State of Connecticut Comprehensive Annual Financial Report Fiscal Year Ended June 30, 1998 - Notes to the Financial Statements

The State sponsors three major public employee retirement systems: the State Employees' Retirement System (SERS) - consisting of Tier I (contributory), Tier II (noncontributory) and Tier IIA (contributory), the Teachers' Retirement System (TRS), and the Judicial Retirement System (JRS).

SERS and JRS are administered by the State Comptroller's Retirement Division under the direction of the Connecticut State Employees Retirement Division. TRS is administered by the Teachers' Retirement Board. None of the above mentioned systems issue stand-alone financial reports.

Plan Descriptions, Funding Policy, and Annual Pension Cost and Net Pension Obligation

Membership of each plan consisted of the following at the date of the latest actuarial evaluation:

	SERS 6/30/97	TRS 6/30/96	JRS 9/30/97

Retirees and beneficiaries receiving benefits	31,642	17,950	192
Terminated plan members entitled to but not yet receiving benefits	743	5,950	-
Active plan members	50,601	41,370	193
Total	82,986	65,270	385

Plan Description
SERS is a single-employer defined-benefit pension plan covering substantially all of the State full-time employees who are not eligible for another State sponsored retirement plan. Plan benefits, cost-of-living adjustments, contributions requirements of plan members and the State, and other plan provisions are described in Sections 5-152 to 5-192 of the General Statutes. The plan provides retirement, disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Funding Policy
The contribution requirements of plan members and the State are established and may be amended by the State legislature. Tier I Plan B and Hazardous Duty members are required to contribute 2% and 4% respectively, of their salary up to the Social Security Taxable Wage Base plus 5% above that level; Tier I Plan C members are required to contribute 5% of their annual salary; Tier IIA members are required to contribute 2% and hazardous duty members are required to contribute 5%. The State is required to contribute at an actuarially determined rate. For fiscal year 1998, the annual required contribution (ARC) was $567.6 million; however, in accordance with the provisions of collectively negotiated agreements, the State only contributed $334.8 million (including federal and other reimbursements) to the plan. Administrative costs of the plan are funded by the State.

Plan Description
TRS is a single-employer defined-benefit pension plan covering any teacher, principal, superintendent or supervisor engaged in service of public schools in the State. Plan benefits, cost-of-living allowances, required contributions of plan members and the State, and other plan provisions are described in Sections 10-183b to 10-183nn of the General Statutes. The plan provides retirement, disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Funding Policy
The contribution requirements of plan members and the State are established and may be amended by the State legislature. Plan members are required to contribute 6% of their annual salary. The State is required to contribute at an actuarially determined rate. For fiscal year 1998, the ARC was $211.0 million; however, the State contributed $179.4 million to the plan, reflecting a reduction of $31.6 million by the legislature to the State's TRS appropriation. Administrative costs of the plan are funded by the State.

Plan Description
JRS is a single-employer defined-benefit pension plan covering any appointed judge or compensation commissioner in the State. Plan benefits, cost-of-living allowances, required contributions of plan members and the State, and other plan provisions are described in Sections 51-49 to 51-51 of the General Statutes. The plan provides retirement disability, and death benefits, and annual cost-of-living adjustments to plan members and their beneficiaries.

Annual Pension Cost, Net Pension Obligation, and Related Information
The State's annual pension cost and net pension obligation to SERS, TRS, and JRS for the current year were as follows (amounts in thousands):

	SERS	TRS	JRS

Annual required contribution	$ 567,635	$211,019	$9,309
Interest on net pension obligation	123,872	67,780	3
Adjustment to annual required contribution	(61,215)	(38,921)	(2)
Annual pension cost	630,292	239,878	9,310
Contributions made	334,846	179,365	9,309
Increase (decrease) in net pension obligation	295,446	60,513	1
Net pension obligation beginning of year	1,457,327	797,416	33
Net pension obligation end of year	$1,752,773	$ 857,929	$ 34

Actuarial information related to the calculation of the annual required contribution for SERS, TRS, and JRS is as follows:

	SERS	TRS	JRS

Actuarial valuation date	6/30/97	6/30/96	9/30/97
Actuarial cost method	Projected unit credit	Entry age	Projected unit credit
Amortization method	Level percent of pay	Level percent of pay	Level percent of pay
Remaining amortization period	34 years	17-36 years	33 years
Asset valuation method	5-year smoothed market	4-year smoothed market	4-year smoothed market
Actuarial assumptions:
Investment rate of return*	8.5%	8.5%	8.5%
Projected salary increases*	3.25%-14.0%	5.0% - 8.1%	5.5%
*Includes inflation at	6.0%	5.0%	5.5%
Cost-of-living adjustments	2.5%-4.0%	4.0%	3.0% - 5.5%

	Fiscal Year	Annual Pension Cost (APC)	Percentage of APC Contributed	Net Pension Obligation
SERS	1996 1997 1998	$ 546,878 597,128 630,293	61.3% 58.5 53.1	$ 1,209,430 1,457,327 1,752,773
TRS	1996 1997 1998	$ 194,880 206,110 239,878	71.8% 71.8% 74.8%	$ 739,191 797,416 857,929
JRS	1996 1997 1998	$ 9,209 9,343 9,310	100% 100 100	$32 33 34

Defined Contribution Plan
The State also sponsors the Connecticut Alternate Retirement Program (CARP), a defined contribution plan. CARP is administered by the State Comptroller's Retirement Office under the direction of the Connecticut State Employees Retirement Division. Plan provisions, including contributions requirements of plan members and the State, are described in Section 5-156 of the General Statutes.

Unclassified employees at any of the units of the Connecticut State System of Higher Education are eligible to participate in the plan. Plan members are required to contribute 5% of their annual salaries. The State is required to contribute 8% of covered salary. During the year, plan members and the State contributed $ 13,761.8 million and $ 21,745.1 million, respectively.