GWINNETT RETIREMENT SYSTEM. GWINNETT COUNTY BOARD OF EDUCATION Suwanee, Georgia

Transcription

1 GWINNETT RETIREMENT SYSTEM GWINNETT COUNTY BOARD OF EDUCATION Suwanee, Georgia TWENTY-NINTH ANNUAL REPORT Fiscal Year Ended December 31, 2011

2 TABLE OF CONTENTS Introductory Section Letter from the Chairman 1 Ten Year History GRS Administrative Staff and Advisors 3 Administrative Section Overview. 4 GRS Department. 5 Financial Section Audit Opinion Statement of Plan Net Assets.. 8 Statement of Changes in Plan Net Assets 9 Financial Highlights Investment Section Investment Policy Investment Highlights Investment Managers.. 16 Detailed Investment Listing 17

3 Introductory Section

4 GWINNETT COUNTY BOARD OF EDUCATION GWINNETT RETIREMENT SYSTEM 437 Old Peachtree Road, NW, Suwanee, GA RICK COST, Chm. DR. FRANCES DAVIS, V. Chm. JIM BARBEE KEITH CHANEY DR. STEPHEN FAIRCHILD DR. STEVE FLYNT RON GAY DON MOORE SANDI ROBERSON BOARD OF EDUCATION LOUISE RADLOFF Chm. CAROLE BOYCE, V. Chm. DR. ROBERT MCCLURE DR. MARY KAY MURPHY DANIEL D. SECKINGER J. ALVIN WILBANKS Superintendent December 11, 2012 Dear Fellow Employees: On behalf of the administrative committee, I am pleased to present the Twenty-Ninth Annual Report of the Gwinnett Retirement System (GRS). This report is intended to enhance your understanding of a valuable employee benefit plan and to serve as a report card on the operating results of GRS during The GRS was established as an alternative to Social Security upon the request of the Gwinnett County Public School employees, on January 1, The Plan is funded through a combination of employer and employee contributions, and investment income. In accordance with Georgia law, periodic contributions to the retirement fund are made based on an independent actuary s calculation of the amount necessary to fund all benefits when due. The Plan provides benefits comparable to Social Security at a much reduced contribution rate for employees. Since inception, the Plan has grown significantly in terms of total participants. At the end of 2011, there were 19,991 active participants in the Plan, slightly down from 20,425 at the end of Retirements from the Plan are still increasing and are expected to continue to grow significantly over the next several years, as a greater percentage of school system employees reach retirement age. During 2011, the number of retirees and beneficiaries of the system increased from 4,434 to 4,874. In 2011 the assets of the Plan continued to recover from the investment market downturn of , albeit at a slower rate than in By year s end, the market value of assets held in the GRS investment portfolio had increased by 1.0 percent over Since the inception of the Plan, assets have achieved an average annual growth rate of over 9 percent per year. These average annual returns compare quite favorably with those of other public pension plans. Detailed investment performance information is provided in the Investment Section of this report. All members of the Committee welcome your input and questions at any time. Please feel free to contact any of us at your convenience. In closing, I would like to express my appreciation to all of our advisors and staff whose diligent work continues to provide all GRS participants with a secure plan that can be counted on to provide all the benefits they expect and deserve. The quality of our plan is a tribute to their wisdom and efforts. Sincerely, Rick A. Cost Chairman, Administrative Committee 1

5 Ten Year History Plan Investments ($ s, in Millions) 1,400 1,300 1,200 1,100 1, Active Plan Participants (In Thousands)

6 2011 Staff and Advisors Gwinnett County Public Schools Board of Education Dr. Robert McClure, Chairman Louise Radloff, Vice Chairman Carole Boyce Dr. Mary Kay Murphy Daniel D. Seckinger GRS Plan Administrative Committee J. Alvin Wilbanks, Superintendent (Ex Officio) Rick Cost, Chief Financial Officer, Chairman Dr. Frances Davis, Chief Human Resources Officer, Vice Chairman Jim Barbee, Teacher, Peachtree Ridge High School Keith Chaney, Principal, Mountain View High School Dr. Stephen Fairchild, Teacher, Duluth High School Dr. Steve Flynt, Associate Superintendent Ronald Gay, Teacher, Hull Middle School Don Moore, Assistant Director, Transportation Sandi Roberson, Retiree Administrative Staff GRS Retirement Services Department Tom Daymude, Director Alex McDugald, Assistant Director Betty Williams, Retirement Services Manager Cheri Trainor, Assistant Director Gwenna Dotson, Lead Retirement Specialist Jan Taylor, Lead Financial Systems Specialist Lynn Skinner, Retirement Specialist Sherry Boring, GRS Payroll Assistant Michelle Watson, Retirement Specialist Connie Fay Crane, Assistant Sondra Shipley, Assistant Susie Meadows, Assistant Martha Parker, Assistant Office of the Chief Financial Officer Paula Gill, Recording Exec. Secretary Investment Managers Domestic Equity Fixed Income International Atlanta Capital Management Standish Mellon Asset Management Dimensional Fund Advisors Sound Shore Management Taplin, Canida & Habacht Marathon Asset Management State Street Global Advisors Vanguard Group Systematic Financial Management Mellon Capital Management Real Estate Parametric REMS Group 3

7 Administrative Section

8 Plan Overview Objective The objective of the is to hold in trust and soundly invest all funds contributed to the Plan in order to provide defined retirement and long-term disability benefits for all covered employees. Eligibility Covered employees may retire and elect to receive monthly retirement benefits upon attainment of age 65 or upon attaining eligibility for early retirement under the appropriate State Plan (Teachers Retirement System of Georgia or Public School Employees Retirement System). Early retirement benefits are reduced by factors which have been established for each year of age under 65. Monthly disability benefits are payable after six months in which the employee remains on approved leave of absence as determined by Board policy, or upon determination of disability if later. Coverage All regular full-time employees are automatically covered by the GRS Plan. Full-time employees are those who are regularly scheduled to work at least twenty hours per week and are not student, seasonal or intermittent employees. Administration The GRS Plan Administrative Committee consists of nine voting members and one non-voting member. The Superintendent (non-voting), Chief Financial Officer, and the Chief Human Resources Officer are permanent members. The seven other rotating members consist of three school teachers, one local school administrator, one classified employee, one retiree drawing GRS benefits and one person in any position the Board chooses. As each rotating member s term expires, replacement members are recommended by the GRS Plan Administrative Committee to the Superintendent and Board of Education for approval. The rotating members serve a seven year term and must remain off the Committee at least twelve months before being considered for another term. A complete listing of the 2011 GRS Committee is included on page 3. Asset Management In 2011 the GRS Plan Administrative Committee employed the firm of NEPC, LLC to provide independent investment counsel. NEPC assisted in the development of investment policies and the selection and employment of investment managers. On an ongoing basis, NEPC has assisted in revising these policies and in monitoring the investment manager results. Detailed information on the investments of the Plan is presented in the Investment Section of this report. Actuarial The GRS Plan Administrative Committee employs the firm of Cavanuagh Macdonald Consulting, LLC to perform annual actuarial valuations. A copy of the most recent actuarial valuation report may be viewed or downloaded from the GRS website at: Audit The accounting firm of Mauldin & Jenkins, LLP conducts annual audits of the Plan. The audit opinion and the two basic financial statements for 2011 are presented in the Financial Section of this report. A full copy of the financial report may be viewed or downloaded from the GRS website at: App.nsf/pages/Publications 4

9 Retirement Services Department Gwinnett Retirement Services Department Mission The mission of the Retirement Services Department is to provide Gwinnett County Public Schools employees and retirees with the information, guidance, support, and service they need to plan and achieve a comfortable, secure, and independent retirement; and to manage the assets of the Plan to ensure the promise of life-long benefits. Key Tasks and Responsibilities Retirement Services Provide Member Counseling Manage Enrollment Manage Benefits Manage Participant Data Provide Member Statements Financial Operations Manage Contributions Provide Accounting Services Provide Financial Statements Manage Disbursements Manage Banking Operations GRS Website The GRS website was created to provide easy access to Plan information and answers to frequently asked questions. The goal of the website is to maintain continuous communication links between GRS and its customers. The current web address is Benefit Recipients The GRS Department is responsible for the retirement process of every employee who retires from the Plan. Since its inception in 1983, the GRS Plan has continued to experience rapid growth in the annual and overall numbers of retirees. The total number of people receiving monthly GRS benefits is now over 4,800. Over the next several years the number of employees eligible for retirement is expected to continue to grow rapidly. Benefit Recipients 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,

10 Financial Section

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13 GWINNETT COUNTY BOARD OF EDUCATION RETIREMENT SYSTEM STATEMENTS OF PLAN NET ASSETS YEARS ENDED DECEMBER 31, 2011 AND 2010 December 31, Assets Receivables: Accrued interest and dividends $ 2,309,314 $ 2,900,038 Pending trades receivable 1,834, ,618 Total receivables 4,143,883 3,116,656 Investments, at fair value: Common stocks 190,330, ,244,866 Preferred stocks 1,123,740 1,457,610 U.S. government securities 44,830,104 26,459,130 Mutual and commingled funds 822,155, ,546,784 Corporate bonds 69,358,553 67,796,596 Money market funds 33,479,066 26,313,100 Municipal bonds 672,256 1,162,308 Mortgage-backed securities 63,312,298 58,561,480 Asset-backed securities 12,158,020 6,826,698 Other bonds 119,697, ,813,248 Securities lending short-term collateral investment pool 76,049, ,450,813 Total investments 1,433,166,990 1,459,632,633 Capital Assets, net 5,207 6,943 Total assets 1,437,316,080 1,462,756,232 Liabilities Accounts payable and accrued expenses 85,530 73,066 Pending trades payable 15,620,359 3,798,880 Loan Payable for securities lending 76,132, ,716,020 Total liabilities 91,838, ,587,966 Net assets held in trust for pension benefits (A schedule of funding progress is presented on page 17) $ 1,345,477,273 $ 1,332,168,266 See auditor's report and accompanying notes to financial statements. 8

14 GWINNETT COUNTY BOARD OF EDUCATION RETIREMENT SYSTEM STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED DECEMBER 31, 2011 AND 2010 Years Ended December 31, Additions Contributions Employer $ 44,518,645 $ 39,585,901 Members 8,773,926 9,006,353 Total contributions 53,292,571 48,592,254 Investment income From investing activities Net appreciation in fair value of investments (24,745,486) 121,078,800 Interest and dividends 28,478,692 28,420,833 Other investment income 30,931 10,484,829 3,764, ,984,462 Less investment activity expenses (2,320,450) (2,144,796) Net income from investing activities 1,443, ,839,666 From security lending activities Security lending income 207, ,512 Security lending expenses (22,343) (24,411) Net appreciation in fair value short-term collateral investment pool (3,663) (11,502) Net income from security lending activities 181, ,599 Deductions Benefits paid to participants Net investment income 1,625, ,072,265 Total additions 54,917, ,664,519 Retirement 37,546,710 32,772,171 Disability 2,354,585 2,150,226 Administrative expenses 39,901,295 34,922,397 1,707,416 3,131,722 Total deductions 41,608,711 38,054,119 Net increase 13,309, ,610,400 Net assets held in trust for pension benefits Beginning of the year 1,332,168,266 1,163,557,866 End of the year $ 1,345,477,273 $ 1,332,168,266 See auditor's report and accompanying notes to financial statements. 9

15 Financial Highlights For the Year Ended December 31, 2011 Additions Plan assets increased by a net $13 million during the year. The growth was due to a combination of investment return and contributions to the plan. Investment return contributed $1 million to Plan asset value. The remaining $12 million was accounted for by contributions net of expenses to the Plan. Further detail on Plan investment performance is provided in the Investment Section of this report. Components of Annual Growth ($ s, in Millions) (50) (100) (150) (200) (250) Contributions Net of Expenses Investment Income Contributions Employer and employee contributions have consistently added to asset value over the life of the Plan. Contributions totaled $53.3 million for the year The Board contributed $44.5 million for the benefit of 19,991 active employees. The remaining $8.8 million was contributed by employees through payroll deduction. Annual Contributions ($ s, in Millions) Employee Contributions Board Contributions 10

16 Investment Section

17 Financial Highlights For the Year Ended December 31, 2011 Benefit Payments Benefit payments of $39,901,295 were disbursed from the Plan during This represents an increase of $5.0 million over benefits disbursed in The level of benefit payments is expected to increase substantially over the next several years as the number of employees eligible for retirement increases. Projected Benefit Payments ($ s, in Millions) Plan Expenses Investment and administrative expenses for the year totaled $2,320,450 and $1,707,416 respectively, for a total of $4,027,956. Investment expenses increased marginally on an absolute basis and as a percent of the value of Plan assets from the prior year due to manager and portfolio transition expenses. Administrative expenses decreased on both an absolute and percentage of assets basis, resulting in lower overall expenses for the Plan compared with Expenses as a % of Total Assets 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0%

18 Investment Policy Investment Objectives The primary investment objective of GRS is better than average returns on investment over the long term. Investment objectives reflect the long-term nature of the Plan, the expected strong cash flow, and the relatively young age of participants. As a public body, the Board of Education s funding ability is influenced by the local economic conditions and by political considerations. Therefore, it is important that the Plan meet its investment goals if benefit levels are to be assured. Operating Procedures The Gwinnett County Board of Education shall be responsible for the overall management of the assets of the retirement system. The Board has established an Administrative Committee to carry out the terms of the Plan, including responsibility for the investment of funds. The Administrative Committee is responsible for establishing investment policy, hiring and firing of advisers, providing professional services to the Plan, and, in general, directing the Plan s investments in a manner most appropriate to meeting Plan goals. Investment Guidelines The policy of GRS is to seek out the best investment management available to provide participants with adequate and cost-effective disability coverage and retirees with an adequate and fully competitive retirement income at a reasonable cost. The Plan Administrative Committee may employ one or more investment managers to carry out investment policies. As a local retirement system maintained by a political subdivision of the State of Georgia, investments made by the Plan are subject to the Official Code of Georgia Annotated. Every two years, the Plan is required to certify to the State Auditor that it has complied with the investment practices outlined in the Public Retirement Systems Investment Authority Law (O.C.G.A et seq) at all times. It is the Administrative Committee s decision to voluntarily abide by the provisions of the Employee Retirement Income Security Act (ERISA) of 1974 where applicable and feasible. It is also understood that the fund s managers will abide by ERISA. The Plan includes two benefit plans that are managed as one portfolio the Retirement Fund and the Disability Fund. The Administrative Committee believes a broadly diversified portfolio of well-selected investments will be most successful in meeting the Fund s goals at the lowest level of risk. The Administrative Committee has adopted the following target asset mix for the fund. All asset classes are measured at cost. Equities 30-65% Fixed Income 30-70% Real Property 0-10% 12

19 Investment Policy Investment Restrictions Investments in corporations are permitted only if the corporation has a market capitalization equivalent to $100 million. Investments in obligations of corporations are permitted only if the obligations are listed as investment grade by a nationally recognized rating agency. Investments in securities of companies on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List (as defined by O.C.G.A ) are prohibited. The following may not be used in making equity investments: leverage techniques option techniques futures commodities private placements direct participation plans The Plan may enter into contracts, agreements, and other instruments designed to manage risk exposure. Expected Returns and Risk Levels The Administrative Committee establishes the following investment goals based on current capital market conditions and the funding status of the Plan: Expected return: Over a five-year period, the total return should be at least 3% above the rate of inflation (as measured by the CPI) and rank in the top half of a peer group of large public pension plans. The Plan is also expected to outperform the target benchmark which is defined as the target asset mix multiplied by the appropriate benchmark for each asset class. Expected risk: Over a five-year period, the standard deviation of the returns for the total fund should be less than 13% and less than that for a peer group of large public pension plans. 13

20 Investment Highlights Asset Mix The Plan investment portfolio was diversified at year end in accordance with the GRS investment policy. Assets as of December 31, 2011 Cash & Equivalents 1% Fixed Income 36% Domestic Equity 30% Real Assets 11% International Equity 22% Investment Returns In 2011 the Plan s equity holdings in domestic large cap, domestic small cap and international equities all underperformed their benchmarks, returning 0.1%, -4.4%, and -12.5%, respectively. The Plan s fixed income and real assets holdings helped to offset the underperformance of equities, returning 7.7% and 11.2% respectively. For the year ending December 31, 2011, the Plan returned 0.3% (gross of fees) exceeding its benchmark by 0.3%. Annual Portfolio Investment Return 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0%

21 Investment Highlights Long Term Investment Return The GRS Plan has a long term investment outlook due to the nature of the Plan and the characteristics of the participant base. The Plan has an assumed actuarial investment return rate of 7.5% in order to appropriately fund both current and future benefits. The one, three, five, seven and ten year returns are presented below. Annualized Portfolio Investment Return 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 10.9% 5.9% 4.3% 2.3% 0.3% 1 Year 3 Year 5 Year 7 Year 10 Year 15

22 Investment Highlights Investment Managers GRS diversifies investments over a wide range of asset classes and investment styles in order to meet stated investment objectives. In order to achieve diversification the GRS Administrative Committee employs a variety of investment managers. The performance of each manager is monitored by the Committee on a regular basis. One, three and five year returns are presented below for each asset class. Equity - Large Cap Returns Equity - Small Cap Returns 20% 15% 10% 5% 0% -5% 14.9% 0.1% -0.1% 1 Year 3 Year 5 Year 20% 15% 10% 5% 0% -5% -10% 17.3% 0.5% -4.4% 1 Year 3 Year 5 Year Equity - International Returns Equity - Global Returns 15% 10% 5% 0% -5% -10% -15% 9.1% -4.3% -12.5% 1 Year 3 Year 5 Year 15% 10% 5% 0% -5% -10% 13.4% -1.3% -6.1% 1 Year 3 Year 5 Year Fixed Income Returns Real Assets Returns 10% 7.7% 6.9% 15% 10% 11.2% 12.2% 5% 4.1% 5% 4.3% 0% 1 Year 3 Year 5 Year 0% 1 Year 3 Year 5 Year 16

23 Investment Highlights Ten Largest Equity Holdings Company Market Value Exxon Mobil Corp $ 3,427,610 Wal-Mart Stores Inc 2,901,169 CVS Caremark Corp 2,875,928 Proctor & Gamble Co 2,866,796 Pfizer Inc 2,810,344 General Electric Co 2,724,039 Microsoft Corp 2,310,897 Texas Instruments Inc 2,288,037 Apple Inc 2,205,225 Time Warner Inc 2,065,473 Total of 10 Largest Equity Holdings $ 26,475,517 Ten Largest Fixed Income Holdings Description Maturity Interest Date Rate Market Value U.S. Treasury Note 5/31/ % $ 12,256,677 U.S. Treasury Inflation Indexed 7/15/ % 11,407,716 U.S. Treasury Note 4/30/ % 9,253,874 U.S. Treasury Inflation Indexed 1/15/ % 8,369,527 U.S. Treasury Inflation Indexed 4/15/ % 8,195,385 U.S. Treasury Inflation Indexed 1/15/ % 7,753,123 U.S. Treasury Inflation Indexed 7/15/ % 7,125,740 U.S. Treasury Inflation Indexed 1/15/ % 6,665,513 FNMA SF MTG 1/1/ % 6,623,213 U.S. Treasury Inflation Indexed 7/15/ % 6,575,574 Total of 10 Largest Fixed Income Holdings $ 84,226,344 A complete list of portfolio holdings is available upon request. 17