Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2004 Basic FINANCIAL STATEMENTS - Notes To Financial Statements - Note 11 - State Retirement Systems

State of Connecticut

Note 11 State Retirement Systems

The State sponsors three major public employee retirement systems: the State Employees' Retirement System (SERS)-consisting of Tier I (contributory), Tier II (noncontributory) and Tier IIA (contributory), the Teachers' Retirement System (TRS), and the Judicial Retirement System (JRS).

The State Comptroller's Retirement Division under the direction of the Connecticut State Employees Retirement Division administers SERS and JRS. The Teachers' Retirement Board administers TRS. None of the above mentioned systems issue stand-alone financial reports. However, financial statements for SERS, TRS, and JRS are presented in Note No. 13. Plan Descriptions, Funding Policy, and Annual Pension Cost and Net Pension Obligation

Membership of each plan consisted of the following at the date of the latest actuarial evaluation:

SERS TRS JRS
6/30/2004 6/30/2004 6/30/2004
Retirees and beneficiaries
receiving benefits 36,749 24,297 217
Terminated plan members
entitled to but not yet
receiving benefits 1,744 1,250 3
Active plan members 47,926 49,946 220
Total 86,419 75,493 440

State Employees' Retirement System
Plan Description

SERS is a single-employer defined-benefit pension plan covering substantially all of the State full-time employees who are not eligible for another State sponsored retirement plan. Plan benefits, cost-of-living adjustments, contribution requirements of plan members and the State, and other plan provisions are described in Sections 5-152 to 5-192 of the General Statutes. The plan provides retirement, disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Funding Policy

The contribution requirements of plan members and the State are established and may be amended by the State legislature. Tier I Plan B and Hazardous Duty members are required to contribute 2 percent and 4 percent respectively, of their salary up to the Social Security Taxable Wage Base plus 5 percent above that level; Tier I Plan C members are required to contribute 5 percent of their annual salary; Tier IIA members are required to contribute 2 percent and hazardous duty members are required to contribute 5 percent. The State is required to contribute at an actuarially determined rate. Administrative costs of the plan are funded by the State.

Teachers Retirement System
Plan Description

TRS is a single-employer defined-benefit pension plan covering any teacher, principal, superintendent or supervisor engaged in service of public schools in the State. Plan benefits, cost-of-living allowances, required contributions of plan members and the State, and other plan provisions are described in Sections 10-183b to 10-183pp of the General Statutes. The plan provides retirement, disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Funding Policy

The contribution requirements of plan members and the State are established and may be amended by the State legislature. Plan members are required to contribute 6 percent of their annual salary. The State is required to contribute at an actuarially determined rate. For fiscal year 2004, the annual required contribution (ARC) was $270.5 million; however, the State contributed $185.3 million to the plan, reflecting a reduction of $85.2 million by the legislature to the State's TRS appropriation. Administrative costs of the plan are funded by the State.

Judicial Retirement System
Plan Description

JRS is a single-employer defined-benefit pension plan covering any appointed judge or compensation commissioner in the State. Plan benefits, cost-of-living allowances, required contributions of plan members and the State, and other plan provisions are described in Sections 51-49 to 51-51 of the General Statutes. The plan provides retirement, disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Funding Policy

The contribution requirements of plan members and the State are established and may be amended by the State legislature. Plan members are required to contribute 6 percent of their annual salary. The State is required to contribute at an actuarially determined rate. Administrative costs of the plan are funded by the State.

Annual Pension Cost, Net Pension Obligation, and Related Information

The State's annual pension cost and net pension obligation to SERS, TRS, and JRS for the current year were as follows (amounts in thousands):

SERS TRS JRS
Annual required contribution $ 470,333 $ 270,544 $ 11,598
Interest on net pension
obligation 176,941 99,866 4
Adjustment to annual required
contribution (113,083) (65,167) (2)
Annual pension cost 534,191 305,243 11,600
Contributions made 470,333 185,348 11,598
Increase (decrease) in net
pension obligation 63,858 119,895 2
Net pension obligation
beginning of year 2,081,663 1,174,895 41
Net pension obligation
end of year $ 2,145,521 $ 1,294,790 $ 43

Three-year trend information is as follows (amounts in thousands):

Annual Percentage Net
Fiscal Pension of APC Pension
Year Cost (APC) Contributed Obligation
SERS 2002 $ 479,501 86.7% $ 2,017,588
2003 485,527 86.8% 2,081,663
2004 534,191 88.0% 2,145,521
TRS 2002 $ 246,404 83.0% $ 1,099,721
2003 254,996 70.6% 1,174,893
2004 305,243 60.7% 1,294,790
JRS 2002 $ 9,599 100% $ 40
2003 10,127 100% 41
2004 11,600 100% 43

Defined Contribution Plan

The State also sponsors the Connecticut Alternate Retirement Program (CARP), a defined contribution plan. CARP is administered by the State Comptroller's Retirement Office under the direction of the Connecticut State Employees Retirement Division. Plan provisions, including contribution requirements of plan members and the State, are described in Section 5-156 of the General Statutes.

Unclassified employees at any of the units of the Connecticut State System of Higher Education are eligible to participate in the plan. Plan members are required to contribute 5 percent of their annual salaries. The State is required to contribute 8 percent of covered salary. During the year, plan members and the State contributed $24.0 million and $37.9 million, respectively.