Opening Doors to the Future 2014-2015 Comprehensive Annual Financial Report for Fiscal Years Ended June 30, 2015 and 2014
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Opening Doors to the Future 2014-2015 Comprehensive Annual Financial Report For Fiscal Years Ended June 30, 2015 and 2014 Benefits Louisiana. A component unit of the State of Louisiana Opening Doors to the Future 2014 - 2015 Comprehensive Annual Financial Report For Fiscal Years Ended June 30, 2015 and 2014 Prepared by the Fiscal, Investments, and Public Information Divisions of the Louisiana State Employees’ Retirement System Benefits Louisiana. A component unit of the State of Louisiana Table of Contents Introductory Section Letter of Transmittal 1 Certificate of Achievement for Excellence in Financial Reporting 8 Public Pension Standards Award 8 Administrative Organization 9 Board of Trustees 10 Professional Consultants 11 Financial Section Independent Auditors’ Report 13 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 16 Management’s Discussion and Analysis 18 Basic Financial Statements 23 Statements of Fiduciary Net Position 23 Statements of Changes in Fiduciary Net Position 24 Notes to Financial Statements 25 Required Supplementary Information 56 Schedules of Changes in Net Pension Liability 56 Schedules of Employers’ Net Pension Liability 57 Schedules of Employer Contributions 58 Schedules of Investment Returns 59 Schedules of Funding Progress for OGB OPEB Trust 60 Notes to Required Supplementary Information 61 Supporting Schedules 63 Schedules of Administrative Expenses 63 Schedules of Investment Expenses 64 Schedules of Board Compensation 65 Opening Doors to the Future Schedules of Professional/Consultant Fees 66 Investment Section Chief Investment Officer’s Report 67 Summary of Investment Policy 69 Investment Summary Report 77 Largest Equity Holdings 78 Largest Debt Holdings 78 Largest Louisiana Holdings 79 Louisiana State Employees’ Retirement System i Investment Section continued LASERS Rates of Return 80 Total Plan 80 Domestic Equity 80 International Equity 81 Domestic Fixed Income 81 Alternative Assets 82 Schedule of Brokerage Commissions Paid 83 Schedule of Investment Fees 84 Actuarial Section Actuary’s Certification Letter 85 Summary of Assumptions 87 Summary of Unfunded Actuarial Liabilities/Solvency Test 93 Summary of Actuarial and Unfunded Actuarial Liabilities 93 Reconciliation of Unfunded Actuarial Liabilities 94 Membership Data 95 Historical Membership Data 96 Principal Provisions of the Plan 97 Statistical Section Summary 103 Changes in Fiduciary Net Position 104 Valuation Assets vs. Pension Liabilities 106 Employee Contribution Rates 107 Employer Contribution Rates 108 Benefit Expenses by Type 109 Opening Doors to the Future Average Monthly Benefit Amounts 111 LASERS Membership 132 LASERS Changes in Membership 132 Number of Benefit Recipients 133 Retired Members by Recipient Type and Plan 134 Location of LASERS Benefit Recipients 137 Fiscal Year 2015 Gross Benefits Paid by Region 138 Top 10 Contributing Employers by Member Count 140 ii This page left blank intentionally. Introductory Section The will to win, the desire to succeed, the urge to reach your full potential... Introductory these are the keys that will Section unlock the door to personal excellence. Confucius, Philosopher Contents Letter of Transmittal 1 Certificate of Achievement for Excellence in Financial Reporting 8 Public Pension Standards Award 8 Administrative Organization 9 Board of Trustees 10 Professional Consultants 11 State Capitol Building, House Chamber Door Back to Table of Contents 8401 United Plaza Blvd. • Baton Rouge, LA 70809 Web: www.lasersonline.orgIntroductory Section Louisiana State Employees’ Mail: P.O. Box 44213 • Baton Rouge, LA 70804-4213 Phone: (toll-free) 1.800.256.3000 • (local) 225.922.0600 Retirement System 8401 United Plaza Blvd. • Baton Rouge, LA 70809 Web: www.lasersonline.org Louisiana State Employees’ Mail: P.O. Box 44213 • Baton Rouge, LA 70804-4213 Phone: (toll-free) 1.800.256.3000 • (local) 225.922.0600 Retirement System October 23, 2015 Dear Board Members: We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) of the Louisiana State Employees’ Retirement System (LASERS or the System) for the fiscal years ended June 30, 2015 and 2014. This fiscal year, abounding global concerns increased volatility in the financial markets which kept our investment returns relatively flat. However, because the market value of assets can be volatile from one year to the next, an asset valuation method is generally used to gradually recognize gains/losses relative to the assumed rate over five years. For this reason, the unfunded accrued liability (UAL), the debt owed the System by the State, improved this year due mainly to investment experience gains relative to the assumed rate of 7.75%. This report includes a wealth of information regarding the activities of LASERS during the past fiscal year, providing clear evidence that LASERS is accomplishing its mission of providing a sound retirement plan for our members through prudent management and exceptional customer service. We trust that you and the other members will find this CAFR helpful in understanding your public employees’ retirement system, which is dedicated to protecting your contributions and maximizing your return. Management Responsibility This report consists of management’s representation concerning LASERS finances. Management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed both to protect the assets from loss, theft, or misuse, and to compile sufficient, reliable information for the preparation of LASERS financial statements in conformity with generally accepted accounting principles. The internal control framework has been designed to provide reasonable, rather than absolute assurance, that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Our independent external auditors, Duplantier, Hrapmann, Hogan, and Maher, have conducted an audit of the basic financial statements in accordance with auditing standards generally accepted in the United States of America, performing such tests and other procedures as they deem necessary to express an Board of Trustees: omas Bickham, Board Chair Hon. John Kennedy Rep. Kevin Pearson Cindy Rougeou, Executive Director Janice Lansing, Vice Chair Judge William Kleinpeter Lori Pierce Board of Trustees: omasConnie Bickham,Carlton Board Chair Hon.Barbara John McManus Kennedy Rep.Kathy Kevin Singleton Pearson Cindy Rougeou, Executive Director JaniceSen. Elbert Lansing, Guillory Vice Chair JudgeCommissioner William Kleinpeter Kristy Nichols LoriShannon Pierce Templet ConnieBeverly CarltonHodges Barbara McManus Kathy Singleton Sen. Elbert Guillory Commissioner Kristy Nichols Shannon Templet Beverly Hodges Benefits Louisiana. Benefits Louisiana.Louisiana State Employees’ Retirement System 1 Introductory Section Financialopinion Information in their report to the Board. The external auditors also have full and unrestricted access to the Board to discuss their audit and related findings as to the integrity of the financial reporting and The basicadequacy financial of internal statements control have systems. been prepared in accordance with generally accepted accounting principles applied on a consistent basis as promulgated by the Governmental Accounting Standards Board. FinancialThe Management’s Information Discussion and Analysis (MD&A) includes a narrative introduction, overview, and analysis to accompany the basic financial statements. This Letter of Transmittal is The basic financial statements have been prepared in accordance with generally accepted accounting designed to complement the MD&A, and should be read in conjunction with it. LASERS MD&A can principles applied on a consistent basis as promulgated by the Governmental Accounting Standards be found immediately following the reports of the independent auditors in the Financial Section of this Board. The Management’s Discussion and Analysis (MD&A) includes a narrative introduction, report. overview, and analysis to accompany the basic financial statements. This Letter of Transmittal is designed to complement the MD&A, and should be read in conjunction with the document. LASERS ProfileMD&A of LASERS can be found immediately following the reports of the independent auditors in the Financial Section of this report. LASERS is a single employer defined benefit plan, established by the state legislature in 1946, with the first membersProfile joining of LASERS the System on July 1, 1947. The System is a public trust fund created to provide retirement allowances and other benefits for state officers and employees and their beneficiaries. All LASERS is a cost‐sharing multiple‐employer defined benefit plan, established by the state legislature in invested1946, funds, with thecash, first and members property joining are the Systemheld in on theJuly name1, 1947. ofThe LASERS System is afor public the trustsole fund benefit created of the membership.to provide A thirteenretirement‐member allowances Board and of otherTrustees benefits (comprised for state ofofficers six active and employeesmembers, andthree their retired members,beneficiaries. and four