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 ................................................................................................ 13 Management's Discussion & Analysis (Unaudited) ................................................................ 15 Basic Financial Statements: Statement of Fiduciary Net Position ................................................................................... 19 Statement of Changes in Fiduciary Net Position ................................................................. 20 Notes to Financial Statements ............................................................................................ 21 Required Supplementary Information (Unaudited): Schedule of Changes in Employers' and Nonemployers' Net Pension Liability ................... 42 Schedule of Employers' and Nonemployers' Net Pension Liability and Related Ratios....... 43 Schedule of Employer and Nonemployer Contributions ..................................................... 43 Schedule of Investment Returns ......................................................................................... 43 Schedule of the System's Proportionate Share of the Net Pension Liability to ERS ............ 44 Schedule of the System's Contributions to ERS ................................................................... 44 Schedule of the System's Proportionate Share of the Net OPEB Liability (Asset) ............... 44 Schedule of the System's Contributions to OPEB Plans ...................................................... 45 Notes to Required Supplementary Information .................................................................. 46 Additional Information: Schedule of Administrative Expenses.................................................................................. 48 Schedule of Investment Expenses ....................................................................................... 49 Investment Section Investment Overview ............................................................................................................. 50 Rates of Return ....................................................................................................................... 51 Investment Allocation ............................................................................................................. 52 Investment Summary ............................................................................................................. 52 Schedule of Fees and Commissions ........................................................................................ 52 Portfolio Detail Statistics ........................................................................................................ 53 Table of Contents 1 TABLE OF CONTENTS Actuarial Section Actuary's Certification Letter ................................................................................................. 54 Summary of Actuarial Assumptions and Methods:................................................................ 56 Service Retirement ............................................................................................................. 58 Separation Before Service Retirement................................................................................ 58 Actuarial Valuation Data: Active Members ................................................................................................................. 59 Retirees and Beneficiaries .................................................................................................. 59 Solvency Test ...................................................................................................................... 60 Member & Employer Contribution Rates ........................................................................... 60 Schedule of Funding Progress ............................................................................................. 61 Analysis of Financial Experience ......................................................................................... 62 Statistical Section Statistical Section Overview ................................................................................................... 63 Financial Trends: Additions by Source ............................................................................................................ 63 Deductions by Type ............................................................................................................ 64 Changes in Fiduciary Net Position ...................................................................................... 64 Operating Information: Benefit Payment Statistics .................................................................................................. 65 Member Withdrawal Statistics ........................................................................................... 66 Average Monthly Benefit Payments for New Retirees ........................................................ 67 Retired Members by Type of Benefit .................................................................................. 68 Retirement Payments by County of Residence ................................................................... 69 Principal Participating Employers ....................................................................................... 71 Reporting Entities ............................................................................................................... 72 2 Table of Contents CERTIFICATE OF ACHIEVEMENT Introductory Section 3 BOARD OF TRUSTEES as of June 30, 2019 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 S. 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 6/30/21 Mr. Greg S. Griffin* State Auditor Ex-Officio Ms. Lynnette T. Riley State Treasurer Ex-Officio Ms. Deborah K. Simonds* Retired Teacher Elected by the Board of Trustees Term Expires 6/30/21 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 3/31/21 Dr. Jason L. Branch Not Employed by Board of Regents Appointed by the Governor Term Expires 6/30/21 * Investment Committee Member 4 Introductory Section LETTER OF TRANSMITTAL September 30, 2019 Board of Trustees Teachers Retirement System of Georgia Atlanta, Georgia 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, 2019. 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. 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, 2018. This was the 31st 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 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 plan provisions is provided on pages 11-12 of this 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 471,993 active and retired members, and 316 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 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. Introductory Section 5 LETTER OF TRANSMITTAL continued Please refer to Management's Discussion and Analysis beginning on page 15 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 Investment Allocation. 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. Overall, U.S. equity returns this past year were up over 9%, while foreign markets lagged with a modest 1% return. Longer-term periods for total equities were generally quite positive. A comparative analysis of rates of return is presented on page 51. For additional information and analysis pertaining to investment policies and strategies, asset allocations, and yield, see Management's Discussion and Analysis beginning on page 15 and the Investment Section beginning on page 50. 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 77.4% for the fiscal year ended June 30, 2018. 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 Brian Kemp 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 At TRS, we know that an organization is only as good as its people, and for that reason we focused this year on empowering our employees by providing them with professional growth opportunities. In an effort to increase leadership skills in existing employees, we identified those candidates with potential and created the Leadership Development Institute Program (LDIP). These 22 employees worked together over the course of a year, learning, reading, and putting into practice leadership techniques that will prepare them for promotion opportunities as they arise. We also launched a Senior Team Education Program, which focused on enhancing the leadership skills of our leadership team. The Executive Director Advisory Committee was created in an effort to address various agency topics and issues gleaned from an agencywide employee workplace satisfaction survey. This committee is charged with identifying areas of strength and weakness and submitting suggestions to the Senior Leadership Team and the members of the LDIP to evaluate and implement approved solutions. We are excited with the current results and look forward to continuing to build upon all of these programs. Our IT division continues to diligently enhance all of our systems in an effort to mitigate vulnerabilities and cyber-attacks. This year we blocked over 13,000 attacks, investigated over 150 potential security incidents, and provided security awareness training to all staff. We are happy to report that we had no security breaches and continue our efforts to thwart all cyber-attacks. We also streamlined our financial statement, audit and Comprehensive Annual Financial Report processes through the implementation of WDesk financial reporting software and implemented processing of vendor payments via ACH versus checks through the Microsoft Dynamics accounts payable system. We added to the Active Member portal the ability to request a service purchase cost calculation which allows TRS to receive and process the request in a timely manner. All of these new processes have increased our efficiency. To engage and keep our members informed, we individually counseled 8,147 members at the TRS office and around the State. Through our 388 outreach events, including meetings, benefit fairs, and workshops, we reached 26,487 members and retirees in over 120 counties. We conducted 7 in-house pre-retirement seminars, 6 half-day seminars with speakers from TRS, Social Security Administration, the Department of Community Health, and financial/estate planning experts. We continued to provide our popular group counseling and mid-career counseling programs. The Outreach Team implemented new mid-career seminars bringing in new speakers on budgeting, saving, risk, insurance and investments in an effort to encourage members to start saving and preparing earlier in their careers. We designed and launched a new website and now have over 6,090 followers on Facebook. We continue to use both platforms to communicate and engage 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 statement of fiduciary net position and the related statement of changes in 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 6 Introductory Section determining responsible stewardship of the assets contributed by the System's members, their employers, and the State of Georgia. LETTER OF TRANSMITTAL continued the staff, the advisors, and to the many people who have worked so diligently to ensure the successful operation of the System. 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 Brian Kemp, members of the Georgia General Assembly, Sincerely, L.C. (Buster) Evans, Ed.D. Executive Director Introductory Section 7 YOUR RETIREMENT SYSTEM Financial & Statistical Highlights Financial Highlights (dollars in thousands) Member Contributions Employer and Nonemployer Contributions Interest and Dividend Income Benefits Paid to Retired Members Member Withdrawals Interest Credited to Member Contributions Statistical Highlights Active Membership Members Leaving the System Retired Members Average Monthly Benefit 8 Introductory Section June 30, 2019 2018 $ 759,474 $ 745,574 $ 2,566,403 $ 2,018,724 $ 1,705,874 $ 1,568,318 $ 4,950,465 $ 4,699,920 $ 76,543 $ 76,061 $ 365,968 $ 349,780 % Change +1.9 +27.1 +8.8 +5.3 +0.6 +4.6 226,387 226,061 +0.1 7,584 7,147 +6.1 131,802 127,223 +3.6 $ 3,130 $ 3,079 +1.7 SYSTEM ASSETS Total System Assets at June 30 (dollars in thousands) 2014 2015 2016 2017 2018 2019 Equities Fixed Income Other(1) Total System Assets $47,126,335 17,490,895 1,907,659 $46,422,828 18,807,238 1,620,195 $43,651,536 19,979,237 2,087,314 $49,236,293 20,139,422 2,048,417 $51,181,613 22,564,510 1,856,129 $53,433,296 22,684,318 2,772,805 $66,524,889 $66,850,261 $65,718,087 $71,424,132 $75,602,252 $78,890,419 (1) Includes cash and equivalents, receivables, net OPEB asset, and capital assets, net. Introductory Section 9 ADMINISTRATIVE STAFF & ORGANIZATION Dr. L.C. (Buster) Evans Executive Director Randy Dennis 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 Consulting Services Actuary Cavanaugh Macdonald Consulting, LLC Auditor KPMG LLP 10 Introductory Section Sonya Kinley Director Human Resources Laura L. Lanier Controller Financial Services J. Gregory McQueen Director Information Technology 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 WCM Investment Management * See page 52 in the Investment Section for a summary of fees paid to Investment Advisors. SUMMARY OF PLAN PROVISIONS 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. Administration State statutes provide that the administration of the System be vested in a ten-member Board of Trustees (the Board) 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 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. 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 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. Introductory Section 11 SUMMARY OF PLAN PROVISIONS continued 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 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 cost-of-living increases the member received up to the time of death. 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-ofliving 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 PLOP 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, 20.90% of annual salary; and investment income. 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. 12 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, 2019, and the related notes to the financial statements, which collectively comprise the System's basic financial statements for the year then ended 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, 2019, 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, schedule of the System's contributions to ERS, schedule of the System's proportionate share of the net OPEB liability (asset), and the schedule of the System's contributions to OPEB plans on pages 15-18 and 42-47 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. 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 Financial Section 13 INDEPENDENT AUDITORS' REPORT continued standards generally accepted in the United States of America. In our opinion, the schedule 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 any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2019 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the System's 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 30, 2019 14 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, 2019. 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 The following highlights are discussed in more detail later in this analysis: At June 30, 2019, the System's assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources by $78.8 billion (reported as net position) as compared to the net position of $75.5 billion at June 30, 2018, representing an increase of $3.3 billion, or 4.3%. Contributions from members increased by $13.9 million or 1.9% from $745.6 million in 2018 to $759.5 million in 2019. Employer and nonemployer contributing entity (Nonemployer) contributions increased by $547.7 million or 27.1% from $2.0 billion in 2018 to $2.6 billion in 2019. The increase in member contributions is primarily due to an increase in the number of active members and higher average payroll during the year. The increase in employer contributions is primarily due to an increase in the employer contribution rate coupled with 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, 2019, and 2018 were $5.0 billion and $4.7 billion, respectively, representing an increase of 5.3%. 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 eight 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; (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. Four schedules are presented from the perspective of the System reporting as the employer for its employees who participate in either the Employees' Retirement System of Georgia (ERS), the State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB), or the Georgia State Employees Postemployment Benefit Fund (State OPEB) and include (1) a schedule of the System's proportionate share of the net pension liability to ERS; (2) a schedule of the System's contributions to ERS; (3) a schedule of the System's proportionate share of the net OPEB liability (asset); and (4) a schedule of the System's contributions to OPEB plans. 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 19. 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 20. 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 21 of this report. Required Supplementary Information A brief explanation of the eight required schedules found beginning on page 42 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 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, Financial Section 15 MANAGEMENT'S DISCUSSION & ANALYSIS (Unaudited) continued the plan's fiduciary net position, net pension liability, covered payroll, and the ratios of fiduciary net position to total pension liability and net pension liability to covered 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 money weighted 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. Schedule of the System's Proportionate Share of the Net OPEB Liability (Asset): This schedule presents historical trend information about the System's proportionate share of the net OPEB liability (asset) for its employees who participate in the State OPEB plan or the SEAD-OPEB plan. This trend information will be accumulated to display a 10-year presentation. Schedule of the System's Contributions to OPEB Plans: This schedule presents historical trend information about the System's contributions for its employees who participate in the State OPEB and/or SEAD-OPEB plans. This trend information will be accumulated to display a 10-year presentation. Financial Analysis of the System A summary of the System's net position at June 30, 2019 and 2018 is as follows: Summary of TRS Net Position (dollars in thousands) Assets: Cash and cash equivalents and receivables Investments Net OPEB asset Capital assets, net Total assets Deferred outflows of resources Liabilities: Net OPEB liability Net pension liability Due to brokers and accounts payable Total liabilities Deferred inflows of resources Net position Net position June 30 2019 2018 $ 2,763,142 76,117,614 2,342 7,321 78,890,419 11,011 1,846,305 73,746,123 2,177 7,647 75,602,252 8,452 18,091 27,823 56,837 102,751 9,742 $ 78,788,937 28,452 28,065 18,533 75,050 2,729 75,532,925 Amount change Percentage change 916,837 2,371,491 165 (326) 3,288,167 2,559 (10,361) (242) 38,304 27,701 7,013 3,256,012 49.7 % 3.2 7.6 (4.3) 4.3 30.3 (36.4)% (0.9) 206.7 36.9 257.0 4.3 The $3.3 billion, or 4.3%, increase in net position from 2018 to 2019 is primarily due to positive fixed income and equity market returns. 16 Financial Section MANAGEMENT'S DISCUSSION & ANALYSIS (Unaudited) continued The following table presents the investment allocation at June 30, 2019 and 2018: Investment Allocation Asset allocation at June 30 (in percentages): Equities: Domestic International Domestic obligations: U.S. treasuries Corporate and other bonds International obligations: Corporates Asset allocation at June 30 (dollars in thousands): Equities: Domestic International Domestic obligations: U.S. treasuries Corporate and other bonds International obligations: Corporates 2019 2018 52.9% 17.3 23.2 6.1 0.5 51.8% 17.6 21.2 8.3 1.1 $ 40,261,927 13,171,369 38,234,479 12,947,134 17,632,382 4,646,365 15,661,380 6,096,883 405,571 $ 76,117,614 806,247 73,746,123 The total investment portfolio at June 30, 2019 increased $2.4 billion, or 3.2%, from June 30, 2018, which is primarily due to positive fixed income and equity market returns. 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 2019 was 6.8%, with a 6.5% return for equities and a 7.0% return for fixed income. The five year annualized rate of return at June 30, 2019 was 6.6% with an 8.4% return on equities and a 2.6% 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, 2019 was 4.1%, compared to 5.0% for the fiscal year ended June 30, 2018. Financial Section 17 MANAGEMENT'S DISCUSSION & ANALYSIS (Unaudited) continued A summary of the changes in the System's net position for the years ended June 30, 2019 and 2018 is as follows: Changes in TRS Net Position (dollars in thousands) Changes in net position 2019 2018 Amount Percentage change change Additions: Employer contributions Nonemployer contributions Member contributions Net investment income Total additions $ 2,560,989 5,414 759,474 4,972,419 8,298,296 2,014,308 4,416 745,574 6,247,155 9,011,453 546,681 998 13,900 (1,274,736) (713,157) 27.1% 22.6 1.9 (20.4) (7.9) Deductions: Benefits payments Refunds Administrative expenses, net Total deductions 4,950,465 4,699,920 250,545 5.3 76,543 76,061 482 0.6 15,276 15,865 (589) (3.7) 5,042,284 4,791,846 250,438 5.2 Net increase in net position $ 3,256,012 4,219,607 (963,595) (22.8) Additions The System accumulates resources needed to fund benefits through contributions and returns on invested funds. Member contributions were higher with an increase of $13.9 million, or 1.9%, primarily due to an increase in membership salary coupled with an increase in the number of active members in 2019. Employer contributions were higher with an increase of $546.7 million, or 27.1%, compared to 2018 primarily due to an increase in the employer contribution rate to 20.90% from 16.81% coupled with an an increase in membership salary and an increase in the number of active members in 2019. The change in net investment income was primarily due to more moderate equity gains in 2019. the number of retirees and beneficiaries receiving benefit payments from 127,223 in 2018 to 131,802 in 2019, and an increase in postretirement benefits. 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. Deductions Deductions increased $250.4 million, or 5.2%, in 2019, primarily because of the $250.5 million, or 5.3%, increase in benefit payments. Regular pension benefit payments increased due to an increase in 18 Financial Section STATEMENT OF FIDUCIARY NET POSITION June 30, 2019 (in thousands) Assets Cash and cash equivalents Receivables: Interest and dividends Due from brokers for securities sold Members and employer contributions Other Total receivables Investments - at fair value: Equities: Domestic International Domestic obligations: U.S. treasuries Corporate and other bonds International obligations: Corporates Total investments Net OPEB asset Capital assets, net Total assets Deferred Outflows of Resources Liabilities Net OPEB liability Net pension liability Due to brokers for securities purchased Accounts payable and other Total liabilities Deferred Inflows of Resources Net Position Restricted for Pensions See accompanying notes to financial statements. $ 2,299,495 219,278 6,672 236,928 769 463,647 40,261,927 13,171,369 17,632,382 4,646,365 405,571 76,117,614 2,342 7,321 78,890,419 11,011 18,091 27,823 46,692 10,145 102,751 9,742 $ 78,788,937 Financial Section 19 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION For the Year Ended June 30, 2019 (in thousands) Additions: Contributions: Employer Nonemployer Member Investment income: Net increase in fair value of investments Interest, dividends, and other Total investment income Less investment expense Net investment income Total additions Deductions: Benefit payments Refunds of member contributions Administrative expenses, net Total deductions Net increase in net position Net Position Restricted for Pensions: Beginning of year End of year See accompanying notes to financial statements 20 Financial Section $ 2,560,989 5,414 759,474 3,312,578 1,705,874 5,018,452 46,033 4,972,419 8,298,296 4,950,465 76,543 15,276 5,042,284 3,256,012 75,532,925 $ 78,788,937 NOTES TO FINANCIAL STATEMENTS June 30, 2019 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 cost sharing, multiple employer 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 ex officio 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 educational related work are eligible for membership. There were 316 employers and 1 nonemployer contributing entity participating in the plan at June 30, 2019. Retirement Benefits As of June 30, 2019, participation in the System is as follows: Inactive members and beneficiaries currently receiving benefits Inactive members not yet receiving benefits, vested Inactive members, nonvested Active plan members Total 131,802 14,060 99,744 226,387 471,993 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 one twelfth 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 that certain cost of living 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 lump sum 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. 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. 47 3 63, the employer contributions for certain full time 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 2019 were based on the June 30, 2016 actuarial valuation as follows: Member Employer: Normal Unfunded accrued liability Total 6.00% 7.77% 13.13% 20.90% 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 21 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 2. Summary of Significant Accounting Policies and Plan Asset Matters 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. 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. 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 long term objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan. The following was the System's adopted asset allocation policy as of June 30, 2019: Asset Class Fixed income Equities Total Target Allocation 25% - 45% 55% - 75% 100% Approximately 23.2% 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 22 Financial Section 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, 2019, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 4.08%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. 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 straight line 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 and Other Postemployment Benefits (OPEB) For the plans listed below, for purposes of measuring the net pension liability, net OPEB asset, net OPEB liability, deferred outflows of resources and deferred inflows of resources related to pension and OPEB, and pension and OPEB expense, information about the fiduciary net position of the plans and additions to and deductions from the fiduciary net position have been determined on the same basis as they are reported by the plans. 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. Pensions: Employees' Retirement System of Georgia (ERS) OPEB: Georgia State Employees Postemployment Benefit Fund (State OPEB) State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of fiduciary net position and changes therein. Actual results could differ from those estimates. New Accounting Pronouncements Pronouncements effective for the 2019 financial statements: 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 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 2. Summary of Significant Accounting Policies and Plan Asset Matters, continued tangible capital asset. There are no applicable reporting requirements for the System related to this Statement. In April 2018, the GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements effective for fiscal years beginning after June 15, 2018. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. There are no applicable reporting requirements for the System related to this Statement. Pronouncements issued, but not yet effective: 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 the process of evaluating the impact of this pronouncement on its financial statements. In June 2017, the GASB issued Statement No. 87, Leases effective for fiscal years beginning after December 15, 2019. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The System is in the process of evaluating the impact of this pronouncement on its financial statements. In June 2018, the GASB issued Statement No. 89, Accounting for Interest Costs Incurred before the End of a Construction Period effective for fiscal years beginning after December 15, 2019. The objectives of this Statement are to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period. In addition, this Statement's goal is to simplify accounting for interest cost incurred before the end of a construction period. The System does not anticipate this statement will impact its financial statements and related reporting. In August 2018, the GASB issued Statement No. 90, Majority Equity Interests-an amendment of GASB Statements No. 14 and No. 61 for fiscal years beginning after December 15, 2018. The objectives of this Statement are to improve the consistency and comparability of reporting a government's majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The System is in the process of evaluating the impact of this pronouncement on its financial statements. issuers, arrangements associated with conduit debt obligations, and related note disclosures. The System does not anticipate this statement will impact its financial statements and related reporting. 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 short term and long term securities as follows: Cash and Cash Equivalents The carrying amount of the System's deposits totaled approximately $2.3 billion at June 30, 2019, with actual bank balances of approximately $1.9 billion. The System's cash balances are fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. government. Short term 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 P 1 and/or A 1 by national credit rating agencies. Master notes, an overnight security administered by a custodian bank, and an obligation of a corporation whose commercial paper is rated P 1 and/or A 1 by national credit rating agencies. Investments in commercial paper or master notes are limited to no more than $500 million in any one name. In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations effective for fiscal years beginning after December 15, 2020. The objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with commitments extended by Financial Section 23 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 3. Investment Program, continued 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, 2019, the System held U.S. Treasury bonds of approximately $17.6 billion. U.S. and foreign corporate obligations. At June 30, 2019, the System held U.S. corporate bonds of approximately $4.6 billion and international corporate bonds of approximately $405.6 million. Obligations unconditionally guaranteed by agencies of the U.S. government. At June 30, 2019, the System did not hold agency bonds. Private placements are authorized under the same general restrictions applicable to corporate bonds. At June 30, 2019, the System did not hold private placements. Mortgage investments are authorized to the extent that they are secured by first mortgages on improved real property located in the state of Georgia. Equity securities are also authorized (in statutes) for investment as a complement to the System's fixed income portfolio and as a long term inflation hedge. By statute, no more than 75% of the total invested assets on a historical cost basis may be placed in equities. Equity holdings in any one corporation may not exceed 5% of the outstanding equity of the issuing corporation. The equity portfolio is managed by the Division in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the Board of Trustees; in house research considering such matters as yield, growth, and sales statistics; and analysis of independent market research. Equity trades are approved and executed by the Division's staff. Common stocks eligible for investment are approved by the Investment Committee of the Board of Trustees before being placed on an approved list. Equity investments are authorized in the following instruments: Domestic equities are those securities considered by the O.C.G.A. to be domiciled in the United States. At June 30, 2019, the System held domestic equities of approximately $40.3 billion. 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, 2019, the System held ADRs of approximately $7.5 billion and international equities of approximately $5.6 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 model derived 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 third party 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. 24 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 3. Investment Program, continued This table shows the fair value leveling of the System's investments (in thousands): Investments Measured at Fair Value as of June 30, 2019 (dollars in thousands) Fair value measures using Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs Investments by fair value level Level 1 Level 2 Level 3 Equities: Domestic $ 40,261,927 $ --$ --$ International 13,044,612 126,757 -- Obligations: Domestic: U.S. treasuries 17,632,382 -- -- Corporate bonds -- 4,646,365 -- International: Corporate bonds -- 405,571 -- Total 40,261,927 13,171,369 17,632,382 4,646,365 405,571 Total investments by fair value level $ 70,938,921 $ 5,178,693 $ --$ 76,117,614 Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the System. O.C.G.A. 47-20-84 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 two bonds that were 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. The quality ratings of investments in fixed income securities as described by Standard & Poor's and by Moody's Investors Service, which are nationally recognized statistical rating organizations, at June 30, 2019, are shown in the chart on the following page. Financial Section 25 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 3. Investment Program, continued Quality Ratings of Fixed Income Investments held at June 30, 2019 (dollars in thousands) Investment type Standard and Poor's/ Moody's quality rating June 30, 2019 Fair value Domestic obligations: U.S. treasuries Corporates Total domestic corporates AAA/Aaa AA/Aaa AA/Aa AA/A A/A BBB/Baa $ 17,632,382 683,602 405,119 242,864 407,552 1,892,896 1,014,332 4,646,365 International obligations: Corporates Total international corporates Total fixed income investments A/A 405,571 405,571 $ 22,684,318 Concentration of Credit Risk: Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government's investment in a single issue. At June 30, 2019, 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 total investments. Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. While the System has no formal interest rate risk policy, active management of the bond portfolio incorporates interest rate risk to generate improved returns. This risk is managed within the portfolio using the effective duration method. This method is widely used in the management of fixed income portfolios and quantifies to a much greater degree the sensitivity to interest rate changes when analyzing a bond portfolio with call options, prepayment provisions, and any other cash flows. Effective duration makes assumptions regarding the most likely timing and amounts of variable cash flows and is best utilized to gauge the effect of a change in interest rates on the fair value of a portfolio. It is believed that the reporting of effective duration found in the table below quantifies to the fullest extent possible the interest rate risk of the System's fixed income assets. Effective Duration of Fixed Income Assets by Security Type (dollars in thousands) Fixed income security type Fair value June 30, 2019 Percentage of all fixed income assets Effective duration (years) Domestic obligations: U.S. treasuries Corporates International obligations: Corporates Total $ 17,632,382 77.7% 5.7 4,646,365 20.5 3.9 405,571 1.8 0.5 $ 22,684,318 100.0% 5.3 26 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 3. Investment Program, continued 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 Board-adopted 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. The System's foreign exchange risk management policy does not quantify limitations on foreign currency-denominated investments. As of June 30, 2019, the System's exposure to foreign currency risk in U.S. Dollars is highlighted in this table: International Investment Securities at Fair Value as of June 30, 2019 (dollars in thousands) Currency Cash & cash equivalents Equities Fixed income Australian Dollar Brazilian Real British Pound Canadian Dollar Chilean Peso Chinese Renminbi Colombian Peso Czech Krone Danish Krone Euro Hong Kong Dollar Indian Rupee Indonesian Rupiah Israeli Shekel Japanese Yen Malaysian Ringgit Mexican Peso New Taiwan Dollar Norwegian Krone Philippine Peso Polish Zloty Qatari Riyal Singapore Dollar South African Rand South Korean Won Swedish Krona Swiss Franc Thailand Baht UAE Dirham $ --$ 205,801 $ -- 126,557 -- 487,348 -- 168,556 -- 15,952 91 39,077 -- 9,945 -- 9,676 -- 87,616 -- 1,362,125 -- 453,948 217 327,307 -- 29,773 -- 11,433 -- 932,129 -- 68,347 -- 45,546 -- 173,458 -- 10,416 -- 22,951 -- 14,812 -- 18,421 -- 104,384 -- 154,997 -- 300,711 -- 147,920 -- 149,532 -- 126,757 -- 19,428 --$ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Total holdings subject to foreign currency risk 308 5,624,923 -- Investment securities payable in U.S. dollars -- 7,546,446 405,571 Total international investments at fair value $ 308 $ 13,171,369 $ 405,571 $ Total 205,801 126,557 487,348 168,556 15,952 39,168 9,945 9,676 87,616 1,362,125 453,948 327,524 29,773 11,433 932,129 68,347 45,546 173,458 10,416 22,951 14,812 18,421 104,384 154,997 300,711 147,920 149,532 126,757 19,428 5,625,231 7,952,017 13,577,248 Financial Section 27 NOTES TO FINANCIAL STATEMENTS June 30, 2019, 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. The System reports the gross loan fee income earned as investment income on the combining statement of changes in fiduciary net position. During a loan, the System continues to receive dividends and interest as the owner of the loaned securities. The brokerage firms pledge collateral securities consisting of U.S. government and agency securities, mortgage backed securities issued by a U.S. government agency, corporate bonds, and equities. The collateral value must be equal to at least 102% to 109% of the loaned securities' value, depending on the type of collateral security. Securities loaned totaled approximately $21.5 billion at June 30, 2019. The collateral value was equal to 104.3% of the loaned securities' value at June 30, 2019. The System's lending collateral was held in the System's name by the tri party 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. 5. Capital Assets The following is a summary of capital assets and depreciation information as of June 30 and for the years then ended: Summary of Capital Assets (dollars in thousands) Capital assets: Land Building Furniture and fixtures Computer equipment Computer software Balance at June 30, 2018 Additions Disposals Balance at June 30, 2019 $ 4,350 $ 2,800 760 2,726 14,980 25,616 --$ -- 12 356 -- 368 --$ -- (212) (689) -- (901) 4,350 2,800 560 2,393 14,980 25,083 Accumulated depreciation for: Building Furniture and fixtures Computer equipment Computer software Capital assets, net (980) (393) (1,616) (14,980) (17,969) $ 7,647 $ (70) (71) (468) -- (609) (241) $ -- 211 605 -- 816 (85) $ (1,050) (253) (1,479) (14,980) (17,762) 7,321 28 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 6. Net Pension Liability of Employers and Nonemployers This table summarizes components of the net pension liability of the participating employers and nonemployers at June 30, 2019: Components of Net Pension Liability (dollars in thousands) Total pension liability $ 100,291,641 Plan fiduciary net position 78,788,937 Employers' and nonemployers' net pension liability $ 21,502,704 Plan fiduciary net position as a percentage of the total pension liability 78.56% Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2018. Based on the funding policy adopted by the Board on May 15, 2019, the investment rate of return assumption was changed to 7.25% in the June 30, 2018 actuarial valuation. Therefore, the investment rate of return used in the roll-forward of the total pension liability is 7.25% using the following actuarial assumptions, applied to all periods including in the measurement: Inflation Salary increases Investment rate of return Post-retirement benefit increases 2.50% 3.00 - 8.75%, including inflation 7.25%, net of pension plan investment expense, including inflation 1.50% semi-annually 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 8-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% 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, 2018 valuation were based on the results of an actuarial experience study for the period July 1, 2009 - June 30, 2014, with the exception of the long-term assumed rate of return on assets (discount rate) which was changed from 7.50% to 7.25%, and the assumed annual rate of inflation which was changed from 2.75% to 2.50%, effective with the June 30, 2018 valuation. Financial Section 29 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 6. Net Pension Liability of Employers and Nonemployers, continued The long term expected rate of return on pension plan investments was determined using a log normal distribution analysis in which best estimate 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 long term 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 small cap equities International developed market equities International emerging market equities Total 30.00% 51.00 1.50 12.40 5.10 100.00% (0.10)% 8.90 13.20 8.90 10.90 * Net of inflation Discount rate: The discount rate used to measure the total pension liability was 7.25%. 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 nonemployer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability of the employers and nonemployers, calculated using the discount rate of 7.25%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.25%) or 1 percentage point higher (8.25%) than the current rate: Employers' and Nonemployers' Net Pension Liability (dollars in thousands) 1% Decrease (6.25%) $34,905,182 Current discount rate (7.25%) $21,502,704 1% Increase (8.25%) $10,481,105 30 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 6. Net Pension Liability of Employers and Nonemployers, continued Actuarial valuation date: The total pension liability is based upon the June 30, 2018 actuarial valuation. An expected total pension liability is determined as of June 30, 2019 using standard roll forward techniques. The roll forward 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. This note to the financial statements and required supplementary information in the first two tables on page 44 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 cost sharing multiple employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. 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/ post/annual-financial-reports. 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 cost of living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Financial Section 31 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 7. System Employees' Retirement Benefits, continued 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 total required contribution rate for the year ended June 30, 2019 was 24.78% of annual covered payroll for old and new plan members and 21.78% for GSEPS members. The rates include the annual actuarially determined employer contribution rate of 24.66% of annual covered payroll for old and new plan members and 21.66% for GSEPS members, plus a 0.12% adjustment for the HB 751 one-time benefit adjustment of 3% to retired state employees. The System's contributions to ERS for funding purposes totaled approximately $4.5 million for the year ended June 30, 2019. 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, 2019, the System reported a liability of approximately $27.8 million for its proportionate share of the net pension liability for the ERS plan. The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2017. An expected total pension liability as of June 30, 2018 was determined using standard roll forward techniques. The System's proportionate share of the net pension liability was based on contributions to ERS during the fiscal year ended June 30, 2018. At June 30, 2018, the System's proportionate share was 0.676785% which is based on contributions, and a decrease of 0.014252% from its proportionate share measured as of June 30, 2017. For the year ended June 30, 2019, the System recognized pension expense of approximately $3.3 million. Pursuant to GASB Statement No. 67, approximately $1.6 million of the pension expense is included in investment expense as a reduction of investment income. At June 30, 2019, 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 Deferred inflows of resources Differences between expected and actual experience Change of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between the System's contributions and proportionate share of contributions System's contributions subsequent to the measurement date Total $ 865 $ -- 1,311 -- -- 641 -- 428 4,451 -- $ 6,627 $ 1,069 System contributions subsequent to the measurement date of approximately $4.5 million are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows (dollars in thousands): Years ended June 30: 2020 $ 2021 2022 2023 1,795 664 (1,066) (286) 32 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 7. System Employees' Retirement Benefits, continued Actuarial assumptions: The total pension liability as of June 30, 2018 was determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increases Investment rate of return 2.75% 3.25 - 7.00%, including inflation 7.30%, 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 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 9-12% less than the actual number of deaths that occurred during the study period for service retirements and beneficiaries and for disability retirements. There is a margin for future mortality improvement in the tables used by the plan. 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, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2009 - June 30, 2014, with the exception of the investment rate of return. Subsequent to the June 30, 2017 measurement date, the ERS Board of Trustees adopted a new funding policy. Because of this new funding policy, the assumed investment rate of return was reduced from 7.50% to 7.40% for the June 30, 2017 actuarial valuation. In addition, based on the new funding policy, the assumed investment rate of return was further reduced by 0.10% from 7.40% to 7.30% as of the June 30, 2018 measurement date. Therefore, an assumption change from 7.50% to 7.30% is reflected in the calculation of the total pension liability. The long term expected rate of return on pension plan investments was determined using a log normal distribution analysis in which best estimate 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 long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Financial Section 33 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 7. System Employees' Retirement Benefits, continued 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 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 Alternatives Total 30.00% 37.20 3.40 1.40 17.80 5.20 5.00 100.00% (0.50)% 9.00 12.00 13.50 8.00 12.00 10.50 *Net of inflation 34 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 7. System Employees' Retirement Benefits, continued Discount rate: The discount rate used to measure the total pension liability was 7.30%. 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 long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the System's proportionate share of the net pension liability to changes in the discount rate: The following presents the System's proportionate share of the net pension liability calculated using the discount rate of 7.30%, as well as what the System's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.30%) or 1 percentage point higher (8.30%) than the current rate (dollars in thousands): System's Proportionate Share of the Net Pension Liability 1% Decrease Current discount rate 1% Increase (6.30%) (7.30%) (8.30%) $39,574 $27,823 $17,811 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/ post/annual-financial-reports. Financial Section 35 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 8. System Employees' Other Postemployment Benefits Plan descriptions and Funding Policy: Georgia State Employees Postemployment Benefit Fund (State OPEB Fund) Plan Description: Employees of State organizations as defined in 45-18-25 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the State OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 45 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board. Benefits Provided: The State OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for employees of State organizations (including technical colleges) and other entities authorized by law to contract with the Department of Community Health (DCH) for inclusion in the plan. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from ERS, Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), the System or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. NonMedicare eligible retiree plan options include Health Reimbursement Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The State OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the State OPEB Fund is permitted. Contributions: As established by the Board, the State OPEB Fund is substantially funded on a pay-as-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the State OPEB Fund from the System was $3.8 million for the year ended June 30, 2019. Active employees are not required to contribute to the State OPEB Fund. State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEAD-OPEB) Plan Description: SEAD-OPEB was created in 2007 by the Georgia General Assembly to amend Title 47 of the O.C.G.A., relating to retirement, so as to establish a fund for the provision of term life insurance to retired and vested inactive members of ERS, LRS, and JRS. The plan is a cost sharing multiple employer defined benefit OPEB plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than OPEB Plans. The SEAD OPEB trust fund accumulates the premiums received from the aforementioned retirement plans, including interest earned on deposits and investments of such payments. Benefits Provided: The amount of insurance for a retiree with creditable service prior to April 1, 1964 in the SEAD-OPEB plan is the full amount of insurance in effect on the date of retirement. The amount of insurance for a service retiree with no creditable service prior to April 1, 1964 in the SEAD-OPEB plan is 70% of the amount of insurance in effect at age 60 or at termination, if earlier. Life insurance proceeds are paid in a lump sum to the beneficiary upon death of the retiree. Contributions: Georgia law provides that employee contributions to the SEAD-OPEB plan shall be in an amount established by the Board of Trustees not to exceed one half of 1% of the member's earnable compensation. There were no employer contributions required for the fiscal year ended June 30, 2019. OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At June 30, 2019, the System reported a liability of $18.1 million for its proportionate share of the State OPEB net liability and an asset of $2.3 million for its proportionate share of the SEAD-OPEB net asset. The following schedule details the System's proportionate share of the OPEB amounts for all plans as of June 30, 2019: Aggregate OPEB Amounts - All Plans (dollars in thousands) OPEB liabilities OPEB assets Deferred outflows of resources Deferred inflows of resources OPEB expense $ 18,091 2,342 4,384 8,673 (1,284) The net OPEB liability and net OPEB asset were measured as of June 30, 2018. The total OPEB liability and OPEB asset were used to calculate the net OPEB liability/asset and were based on actuarial valuations as of June 30, 2017. An expected total OPEB liability and OPEB asset as of June 30, 2018 were determined using standard roll-forward techniques. The System's proportionate share of the net OPEB liability for the State OPEB plan was actuarially determined based on employer contributions during the fiscal year ended June 30, 2018. At June 30, 2018, the System's proportionate share was 0.691645%, which was a decrease of 0.006700% from its proportionate share measured as of June 30, 2017. The System's proportionate share of the net OPEB asset for the SEAD-OPEB plan was based on actual member salaries reported to the SEAD-OPEB plan during the fiscal year ended June 30, 2018. At June 30, 2018, the System's proportionate share was 0.865387%, which was an increase of 0.027889% from its proportionate share measured as of June 30, 2017. 36 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 8. System Employees' Other Postemployment Benefits, continued For the year ended June 30, 2019 the System recognized a reduction of OPEB expense of $1.1 million for the State OPEB plan and a reduction of OPEB expense of $224.9 thousand for the SEAD-OPEB plan. Pursuant to GASB Statement No. 67, approximately $560.5 thousand of the State OPEB reduction of expense and $118.1 thousand of the SEAD-OPEB reduction of OPEB expense is included in investment expense as a reduction of investment income. At June 30, 2019, the System reported deferred outflows of resources and deferred inflows of resources related to OPEB for each plan from the following sources: Deferred Outflows and Inflows of Resources (dollars in thousands) State OPEB plan Deferred Deferred outflows of inflows of resources resources SEAD-OPEB plan Deferred outflows of resources Deferred inflows of resources Differences between expected and actual experience Change of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between the System's contributions and proportionate share of contributions System's contributions subsequent to the measurement date Total $ -- $ 1,423 $ 26 $ -- -- 6,558 120 -- 418 -- -- 387 -- 259 -- 46 3,820 -- -- -- $ 4,238 $ 8,240 $ 146 $ 433 System contributions subsequent to the measurement date of $3.8 million for the State OPEB plan are reported as deferred outflows of resources and will be recognized as a reduction of the net State OPEB liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows (dollars in thousands): Years ended June 30: 2020 2021 2022 2023 State OPEB SEAD-OPEB $ (2,541) $ (62) (2,541) (74) (2,113) (118) (627) (33) Financial Section 37 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 8. System Employees' Other Postemployment Benefits, continued Actuarial assumptions: The total OPEB liability and OPEB asset as of June 30, 2018 were determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2018: Actuarial Assumptions Inflation Salary increases Investment rate of return Single equivalent interest rate Healthcare cost trend rate: Pre-Medicare eligible Medicare eligible Ultimate trend rate: Pre-Medicare eligible Medicare eligible Year of Ultimate trend rate Pre-Medicare eligible Medicare eligible State OPEB plan 2.75% 3.25 - 7.00%, including inflation SEAD-OPEB plan 2.75% 3.25 - 7.00%, including inflation 7.30%, compounded annually, net of investment expense, including inflation 5.22% 7.30%, net of OPEB plan investment expense, including inflation n/a 7.50% n/a 5.50% n/a 4.75% n/a 4.75% n/a 2028 n/a 2022 n/a Mortality rates for the State OPEB plan were based on the RP 2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale BB. The RP-2000 Combined Mortality Table projected to 2025 with projection scale BB and set forward 2 years for both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back 7 years for males and set forward 3 years for females is used for the period after disability retirement. Postretirement mortality rates for the SEAD-OPEB plan 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. There is a margin for future mortality improvement in the tables used by the plan. The actuarial assumptions used in the June 30, 2017 valuation for the State OPEB and SEAD-OPEB plans were based on the results of an actuarial experience study for the period July 1, 2009 - June 30, 2014, with the exception of the investment rate of return for SEADOPEB. Subsequent to the June 30,2017 measurement date, the SEAD Board of Trustees adopted a new funding policy. Because of this new funding policy, the assumed investment rate of return was reduced from 7.50% to 7.40% for the June 30, 2017 actuarial valuation. In addition, based on the new funding policy, the assumed investment rate of return was further reduced by 0.10% from 7.40% to 7.30% as of the June 30, 2018 measurement date. Therefore, an assumption change from 7.50% to 7.30% is reflected in the calculation of the total pension liability. Projection of State OPEB benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and includes the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation. The long term expected rate of return on the State OPEB and SEADOPEB plan investments were determined using a log normal distribution analysis in which best estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. 38 Financial Section NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 8. System Employees' Other Postemployment Benefits, continued The target 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 State OPEB Target allocation Long-term expected real rate of return* SEAD-OPEB 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 Alternatives Total 30.00% 37.20 3.40 1.40 17.80 5.20 5.00 100.00% (0.50)% 9.00 12.00 13.50 8.00 12.00 10.50 30.00% 37.20 3.40 1.40 17.80 5.20 5.00 100.00% (0.50)% 9.00 12.00 13.50 8.00 12.00 10.50 *Net of inflation Discount rate The State OPEB discount rate has changed since the prior measurement date from 3.60% to 5.22%. In order to measure the total OPEB liability for the State OPEB Fund, a single equivalent interest rate of 5.22% was used as the discount rate. This is comprised mainly of the yield or index rate for 20 year tax-exempt general obligation municipal bonds with an average rating of AA or higher (3.87% per the Bond Buyers Index). The projection of cash flows used to determine the discount rate assumed that contributions from members and from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount. Projected future benefit payments for all current plan members were projected through 2118. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be available to make OPEB payments for inactive employees through year 2040. Therefore, the calculated discount rate of 5.22% was applied to all periods of projected benefit payments to determine the total OPEB liability. The discount rate used to measure the total SEAD-OPEB liability was 7.30%. 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 OPEB plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. Sensitivity of the Employer Agency's proportionate share of the net OPEB liability to changes in the discount rate: The following presents the System's proportionate share of the net State OPEB liability and net SEAD-OPEB asset calculated using the discount rate detailed below, as well as what the proportionate Financial Section 39 NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 8. System Employees' Other Postemployment Benefits, continued share of the net State OPEB liability and net SEAD-OPEB asset would be if it were calculated using a discount rate that is 1 percentage point lower or 1-percentage point higher than the current discount rate (dollars in thousands): System's Proportionate Share of the Net OPEB Liability (Asset) 1% Decrease Current discount rate (4.22%) (5.22%) State OPEB $21,492 $18,091 1% Increase (6.22%) $15,280 SEAD-OPEB (6.30%) (1,262) (7.30%) (2,342) (8.30%) (3,228) Sensitivity of the Employer Agency's proportionate share of the net OPEB liability to changes in the healthcare cost trend rates: The following presents the System's proportionate share of the State net OPEB liability, as well as what the proportionate share of the State net OPEB liability would be if it were calculated using 40 Financial Section healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates (dollars in thousands): System's Proportionate Share of the Net State OPEB Liability 1% Decrease Current healthcare cost trend rate 1% Increase $14,923 $18,091 $21,964 OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Reports (CAFR) for each of the plans which are publicly available. The State OPEB plan is located at https://sao.georgia.gov/comprehensive-annual-financial-reports and the SEAD-OPEB plan is located at www.ers.ga.gov/post/ annual-financial-reports. NOTES TO FINANCIAL STATEMENTS June 30, 2019, continued 9. Deferred Outflows and Inflows of Resources Deferred Outflows and Inflows of Resources reported on the Statement of Net Position as of June 30, 2019 consist of the following (dollars in thousands): Deferred Outflows of Resources Deferred Outflows of Resources Differences between expected and actual experience Change of assumptions Net difference between projected and actual earnings on plan investments Changes in proportion and differences between the System's contributions and proportionate share of contributions System's contributions subsequent to the measurement date Total Deferred Outflows of Resources ERS pension plan State OPEB plan SEADOPEB plan Total $ 865 $ 1,311 -- --$ -- 418 26 $ 891 120 1,431 -- 418 -- -- -- -- 4,451 3,820 $ 6,627 $ 4,238 $ -- 8,271 146 $ 11,011 Deferred Inflows of Resources Deferred Inflows of Resources Differences between expected and actual experience Change of assumptions Net difference between projected and actual earnings on plan investments Changes in proportion and differences between the System's contributions and proportionate share of contributions Total Deferred Inflows of Resources ERS pension plan State OPEB plan SEADOPEB plan Total $ -- $ 1,423 $ -- $ 1,423 -- 6,558 -- 6,558 641 -- 387 1,028 428 259 46 733 $ 1,069 $ 8,240 $ 433 $ 9,742 Financial Section 41 REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30 (Unaudited) Schedule of Changes in Employers' & Nonemployers' Net Pension Liability (dollars in thousands) 2019 2018 2017 2016 2015 2014 Total pension liability: Service cost $ 1,536,336 $ 1,484,705 $ 1,413,080 $ 1,435,810 $ 1,386,498 $ 1,374,556 Interest 6,868,617 6,565,372 6,293,611 5,990,178 5,779,597 5,557,046 Differences between expected and actual experience 430,272 894,691 573,483 380,526 (165,785) -- Changes of assumptions 2,388,357 -- -- 662,047 -- -- Benefit payments (4,950,465) (4,699,920) (4,461,124) (4,228,819) (3,996,879) (3,764,452) Refunds of member contributions (76,543) (76,061) (76,296) (79,334) (80,085) (87,095) Net change in total pension liability 6,196,574 4,168,787 3,742,754 4,160,408 2,923,346 3,080,055 Total pension liability - beginning 94,095,067 89,926,280 86,183,526 82,023,118 79,099,772 76,019,717 Total pension liability - ending (a) 100,291,641 94,095,067 89,926,280 86,183,526 82,023,118 79,099,772 Plan fiduciary net position: Contributions - employer Contributions - nonemployer Contributions - member Net investment income Benefit payments Refunds of member contributions Administrative expense Other1 2,560,989 5,414 759,474 4,972,419 (4,950,465) (76,543) (15,276) -- 2,014,308 4,416 745,574 6,247,155 (4,699,920) (76,061) (15,865) (27,654) 1,648,669 6,175 716,233 7,971,677 (4,461,124) (76,296) (16,773) -- 1,572,624 7,908 685,626 810,574 (4,228,819) (79,334) (15,279) -- 1,399,668 7,038 661,835 2,384,145 (3,996,879) (80,085) (14,996) (27,706) 1,264,546 6,417 640,120 9,826,743 (3,764,452) (87,095) (15,025) -- Net change in plan fiduciary net position 3,256,012 4,191,953 5,788,561 (1,246,700) 333,020 7,871,254 Plan fiduciary net position - beginning 75,532,925 71,340,972 65,552,411 66,799,111 66,466,091 58,594,837 Plan fiduciary net position - ending (b) 78,788,937 75,532,925 71,340,972 65,552,411 66,799,111 66,466,091 Net pension liability-ending (a)-(b) $ 21,502,704 $ 18,562,142 $ 18,585,308 $ 20,631,115 $ 15,224,007 $ 12,633,681 1 The System is a participating employer in the Employees' Retirement System of Georgia, the Georgia State Employees Postemployment Benefit Fund, and the State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund. Pursuant to the requirements of GASB Statement No. 68, the fiscal year 2015 beginning Fiduciary Net Position was restated by $27,705,937. Pursuant to the requirements of GASB Statement No. 75, the fiscal year 2018 beginning Fiduciary Net Position was restated by $27,653,657. These restatements were made for reporting purposes to reflect the impact of recording the initial deferred outflows of resources and the net pension and OPEB liabilities and OPEB asset. For actuarial purposes, these adjustments are is being recognized in fiscal year 2015 and 2018 respectively, and beginning fiduciary net position was not restated. Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. See accompanying notes to required supplementary information and independent auditors' report. 42 Financial Section REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30 (Unaudited), continued Schedule of Employers' & Nonemployers' Net Pension Liability & Related Ratios (dollars in thousands) Total pension liability Plan fiduciary net position 2019 $ 100,291,641 78,788,937 2018 $ 94,095,067 75,532,925 2017 $ 89,926,280 71,340,972 2016 $86,183,526 65,552,411 2015 $ 82,023,118 66,799,111 2014 $ 79,099,772 66,466,091 Employers' and nonemployers' net pension liability $ 21,502,704 $ 18,562,142 $ 18,585,308 $20,631,115 $15,224,007 $12,633,681 Plan fiduciary net position as a percentage of the total pension liability Covered payroll Employers' and nonemployers' net pension liability as a percentage of covered payroll 78.56% 80.27% 79.33% 76.06% 81.44% 84.03% $ 12,279,440 $ 12,009,066 $ 11,596,664 $11,075,907 $10,697,384 $10,349,862 175.11% 154.57% 160.26% 186.27% 142.32% 122.07% Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. Schedule of Employer and Nonemployer Contributions (dollars in thousands) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Actuarially determined employer and nonemployer contribution Contributions in relation to actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll $ 2,566,403 $ 2,018,724 $ 1,654,844 $ 1,580,532 $ 1,406,706 $ 1,270,963 $ 1,180,469 $ 1,082,224 $ 1,089,912 $ 1,057,416 2,566,403 $ -- 2,018,724 $ -- 1,654,844 $ -- 1,580,532 $ -- 1,406,706 $ -- 1,270,963 $ -- 1,180,469 $ -- 1,082,224 $ -- 1,089,912 $ -- 1,057,416 $ -- $12,279,440 $12,009,066 $11,596,664 $11,075,907 $10,697,384 $10,349,862 $10,345,916 $10,527,471 $10,602,257 $10,856,427 20.90% 16.81% 14.27% 14.27% 13.15% 12.28% 11.41% 10.28% 10.28% 9.74% Schedule of Investment Returns Annual money-weighted rate of return, net of investment expense 2019 2018 2017 2016 2015 2014 4.08% 5.05% 7.62% (2.92)% (0.45)% 12.17% Note: Schedule is intended to show information 10 years. Additional years will be displayed as they become available. See accompanying notes to required supplementary information and independent auditors' report. Financial Section 43 REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30 (Unaudited), continued Schedule of the System's Proportionate Share of the Net Pension Liability to ERS (dollars in thousands) 2019 2018 2017 2016 2015 System's proportion of the net pension liability System's proportionate share of the net pension liability System's covered payroll System's proportionate share of the net pension liability as a percentage of its covered payroll 0.676785% 0.691037% 0.698825% 0.683763% 0.668620% $ 27,823 $ 28,065 $ 33,057 $ 27,702 $ 25,077 18,202 17,756 16,880 16,291 17,622 152.86% 158.06% 195.84% 170.04% 142.31% ERS fiduciary net position as a percentage of the total pension liability 76.68% 76.33% 72.34% 76.20% 77.99% 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) Contractually required contribution Contributions in relation to the contractually required contribution 2019 2018 2017 2016 2015 $ 4,451 $ 4,423 $ 4,328 $ 4,102 $ 3,433 4,451 4,423 4,328 4,102 3,433 Contribution deficiency (excess) $ --$ --$ --$ --$ -- System's covered payroll $ 18,555 $ 18,202 $ 17,756 $ 16,880 $ 16,291 Contributions as a percentage of covered payroll 23.99% 24.30% 24.37% 24.30% 21.07% 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 OPEB Liability (Asset) (dollars in thousands) State OPEB plan System's proportion of the net OPEB liability (asset) System's proportionate share of the net OPEB liability (asset) System's covered payroll System's proportionate share of the net OPEB liability (asset) as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total OPEB liability 2019 2018 0.691645% 0.698345% $ 18,091 $ 28,452 20,599 19,895 87.82% 31.48% 143.01% 17.34% SEAD-OPEB plan System's proportion of the net OPEB liability (asset) System's proportionate share of the net OPEB liability (asset) System's covered payroll System's proportionate share of the net OPEB liability (asset) as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total OPEB liability (asset) Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. See accompanying notes to required supplementary information and independent auditor's report. 0.865387% 0.837498% $ (2,342) $ (2,177) 12,056 12,196 19.43% 129.46% 17.85% 130.17% 44 Financial Section REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30 (Unaudited), continued Schedule of the System's Contributions to OPEB Plans (dollars in thousands) State OPEB plan Contractually required contribution Contributions in relation to the contractually required contribution 2019 2018 $ 3,820 $ 3,449 3,820 3,449 Contribution deficiency (excess) $ --$ -- System's covered payroll $ 21,061 $ 20,599 Contributions as a percentage of covered payroll 18.14% 16.74% SEAD-OPEB plan Contractually required contribution1 Contributions in relation to the contractually required contribution Contribution deficiency (excess) System's covered payroll 1 Employer contributions are not currently required for the SEAD-OPEB plan. Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. $ --$ -- -- -- $ --$ -- $ 11,996 $ 12,056 --% --% See accompanying notes to required supplementary information and independent auditor's report. Financial Section 45 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2018 (Unaudited) Required Supplementary Information for the Required Supplementary Information for the System as the Plan System as a Participating Employer in ERS 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. Based on the funding policy adopted by the Board on May 15, 2019, the investment rate of return assumption was changed to 7.25%. In addition, the assumed rate of inflation was changed to 2.50%. 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, 2019 employer contributions are based on June 30, 2016 valuation). The following actuarial methods and assumptions were used to determine the most recent contribution rate reported in that schedule: 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. 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. 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. Required Supplementary Information for the System as a Participating Employer in the State OPEB plan Valuation date: Actuarial cost method: Amortization method: Remaining amortization period: Asset valuation method: Inflation rate: Salary increases: Investment rate of return: Post-retirement benefit increases: June 30, 2016 Entry age Level percent of pay, closed 28.0 years Five-year smoothed market 2.75% 3.25 to 9.00%, including inflation 7.50%, net of pension plan investment expense, including inflation 1.50% semi-annually Changes in Benefit Terms and Assumptions Changes of benefit terms: There were no changes in benefit terms that affect the measurement of the total State OPEB liability since the prior measurement date. Changes in assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location. 46 Financial Section NOTES TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 (Unaudited), continued Required Supplementary Information for the System as a Participating Employer in the SEADOPEB plan Changes of assumptions On December 17, 2015, the Board of Trustees adopted recommended changes to the economic and demographic assumptions utilized by the Plan. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. Financial Section 47 ADDITIONAL INFORMATION For the Year Ended June 30, 2019 Schedule of Administrative Expenses (dollars in thousands) Personal services: Salaries and fringes Retirement contributions Health insurance FICA Miscellaneous Total personal services Communications: Postage Publications and printing Telecommunications Travel Total communications Professional services: Computer services Contracts Actuarial services Audit fees Legal services Medical services Total professional services Management Expenses: Building maintenance Total management expenses Other services and charges: Repairs and maintenance Supplies and materials Depreciation expense Miscellaneous Total other services and charges Total administrative expenses Less reimbursement by other state retirement systems for services rendered on their behalf Net administrative expenses See accompanying independent auditor's report. 48 Financial Section $ 9,143 1,635 385 658 145 11,966 179 258 115 159 711 1,199 3 135 181 37 68 1,623 596 596 9 220 609 302 1,140 16,036 760 $ 15,276 ADDITIONAL INFORMATION For the Year Ended June 30, 2019, continued Schedule of Investment Expenses (dollars in thousands) Investment advisory and custodial fees Miscellaneous Total investment expenses See accompanying independent auditors' report. $ 36,242 9,791 $ 46,033 Financial Section 49 INVESTMENT OVERVIEW Slowing global growth and heightened geopolitical tensions are key themes as a new fiscal year begins. For the U.S., annual economic growth as measured by Real GDP rose 2.3%. This is a deceleration from last fiscal year, a trend that is generally consistent across the world. Overall, U.S. equity returns this past year were up over 9%, while foreign markets lagged with a modest 1% return. Longer-term periods for total equities were generally quite positive. We continually emphasize that the pension plan has a long-term investment horizon and that short-term concerns should not drive investment decisions. The System invests primarily in a mix of liquid, high-quality bonds and stocks. These types of investments further diversify the portfolio and 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. U.S. economic growth has slowed somewhat to slightly over 2% with a strong consumer sector offsetting a slowing manufacturing sector. A relatively low inflation rate, strong employment, and rising wages are keeping consumer spending strong. The international economic situation is not as resilient, which has prompted central banks worldwide to shift to a policy of accommodation after broadly raising rates the last few years. Globally, most surprising has been the continued aggressive bond-buying program in Europe where the overall deposit rate is negative and a shockingly large number of corporate issues are selling at negative rates. One emerging trend is a decline in the outlook for corporate earnings. 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 significant equity exposure with the remainder of the fund invested in fixed income securities designed to generate income and preserve capital. Returns for one, three, five, ten, and twenty-year periods are presented in this section. Longer periods, such as the twenty-year, allow for a 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 timeweighted rate of return, was 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. c The return for the S&P 500 was 10.4%. The S&P MidCap 400 and the S&P SmallCap 600 indexes had returns of 1.4% and (4.9%), respectively. Growth stocks generally outperformed value stocks for the year, while, by sector, utilities edged out information technology for the best performance. Energy was the worst-performing sector and was one of only two sectors that declined this past fiscal year. International market returns were positive but weak. The MSCI EAFE Index returned 1.3%, and the Emerging Market Index had a return of 1.2%. For reference, the ICE U.S. Dollar Index was up 1.6% for the year. Interest rates declined the last year across the maturity spectrum. Parts of the yield curve inverted this year as the ten-year treasury yield dropped. In fact, the ten-year Treasury return was 10.3% as compared to returns of 2.3%, 3.0%, and 7.4% for the three-month, one-year, and five-year Treasuries, respectively. During the fiscal year, the Federal Reserve raised rates twice for a total of 50 basis points. We look at two fixed income indexes to measure the bond market's performance. The Bloomberg Barclays Government / Credit Index had a return of 8.5%. It is a broad index containing corporate and government-sponsored bonds as well as Treasuries. The FTSE Gov/ Corp AAA/AA had a return of 7.4% 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 widened during the first half of the fiscal year as the Federal Reserve pushed rates higher. This trend reversed in the second half of the fiscal year, leading to better corporate performance. 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 50 Investment Section RATES OF RETURN 1 Year 3 Year 5 Year 10 Year 20 Year Equities 6.49% 12.84 8.36 12.66 5.43 S&P 1500 9.32% 13.91 10.45 14.73 6.30 MSCA ACWI ex US 1.29% 9.39 2.16 6.54 -- 1 Year Fixed Income 7.04% Barclays Govt/ Credit 8.52% 1 Month T Bills 2.28% 3 Year 1.80 2.41 1.32 5 Year 2.60 3.11 0.81 10 Year 3.41 4.09 0.44 20 Year 5.00 5.02 1.66 1 Year 3 Year 5 Year 10 Year 20 Year Total Portfolio 6.80% 9.39 6.59 9.66 5.84 Note: Time-weighted rates of return are calculated using the Daily Valuation Method based on market rates of return. CPI 1.66% 2.06 1.48 1.74 2.18 Investment Section 51 INVESTMENTS Investment Summary Asset Allocation at June 30 Equities Fixed Income Asset Allocation at June 30 (in millions) Equities Fixed Income Total Investments 0 2014 72.9% 27.1% 2015 71.2% 28.8% 2016 68.6% 31.4% 2017 70.9% 29.1% 2018 69.4% 30.6% 2019 70.2% 29.8% $ 47,126 $ 46,423 $ 43,652 $ 49,237 $ 51,182 $ 53,433 17,491 18,807 19,979 20,139 22,564 22,685 $ 64,617 $ 65,230 $ 63,631 $ 69,376 $ 73,746 $ 76,118 Schedule of Fees and Commissions (dollars in thousands) For the Year Ended June 30, 2019 Investment Advisors' Fees: U.S. Equity International Equity $ 15,555 18,187 Investment Commissions: U.S. Equity International Equity 7,608 5,213 SEC & Foreign Transaction Fees: Miscellaneous*: Total Fees and Commissions $ *Amount included in total investment expenses shown on page 49. 2,970 12,291 61,824 52 Investment Section PORTFOLIO DETAIL STATISTICS Twenty Largest Equity Holdings (dollars in thousands)* Shares 8,525,232 553,264 4,776,260 786,882 3,013,826 3,089,850 4,076,499 2,134,533 2,989,780 5,373,177 2,161,800 1,377,536 3,056,080 877,450 5,583,888 7,050,603 1,390,099 2,268,367 9,712,531 1,974,968 Company Microsoft Corp. Amazon.Com Inc. Apple Inc. Alphabet Inc. Facebook Inc. Visa Inc. JPMorgan Chase & Co. Berkshire Hathaway Inc. Johnson & Johnson Exxon Mobil Corp. Alibaba Group Holding Ltd. UnitedHealth Group Inc. Procter & Gamble Co. Netflix Inc. Verizon Communications Inc. Pfizer Inc. The Home Depot Inc. Chevron Corp. Bank of America Corp. The Walt Disney Company Total of 20 Largest Equity Holdings Total Equity Holdings Fair Value $ 1,142,040 1,047,677 945,317 851,374 581,668 536,243 455,753 455,018 416,417 411,747 366,317 336,133 335,099 322,305 319,008 305,432 289,099 282,276 281,663 275,785 $ 9,956,371 $ 53,433,296 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 U.S. Treasury Note U.S. Treasury Note U.S. Treasury Note U.S. Treasury Note General Electric Company Maturity Date 11/15/24 3/31/23 10/31/22 3/31/25 1/31/25 8/31/25 8/15/27 8/15/21 2/15/28 10/9/22 Interest Rate % 2.25 1.5 2 2.625 2.5 2.75 2.25 2.125 2.75 2.7 Total of 10 Largest Fixed-Income Holdings Total Fixed-Income Holdings Par Value (in thousands) 1,297,000 1,105,000 1,000,000 920,000 860,000 810,000 808,000 647,000 600,000 609,000 Fair Value (in thousands) $ 1,327,194 1,095,806 1,008,750 960,646 891,846 853,092 827,602 651,930 637,968 608,324 $ 8,863,158 $ 22,684,318 * A complete listing is available upon written request, subject to restrictions of O. C. G. A. Section 47-1-14. Investment Section 53 ACTUARY'S CERTIFICATION LETTER May 15, 2019 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, 2018. The report indicates that annual employer contributions at the rate of 19.06% of compensation for the fiscal year ending June 30, 2021 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. The valuation reflects a change from the smoothed valuation interest methodology that has been in effect since June 30, 2009, to a constant interest rate method. In conjunction with the change in methodology, the long-term assumed rate of return in assets (discount rate) has been changed from 7.50% to 7.25%, and the assumed annual rate of inflation has been reduced from 2.75% to 2.50%. We have made proposed changes to the Board's funding policy to reflect these changes to the valuation assumptions and methods. 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 2018 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 54 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, John J. Garrett, ASA, FCA, MAAA Principal and Consulting Actuary Cathy Turcot Principal and Managing Director Edward Koebel, EA, FCA, MAAA Principal and Consulting Actuary Actuarial Section 55 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, 2018, 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, with the exception of the investment rate of return and salary increases assumptions adopted by the Board on May 15, 2019. 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 21. The more pertinent facts and significant assumptions underlying the computations included in the June 30, 2018 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) Investment Rate of Return The assumed investment rate of return is 7.25% compounded annually, which consists of a 4.75% assumed real rate of return and a 2.50% 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 May 15, 2019. 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 $21.9 billion at June 30, 2018. c) Salary Increases Salaries are expected to increase 3.00% to 8.75% annually depending upon the members' years of creditable service. The salary increase includes a 0.50% assumed real rate of wage inflation and a 2.50% assumed annual rate of inflation. Adopted May 15, 2019. 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 56 Actuarial Section SUMMARY OF ACTUARIAL ASSUMPTIONS & METHODS continued h) Required Contributions (% of compensation) Contributions required by the annual actuarial valuation as of June 30, 2018, to be made for the year ended June 30, 2021: (1) Member (2) Employer: Normal Unfunded Accrued Liability Total 6.00% 7.25% 11.81% 19.06% Actuarial Section 57 SUMMARY OF ACTUARIAL ASSUMPTIONS & METHODS continued Service Retirement Adopted November 18, 2015 < 30 years Age 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 Male of service 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 Female < 30 years of service of service 3.00% 55.00% 5.50 37.00 25.00 43.00 25.00 43.00 25.00 43.00 25.00 43.00 25.00 43.00 31.00 31.00 33.00 33.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 0 Separation Before Service Retirement Adopted November 18, 2015 Annual Rate of Age Death Disability Withdrawal Years of Service 0-4 Yrs 5-9 Yrs 10+ Yrs. Male 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 -- 25.00% --% --% 17.00 12.00 -- 13.50 7.00 8.00 13.50 6.00 3.00 13.00 6.00 2.50 12.00 6.00 2.30 11.00 5.50 2.50 11.00 5.50 3.00 12.00 5.50 -- 13.00 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 16.00 -- 13.50 8.00 6.00 13.00 7.00 3.50 11.00 6.50 3.00 10.50 6.00 2.30 10.00 5.00 2.40 10.00 5.00 2.75 10.50 5.50 -- 13.00 6.50 -- 58 Actuarial Section ACTUARIAL VALUATION DATA Active Members Fiscal Year(1) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number of Participating Employers 392 386 399 404 401 405 414 416 419 422 Members 226,537 222,020 216,137 213,648 209,854 209,828 213,990 218,193 222,902 226,039 Annual Payroll(2) (000's) $10,641,543 10,437,703 10,099,278 10,036,023 9,924,682 9,993,686 10,347,332 10,783,277 11,333,997 11,704,334 Average Pay $46,975 47,012 46,726 46,975 47,293 47,628 48,354 49,421 50,847 51,780 % Increase 3.6% 0.1 (0.6) 0.5 0.7 0.7 1.5 2.2 2.9 1.8 Retirees and Beneficiaries Added to Roll Fiscal Year(1) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number 5,543 6,383 7,136 7,055 7,937 7,078 7,207 7,225 7,189 7,345 Annual Allowances (000's) 245,006 279,009 295,192 298,471 322,853 291,066 306,751 312,063 318,594 341,242 Removed from Roll Number 1,768 1,763 1,937 1,915 1,983 2,195 2,237 2,392 2,459 2,732 Annual Allowances (000's) 45,116 46,853 55,062 55,565 59,453 68,324 72,818 80,359 84,596 98,829 Roll-End of Year Number 82,358 86,978 92,177 97,317 103,271 108,154 113,124 117,957 122,687 127,300 Annual Allowances (000's) 2,630,321 2,862,477 3,102,607 3,345,513 3,608,913 3,831,655 4,065,588 4,297,292 4,531,290 4,773,703 % Increase in Annual Allowances 8.2% 8.8 8.4 7.8 7.9 6.2 6.1 5.7 5.4 5.3 Average Annual Allowances 31,938 32,910 33,659 34,377 34,946 35,428 35,939 36,431 36,934 37,500 (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, 2019 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 59 ACTUARIAL VALUATION DATA continued Solvency Test (dollars in thousands) Aggregate Actuarial Accrued Liabilities For Fiscal Year1 20092 2010 2011 2012 2013 2014 2015 2016 2017 2018 (1) Active Member Contributions $6,382,932 6,705,274 6,973,343 7,242,569 7,480,767 7,815,630 8,153,958 8,522,267 8,936,010 9,350,031 (2) Retirees and Beneficiaries $29,725,063 34,264,548 37,271,020 39,759,145 43,152,402 45,841,742 50,251,964 55,186,998 57,659,259 58,993,494 (3) Active Members (EmployerFinanced Portion) $23,342,121 22,622,215 21,734,277 21,346,964 21,587,696 22,114,745 24,385,088 28,012,510 29,385,762 28,561,728 Actuarial Value of Assets $53,438,604 54,529,416 55,427,716 56,262,332 58,594,837 62,061,722 65,514,119 68,161,710 71,212,660 75,024,364 Portion of Accrued Liabilities Covered by Assets (1) (2) (3) 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 15.9 100.0 100.0 15.7 100.0 100.0 23.4 1Fiscal 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, 2019 is currently in process and was not available for this analysis. 2Revised 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 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Member 5.53% 5.53 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Employer 10.28% 10.28 11.41 12.28 13.15 14.27 14.27 16.81 20.90 21.14 60 Actuarial Section ACTUARIAL VALUATION DATA continued Schedule of Funding Progress (dollars in thousands) Actuarial Valuation Date 6/30/09* 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18 Actuarial Value of Plan Assets (a) $ 53,438,604 54,529,416 55,427,716 56,262,332 58,594,837 62,061,722 65,514,119 68,161,710 71,212,660 75,024,364 Actuarial Accrued Liability (AAL) -Entry Age (b) $ 59,450,116 63,592,037 65,978,640 68,348,678 72,220,865 75,772,117 82,791,010 91,721,775 95,981,031 96,905,253 Unfunded AAL (UAAL) Funding Excess) (b-a) $ 6,011,512 9,062,621 10,550,924 12,086,346 13,626,028 13,710,395 17,276,891 23,560,065 24,768,371 21,880,889 Funded Ratio (a/b) 89.9% 85.7 84.0 82.3 81.1 81.9 79.1 74.3 74.2 77.4 Annual Covered Payroll (c) $ 10,641,543 10,437,703 10,099,278 10,036,023 9,924,682 9,993,686 10,347,332 10,783,277 11,333,997 11,704,334 UAAL (Funding Excess) as a Percentage of Covered Payroll [(b-a)/c] 56.5% 86.8 104.5 120.4 137.3 137.2 167.0 218.5 218.5 186.9 *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 61 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 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Interest Added to Previous Unfunded Accrued Liability $ 1,733.8 $ 1,649.2 $ 1,300.9 $ 1,077.6 $ 1,084.6 $ 977.8 $ 846.2 $ 733.2 $ 486.3 $ 358.5 Accrued Liability Contribution (1,261.0) (929.4) (985.4) (796.1) (662.0) (604.7) (443.5) (396.3) (312.0) (125.0) Experience: Valuation Asset Growth (925.3) (539.2) 150.9 (677.3) (836.1) 1,241.1 1,855.1 2,018.7 1,674.9 2,433.5 Pensioners' Mortality (32.4) 40.5 (13.4) 37.7 35.3 52.7 51.6 24.2 89.8 50.1 Turnover and Retirements 266.2 246.9 209.2 335.9 119.6 378.2 319.1 195.3 269.5 307.1 New Entrants 161.2 172.7 153.1 138.9 115.3 96.2 101.2 89.6 123.7 185.1 Salary Increases (103.6) 327.9 72.3 (227.6) (624.9) (715.2) (709.9) (1,132.2) (1,040.5) 14.1 Interest Smoothing Amendments (1) (2,744.0) 121.6 5,286.1 2,861.2 739.8 915.9 (627.0) 412.8 -- -- -- -- -- -- -- -- -- (685.5) -- -- Change in Member Contribution Rate (3) -- -- -- -- -- -- -- -- 12.8 -- Assumption and Method Changes(2) (133.4) -- -- 688.3 -- (926.7) -- -- 1,472.4 (2,062.3) Miscellaneous 151.0 118.1 109.5 127.9 112.8 124.4 142.6 228.5 274.2 70.9 Total Increase $ (2,887.5) $ 1,208.3 $ 6,283.2 $ 3,566.5 $ 84.4 $ 1,539.7 $ 1,535.4 $ 1,488.3 $ 3,051.1 $ 1,232.0 (1) Amendments 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 and 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. 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. 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. 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. 2018 - Reflects elimination of the interest smoothing methodology and the reductions in the long-term discount rate and the inflation assumption. (3) Member Contribution Rate 2010 - Reflects an increase in the member contribution rate from 5.53% to 6.00% effective July 1, 2012. 62 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 Operating Information The schedules presented on pages 65 through 71 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. The schedules presented on pages 63 through 64 contain trend information to help the reader understand how the System's financial position has changed over time. Additions by Source (dollars in thousands) Fiscal Year Member Contributions Employer and Nonemployer Contributions Net Investment Income (Loss) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $592,264 604,126 601,512 640,745 640,120 661,835 685,626 716,233 745,574 759,474 $1,057,416 1,089,912 1,082,224 1,180,469 1,270,963 1,406,706 1,580,532 1,654,844 2,018,724 2,566,403 $4,671,571 9,594,994 1,090,900 6,938,349 9,826,743 2,384,145 810,574 7,971,677 6,247,155 4,972,419 Contributions were made in accordance with actuarially determined contribution requirements Total Additions to (Deductions from) Fiduciary Net Position $6,321,251 11,289,032 2,774,636 8,759,563 11,737,826 4,452,686 3,076,732 10,342,754 9,011,453 8,298,296 Statistical Section 63 STATISTICAL SECTION OVERVIEW & FINANCIAL TRENDS continued Deductions by Type (dollars in thousands) Benefit Payments Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Service $2,639,144 2,868,815 3,091,370 3,353,295 3,569,374 3,791,526 4,015,786 4,241,760 4,473,928 4,714,549 Partial Lump-Sum Option $34,530 37,652 42,441 42,259 33,148 34,494 33,929 31,839 32,100 32,714 Disability $74,998 80,393 85,830 91,727 98,145 103,483 109,669 114,813 118,567 124,071 Survivor Benefits $49,290 52,122 55,328 58,234 61,203 64,911 67,013 70,179 73,385 76,912 Supplemental Payments(1) $1,122 922 754 633 508 379 312 297 250 204 Lump-Sum Death Settlement $1,340 1,599 1,829 2,001 2,074 2,086 2,110 2,236 1,690 2,015 Total Benefit Payments $2,800,424 3,041,503 3,277,552 3,548,149 3,764,452 3,996,879 4,228,819 4,461,124 4,699,920 4,950,465 Net Administrative Expenses $20,223 20,986 21,954 22,584 15,025 14,996 15,279 16,773 15,865 15,276 Refunds $53,638 67,916 72,157 81,142 87,095 80,085 79,334 76,296 76,061 76,543 Total Deductions From Fiduciary Net Position $2,874,285 3,130,405 3,371,663 3,651,875 3,866,572 4,091,960 4,323,432 4,554,193 4,791,846 5,042,284 (1) Supplemental payments to retirees who belong to a local retirement system. Changes in Fiduciary Net Position (dollars in thousands) Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total Additions to (Deductions from) Fiduciary Net Position $6,321,251 11,289,032 2,774,636 8,759,563 11,737,826 4,452,686 3,076,732 10,342,754 9,011,453 8,298,296 Total Deductions from Fiduciary Net Position $2,874,285 3,130,405 3,371,663 3,651,875 3,866,572 4,091,960 4,323,432 4,554,193 4,791,846 5,042,284 Changes in Fiduciary Net Position $3,446,966 8,158,627 (597,027) 5,107,688 7,871,254 360,726 (1,246,700) 5,788,561 4,219,607 3,256,012 64 Statistical Section Benefit Payment Statistics OPERATING INFORMATION Statistical Section 65 OPERATING INFORMATION continued Member Withdrawal Statistics 66 Statistical Section OPERATING INFORMATION continued Average Monthly Benefit Payments for New Retirees Effective Retirement Dates for Fiscal Years Ended June 30, 2010 Average monthly benefit Average final average salary Number of retirees 2011 Average monthly benefit Average final average salary Number of retirees 2012 Average monthly benefit Average final average salary Number of retirees 2013 Average monthly benefit Average final average salary Number of retirees 2014 Average monthly benefit Average final average salary Number of retirees 2015 Average monthly benefit Average final average salary Number of retirees 2016 Average monthly benefit Average final average salary Number of retirees 2017 Average monthly benefit Average final average salary Number of retirees 2018 Average monthly benefit Average final average salary Number of retirees 2019 Average monthly benefit Average final average salary Number of retirees 10 - 15 16 - 20 Years Credited Service 21 - 25 26 - 30 $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 $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 $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 $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 $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 $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 $883.07 $3,786.36 1,695 $1,447.47 $4,215.09 1,094 $1,979.68 $4,558.19 1,130 $2,582.75 $5,046.61 1,001 $870.72 $3,778.31 1,692 $1,455.45 $4,230.72 1,120 $1,997.91 $4,657.44 1,089 $2,588.80 $5,139.34 973 $880.97 $3,789.48 1,609 $1,503.44 $4,388.19 1,184 $2,106.91 $4,882.12 1,090 $2,703.58 $5,295.62 967 $932.13 $3,964.41 1,537 $1,504.91 $4,434.82 1,206 $2,051.21 $4,826.46 1,188 $2,709.96 $5,401.88 909 Over 30 $3,655.74 $5,820.83 2,736 $3,735.70 $5,940.78 2,797 $3,764.35 $5,995.69 2,589 $3,642.94 $5,811.25 2,762 $3,556.03 $5,868.78 2,099 $3,573.41 $5,900.24 2,190 $3,496.30 $5,796.47 2,297 $3,535.59 $5,877.02 2,300 $3,625.69 $6,009.09 2,471 $3,638.98 $6,125.55 2,395 Total $2,479.89 $4,902.99 6,425 $2,456.69 $4,943.41 7,168 $2,425.05 $4,948.47 7,051 $2,335.21 $4,821.63 7,929 $2,152.62 $4,736.63 7,072 $2,217.71 $4,812.42 7,167 $2,207.94 $4,786.10 7,217 $2,220.50 $4,839.84 7,174 $2,331.31 $4,997.10 7,321 $2,330.77 $5,080.38 7,235 Statistical Section 67 OPERATING INFORMATION continued Retired Members by Type of Benefit Amount of Monthly Benefit 1 - 500 500 - 1000 1000 - 1500 1500 - 2000 2000 - 2500 2500 - 3000 3000 - 3500 3500 - 4000 4000 - 4500 4500 - 5000 5000 - 5500 5500 - 6000 6000 - 6500 6500 - 7000 7000 - 7500 7500 - 8000 8000 - 8500 8500 - 9000 9000 - 9500 9500 - 10000 Over 10000 TOTALS Number of Retirees 5,260 14,556 14,679 11,528 10,049 9,856 11,165 11,970 12,002 9,388 6,409 4,150 2,957 2,103 1,538 1,068 796 550 412 329 1,037 131,802 Type of Retirement (1) A 4,329 12,542 12,998 10,228 9,082 9,090 10,508 11,573 11,800 9,271 6,338 4,118 2,926 2,088 1,523 1,054 789 543 406 327 1,030 122,563 B 392 1,166 992 792 609 550 478 280 133 61 32 12 13 3 1 3 1 2 2 -- -- 5,522 C 515 845 684 507 356 216 179 117 69 56 39 20 18 12 14 11 6 5 4 2 7 3,682 D 24 3 5 1 2 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 35 Option Selected (2) Max 2,980 8,863 8,653 6,496 5,481 5,284 6,229 7,070 7,640 6,137 4,253 2,689 1,806 1,301 888 632 462 298 218 150 415 77,945 Opt-1 167 548 562 450 413 439 518 541 641 523 341 239 169 122 99 53 52 32 20 19 31 5,979 Opt-2 1,104 2,521 2,441 1,894 1,590 1,407 1,407 1,321 1,040 795 553 400 339 233 206 158 98 83 74 59 250 17,973 Opt-3 289 605 626 623 567 569 568 570 536 430 298 217 181 132 113 88 61 56 34 39 132 6,734 Opt-4 149 143 97 94 95 103 172 158 179 146 106 89 62 56 39 34 24 21 16 22 58 1,863 Opt-2 Pop-Up 441 1,387 1,656 1,332 1,217 1,355 1,497 1,511 1,208 818 509 291 230 148 102 54 58 26 21 23 85 13,969 Opt-3 Pop-Up 130 489 644 639 686 699 774 799 758 539 349 225 170 111 91 49 41 34 29 17 66 7,339 (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. 68 Statistical Section OPERATING INFORMATION continued Retirement Payments by County of Residence During Fiscal Year 2019 County Appling Atkinson Bacon Baker Baldwin Banks Barrow Bartow Ben Hill Berrien Bibb Bleckley Brantley Brooks Bryan Bulloch Burke Butts Calhoun Camden Candler Carroll Catoosa Charlton Chatham Chattahoochee Chattooga Cherokee Clarke Clay Clayton Clinch Cobb Coffee Colquitt Columbia Cook Coweta Crawford Crisp Number of Retirees 336 89 175 52 803 192 755 1,109 283 269 1,952 316 190 250 344 1,536 327 273 108 462 199 1,880 629 104 3,160 30 324 2,543 3,300 58 1,479 112 6,731 582 665 2,430 242 1,623 196 349 FY19 Total Gross Pay $ 12,036 3,462 6,292 1,739 28,186 6,350 25,005 38,068 9,235 8,935 69,717 10,634 6,349 8,241 10,613 55,000 10,212 9,740 3,526 15,674 6,277 66,918 21,066 3,652 112,469 1,090 10,635 92,348 142,413 2,257 52,002 4,295 252,560 20,460 23,479 87,567 8,251 59,249 6,630 12,667 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 133 290 389 6,557 305 151 1,650 1,041 238 42 554 325 426 161 420 1,978 1,625 1,632 376 6,861 484 31 1,462 637 361 335 5,892 666 2,437 191 386 622 443 138 2,068 1,714 170 1,066 218 174 FY19 Total Gross Pay $ 4,346 11,721 13,839 281,638 10,591 5,465 63,550 37,163 8,613 1,293 16,153 10,266 15,156 5,358 15,687 79,579 61,119 59,979 13,440 296,733 17,735 951 56,301 22,147 12,477 14,019 214,812 23,744 94,626 6,021 12,714 22,988 16,871 4,008 75,670 63,251 5,997 36,801 7,806 6,321 Statistical Section 69 OPERATING INFORMATION continued County 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 Number of Retirees 239 141 131 408 260 105 801 434 375 186 80 1,739 581 179 864 104 352 203 287 97 294 439 167 418 392 2,645 947 1,530 503 1,099 499 728 293 311 506 155 428 31 323 117 FY19 Total Gross Pay $ 8,199 4,993 4,671 14,829 9,252 3,435 29,851 15,328 12,010 6,829 2,290 61,616 20,872 5,861 25,160 3,014 12,828 6,860 10,111 3,352 9,752 16,097 6,132 16,234 14,363 94,909 33,240 66,954 15,963 35,427 19,684 28,479 10,102 10,675 18,936 5,628 16,316 923 13,653 3,967 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 3,262 967 62 260 157 964 406 81 571 104 21 217 135 183 142 752 898 385 263 113 882 178 94 440 437 640 1,127 570 74 311 443 36 107 535 1,032 150 182 144 295 16,366 FY19 Total Gross Pay $ 109,332 36,301 1,896 8,750 5,430 34,371 15,168 2,875 21,631 3,123 700 7,409 4,870 6,749 4,906 27,596 33,044 14,024 10,108 3,721 32,117 5,816 2,912 16,961 14,937 20,791 41,068 21,212 2,457 11,121 14,114 1,279 3,992 20,241 39,142 5,726 6,183 4,688 10,115 572,546 Total Benefit Payments $ 4,950,465 70 Statistical Section OPERATING INFORMATION continued Principal Participating Employers Employers State of Georgia Gwinnett County Schools Cobb County Schools Dekalb County Schools Fulton County Schools Atlanta Public Schools Clayton County Schools Chatham County Schools Forsyth County Schools Henry County Schools Muscogee County School District University of Georgia Top 10 Total Covered Employees 38,665 17,426 11,472 11,247 10,048 5,150 4,948 4,415 4,340 4,168 -- * 2019 Percentage of Rank Total System 1 17.08% 2 7.70% 3 5.07% 4 4.97% 5 4.44% 6 2.27% 7 2.18% 8 1.95% 9 1.92% 10 1.84% -- -- -- * Covered Employees -- 16,446 12,068 11,186 10,164 5,624 5,576 4,396 -- 4,064 3,883 7,806 2010 Percentage of Rank Total System -- --% 1 7.41% 2 5.43% 3 5.04% 4 4.58% 6 2.53% 7 2.51% 8 1.98% -- --% 9 1.83% 10 1.75% 5 3.52% 111,879 49.42% 81,213 36.58% 226,387 100.00% 222,046 100.00% * Amount is included in State of Georgia totals 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 71 OPERATING INFORMATION continued Reporting Entities Universities and Colleges Abraham Baldwin Agricultural College Albany State University Atlanta Metropolitan State College Augusta University Clayton College & State University College of Coastal Georgia Columbus State University Cooperative Extension Service Dalton State 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 72 Statistical Section Bleckley County 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 OPERATING INFORMATION continued 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 Statistical Section 73 OPERATING INFORMATION continued 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 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 Catoosa County Library Chattooga County Public Library Cherokee Regional Library 74 Statistical Section 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 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 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 Columbus Technical Institute Georgia Piedmont Technical College Georgia Northwestern 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 OPERATING INFORMATION continued 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 Coastal Plains Education Center Coweta Charter Academy DeKalb Academy of Technology and Environment DeKalb Path Academy DeKalb Preparatory Academy Dubois Integrity Academy Foothills Education Charter High School Fulton Academy of Science and Technology Fulton Leadership Academy Furlow Charter School Genesis Innovation Academy for Boys Genesis Innovation Academy for Girls 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 Academy of Georgia International Charter School of Atlanta International Community School Statistical Section 75 OPERATING INFORMATION continued 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 North Metro Academy of Performing Arts New Life Academy of Excellence Inc. Odyssey Charter School Pataula Charter Academy Purpose Built Schools of Atlanta Sail Charter School Savannah Classical Academy Scintilla Charter Academy SLAM Academy of Atlanta Southwest Georgia STEM Charter Resurgence Hall Tapestry Public Charter School The Globe Academy The Kindezi School Utopian Academy for the Arts Wesley International Academy Westside Atlanta Charter School State Agencies Board of Regents Department of Administrative Service Department of Agriculture Department of Behavioral Health and Development Disability Department of Community Health Department of Corrections Department of Human Services Department of Natural Resources Department of Public Health Department of Public Safety 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 Economic Development Georgia Department of Education Georgia Department of Juvenile Justice Georgia Department of Labor Georgia Department of Law Georgia Department of Revenue Georgia Department of Transportation Georgia General Assembly Georgia Military College Georgia Public Defender Standards Council Georgia Public Telecommunications Commission Georgia Student Finance Commission Georgia Technology Authority Governor's Office of Planning and Budget Prosecuting Attorneys' Council of Georgia Secretary of State State Accounting Office Technical College System of Georgia Other Baldwin County Board of Health Ben Hill County DFACS Cherokee County Board of Health Clayton Center Community Service Board DeKalb County DFACS East Central Health District Effingham County Tax Commissioner Office Floyd County DFACS Glynn County Health Dept Newton County DFACS Northwest Georgia Public Health Richmond County DFACS Tift County Board of Health Ware County Health Department Whitfield County Board of Health 76 Statistical Section