MEMBER SERVICES ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS AGENCY SUMMARY STATE RETIREMENT SYSTEM

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1 ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS AGENCY SUMMARY STATE RETIREMENT SYSTEM LeRoy Gilbertson, Director Contact: Anthony Guarino, Deputy Director (602) Agency Mission: To contribute toward its members' long-term financial security by providing retirement, disability, survivors' and health insurance benefits; and by counseling and disseminating information to its members. Agency Description: The Arizona State Retirement System provides pension and other benefits for employees of most public employers in Arizona, including public schools, most local and county governments, and the State of Arizona. As of June 30, 998, the ASRS had approximately 70,86 active (working and contributing) members, 58,857 inactive members, 53,583 retired members and 3,093 disabled retirees. The Arizona Retirement Fund has a market value of approximately $20 billion. Agency Summary: MEMBER SERVICES ADMINISTRATION AND SUPPORT INVESTMENT MANAGEMENT Capital Funds Agency Total Funding and FTE Summary: Operating Funds Subtotal Capital Funds Agency Total RTA,90., ,03.0 6,7.8 8, ,905.,53.7 5, , , , ,505. Agency s and Key : Key , , ,69. 2, ,66.2, ,07.3 2, , ,505. 2, , , To exceed customer expectations for benefit administration and counseling, education, information, and communication services through efficient and effective administrative practices. Percent of overall member satisfaction with ASRS telephone services Percent of overall member satisfaction with the benefit estimate process Percent of overall member satisfaction with pre-retirement counseling sessions Percent of overall member satisfaction with pre-retirement seminars Percent of overall member satisfaction with the service purchase process Percent of overall member satisfaction with the retirement application process Percent of overall member satisfaction with the retirement benefit payment process Percent of overall member satisfaction with the health insurance program Percent of overall member satisfaction with the ASRS quarterly newsletter 2 NA NA NA NA NA NA NA To enhance the safety and security of retirement system assets, minimize risk and maximize investment return through prudent, efficient and effective investment management. Key Actuarial investment return (percent) 6.2 >8 8 8 Funded status (percent) 8.6 > Excess earnings cost of living adjustment Percent increase in contribution rate none none none <.5 RTA. PROGRAM SUMMARY MEMBER SERVICES Phone: (602) A.R.S Program Mission: To serve members through retirement, health insurance, long term disability benefit administration, and counseling and education services. Program Description: The Member Services Program administers ASRS benefits, responds to member inquiries pertaining to benefits, counsels members regarding their benefits and status, and communicates with members on retirement issues. Page 2 State Retirement System General Government

2 ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS 2,258.3, ,03.0, ,90., , This Program Contains the Following Subprograms: Benefit Services Advisory Services Health Insurance Long-term Disability External Affairs RTA.. SUBPROGRAM SUMMARY BENEFIT SERVICES Phone: (602) A.R.S et. seq. To administer ASRS benefits in an accurate and timely manner. The Benefit Services subprogram is responsible for administering ASRS benefits, including retirement and survivors' benefits, and forfeitures of ASRS contributions. Approximately 3,000 members retire annually, and an additional 9,000 apply for survivors' benefits or withdrawal of contributions. Subprogram s and : To identify and exceed member expectations and provide timely and quality benefits payable services. Percent of initial retirement benefit checks distributed within 60 calendar days of retirement date NA RTA..2 SUBPROGRAM SUMMARY ADVISORY SERVICES Phone: (602) A.R.S To counsel and coordinate service transactions on behalf of members regarding retirement and related matters. The Advisory Services subprogram provides counseling for members at various locations in two forums. Educational seminars are held in various locations throughout Arizona. Topics in this fullday seminar include: the ASRS organization and functions; benefits available through the ASRS; and social, psychological, and legal aspects of retirement and aging. ASRS benefit advisors are available at the Phoenix and Tucson ASRS locations to meet with members on an individual basis in order to provide specific benefit information and to assist in the retirement process. Benefit Advisors also travel throughout the state to serve locations that are convenient for the membership. Benefit Advisors respond to telephone inquiries and coordinate service transactions, such as the re-purchase of forfeited service credit, on behalf of members. Subprogram s and : 90.8,65.8, ,65.8, To identify and exceed member expectations for timely and quality responses to inquiries, benefit service requests, individual counseling, off-site seminars, and annual benefit statements. Response time (seconds) to telephone inquiries Business days to acknowledge service requests Percent of time scheduled service commitments are met RTA..3 SUBPROGRAM SUMMARY HEALTH INSURANCE Phone: (602) A.R.S To administer a health insurance program for retired and disabled members in a manner that provides a framework to offer affordable coverage. The Health Insurance subprogram has established contractual General Government State Retirement System Page 25

3 ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS relationships with medical and dental insurance carriers to provide health insurance coverage for retired and disabled members of the several state retirement plans. The Health Insurance subprogram is designed to provide coverage that is both coordinated and not coordinated with Medicare. Subprogram s and : Counties where managed care is available To extend the availability of both managed care and freedom of choice options. RTA.. SUBPROGRAM SUMMARY LONG-TERM DISABILITY Phone: (602) A.R.S To administer a long-term disability (LTD) program for active members in a manner that provides the framework to offer disabled members financial protection, rehabilitation, and a plan for re-employment. The LTD subprogram provides two-thirds of a member's salary in the event of disability. This amount is subject to reduction based on the recipient's workers' compensation and social security benefits. Subprogram s and : 0.0 2, ,57.3, ,932. 2, ,57.3 To identify and exceed member requirements for timely and quality LTD services. Number of months needed to determine eligibility RTA..5 SUBPROGRAM SUMMARY EXTERNAL AFFAIRS Contact: Tom Augherton, Deputy Director External Operations Phone: (602) A.R.S et. seq. To provide communication and education services to members, employers, legislators, and other interested parties with regard to retirement issues. The External Affairs Division is responsible for establishing effective lines of communication with the ASRS's 00+ employers, its nearly 250,000 employee members, other constituent groups, the state legislature and other outside entities. The services provided by the External Operations Division include:. Education and communication (preparation and distribution of quarterly member and employer newsletters, member benefit handbook, employer instructions manual, updated excerpts from the Arizona Revised Statutes, ASRS Board rules, member services information brochures, and annual member benefit statement and the annual ASRS financial statement); 2. Cooperative relations (coordination between the ASRS and its constituent groups); 3. Legislative agenda and regulatory (federal and state lobbying activities and legislative and regulatory review for compliance). Subprogram s and : To identify and exceed user requirements for timely and quality publication services. Timeliness in printing and distributing the quarterly member newsletter RTA.2 PROGRAM SUMMARY ADMINISTRATION AND SUPPORT Contact: Anthony Guarino, Deputy Director Phone: (602) A.R.S et. seq. Program Mission: To establish and maintain an administrative framework to carry out the Retirement Code and directives of the Retirement Board. Program Description: The Administration and Support Program contains the various support functions needed to fulfill the Retirement System's statutory responsibilities. The support functions include the director's office, human resources, budget, accounting, data processing, internal Page 26 State Retirement System General Government

4 audit, and legal ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS , ,7.8 8,58.8 6,705. 6,7.8 8, , This Program Contains the Following Subprograms: Director's Office Financial Services Information Services RTA.2. SUBPROGRAM SUMMARY DIRECTOR'S OFFICE Contact: Anthony Guarino, Deputy Director Phone: (602) A.R.S To provide administrative and managerial support that assures the accurate, timely, and efficient execution of ASRS statutes and Retirement Board directives. This subprogram contains the activities and functions necessary to administer and support ASRS statutes and Board directives, including the offices of the director and deputy director; support staff; legal counsel; human resources; internal audit; and budget, planning, and procurement. Subprogram s and : To exceed standards for ASRS operational integrity and compliance with relevant laws, rules, policies and procedures. Percent of external audit findings addressed Completion of annual risk assessment Completion of annual audit work plan based on the risk assessment Completion of annual audits RTA.2.2 SUBPROGRAM SUMMARY FINANCIAL SERVICES Contact: Richard Beissel, Assistant Director Phone: (602) A.R.S To deliver sound accounting and financial-related services for the ASRS. The Financial Services subprogram performs all accounting functions for the ASRS, including receivables of more than $350 million annually from 00+ employers and 70,000 active employees; support and validation of ASRS investment activities; payables, and staff payroll. Subprogram s and : , ,53.3,86.3,86.3 3,53.3 5, , To identify and exceed user requirements for timely and quality comptroller services. Business days to pay liabilities Complete annual reconciliation of cash by August 3 2 To identify and exceed expectations for timely and quality membership accounting. Business days to post contributions RTA.2.3 SUBPROGRAM SUMMARY INFORMATION SERVICES Contact: Kent Smith, Assistant Director Phone: (602) A.R.S To support all ASRS divisions in the administration of the Retirement Code through the establishment of automated systems that support agency programs by providing accurate and timely dissemination of information to users, members, and other interested entities. The Information Services subprogram provides all services pertaining to the development, implementation, and maintenance of the Retirement System's computer systems. This subprogram also maintains records for the ASRS's nearly 250,000 active, inactive, and retired members, and oversees the ASRS Mail Center, from General Government State Retirement System Page 27

5 which thousands of mailings are distributed ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS Subprogram s and : 2,26.0 2,8.3, ,26.0 2,8.3, To develop and maintain business applications and a database system that provide procedures and programs to collect, organize, maintain, and present the data required to meet the informational needs of the agency and its constituents. Respond to business application development requests within scheduled commitments 2 To provide a stable and secure computer system environment capable of supporting present ASRS needs and flexible enough to support future requirements. Respond to requests for network support within scheduled commitments RTA.3 PROGRAM SUMMARY INVESTMENT MANAGEMENT Phone: (602) A.R.S et. seq. Program Mission: To manage Arizona Retirement Fund assets in a manner consistent with the goals and objectives of the Arizona Retirement Board. Program Description: The Investment Management program is responsible for overseeing the investment of Retirement Fund assets. The market value of these assets is approximately $20 billion as of June 30, 998. Arizona Revised Statutes (ARS) establishes limitations on the investment of these assets, including no more than 80% in equities and 20% in international equities. Up to one percent may be invested in economic development projects in Arizona. As of June 30, 998, ARS permits up to 0 percent of the assets to be invested internally by the ASRS Staff. As of June 30, 999, the amount increases to 50 percent. The ASRS historically has relied on external investment managers to manage Retirement Fund assets. The ASRS currently manages approximately 30 percent of the fund internally ,732., ,07.3,53.7 5, , This Program Contains the Following Subprograms: Internal Management External Management Asset Allocation RTA.3. SUBPROGRAM SUMMARY INTERNAL MANAGEMENT Phone: (602) A.R.S To manage the internal ASRS portfolios so as to achieve designated investment performance levels at minimal cost. Historically, the ASRS has relied entirely on external investment managers, at an average cost of approximately $ million annually for every $ billion invested. The ASRS currently has an internal investment program which manages approximately 30 percent of the total fund. The investments made through this program are consistent with indexed or enhanced index portfolios, in which most investments are part of a recognized market index, such as the Standard & Poor's 500. The goal of this strategy is to achieve investment returns that are consistent with the market as a whole (as measured by market indexes) but at a much lower cost. The ASRS expects to maintain its internal investment program for approximately one-tenth the cost of the externally managed portfolio. Subprogram s and : To generate investment returns that are consistent with the relevant benchmark. Achievement of annual investment returns within fifty basis points of benchmark N/A Yes Yes Yes Page 28 State Retirement System General Government

6 RTA.3.2 SUBPROGRAM SUMMARY EXTERNAL MANAGEMENT Phone: (602) A.R.S ARIZONA MASTER LIST OF STATE GOVERNMENT PROGRAMS To monitor external manager compliance and performance. The External Management subprogram is responsible for monitoring the performance of the approximately 5 different investment managers entrusted with Retirement Fund assets. This includes working with the ASRS performance investment consultant to measure manager performance relative to established benchmarks and interpreting directives of the Retirement Board for external managers. Subprogram s and : 3,732., ,07.3 3,732., ,07.3 To generate investment returns that are consistent with the relevant benchmark. Subprogram s and : To review and implement the ASRS asset allocation. Completion/implementation of asset mix review Yes No Yes No Percent of managers achieving relevant benchmark N/A RTA.3.3 SUBPROGRAM SUMMARY ASSET ALLOCATION Phone: (602) A.R.S et. seq. To ensure the Retirement Fund is invested in an optimal asset mix. Asset allocation refers to the mix of Retirement Fund investments among various classes of assets including bonds, equities, cash, international equities, real estate, etc. This subprogram conducts formal and informal reviews of the asset mix, relying on ASRS Staff and outside consultants, to ensure the portfolio remains within the optimal allocation. The optimal asset mix is determined through periodic asset/liability review which contains a recommendation for the optimal mix to meet current and future liabilities. (NOTE: The funding and FTE for this subprogram has been combined with the other subprograms.) General Government State Retirement System Page 29