T Ennessee C Onsolidated R Etirement S Ystem
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T ENNESSEE CONSOLIDATED T ENNESSEE CONSOLIDATED R ETIREMENT SYSTEM R ETIREMENT SYSTEM TIGER SWALLOWTAIL BUTTERFLY TIGER SWALLOWTAIL BUTTERFLY BY BRENDA MERCIER, INFORMATION SYSTEMS BY BRENDA MERCIER, INFORMATION SYSTEMS COMPREHENSIVE ANNUAL FINANCIAL REPORT COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012 FOR THE FISCAL YEAR ENDED JUNE 30, 2012 PENSION TRUST FUNDS OF THE STATE OF TENNESSEE PENSION TRUST FUNDS OF THE STATE OF TENNESSEE PREPARED BY: PREPARED BY: STATE OF TENNESSEE TREASURY DEPARTMENT STATE OF TENNESSEE TREASURY DEPARTMENT 502 DEADERICK STREET 502 DEADERICK STREET NASHVILLE, TENNESSEE 37243-0201 NASHVILLE, TENNESSEE 37243-0201 (615) 741-7063 (615) 741-7063 TCRS.TN.GOV TCRS.TN.GOV DAVID H. LILLARD, JR., STATE TREASURER DAVID H. LILLARD, JR., STATE TREASURER JILL BACHUS, TCRS DIRECTOR JILL BACHUS, TCRS DIRECTOR The cover and divider pages within this report The cover and divider pages within this report feature the beautiful photography feature the beautiful photography by Treasury employees taken throughout Tennessee. by Treasury employees taken throughout Tennessee. The cover photo was taken in Brentwood, TN The cover photo was taken in Brentwood, TN by Heather Sczepczenski, State Treasurer’s Offi ce. by Heather Sczepczenski, State Treasurer’s Offi ce. This report is available in its entirety on the Internet at: This report is available in its entirety on the Internet at: www.tn.gov/treasury/tcrs/TCRS-AnnualReport.pdf www.tn.gov/treasury/tcrs/TCRS-AnnualReport.pdf The Tennessee Department of Treasury operates all programs and activities free from discrimination on the The Tennessee Department of Treasury operates all programs and activities free from discrimination on the basis of sex, race, or any other classification protected by federal or Tennessee state law. Individuals with basis of sex, race, or any other classification protected by federal or Tennessee state law. Individuals with disabilities who may require an alternative communication format for this or other Treasury Department disabilities who may require an alternative communication format for this or other Treasury Department publications, please contact the Treasury ADA coordinator at 615-741-2956. publications, please contact the Treasury ADA coordinator at 615-741-2956. Treasury Department, January 2013, Authorization #309209, 200 copies. Treasury Department, February 2010, Authorization #309209, 200 copies. This public document was printed at a cost of $6.96 each. This public document was printed at a cost of $6.96 each. TABLE OF CONTENTS INTRODUCTORY SECTION GFOA Certificate of Achievement ........................................................................................................................................... 1 Public Pension Standards Award .......................................................................................................................................... 2 Chairman of the Board’s Letter ............................................................................................................................................... 3 Letter of Transmittal ................................................................................................................................................................. 4 Administration and Mission .................................................................................................................................................. 6 The Council on Pensions and Insurance ............................................................................................................................... 7 The Board of Trustees ............................................................................................................................................................... 9 Professional Consultants ....................................................................................................................................................... 11 Treasury Department Executive Staff ................................................................................................................................... 13 Organization Chart ................................................................................................................................................................ 14 FINANCIAL SECTION Independent Auditor’s Report .............................................................................................................................................. 15 Management’s Discussion and Analysis ............................................................................................................................ 17 Financial Statements: Statements of Plan Net Assets ....................................................................................................................................... 22 Statements of Changes in Plan Net Assets .................................................................................................................. 24 Notes to the Financial Statements ................................................................................................................................. 26 Required Supplementary Information: Schedules of Funding Progress ..................................................................................................................................... 39 Schedules of Employer Contributions .......................................................................................................................... 39 Supporting Schedules: Schedules of Administrative Expenses ........................................................................................................................ 40 Schedules of Investment Expenses ................................................................................................................................ 42 Schedules of Expenses for Consultants ........................................................................................................................ 44 INVESTMENT SECTION Report by Investment Consultant ......................................................................................................................................... 45 Letter from TCRS Chief Investment Officer ......................................................................................................................... 46 Statutory Investment Authority ............................................................................................................................................ 47 Investment Performance Review .......................................................................................................................................... 48 Asset Allocation ...................................................................................................................................................................... 49 Largest Holdings .................................................................................................................................................................... 50 Investment Summary .............................................................................................................................................................. 51 Schedules of Investment Fees and Commissions ............................................................................................................... 52 (continued) TABLE OF CONTENTS (CONTINUED) ACTUARIAL SECTION Actuarial Introduction ........................................................................................................................................................... 55 Actuary’s Certification Letter ................................................................................................................................................ 56 Summary of Actuarial Assumptions and Methods ........................................................................................................... 58 Actuarial Data ......................................................................................................................................................................... 60 Actuarial Balance Sheet ......................................................................................................................................................... 62 Short-Term Solvency Test ...................................................................................................................................................... 63 Summary of Accrued and Unfunded Accrued Liabilities ................................................................................................. 64 Selected Actuarial Funding Information ............................................................................................................................. 65 Analysis of Financial Experience ......................................................................................................................................... 66 Plan Summary ......................................................................................................................................................................... 67 Services for Active and Retired Members ............................................................................................................................ 69 Sample Benefit Calculations ................................................................................................................................................