New York State and Local Retirement System 2011 Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2011 A pension trust fund of the State of New York New York State and Local Retirement System New York State Office of the State Comptroller Thomas P. DiNapoli 2011 Comprehensive Annual Financial Report For Fiscal Year Ended March 31, 2011 New York State and Local Retirement System Employees’ Retirement System Police and Fire Retirement System A pension trust fund of the State of New York Prepared by the staff of the New York State and Local Retirement System 110 State Street Albany, NY 12244 Contents Contents Introduction Professional Awards ................................................................................................... 7 Letter of Transmittal .................................................................................................. 9 Administrative Organization .......................................................................................13 Advisory Committees .....................................................................................13 New York State and Local Retirement System Organization Chart ................................16 Overview of Retirement Operations ..............................................................................17 By the Numbers ......................................................................................................22 Members and Retirees ....................................................................................22 Retirees in New York State ...............................................................................23 Annual Benefit Payments Within New York State ....................................................24 Annual Benefit Payments Within the United States ..................................................25 Annual Benefit Payments Outside the United States .................................................25 Financial Independent Auditors’ Report ......................................................................................29 Management’s Discussion and Analysis ...........................................................................31 Statement of Plan Net Assets — March 31, 2011 .................................................................35 Statement of Changes in Plan Net Assets .........................................................................36 Notes to Financial Statements ......................................................................................37 Required Supplementary Information .............................................................................54 Schedule of Funding Progress ...........................................................................54 Schedule of Employer Contributions ..................................................................55 Additional Supplementary Information ...........................................................................56 Schedule of Administrative Expenses ..................................................................56 Schedule of Investment Expenses .......................................................................57 Schedule of Consulting Fees .............................................................................58 Independent Auditors’ Report on Internal Control .............................................................59 Investment Overview of Investments ............................................................................................63 Investment Results ...................................................................................................71 Investment Summary ................................................................................................72 2 New York State and Local Retirement System Contents Asset Allocation — March 31, 2011 ..................................................................................73 Global Equity Performance .........................................................................................74 Domestic Equity Portfolio — Ten Largest Holdings ............................................................77 Fixed Income Portfolio and Comparison .........................................................................78 Fixed Income Performance..........................................................................................79 Fixed Income Portfolio — Ten Largest Holdings ................................................................80 Real Estate Portfolio ..................................................................................................81 Alternative Investments Summary .................................................................................82 Corporate Governance ...............................................................................................83 Domestic Equity Management Fees ...............................................................................85 Domestic Equity Commissions .....................................................................................86 International Equity Management Fees ...........................................................................88 International Equity Commissions ................................................................................89 Domestic Bond Transactions .......................................................................................91 Real Estate Management and Incentive Fees (Expensed) .......................................................92 Real Estate Management and Incentive Fees (Capitalized) .....................................................93 Private Equity Management Fees (Expensed) ....................................................................94 Private Equity Management Fees (Capitalized) ..................................................................95 Absolute Return Strategy Management and Incentive Fees ....................................................96 Consultant & Advisor Fees ..........................................................................................98 Actuarial Statement of the Actuary .......................................................................................... 101 Actuarial Funding and Valuation ................................................................................ 103 Elements of the Actuarial Valuation ............................................................................. 105 Actuarial Valuation Balance Sheets .............................................................................. 108 Local Government Employers’ Final Contribution Rates For Select Plans ................................. 110 Contribution Rate Trend for Local Governments ............................................................. 112 Employer Contributions ........................................................................................... 114 Historical Trends ................................................................................................... 116 Changes In Contributions ......................................................................................... 117 Solvency Test ........................................................................................................ 118 Schedule of Active Member Data ................................................................................ 119 Schedule of Retired Members and Beneficiaries ............................................................... 120 2011 Comprehensive Annual Financial Report 3 Contents Statistical Schedule of Additions to Plan Net Assets ....................................................................... 123 Schedule of Investment Income .................................................................................. 124 Schedule of Deductions from Plan Net Assets ................................................................. 125 Schedule of Total Changes in Plan Net Assets .................................................................. 126 Service Retirees — ERS ............................................................................................ 128 Service Retirees — PFRS .......................................................................................... 129 Disability Retirees — ERS ......................................................................................... 130 Disability Retirees — PFRS ....................................................................................... 131 New Option Selections ............................................................................................. 132 Option Selection — Total Payments ............................................................................. 133 Average Pension Benefits Paid During Year Shown ........................................................... 134 Average Benefit Pay Types ......................................................................................... 135 New Benefits — Service Retirements by Age and Service .................................................... 137 New Benefits — Accidental and Ordinary Death .............................................................. 138 Combined System Participants ................................................................................... 139 Membership by Age and Years of Service ....................................................................... 140 Membership by Tier ...............................................................................................