part due to easy central bank policies in Japan and Europe. In contrast, the Federal Reserve has begun to raise interest rates.

used to calculate returns in a manner consistent with the CFA Institute's objectives as stated in its publication "Global Investment Performance Standards Handbook," third edition.
The return for the S&P 500 was 17.9%. U.S. small cap and mid cap stocks outperformed large cap stocks last year. The S&P MidCap 400 and the S&P SmallCap 600 indexes had returns of 18.6% and 22.5%, respectively. The Financial and Technology sectors had the highest returns for the 12 month period posting returns of over 28%, while Energy and Telecom Services were flat.
International markets also had strong returns. The MSCI EAFE Index returned 20.3% and the MSCI Emerging Market Index had a return of 23.7%. The dollar was down fractionally for the fiscal year.
Interest rates increased across the board during the first six months of the fiscal year and then flattened out resulting in negative bond returns. The total return on the 10-year Treasury Note was (5.6)% and the 30-year Treasury Bond had a (9.1)% return. The return on short-term Treasury bills was 0.4%.
We look at two fixed income indexes to measure the bond market's performance. The Barclays Government / Credit Index had a return of (0.41)%. It is a broad index containing corporate and government sponsored bonds as well as Treasuries. The Citigroup Treasury / Sponsored / AAA/AA had a return of (1.9)% and is a broad index containing higher rated corporate bonds as well as Treasuries and Government securities. The spread between corporate bonds and Treasury bonds tightened during the year leading to relatively better performance in corporate bonds.

Studies undertaken to evaluate the investment returns of pension funds over very long time horizons indicate that the asset allocation decision has the largest impact on the fund's returns. Although the returns for the various asset categories vary from year to year, over the long term equities typically 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 invested in fixed income securities designed to generate income and preserve capital.

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

Returns for one-three-five-ten and twenty-year periods are presented in this section. 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, a time-weighted rate of return, was

41

Investmant Section

RATES OF RETURN

Equities

EQUITIES S&P 1500

MSCI ACWI EX US





S&P

Equities 1500

1 Year 19.2% 18.1%

3 Year 7.4

9.5

5 Year 12.8 14.7

10 Year 5.9

7.3

20 Year 6.6

7.5

MSCI ACWI ex US
20.5%
0.8
7.2
1.1
--

Fixed Income

FIXED INCOME BARCLAYS GOV'T / CREDIT

1 MONTH T BILLS

Barclays Fixed Govt/ Income Credit

1 Month T Bills

1 Year (1.0) % 3 Year 2.2 5 Year 1.8 10 Year 4.4 20 Year 5.6

(0.4) % 2.6 2.3 4.6 5.3

0.4 % 0.2 0.1 0.4 1.9

Total Portfolio

Total Portfolio

1 Year 3 Year 5 Year 10 Year 20 Year

12.5% 5.8 9.4 6.1 6.7

TOTAL PORTFOLIO CPI Note: Time-weighted rates of return are calculated using the Daily Valuation Method based on market rates of return.

CPI
1.6% 0.9 1.3 1.6 2.1

Investment Section

42

INVESTMENTS
Asset Allocation

EQUITIES FIXED INCOME

Schedule of Fees and Commissions
For the Year Ended June 30, 2017

Investment Advisors' Fees*: U.S. Equity International Equity

$ 12,491,649 13,909,917

Investment Commissions: U.S. Equity International Equity
SEC & Foreign Transaction Fees:

6,102,106 7,091,600
2,019,761

Miscellaneous*: Total Fees and Commissions

14,920,533 $ 56,535,566

*Amount included in total investment expenses shown on page 40.

Investment Summary
Asset Allocation at June 30 Equities Fixed Income
Asset Allocation at June 30 (in millions) Equities Fixed Income

2012
71.0% 29.0%

2013
73.5% 26.5%

2014
72.9% 27.1%

2015
71.2% 28.8%

2016
68.6% 31.4%

2017
70.9% 29.1%

$37,191 $41,396 $47,126 $46,423 $43,652 $49,237 15,188 14,882 17,491 18,807 19,979 20,139

Total Investments $52,379 $56,278 $64,617 $65,230 $63,631 $69,376

43

Investmant Section

PORTFOLIO DETAIL STATISTICS

Twenty Largest Equity Holdings*

Shares
6,193,748 860,932
10,516,942 582,254
3,670,320 3,933,930 6,086,877 5,051,609 2,404,180 6,624,028 3,686,200 13,684,610 3,715,380 9,606,406 2,035,400 10,571,562 6,366,209 2,706,877 1,515,636 7,392,517

Company
Apple Inc Alphabet Inc. Microsoft Corp. Amazon.Com Inc. Facebook Inc. Johnson & Johnson Exxon Mobil Corp. JPMorgan Chase & Co. Berkshire Hathway Inc. Wells Fargo & Co. Visa Inc. Bank of America Corp. Procter & Gamble Co. Pfizer Inc. Alibaba Group Holding Ltd. General Electric Co. Verizon Communications Inc. Chevron Corp. UnitedHealth Group Inc. AT&T Inc.

Fair Value
$ 892,023,587 791,998,398 724,932,812 563,621,872 554,144,914 520,419,600 491,393,580 461,717,063 407,195,967 367,037,391 345,691,836 331,988,639 323,795,367 322,679,177 286,787,860 285,537,890 284,314,894 282,408,477 281,029,227 278,919,666

Total of 20 Largest Equity Holdings

$ 8,797,638,217

Total Equity Holdings

$ 49,236,292,890

Ten Largest Fixed-Income Holdings*

Description
U.S. Treasury Note U.S. Treasury Note U.S. Treasury Note U.S. Treasury Note U.S. Treasury Note General Electric Company U.S. Treasury Note U.S. Treasury Bond U.S. Treasury Bond U.S. Treasury Note

Maturity Date
11/15/24 3/31/23 9/30/17 4/30/19 8/15/21 10/9/22 8/15/24
11/15/28 2/15/39 1/31/19

Interest Rate % Par Value

2.25 $ 1,297,000,000

1.5

1,105,000,000

1.875

1,068,000,000

1.625

768,000,000

2.125

647,000,000

2.7

609,000,000

2.375

567,000,000

5.25

428,000,000

3.5

482,000,000

1.125

500,000,000

Total of 10 Largest Fixed-Income Holdings

Total Fixed-Income Holdings

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

Fair Value
$ 1,304,146,470 1,074,700,900 1,070,050,560 771,333,120 656,096,820 619,432,170 575,635,410 550,981,520 544,568,420 498,185,000
$ 7,665,130,390
$ 20,139,422,200

Investment Section

44

ACTUARY'S CERTIFICATION LETTER

May 10, 2017
Board of Trustees Teachers Retirement System of Georgia Suite 100, Two Northside 75 Atlanta, GA 30318
Members of the Board:
Section 47-3-23 of the law governing the operation of the Teachers 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, 2016. The report indicates that annual employer contributions at the rate of 20.90% of compensation for the fiscal year ending June 30, 2019 are sufficient to support the benefits of the System. 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 2016 Session of the General Assembly. 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.
The System is funded on an actuarial reserve basis. The actuarial assumptions recommended by the actuary and adopted by the Board are both individually and 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 financial reporting purposes meet the parameters set by Actuarial Standards of Practice (ASOPS). 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 amortized as a level percent of payroll in accordance with the funding policy adopted by the Board.
The Plan and the employers are required to comply with the financial reporting requirements of GASB Statements No. 67 and 68. The necessary disclosure information is provided in separate supplemental reports.
We have provided the following information and supporting schedules for the Actuarial Section of the Comprehensive Annual Financial Report:
Summary of Actuarial Assumptions and Methods Schedule of Active Members Schedule of Retirees and Beneficiaries Added to and Removed from Rolls Schedule of Funding Progress Analysis of Financial Experience

45

Actuarial Section

ACTUARY'S CERTIFICATION LETTER
continued
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.
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.
The actuarial computations presented in this report are for purposes of determining the recommended funding amounts for the System. Use of these computations for purposes other than meeting these requirements may not be appropriate.
This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement system and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the System.
Sincerely yours,

Edward A. Macdonald, ASA, FCA, MAAA President

Cathy Turcot Principal and Managing Director

John J. Garrett, ASA, FCA, MAAA Principal and Consulting Actuary

Actuarial Section

46

SUMMARY OF ACTUARIAL ASSUMPTIONS & METHODS

The laws governing the Teachers Retirement System of Georgia (the System) provide that an actuary perform an annual valuation of the contingent assets and liabilities of the System and 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 actuarial valuation of the System, prepared as of June 30, 2016, was made on the basis of the funding policy adopted by the Board on November 20, 2013 and the 5-year experience study adopted by the Board on November 18, 2015. The Board is responsible for maintaining this funding policy. A summary of plan provisions can be found in the Introductory Section beginning on page 11, and a plan description can be found in the Financial Section beginning on page 14.
The more pertinent facts and significant assumptions underlying the computations included in the June 30, 2016 valuation are as follows:
a) Actuarial Method Used
The actuarial cost method used for funding purposes is the Entry Age Normal method, which is the same cost method used for financial reporting purposes. The Entry Age Normal method is the most commonly used funding method among public retirement plans. This cost method allocates the cost of benefits over each member's expected career as a level percentage of their expected salary and demonstrates the highest degree of stability in the calculation of a plan's normal cost over time. Gains and losses are reflected in the unfunded accrued liability. Adopted November 20, 2013.
b) Ultimate Investment Return
7.50% compounded annually, which consists of a 4.75% assumed real rate of return and a 2.75% assumed annual rate of inflation. This long-term expected rate of return is used to determine the total pension liability for financial reporting purposes. Adopted November 18, 2015.
c) Salary Increases
Salaries are expected to increase 3.25% to 9.00% annually depending upon the members' years of creditable service. The salary increase includes a 0.50% assumed real rate of wage inflation and a 2.75% assumed annual rate of inflation. Adopted November 18, 2015.

d) Death, Disability and Withdrawal Rates
Death, disability and withdrawal rates for active employees and service retirement tables are based upon the System's historical experience. The death-after-retirement rates are based on the RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward one year for males). The death-after-disability retirement rates are based on the RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females). Adopted November 18, 2015.
e) Asset Valuation Method
In accordance with the funding policy, the actuarial value of the assets was set equal to the fair value of assets on June 30, 2013. Five-year smoothing of investment gains and losses commenced in the subsequent year. The actuarial value of assets recognizes a portion of the difference between the fair value of the assets and the expected fair value of assets, based on the assumed valuation rate of return. The amount recognized is one-fifth of the difference between fair value and actuarial expected value. Adopted November 20, 2013. The actuarial value of assets is limited to a range between 75% and 125% of fair value. Adopted July 27, 2011.
f) Service Retirement Benefit
The service benefit (pension) paid to members is an annuity that is owed to them at retirement that will provide a total annual pension equal to 2% of the member's average compensation over the two consecutive years of membership service producing the highest such average, multiplied by the number of years of creditable service up to 40 years. It is also assumed that certain cost-of-living adjustments will be made in future years.
g) Actuarially Determined Unfunded Accrued Liability
The present value of the unfunded accrued liability, based on unaudited data provided the actuary by the System, was approximately $23.6 billion at June 30, 2016.

47

Actuarial Section

SUMMARY OF ACTUARIAL ASSUMPTIONS & METHODS
continued

h) Valuation Interest Rate Smoothing

i) Required Contributions (% of compensation)

The valuation liabilities are calculated using a smoothed interest rate method. The interest rate assumed during the look-forward period (currently 23 years from the valuation date) is the investment rate of return expected to be earned during the lookforward period based on the actual rate of return earned during the look-back period (currently 7 years) such that the average assumed rate of return over the combined 30-year period is equivalent to the assumed ultimate investment rate of return (currently 7.50%). The interest rate after the 23-year look-forward period is the ultimate investment rate of return of 7.50%. Adopted November 20, 2013. The smoothed interest rate used during the 23-year look-forward period is subject to a corridor around the annual expected rate of return to limit the extent that the calculated smoothed rate can vary from the long-term investment rate of return. Adopted November 20, 2013.

Contributions required by the annual actuarial valuation as of June 30, 2016, to be made for the year ended June 30, 2019:

(1) Member
(2) Employer: Normal Unfunded Accrued Liability Total

6.00%
7.77% 13.13% 20.90%

Actuarial Section

48

SUMMARY OF ACTUARIAL ASSUMPTIONS & METHODS

continued

Service Retirement
Adopted November 18, 2015

Male

< 30 years

Age

of service

> 30 years of service

50

3.50%

55

5.00

60

20.00

61

18.00

62

26.00

63

22.00

64

22.00

65

30.00

66

32.00

67

30.00

68

30.00

69

28.00

70

30.00

60.00% 40.00 36.00 32.00 36.00 33.00 32.00 30.00 32.00 30.00 30.00 28.00 30.00

< 30 years of service
3.00% 5.50 25.00 25.00 25.00 25.00 25.00 31.00 33.00 30.00 30.00 30.00 30.00

Female
> 30 years of service
55.00% 37.00 43.00 43.00 43.00 43.00 43.00 31.00 33.00 30.00 30.00 30.00 30.00

Separation Before Service Retirement
Adopted November 18, 2015
Annual Rate of

Age

Death

Disability



20

0.0320%

0.0135%

25

0.0349

0.0135

30

0.0412

0.0210

35

0.0717

0.0330

40

0.1001

0.0550

45

0.1399

0.0900

50

0.1983

0.1700

55

0.2810

0.3000

60

0.4092

--

64

0.5330

--

Male

Withdrawal Years of Service

0-4 Yrs

5-9 Yrs

10+ Yrs

25.00% 17.00 13.50 13.50 13.00 12.00 11.00 11.00 12.00 13.00

-- %-- %

12.00--

7.00

8.00

6.00

3.00

6.00

2.50

6.00

2.30

5.50

2.50

5.50

3.00

5.50

--

6.50

--

Female

20

0.0177%

0.0100%

25

0.0192

0.0130

30

0.0245

0.0140

35

0.0441

0.0190

40

0.0655

0.0390

45

0.1043

0.0650

50

0.1555

0.1400

55

0.2228

0.3400

60

0.3058

--

64

0.4015

--

28.00% 13.50 13.50 13.00 11.00 10.50 10.00 10.00 10.50 13.00

--% 16.00
8.00 7.00 6.50 6.00 5.00 5.00 5.50 6.50

--% -- 6.00 3.50 3.00 2.30 2.40 2.75 -- --

49

Actuarial Section

Active Members

Fiscal Year(1)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Number of Participating Employers Members

385

215,566

389

224,993

392

226,537

386

222,020

399

216,137

404

213,648

401

209,854

405

209,828

414

213,990

416

218,193

Annual Payroll(2) (000's)
$ 9,492,003 10,197,584 10,641,543 10,437,703 10,099,278 10,036,023
9,924,682 9,993,686 10,347,332 10,783,277

ACTUARIAL VALUATION DATA
continued

Average Pay
$ 44,033 45,324 46,975 47,012 46,726 46,975 47,293 47,628 48,354 49,421

% Increase
3.5% 2.9 3.6 0.1 (0.6) 0.5 0.7 0.7 1.5 2.2

Retirees and Beneficiaries

Added to Roll

Removed from Roll

Roll-End of Year

Annual

Annual

Annual

Fiscal Allowances AllowancesAllowances

Year(1) Number (000's) Number (000's) Number (000's)

2007 5,858

$ 230,924

1,656

$ 39,293

74,421 $ 2,232,102

2008 5,817

238,137

1,655

39,808

78,583 2,430,431

2009 5,543

245,006

1,768

45,116

82,358 2,630,321

2010 6,383

279,009

1,763

46,853

86,978 2,862,477

2011 7,136

295,192

1,937

55,062

92,177 3,102,607

2012 7,055

298,471

1,915

55,565

97,317 3,345,513

2013 7,937

322,853

1,983

59,453

103,271 3,608,913

2014 7,078

291,066

2,195

68,324

108,154 3,831,655

2015 7,207

306,751

2,237

72,818

113,124 4,065,588

2016 7,225

312,063

2,392

80,359

117,957 4,297,292

% Increase in Annual Allowances
9.4% 8.9 8.2 8.8 8.4 7.8 7.9 6.2 6.1 5.7

Average Annual Allowances
$ 29,993 30,928 31,938 32,910 33,659 34,377 34,946 35,428 35,939 36,431

(1) Fiscal year refers to the actuarial valuation performed as of June 30 of that year and determines the funding necessary for the fiscal year beginning two years after the valuation date. An actuarial valuation for the fiscal year ended June 30, 2017 is currently in process and was not available for this analysis.
(2) The annual payroll shown in the schedule of active member valuation data is the annual compensation of the active members at the date of the valuation. The covered payroll reported in the financial section represents the payroll during the fiscal year upon which employer contributions were made.

Actuarial Section

50

ACTUARIAL VALUATION DATA
continued

Solvency Test (dollars in thousands)


Fiscal Year*

Aggregate Actuarial Accrued Liabilities For

(1) Active Member Contributions

(2)

(3)

Retirees Active Members Actuarial

and

(Employer-Financed Value of

Beneficiaries

Portion)

Assets

2007 $ 5,703,184

$ 28,212,100

$ 21,081,286

$ 52,099,171

2008

6,009,710

30,915,200

22,208,867

54,354,284

2009**

6,382,932

29,725,063

23,342,121

53,438,604

2010

6,705,274

34,264,548

22,622,215

54,529,416

2011

6,973,343

37,271,020

21,734,277

55,427,716

2012

7,242,569

39,759,145

21,346,964

56,262,332

2013

7,480,767

43,152,402

21,587,696

58,594,837

2014

7,815,630

45,841,742

22,114,745

62,061,722

2015

8,153,958

50,251,964

24,385,088

65,514,119

2016

8,522,267

55,186,998

28,012,510

68,161,710

Portion of

Accrued Liabilities

Covered by Assets

(1)

(2)

(3)

100.0% 100.0% 86.3%

100.0

100.0 78.5

100.0

100.0 74.2

100.0

100.0 59.9

100.0

100.0 51.5

100.0

100.0 43.4

100.0

100.0 36.9

100.0

100.0 38.0

100.0

100.0 29.1

100.0

100.0 15.9

*Fiscal year refers to the actuarial valuation performed as of June 30 of that year and determines the funding necessary for the fiscal year beginning two years after the valuation date. An actuarial valuation for the fiscal year ended June 30, 2017 is currently in process and was not available for this analysis.
** Revised since the previous valuation to reflect the refinement of the smoothed valuation interest rate methodology used in the 2010 valuation, which includes corridors around the long-term investment rate of return.

Member & Employer Contribution Rates

Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Member 5.00 % 5.25 5.53 5.53 6.00 6.00 6.00 6.00 6.00 6.00

Employer 9.28 % 9.74 10.28 10.28 11.41 12.28 13.15 14.27 14.27 16.81

51

Actuarial Section

ACTUARIAL VALUATION DATA
continued

Schedule of Funding Progress (dollars in thousands)







Actuarial

Actuarial

Value of

Valuation

Plan Assets

Date

(a)

6/30/07

$ 52,099,171

6/30/08

54,354,284

6/30/09*

53,438,604

6/30/10

54,529,416

6/30/11

55,427,716

6/30/12

56,262,332

6/30/13

58,594,837

6/30/14

62,061,722

6/30/15

65,514,119

6/30/16

68,161,710



Actuarial

Unfunded

Accrued

AAL

Annual

Liability (AAL)

(UAAL)

Funded

Covered

-Entry Age

(Funding Excess)

Ratio

Payroll

(b)

(b-a)

(a/b)

(c)

$ 54,996,570

$ 2,897,399

94.7% $ 9,482,003

59,133,777

4,779,493

91.9

10,197,584

59,450,116

6,011,512

89.9

10,641,543

63,592,037

9,062,621

85.7

10,437,703

65,978,640

10,550,924

84.0

10,099,278

68,348,678

12,086,346

82.3

10,036,023

72,220,865

13,626,028

81.1

9,924,682

75,772,117

13,710,395

81.9

9,993,686

82,791,010

17,276,891

79.1

10,347,332

91,721,775

23,560,065

74.3

10,783,277

UAAL (Funding Excess)
as a Percentage of Covered Payroll
[(b-a)/c] 30.5%
46.9
56.5
86.8
104.5
120.4
137.3
137.2
167.0
218.5

*Revised since the previous valuation to reflect the refinement of the "smoothed valuation interest rate" methodology used in the 2010 valuation, which includes corridors around the long-term investment rates of return.
This data, except for annual covered payroll, was provided by the System's actuary.

Actuarial Section

52

ACTUARIAL VALUATION DATA

continued

Analysis of Financial Experience (dollars in millions)

Analysis of the Change in Unfunded Accrued Liability Increase (Decrease) During the Years Ended June 30,

Item

2016 2015

Interest Added to Previous

Unfunded Accrued Liability $1,300.9 $1,077.6

Accrued Liability Contribution (985.4) (796.1)

Experience:

Valuation Asset Growth

150.9 (677.3)

Pensioners' Mortality

(13.4) 37.7

Turnover and Retirements

209.2 335.9

New Entrants

153.1 138.9

Salary Increases

72.3 (227.6)

Method Changes (4)

--

--

Interest Smoothing

5,286.1 2,861.2

Amendments (1)

--

--

Change in Member

Contribution Rate (3)

--

--

Assumption Changes (2)

-- 688.3

Miscellaneous

109.5 127.9

Total Increase

$ 6,283.2 $ 3,566.5

2014 2013 2012 2011 2010 2009 2008

$1,084.6 $977.8 $846.2 $733.2 $486.3 $358.5 $217.3 (662.0) (604.7) (443.5) (396.3) (312.0) (125.0) (118.5)

(836.1) 35.3 119.6 115.3
(624.9) --
739.8 --

1,241.1 52.7 378.2 96.2
(715.2) (926.7) 915.9
--

1,855.1 2,018.7 1,674.9 2,433.5

51.6

24.2

89.8 50.1

319.1 195.3 269.5 307.1

101.2 89.6 123.7 185.1

(709.9) (1,132.2) (1,040.5) 14.1

--

--

-- (2,062.3)

(627.0) 412.8

--

--

-- (685.5)

--

--

548.9 58.4 291.4 258.8 162.8
--
-- 386.3

-- -- 112.8 $ 84.4

-- -- 124.4 $1,539.7

-- -- 142.6 $ 1,535.4

--

12.8 --(15.7)

-- 1,472.4

--

--

228.5 274.2 70.9 92.4

$ 1,488.3 $ 3,051.1 $ 1,232.0 $ 1,882.1

2007
$134.7 57.2
(132.3) 25.6
213.3 212.6 294.5
-- -- 252.3
(8.4) --
51.2 $ 1,100.7

(1) Amendments 2007 - Reflects the impact of the first phase of the Plymel lawsuit. 2008 - Reflects the impact of the final Plymel lawsuit. 2011 - Reflects the impact of discontinuing the one-time 3% increase on the first $37,500 of members' allowances for all members who retire on or after January 1, 2013.
(2) Assumption Changes 2010 - The assumed rates of withdrawal, disability, retirement, and mortality and the assumed rates of salary increase have been revised to more closely reflect the actual and anticipated experience of the System.
2015 - The assumed rates of withdrawal, disability, retirement, and mortality and the assumed rates of salary increase have been revised to more closely reflect the actual and anticipated experience of the System. In addition, assumptions related to percent married, unused sick leave, and termination benefits were also revised.
(3) Member Contribution Rate 2007 - Reflects an increase in the member contribution rate from 5.00% to 5.25% effective July 1, 2009. 2008 - Reflects an increase in the member contribution rate from 5.25% to 5.53% effective July 1, 2010. 2010 - Reflects an increase in the member contribution rate from 5.53% to 6.00% effective July 1, 2012.
(4) Method Changes 2009 - Reflects change to a valuation interest rate smoothing methodology and a change to include a corridor around the long-term investment rate of return. 2013 - Reflects change to asset smoothing methodology where the final actuarial value of assets used for the current valuation was set to the fair value of assets as of June 30, 2013. Five-year smoothing of investment gains and losses will commence in subsequent years.

53

Actuarial Section

STATISTICAL SECTION OVERVIEW & FINANCIAL TRENDS

The statistical section presents additional information to provide financial statement users with added historical perspective, context, and detail to assist in using the information in the financial statements, notes to financial statements, and required supplementary information to understand and assess the System's financial condition.
Financial Trends
The schedules presented on page 54 and page 55 contain trend

information to help the reader understand how the System's financial position has changed over time.
Operating Information
The schedules presented on pages 56 through 66 contain benefits, service and employer data to help the reader understand how the System's financial report relates to the services of the System and the activities it performs.

Additions by Source (dollars in thousands)





Employer and

Net

Fiscal

Member

Nonemployer

Investment

Year

Contributions

Contributions

Income (Loss)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$ 554,027 567,635 592,264 604,126 601,512 640,745 640,120 661,835 685,626 716,233

$ 986,759 1,026,287 1,057,416 1,089,912 1,082,224 1,180,469 1,270,963 1,406,706 1,580,532 1,654,844

$ (1,775,578) (6,572,435) 4,671,571 9,594,994 1,090,900 6,938,349 9,826,743 2,384,145 810,574 7,971,677

Contributions were made in accordance with actuarially determined contribution requirements.

Total Additions to (Deductions from) Fiduciary Net Position
$ (234,792) (4,978,513) 6,321,251 11,289,032 2,774,636 8,759,563 11,737,826 4,452,686 3,076,732 10,342,754

Deductions by Type (dollars in thousands)

Benefit Payments

Partial

Lump-Sum Total

Net

FYiescaarl Service LuOmppt -ioSunm Dis ability SB uernveivfiotsr S uPpapylmemenetns t(a1)l SetDtleeam thent PaB yemneefnitts

Administrative Expenses

Refunds

2008 $ 2,527,156 $ 40,820 $ 89,348 $ 95,452 $ 1,648 $ 2,059 $ 2,756,483 $ 23,744 $ 54,482

2009 2,385,561 37,191 72,028 36,922 1,414 1,371 2,534,487 22,603 49,414

2010 2,639,144 34,530 74,998 49,290 1,122 1,340 2,800,424 20,223 53,638

2011 2,868,815 37,652 80,393 52,122 922 1,599 3,041,503 20,986 67,916

2012 3,091,370 42,441 85,830 55,328 754 1,829 3,277,552 21,954 72,157

2013 2014 2015 2016 2017

3,353,295 3,569,374 3,791,526 4,015,786 4,241,760

42,259 33,148 34,494 33,929 31,839

91,727 98,145 103,483 109,669 114,813

58,234 61,203 64,911 67,013 70,179

633 2,001 508 2,074 379 2,086 312 2,110 297 2,236

3,548,149 3,764,452 3,996,879 4,228,819 4,461,124

22,584 15,025 14,996 15,279 16,773

81,142 87,095 80,085 79,334 76,296

Total Deductions From Fiduciary Net Position
$ 2,834,709 2,606,504 2,874,285 3,130,405 3,371,663 3,651,875 3,866,572 4,091,960 4,323,432 4,554,193

(1) Supplemental payments to retirees who belong to a local retirement system.

Statistical Section

54

FINANCIAL TRENDS
continued

Changes in Fiduciary Net Position (dollars in thousands)

Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total Additions to (Deductions from) Fiduciary Net Position $ (234,792) (4,978,513) 6,321,251 11,289,032 2,774,636 8,759,563 11,737,826 4,452,686 3,076,732 10,342,754

Total Deductions from Fiduciary Net Position $ 2,834,709
2,606,504 2,874,285 3,130,405 3,371,663 3,651,875 3,866,572 4,091,960 4,323,432 4,554,193

Changes in Fiduciary Net Position $ (3,069,501)
(7,585,017) 3,446,966 8,158,627 (597,027) 5,107,688 7,871,254
360,726 (1,246,700) 5,788,561

55

Statistical Section

OPERATING INFORMATION
continued

Benefit Payment Statistics

Number of Retirees

78,633

82,382

87,017

92,180

97,323

101,139

108,100

113,066

117,918

122,629

Annual Benefit (dollars in millions)

$2,757

$2,535

$2,800

$3,764

$3,278

$3,042

$3,548

$3,997

$4,229

$4,461

Average Monthly Benefit

$2,528

$2,620

$2,682

$2,750

$2,807

$2,923

$2,902

$2,946

$2,989

$3,032

Retirees who belonged to a local retirement system and who received supplemental payments are not included.

Statistical Section

56

OPERATING INFORMATION
continued

Member Withdrawal Statistics

Number of Members

8,106

8,423

8,394

8,687 8,011

8,148

6,939

6,944

7,383

7,296

Annual Withdrawal (dollars in millions)

$87

$81 $72

$80

$79

$76

$68

$55

$54

$49

Average Withdrawal

$6,689

$7,119

$7,719

$8,389

$8,548

$9,650

$10,015

$9,986

$10,700

$10,417

57

Statistical Section

OPERATING INFORMATION
continued

Average Monthly Benefit Payments for New Retirees



Years Credited Service

Effective Retirement Dates

for Fiscal Years Ended June 30, 10 - 15 16 - 20 21 - 25 26 - 30 Over 30

Total



2008

Average monthly benefit

$ 809.08 $ 1,324.02 $ 1,866.99 $ 2,466.86 $ 3,488.62

$ 2,424.71

Average final average salary

$ 3,404.28 $ 3,734.90 $ 4,283.55 $ 4,797.61 $ 5,676.32

$ 4,755.66

Number of retirees

1,010

726

777

686

2,665

5,864

2009 Average monthly benefit Average final average salary Number of retirees

$ 812.18 $ 3,430.35
1,008

$ 1,293.52 $ 3,676.14
701

$ 1,892.41 $ 4,302.88
774

$ 2,564.06 $ 4,938.17
601

$ 3,603.15 $ 5,785.56
2,480

$ 2,456.32 $ 4,794.47
5,564

2010 Average monthly benefit Average final average salary Number of retirees

$ 859.93 $ 3,651.87
1,195

$ 1,433.00 $ 4,095.26
786

$ 1,931.22 $ 4,366.28
1,018

$ 2,624.98 $ 5,142.35
690

$ 3,655.74 $ 5,820.83
2,736

$ 2,479.89 $ 4,902.99
6,425

2011 Average monthly benefit Average final average salary Number of retirees

$ 879.11 $ 3,753.60
1,455

$ 1,483.30 $ 4,216.80
954

$ 1,963.77 $ 4,461.70
1,150

$ 2,719.55 $ 5,175.76
812

$ 3,735.70 $ 5,940.78
2,797

$ 2,456.69 $ 4,943.41
7,168

2012 Average monthly benefit Average final average salary Number of retirees

$ 900.60 $ 3,813.60
1,532

$ 1,417.23 $ 4,070.28
920

$ 2,008.09 $ 4,564.72
1,125

$ 2,723.70 $ 5,250.18
885

$ 3,764.35 $ 5,995.69
2,589

$ 2,425.05 $ 4,948.47
7,051

2013 Average monthly benefit Average final average salary Number of retirees

$ 881.25 $ 3,720.18
1,721

$ 1,465.23 $ 4,200.63
1,107

$ 1,979.00 $ 4,506.44
1,279

$ 2,626.66 $ 5,060.19
1,060

$ 3,642.94 $ 5,811.25
2,762

$ 2,335.21 $ 4,821.63
7,929

2014 Average monthly benefit Average final average salary Number of retirees

$ 877.35 $ 3,801.40
1,744

$ 1,410.94 $ 4,136.09
1,066

$ 1,902.93 $ 4,454.29
1,169

$ 2,515.64 $ 4,962.86
994

$ 3,556.03 $ 5,868.78
2,099

$ 2,152.62 $ 4,736.63
7,072

2015 Average monthly benefit Average final average salary Number of retirees

$ 897.66 $ 3,818.45
1,659

$ 1,416.36 $ 4,161.17
1,119

$ 2,008.34 $ 4,635.36
1,164

$ 2,566.87 $ 5,007.10
1,035

$ 3,573.41 $ 5,900.24
2,190

$ 2,217.71 $ 4,812.42
7,167

2016

Average monthly benefit

$ 883.07 $ 1,447.47 $ 1,979.68 $ 2,582.75 $ 3,496.30

$ 2,207.94

Average final average salary

$ 3,786.36 $ 4,215.09 $ 4,558.19 $ 5,046.61 $ 5,796.47

$ 4,786.10

Number of retirees

1,695

1,094

1,130

1,001

2,297

7,217

2017

Average monthly benefit

$ 870.72 $ 1,455.45 $ 1,997.91 $ 2,588.80 $ 3,535.59

$ 2,220.50

Average final average salary

$ 3,778.31 $ 4,230.72 $ 4,657.44 $ 5,139.34 $ 5,877.02

$ 4,839.84

Number of retirees

1,692

1,120

1,089

973

2,300

7,174

Statistical Section

58

OPERATING INFORMATION
continued

Retired Members by Type of Benefit

Amount of Monthly Number of Benefit Retirees

Type of Retirement (1)

A

B CD

Option Selected (2) Opt-2 Opt-3
Max Opt-1 Opt-2 Opt-3 Opt-4 Pop-Up Pop-Up

$ 1250

542

339 48 115 40

184 11 193

69 43

31 11

250500 500750

4,710 6,665

3,913 391 404 2 5,650 610 401 4

2,884 4,160

159 897 250 1,146

202 106 281 76

346 116 559 193

7501000 7,238 6,300 536 400 2 4,397 284 1,243 282 59 10001250 7,290 6,391 524 369 6 4,437 275 1,228 316 39 1,2501,500 6,357 5,596 471 289 1 3,819 236 1,002 258 55

723 250 684 311 698 289

1,5001,750 5,453 4,819 375 258 1 3,099 212 905 307 45 1,7502,000 5,019 4,457 343 218 1 2,876 215 768 269 50 2,0002,250 4,870 4,372 317 180 1 2,722 189 761 293 46

596 289 542 299 529 330

2,2502,500 4,573 4,156 285 131 1 2,521 197 670 262 46 558 319 2,5002,750 4,777 4,402 270 105 - 2,645 213 671 292 52 591 313 2,7503,000 4,902 4,510 295 97 - 2,768 212 638 282 53 628 321 3,0003,250 5,527 5,180 259 88 - 3,197 261 656 277 88 673 375 3,2503,500 5,862 5,617 169 76 - 3,527 266 671 285 69 680 364 3,5003,750 5,985 5,791 135 59 - 3,642 272 643 261 87 705 375 3,7504,000 6,436 6,310 84 42 - 4,150 353 541 279 86 620 407 4,0004,250 5,953 5,852 69 32 - 3,855 307 483 284 97 566 361 4,2504,500 5,204 5,142 35 27 - 3,428 284 441 223 73 439 316 4,5004,750 4,429 4,368 29 32 - 2,977 258 353 208 64 343 226 4,7505,000 3,550 3,508 15 27 - 2,383 181 310 173 53 264 186 Over 5,000 17,287 17,126 47 114 - 10,516 979 2,047 1,191 462 1,145 947
TOTALS 122,629 113,799 5,307 3,464 59 74,187 5,614 16,267 6,294 1,749 11,920 6,598

(1) Type of Retirement A - Service B - Disability C - Survivor benefit D - Supplemental payments to retirees who belonged to a local retirement system.
(2) Refer to Summary of Plan Provisions, beginning on page 11 for descriptions of Options.

59

Statistical Section

Retirement Payments By County of Residence

OPERATING INFORMATION
continued

County

Number of Retirees

Appling

297

Atkinson

92

Bacon

143

Baker

33

Baldwin

772

Banks

206

Barrow

679

Bartow

987

Ben Hill

272

Berrien

244

Bibb

1,886

Bleckley

274

Brantley

143

Brooks

187

Bryan

323

Bulloch

1,364

Burke

274

Butts

287

Calhoun

123

Camden

386

Candler

160

Carroll

1,806

Catoosa

477

Charlton

90

Chatham

2,887

Chattahoochee 32

Chattooga

309

Cherokee

2,157

Clarke

3,245

Clay

54

Clayton

1,223

Clinch

103

Cobb

5,762

Coffee

521

Colquitt

578

Columbia

2,328

Cook

213

Coweta

1,381

Crawford

208

Crisp

327

FY17 Total Gross Pay
$ 11,051,086 3,371,895 5,125,016 1,055,668 27,342,811 6,817,685 22,538,356 34,581,503 9,511,355 8,477,200 68,302,152 9,498,766 5,137,938 6,581,009 10,563,472 49,886,805 8,990,922 10,664,527 4,028,838 13,838,979 5,235,065 65,033,956 16,248,069 3,519,674
103,720,452 1,105,583 10,390,517 80,032,456
140,968,023 2,020,784 45,648,312 4,324,728
217,979,064 18,696,904 20,728,574 84,745,991 7,427,293 51,509,384 7,390,780 11,890,464

County
Dade Dawson Decatur DeKalb Dodge Dooly Dougherty Douglas Early Echols Effingham Elbert Emanuel Evans Fannin Fayette Floyd Forsyth Franklin Fulton Gilmer Glascock Glynn Gordon Grady Greene Gwinnett Habersham Hall Hancock Haralson Harris Hart Heard Henry Houston Irwin Jackson Jasper Jeff Davis

Number of Retirees
122 314 360 5,949 264 130 1,663 969 193
8 432 301 379 141 364 1,769 1,403 1,052 374 7,171 408
42 1,312
562 289 293 4,653 627 1,934 147 356 409 291 100 1,851 1,413 109 1,038 193 152

FY17 Total Gross Pay
$ 3,833,167 13,015,106 13,029,312 255,434,215 9,428,353 4,672,384 64,131,685 35,173,086 6,882,556 275,900 12,937,167 9,844,198 13,857,205 4,901,605 13,497,414 70,929,400 53,901,357 38,347,025 13,514,237 316,822,791 15,204,880 1,315,086 50,172,894 19,364,938 10,520,357 12,537,522 176,063,464 22,027,663 76,174,566 4,377,407 11,884,290 15,173,598 11,668,253 3,005,428 68,444,029 53,619,812 3,962,001 37,515,435 6,849,511 5,774,214

Statistical Section

60

OPERATING INFORMATION
continued

County

Number of Retirees

Jefferson Jenkins Johnson Jones Lamar Lanier Laurens Lee Liberty Lincoln Long Lowndes Lumpkin Macon Madison Marion McDuffie McIntosh Meriwether Miller Mitchell Monroe Montgomery Morgan Murray Muscogee Newton Oconee Oglethorpe Paulding Peach Pickens Pierce Pike Polk Pulaski Putnam Quitman Rabun Randolph

214 128 125 232 237
75 720 307 324 163
60 1,672
481 161 801
86 317 183 243
87 268 296 143 369 344 2,580 836 1,250 290 670 603 641 275 264 486 150 369
37 279
93

FY17 Total Gross Pay
$ 7,348,689 4,312,501 4,442,747 8,603,874 8,574,247 2,377,568 26,308,972 11,056,344 11,176,762 6,148,478 1,870,790 59,865,859 18,016,141 5,307,271 23,638,539 2,718,770 11,307,686 6,254,442 8,861,772 3,068,108 8,993,343 10,802,054 5,071,403 14,453,498 13,089,556 94,383,910 30,594,773 53,094,326 9,483,316 21,833,731 23,182,364 25,442,675 8,961,307 8,839,133 18,362,004 5,428,660 14,272,203 1,280,065 11,697,613 3,387,147

County
Richmond Rockdale Schley Screven Seminole Spalding Stephens Stewart Sumter Talbot Taliaferro Tattnall Taylor Telfair Terrell Thomas Tift Toombs Towns Treutlen Troup Turner Twiggs Union Upson Walker Walton Ware Warren Washington Wayne Webster Wheeler White Whitfield Wilcox Wilkes Wilkinson Worth Outside GA

Number of Retirees
2,850 835 57 230 134 886 422 76 521 83 22 203 117 190 128 738 845 365 249 102 797 182 79 394 376 602
1,155 567 60 275 391 26 94 472 943 153 175 133 227
11,086

FY17 Total Gross Pay
$ 94,627,293 31,330,627 1,839,742 7,892,432 4,720,756 31,490,679 15,767,739 2,628,198 20,138,469 2,341,014 667,564 7,097,101 4,291,674 6,658,763 4,485,031 26,658,909 30,782,365 13,560,700 9,488,223 3,487,860 29,956,101 5,910,323 2,954,818 15,244,543 13,116,360 20,181,978 42,175,113 20,788,957 2,085,473 9,949,906 13,082,513 846,521 3,650,650 17,459,408 35,687,736 5,816,998 6,090,232 4,306,501 7,880,589 494,006,197

TOTALS

122,629 $ 4,461,124,000

61

Statistical Section

OPERATING INFORMATION
continued

Principal Participating Employers

Employers

Covered Employees

State of Georgia Gwinnett County Schools Cobb County Schools DeKalb County Schools Fulton County Schools Atlanta Public Schools Clayton County Schools Chatham County Schools Henry County Schools Forsyth County Schools Muscogee County School District

37,961 16,978 11,466 11,048 10,043
5,339 5,083 4,525 4,231 3,955
--

2017
Rank
1 2 3 4 5 6 7 8 9 10 --

Percentage of Total System
17.03 % 7.62 % 5.14 % 4.96 % 4.51 % 2.40 % 2.28 % 2.03 % 1.90 % 1.77 % --

Top 10 Total

110,629 222,918

49.63 % 100.0 %

Covered Employees
31,777 16,448 12,314 11,774
9,912 5,563 5,804 4,272 3,915
-- 3,974

2008
Rank
1 2 3 4 5 7 6 8 10 -- 9

Percentage of Total System
14.12 % 7.31 % 5.47 % 5.23 % 4.40 % 2.47 % 2.58 % 1.90 % 1.74 % -- 1.77 %

105,753 225,023

47.00 % 100.00 %

Note: GASB Statement No. 67 was implemented during the fiscal year ended June 30, 2014 and required legally separate employers within the same financial reporting entity to be treated as a single employer for reporting purposes. Therefore, information presented for fiscal years prior to implementation is not comparable with information presented for fiscal years after implementation.

Statistical Section

62

OPERATING INFORMATION

continued

Reporting Entities
Universities and Colleges
Abraham Baldwin Agricultural College Albany State University Armstrong Atlantic State University Atlanta Metropolitan State College Augusta University Bainbridge College Clayton College & State University College of Coastal Georgia Columbus State University Cooperative Extension Service Dalton State College Darton College East Georgia State College Fort Valley State University Georgia College & State University Georgia Gwinnett College Georgia Highlands College Georgia Institute of Technology Georgia Southern University Georgia Southwestern State University Georgia State University Gordon College Kennesaw State University Middle Georgia State College Savannah State University South Georgia State College The University of Georgia University of North Georgia University of West Georgia Valdosta State University
Boards of Education
Appling County Atkinson County Atlanta Public Bacon County Baker County Baldwin County Banks County Barrow County Bartow County Ben Hill County Berrien County Bibb County Bleckley County

63

Statistical Section

Brantley County Bremen City Brooks County Bryan County Buford City Bulloch County Burke County Butts County Calhoun City Calhoun County Camden County Candler County Carroll County Carrollton City Schools Cartersville City Catoosa County Charlton County Chatham County Chattahoochee County Chattooga County Cherokee County Chickamauga City Clarke County Clay County Clayton County Clinch County Cobb County Coffee County Colquitt County Columbia County Commerce City Cook County Coweta County Crawford County Crisp County Dade County Dalton City Dawson County Decatur City Decatur County DeKalb County Dodge County Dooly County Dougherty County Douglas County Dublin City Early County Echols County Effingham County

Elbert County Emanuel County Evans County Fannin County Fayette County Floyd County Forsyth County Franklin County Fulton County Gainesville City Gilmer County Glascock County Glynn County Gordon County Grady County Greene County Griffin-Spalding County Gwinnett County Habersham County Hall County Hancock County Haralson County Harris County Hart County Heard County Henry County Houston County Irwin County Jackson County Jasper County Jeff Davis County Jefferson City Jefferson County Jenkins County Johnson County Jones County Lamar County Lanier County Laurens County Lee County Liberty County Lincoln County Long County Lowndes County Lumpkin County Macon County Madison County Marietta City Marion County

McDuffie County McIntosh County Meriwether County Miller County Mitchell County Monroe County Montgomery County Morgan County Murray County Muscogee County Newton County Oconee County Oglethorpe County Paulding County Peach County Pelham City Pickens County Pierce County Pike County Polk School District Pulaski County Putnam County Quitman County Rabun County Randolph County Richmond County Rockdale County Rome City Schley County Screven County Seminole County Social Circle City Stephens County Stewart County Sumter County Talbot County Taliaferro County Tattnall County Taylor County Telfair County Terrell County Thomas County Thomaston-Upson County Thomasville City Tift County Toombs County Towns County Treutlen County

OPERATING INFORMATION

Trion City Troup County Turner County Twiggs County Union County Valdosta City Vidalia City Walker County Walton County Ware County Warren County Washington County Wayne County Webster County Wheeler County White County Whitfield County Wilcox County Wilkes County Wilkinson County Worth County
Public Libraries
Athens Regional Library Augusta Richmond County Library Barnesville-Lamar County Library Bartow County Library Bartram Trail Regional Library Brooks County Library Camden County Library Catoosa County Library Chattooga County Public Library Cherokee Regional Library Chestatee Regional Library Clayton County Regional Library Coastal Plains Regional Library Cobb County Public Library Conyers-Rockdale Library System Coweta Public Library DeKalb County Public Library DeSoto Trail Regional Library Dougherty County Public Library Elbert County Library Fitzgerald-Ben Hill County Library Flint River Regional Library Forsyth County Public Library Gwinnett County Public Library Hall County Library

continued
Hart County Library Henry County Library Houston County Public Library Jefferson County Library System Kinchafoonee Regional Library Lake Blackshear Regional Library Lee County Library Lincoln County Library Live Oak Public Libraries Mary Vinson Memorial Library Middle Georgia Regional Library Moultrie-Colquitt County Library Mountain Regional Library Northeast Georgia Regional Library Newton County Library Northeast Georgia Regional Library Northwest Georgia Regional Library Ocmulgee Regional Library Oconee Regional Library Ohoopee Regional Library Okefenokee Regional Library Peach Public Library Piedmont Regional Library Pine Mountain Regional Library Roddenbery Memorial Library Sara Hightower Regional Library Satilla Regional Library Screven-Jenkins Regional Library Sequoyah Regional Library South Georgia Regional Library Southwest Georgia Regional Library Statesboro Regional Library Thomas County Public Library Three Rivers Regional Library Troup-Harris-Coweta Regional Library Uncle Remus Regional Library Warren County Public Library West Georgia Regional Library Worth County Library System
Technical Colleges
Albany Technical Institute Athens Technical College Atlanta Technical College Augusta Technical Institute Central Georgia Technical College Chattahoochee Technical College Coastal Pines Technical College

Statistical Section

64

OPERATING INFORMATION

continued

Columbus Technical Institute Georgia Northwestern Technical College Georgia Piedmont Technical College Gwinnett Technical College Lanier Technical College North Georgia Technical Institute Oconee Fall Line Technical College Ogeechee Technical College Savannah Technical College South Georgia Technical College Southeastern Technical College Southern Crescent Technical College Southern Regional Technical College West Georgia Technical College Wiregrass Georgia Technical College
Regional Educational Service Agencies
Central Savannah River Area RESA Chattahoochee Flint RESA Coastal Plains RESA First District RESA Griffin RESA Heart of Georgia RESA Metro RESA Middle Georgia RESA North Georgia RESA Northeast Georgia RESA Northwest Georgia RESA Oconee RESA Okefenokee RESA Pioneer RESA Southwest Georgia RESA West Georgia RESA
Charter Schools
Academy for Classical Education, Inc. Amana Academy Atlanta Classical Academy Atlanta Heights Charter School Atlanta Neighborhood Charter School,
Inc. Baconton Community Charter School Brighten Academy Brookhaven Innovation Academy Centennial Academy Charles Drew Charter School

Charter Conservatory for Liberal Arts and Technology
Chattahoochee Hills Charter School, Inc. Cherokee Charter Academy Cirrus Academy Coweta Charter Academy DeKalb Academy of Technology and
Environment DeKalb Path Academy DeKalb Preparatory Academy Destiny Achievers Academy of
Excellence Dubois Integrity Academy Foothills Education Charter High School Fulton Academy of Science and
Technology Fulton Leadership Academy Furlow Charter School Georgia Connections Academy Georgia Cyber Academy Georgia High School for Accelerated
Learning Georgia Magnet Charter School Georgia Online Academy, Inc. Georgia School for Innovation and the
Classics International Academy of Smyrna
Charter School International Charter School of Atlanta International Community School Ivy Preparatory Academy for Girls Ivy Preparatory Academy Kennesaw Charter Science and Math
Academy Kipp Metro Atlanta Collaborative Latin College Prep Latin Grammar School Leadership Preparatory Academy
Charter School Liberty Technical Charter School Main Street Academy Mountain Education Center Inc. Museum School of Avondale New Life Academy of Excellence Inc. North Metro Academy of Performing
Arts Odyssey Charter School Pataula Charter Academy

65

Statistical Section

Purpose Built Schoolsof Atlanta Savannah Classical Academy Scintilla Charter Academy Southwest Georgia STEM Charter Tapestry Public Charter School The Globe Academy The Kindezi School Utopian Academy for the Arts Wesley International Academy Westside Atlanta Charter School
State Agencies
Department of Administrative Services Department of Agriculture Department of Community Health Department of Corrections Department of Human Services Department of Natural Resources Department of Public Health Department of Public Safety Department of Behavioral Health
and Development Disability Georgia Agricultural Exposition
Authority Georgia Building Authority Georgia Bureau of Investigation Georgia Department of Audits Georgia Department of Community
Supervision Georgia Department of Defense Georgia Department of Driver Services Georgia Department of Early Care and
Learning Georgia Department of Education Georgia Department of Economic
Development Georgia Department of Juvenile Justice Georgia Department of Labor Georgia Department of Law Georgia Department of Revenue Georgia General Assembly Georgia Public Defender Standards
Council Georgia Public Telecommunications
Commission Georgia Student Finance Commission Governor's Office of Planning and
Budget

Georgia Technology Authority Prosecuting Attorneys' Council of
Georgia Secretary of State State Accounting Office State Road Tollway and Authority Technical College System of Georgia
Other
Baldwin County Board of Health Clarke County Health Department Clayton Center Community Service
Board DeKalb County DFACS Effingham County Tax Commissioner
Office Floyd County DFACS Georgia Military College Glynn County Health Dept Tift County Board of Health Twiggs County Board of
Health Ware County Health Department Whitfield County Board of Health

OPERATING INFORMATION
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Statistical Section

66

A COMPONENT UNIT OF THE STATE OF GEORGIA

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