Notes to the Financial Statements
June 30, 2013
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) Tier IIA (contributory) and Tier III (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 and Funding Policy
Membership of each plan consisted of the following at the date of the
latest actuarial evaluation:
| SERS | TRS | JRS | |
|---|---|---|---|
| 6/30/2012 | 6/30/2012 | 6/30/2012 | |
| Retirees and beneficiaries | |||
| receiving benefits | 43,887 | 32,294 | 239 |
| Terminated plan members | |||
| entitled to but not yet | |||
| receiving benefits | 1,561 | 1,609 | 2 |
| Active plan members | 47,868 | 49,808 | 204 |
| Total | 93,316 | 83,711 | 445 |
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 regular
and Hazardous Duty members are required to contribute 2 percent and 4 percent of
their annual salary, respectively, 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 II Plan Hazardous Duty members
are required to contribute 4 percent of their annual salary; Tier IIA and Tier
III Plans regular and Hazardous Duty members are required to contribute 2
percent and 5 percent of their annual salary, respectively. 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. 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 and Net Pension Obligation
The State’s annual pension cost and net pension obligation for each plan
for the current year were as follows (amounts in thousands)
| SERS | TRS | JRS | |
|---|---|---|---|
| Annual required contribution | $1,059,652 | $787,536 | $16,006 |
| Interest on net pension | |||
| obligation | 244,717 | (42,725) | 2,689 |
| Adjustment to annual required | |||
| contribution | (219,938) | 54,236 | (3,454) |
| Annual pension cost | 1,084,431 | 799,047 | 15,241 |
| Contributions made | 1,058,113 | 787,536 | 16,006 |
| Increase (decrease) in net | |||
| pension obligation | 26,318 | 11,511 | (765) |
| Net pension obligation (asset) | |||
| beginning of year | 2,966,249 | (502,643) | 32,584 |
| Net pension obligation (asset) | |||
| end of year | $2,992,567 | $(491,132) | $31,819 |
Three-year trend information for each plan is as follows (amounts in thousands):
| Annual | Percentage | Net | ||
|---|---|---|---|---|
| Fiscal | Pension | of APC | Pension | |
| Year | Cost (APC) | Contributed | Obligation/(asset) | |
| SERS | 2011 | $999,261 | 82.6% | $2,913,694 |
| 2012 | $978,898 | 94.6% | $2,966,249 | |
| 2013 | $1,084,431 | 97.6% | $2,992,567 | |
| TRS | 2011 | $576,460 | 100.7% | $(498,593) |
| 2012 | $753,196 | 100.5% | $(502,643) | |
| 2013 | $799,047 | 98.6% | $(491,132) | |
| JRS | 2011 | $16,534 | 0% | $31,983 |
| 2012 | $15,696 | 96.2% | $32,584 | |
| 2013 | $15,241 | 105.0% | $31,819 |
Funded Status and Funding Progress
The following is funded status information for each plan as of June 30,
2012 the most recent actuarial valuation date (amounts in millions):
| Actuarial | Actuarial | Unfunded | UAAL as a | |||
|---|---|---|---|---|---|---|
| Value of | Accrued | AAL | Funded | Covered | Percentage of | |
| Assets | Liability (AAL) | (UAAL) | Ratio | Payroll | Covered Payroll | |
| (a) | (b) | (b-a) | (a/b) | (c) | ((b-a)/c) | |
| SERF | $9,745 | $23,019 | $13,274 | 42.3% | $3,355 | 395.7% |
| TRF | $13,735 | $24,862 | $11,127 | 55.2% | $3,653 | 304.7% |
| JRF | $175 | $320 | $145 | 54.7% | $30 | 477.9% |
The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.
Actuarial Methods and Assumptions
The following is information as of the most recent actuarial valuation:
| SERF | TRF | JRS | |
|---|---|---|---|
| Valuation Date | 6/30/2012 | 6/30/2012 | 6/30/12 |
| Actuarial Cost Method | Projected unit credit | Entry Age | Projected unit credit |
| Amortization Method | Level percent of payroll, closed | Level percent closed | Level percent of payroll, closed |
| Remaining Amortization Period | 19 Years | 22.4 years | 19 Years |
| Asset Valuation Method | 5-year smoothed actuarial value | 4- year smoothed market | 5-year smoothed actuarial value |
| Actuarial Assumptions: | |||
| Investment Rate of Return | 8.00% | 8.5% | 8.00% |
| Projected Salary Increases | 4.00%-20.00% | 3.75%-7.0% | 4.75% |
| Includes inflation at | 3.75% | 3.0% | 0.00% |
| Cost-of-Living Adjustments | 2.3%-3.6% | 2.0%-3.0% | 2.30-4.75% |
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 $35.4 million and $16.9 million, respectively.