State of Connecticut Comprehensive Annual Financial Report Fiscal Year Ended June 30, 1998 - Notes to the Financial Statements - Note 9

State of Connecticut

June 30,1998

Note 9

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).

SERS and JRS are administered by the State Comptroller's Retirement Division under the direction of the Connecticut State Employees Retirement Division. TRS is administered by the Teachers' Retirement Board. None of the above mentioned systems issue stand-alone financial reports.

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
6/30/97
TRS
6/30/96
JRS
9/30/97
Retirees and beneficiaries receiving benefits 31,642 17,950 192
Terminated plan members entitled to but not yet receiving benefits 743 5,950 -
Active plan members 50,601 41,370 193
Total 82,986 65,270 385

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, contributions 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% and 4% respectively, of their salary up to the Social Security Taxable Wage Base plus 5% above that level; Tier I Plan C members are required to contribute 5% of their annual salary; Tier IIA members are required to contribute 2% and hazardous duty members are required to contribute 5%. The State is required to contribute at an actuarially determined rate. For fiscal year 1998, the annual required contribution (ARC) was $567.6 million; however, in accordance with the provisions of collectively negotiated agreements, the State only contributed $334.8 million (including federal and other reimbursements) to the plan. 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 10-183nn 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% of their annual salary. The State is required to contribute at an actuarially determined rate. For fiscal year 1998, the ARC was $211.0 million; however, the State contributed $179.4 million to the plan, reflecting a reduction of $31.6 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% 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 $ 567,635 $211,019 $9,309
Interest on net pension obligation 123,872 67,780 3
Adjustment to annual required contribution (61,215) (38,921) (2)
Annual pension cost 630,292 239,878 9,310
Contributions made 334,846 179,365 9,309
Increase (decrease) in net pension obligation 295,446 60,513 1
Net pension obligation beginning of year 1,457,327 797,416 33
Net pension obligation end of year $1,752,773 $ 857,929 $ 34

Actuarial information related to the calculation of the annual required contribution for SERS, TRS, and JRS is as follows:

SERS TRS JRS
Actuarial valuation date 6/30/97 6/30/96 9/30/97
Actuarial cost method Projected
unit credit
Entry age Projected
unit credit
Amortization method
Level percent
of pay

Level percent
of pay

Level percent
of pay
Remaining amortization period 34 years 17-36 years 33 years
Asset valuation method 5-year
smoothed market
4-year
smoothed market
4-year
smoothed
market
Actuarial assumptions:
Investment rate of return* 8.5% 8.5% 8.5%
Projected salary increases* 3.25%-14.0% 5.0% - 8.1% 5.5%
*Includes inflation at 6.0% 5.0% 5.5%
Cost-of-living adjustments 2.5%-4.0% 4.0% 3.0% - 5.5%

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


Fiscal
Year
Annual
Pension
Cost (APC)
Percentage
of APC
Contributed
Net
Pension
Obligation
SERS
1996
1997
1998

$ 546,878
597,128
630,293

61.3%
58.5
53.1

$ 1,209,430
1,457,327
1,752,773
TRS
1996
1997
1998

$ 194,880
206,110
239,878

71.8%
71.8%
74.8%

$ 739,191
797,416
857,929
JRS
1996
1997
1998

$ 9,209
9,343
9,310

100%
100
100

$32
33
34

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 contributions 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% of their annual salaries. The State is required to contribute 8% of covered salary. During the year, plan members and the State contributed $ 13,761.8 million and $ 21,745.1 million, respectively.

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