New York State and Local Retirement System COMPREHENSIVE ANNU A L FIN A N C I A L REPORT For Fiscal Year Ended March 31, 2009 New York State Office of the State Comptroller Thomas P. DiNapoli 2009 NEW Y ORK STATE A N D LOCA L RETIREME N T Sys TEM COMPREHE ns IVE Ann UA L FI N A N CIA L REPORT FI S CA L Y EAR EN DED MARCH 31, 2009 Employees’ Retirement System Police and Fire Retirement System Prepared by the staff of the New York State and Local Retirement System 110 State Street • Albany, NY 12244 TAB L E O F CO N TE N T S Introduction Professional Awards ...............................................................................7 Letter of Transmittal ................................................................................9 Administrative Organization .................................................................... 13 Advisory Committees ....................................................................... 13 New York State and Local Retirement System Organizational Chart .................... 16 Overview of Retirement Operations ........................................................... 17 By the Numbers ................................................................................. 21 Members and Retirees ...................................................................... 21 Retirees in New York State .................................................................. 22 Annual Benefit Payments Within New York State ......................................... 23 Annual Benefit Payments Within the United States ....................................... 24 Annual Benefit Payments Outside the United States ...................................... 24 Financial Independent Auditors’ Report ...........................................................................................27 Management’s Discussion and Analysis ............................................................................29 Statement of Plan Net Assets .............................................................................................33 Statement of Changes in Plan Net Assets ...........................................................................34 Notes to Financial Statements ...........................................................................................35 Required Supplementary Information ................................................................................47 Schedule of Funding Progress .....................................................................................48 Schedule of Employer Contributions ...........................................................................49 Additional Supplementary Information .............................................................................50 Schedule of Administrative Expenses ...........................................................................50 Schedule of Investment Expenses ................................................................................51 Schedule of Consulting Fees........................................................................................52 Independent Auditors’ Report on Internal Control .............................................................53 Investment Overview of Investments ........................................................................ 57 Investment Results ............................................................................... 64 Investment Summary ............................................................................ 65 Asset Allocation — March 31, 2009 ........................................................... 66 Domestic Equity Performance .................................................................. 67 Domestic Equity Portfolio — Ten Largest Holdings ........................................... 69 Fixed Income Portfolio and Comparison ....................................................... 69 Fixed Income Performance ..................................................................... 70 Fixed Income Portfolio — Ten Largest Holdings ............................................... 70 International Equity Performance ............................................................... 71 Real Estate Portfolio ............................................................................. 72 Private Equity Investments Summary ........................................................... 73 Corporate Governance .......................................................................... 74 Domestic Equity Management Fees ............................................................ 76 Domestic Equity Commissions ................................................................. 77 International Equity Management Fees ........................................................ 80 International Equity Commissions .............................................................. 81 Domestic Bond Transactions .................................................................... 83 Real Estate Management Fees (Expensed) ...................................................... 84 Real Estate Management Fees (Capitalized) ................................................... 85 Private Equity Management Fees (Expensed) .................................................. 86 Private Equity Management Fees (Capitalized) ................................................ 87 Absolute Return Strategy Management Fees ................................................... 88 Consultant & Advisor Fees ...................................................................... 89 Actuarial Statement of the Actuary ........................................................................ 93 Actuarial Funding and Valuation ............................................................... 95 Elements of the Actuarial Valuation ............................................................ 97 Actuarial Valuation Balance Sheets ...........................................................100 Local Government Employers Final Contribution Rates For Select Plans ...................102 Contribution Rate Trend for Local Governments .............................................103 Employer Contributions ........................................................................104 Historical Trends ................................................................................106 Changes in Contributions ......................................................................107 Solvency Test ....................................................................................108 Schedule of Active Member Data .............................................................109 Schedule of Retired Members and Beneficiaries .............................................110 Statistical Schedule of Additions to Plan Net Assets .....................................................113 Schedule of Investment Income ...............................................................114 Schedule of Deductions from Plan Net Assets ................................................115 Schedule of Total Changes in Plan Net Assets ................................................116 Service Retirees — ERS .........................................................................118 Service Retirees — PFRS .......................................................................119 Disability Retirees — ERS ......................................................................120 Disability Retirees — PFRS ....................................................................121 New Option Selections ........................................................................122 Option Selection — Total Payments ...........................................................123 Average Pension Benefits Paid During Year Shown...........................................124 Average Benefit Pay Types ......................................................................125 New Benefits — Service Retirements by Age and Service ...................................127 New Benefits — Ordinary and Accidental Death ............................................128 Combined System Participants .................................................................129 Membership by Age and Years of Service .....................................................130 Membership by Tier ............................................................................131 Membership By Status ..........................................................................132 Number of Employers ..........................................................................132 Membership By Employer Type ................................................................133 Average Salary by Employer Type .............................................................134 Members and Salaries by Plan — ERS ........................................................135 Members and Salaries by Plan — PFRS .......................................................136 Pensioners and Beneficiaries by Age ..........................................................137 Pensioners and Beneficiaries — ERS ..........................................................138 Pensioners and Beneficiaries — PFRS .........................................................139 Local Government Salaries and Billings — ERS ..............................................140 Local Government Salaries and Billings — PFRS ............................................141 Contributions Recorded 2000–2009 .........................................................142