Calpers Annual Report
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year ended june 30, 2001 Comprehensive Annual Financial Report California Public Employees’ Retirement System CalPERS70 years of service year ended june 30, 2001 Comprehensive Annual Financial Report California Public Employees’ Retirement System James E. Burton Chief Executive Officer TABLE OF CONTENTS INTRODUCTORY SECTION Chief Executive Officer’s Letter of Transmittal 2 CalPERS Organizational Chart 6 FINANCIAL SECTION Report of Independent Accountants 8 MANAGEMENT’S DISCUSSION AND ANALYSIS 10 BASIC FINANCIAL STATEMENTS Combined Statement of Fiduciary Net Assets 22 Combined Statement of Changes in Fiduciary Net Assets 24 Combined Statement of Net Assets—Proprietary Funds 25 Combined Statement of Revenues, Expenses, and Changes in Fund Net Assets—Proprietary Funds 26 Combined Statement of Cash Flows—Proprietary Funds 27 Notes to the Basic Financial Statements 28 REQUIRED SUPPLEMENTAL SCHEDULES Required Supplemental Schedule of Funding Progress 48 Required Supplemental Schedule of Employer Contributions 50 Notes to Required Supplemental Schedules 52 Required Supplemental Schedule of Claims Development Information 53 SUPPORTING SCHEDULES Administrative Expenses—All Funds 58 Investment Expenses—PERF 59 Consultant and Professional Services Expenses—PERF 61 Prepared by the staff of the California Public Employees’ Retirement System 2 TABLE OF CONTENTS (continued) INVESTMENT SECTION Chief Investment Officer’s Letter 64 Summary of Investments 65 Investment Performance 66 Portfolio of California Investments at Market Value 67 Top 10 Internal Domestic Equity Holdings 68 ACTUARIAL SECTION—Year Ended June 30, 2000 CalPERS Actuarial Certification 70 CalPERS Actuarial Methods and Assumptions 71 Changes Since Prior Valuation 74 Exhibit A - Unfunded Actuarial Accrued Liabilities (UAAL) 76 Exhibit B - Funding Progress—Solvency Test 78 Exhibit C - Sample Pay Increase Assumptions for Individual Members 81 Exhibit D - Sample Non-Economic Assumptions 82 Exhibit E - Single Life Retirement Values 88 Exhibit F - History of Member Salary Data 88 Exhibit G - Members in Valuation 89 Actuarial Certifications—Other Systems 94 STATISTICAL SECTION CalPERS Program Data 98 CalPERS Public Agency Employers 109 Judges’ Retirement System Program Data 122 Judges’ Retirement System II Program Data 124 Legislators’ Retirement System Program Data 126 Volunteer Firefighters’ Length of Service Award System Program Data 130 OTHER PROGRAMS SECTION Health Benefits Program 132 Deferred Compensation Program 146 Long-Term Care Program 147 introductory Section Leadership 1 CEO LETTER OF TRANSMITTAL C December 14, 2001 Members of the CalPERS Board of Administration: I am pleased to present the CalPERS Comprehensive Annual Financial Report (CAFR) and accompanying Operations Summary for the year ended June 30, 2001. The 2000-01 fiscal year marked a milestone for the System—70 years since the landmark legislation that established the pension system. During our years of operation, we have seen significant advances, continued to meet new challenges, and celebrated numerous successes. During this fiscal year, we continued on the pathways dictated by our Strategic Plan—staying focused on expanding quality customer service, innovative benefits administration, and strong, secure asset management. The pages of this report will tell the story of our work in these areas—and our efforts to develop effective solutions when faced with skyrocketing health industry inflation and a challenging investment environment. For details on these and other projects, I encourage you to review the information in this report. It provides information on all the programs administered by CalPERS: Public Employees’ Retirement Fund (PERF), Legislators’ Retirement Fund (LRF), Judges’ Retirement Fund (JRF), Judges’ Retirement Fund II (JRF II), Volunteer Firefighters’ Length of Service Award Fund (VFF), State Peace Officers’ and Firefighters’ Defined Contribution Plan Fund James E. Burton (SPOFF), Health Care Fund (HCF), Contingency Chief Executive Officer Reserve Fund (CRF), Old Age & Survivors’ Insurance Revolving Fund (OASI), Replacement Benefit Fund 2 CEO LETTER OF TRANSMITTAL (continued) (RBF), Supplemental Contributions Program Fund Our independent external auditors, Pricewaterhouse- (SCPF), Long-Term Care Fund (LTCF), Deferred Coopers LLP, have conducted an audit of the basic Compensation Fund (DCF), and Public Agency financial statements in accordance with generally Deferred Compensation Program (IRC 457). accepted auditing standards, performing such tests and other procedures as they deem necessary to express an Beginning in 1932, the System began providing opinion in their report to the Board. The external services to State, public agency, and school members. auditors also have full and unrestricted access to the While primarily responsible for administering Board to discuss their audit and related findings as to retirement, death, and health benefits, CalPERS also the integrity of the financial reporting and adequacy of administers supplemental retirement savings plans and internal control systems. long-term care insurance. As a service to members and employers, a variety of educational workshops and seminars are also offered. Awards The Government Finance Officers Association of Management Responsibility for Financial the United States and Canada (GFOA) awarded a Reporting Certificate of Achievement for Excellence in Financial Reporting to CalPERS for its Comprehensive The CalPERS financial statements included in this Annual Financial Report for the fiscal year ended CAFR for the 2000-01 fiscal year have been prepared June 30, 2000. This was the fifth consecutive year by System management, which is responsible for the that CalPERS has achieved this prestigious award. integrity and fairness of the data presented, including the many amounts that out of necessity must be based In order to be awarded a Certificate of Achievement, on estimates and judgments. The accounting policies a government must publish an easily readable and followed in preparation of these financial statements efficiently organized comprehensive annual financial conform with generally accepted accounting principles. report. This report must satisfy both generally accepted Financial information presented throughout this Annual accounting principles and applicable legal requirements. Report is consistent with these financial statements. A Certificate of Achievement is valid for a period of CalPERS has established and maintains a system of one year only. We believe our current comprehensive internal controls designed to provide reasonable annual report continues to meet the Certificate of assurance that assets are properly safeguarded, Achievement Program’s requirements, and we are transactions are properly executed, and financial submitting it to GFOA to determine its eligibility for statements are reliable. In addition, internal audit another certificate. personnel provide a continuing review of the internal controls and operations of CalPERS, and the Chief of the Office of Audit Services regularly reports to the CalPERS Board of Administration’s Finance Committee. The Committee reviews the audit findings and recommendations for improvements in internal control and operational efficiency and the actions of management to implement such recommendations. 3 CEO LETTER OF TRANSMITTAL (continued) The Comprehensive Annual Financial Report Responsibility for the accuracy, completeness, and fair presentation of the information, and all disclosures, This report consists of five sections: rests with CalPERS. The basic financial statements Introductory—contains this introduction letter have been prepared in accordance with generally and our organizational chart. Summary program accepted accounting principles applied on a consistent information is contained in the accompanying basis as promulgated by the Governmental Accounting 2001 Comprehensive Annual Financial Report Standards Board (GASB) and its predecessor, the Operations Summary; National Council on Governmental Accounting. Financial—presents management’s responsibility The basic financial statements are presented in for financial reporting and the independent auditors’ accordance with guidelines established by GASB opinion on the CalPERS basic financial statements, Statement No. 25, Financial Reporting for Defined management’s discussion and analysis, and sections Benefit Plans, and GASB Statement No. 26, Financial on required supplemental schedules and supporting Reporting for Post Employment Health Care Plans schedules; Administered by Defined Benefit Plans, and other GASB statements as appropriate. Investment—summarizes and presents performance information for the PERF. Although not required to implement GASB Statement No. 34, Basic Financial Statements—Management’s Actuarial—contains the certifications and results of Discussion and Analysis—for State and Local the actuarial valuations as of June 30, 2000, the latest Governments until fiscal year 2002, CalPERS has data available; elected to adopt the new pronouncement, as amended, Statistical—contains significant membership and for the fiscal year ended June 30, 2001. retirement data for CalPERS, Judges’ Retirement System, Judges’ Retirement System II, Legislators’ Investments Retirement System, Volunteer Firefighters’ Length of Proper funding and healthy long-term investment Service Award System, Health Benefits Program, returns are essential to the financial soundness of Deferred Compensation Program, and Long-Term CalPERS.