In 1987, the System had 4.3 active members for everyone drawing a benefit, which decreased to 3.8 in 1997. We anticipate that this trend will continue to decrease to about 3.4 active members per retiree by the turn of the century.

For the 10-year period 1987 through 1997, the increase in members, by employer type, was as follows:

Increases in Active Members by Employer Type

Contribution Rates - As of July 1, 1997, contribution rates for regular and police/fire members under the two contribution plans were as follows:

Major Initiatives

On Tuesday, November 5, 1996, Nevada voters overwhelmingly passed Ballot Question 1. Passage of Question 1 builds important public pension safeguards in the Nevada Constitution to:

The 1996 benefit modeling study, undertaken as an important first step in our strategic planning process, resulted in the passage of legislation critical to PERS' retirees. Senate Bill 216 of the 1997 Nevada Legislature provides long-term retirees of the System with greater post-retirement benefits. In addition to the increases previously provided, an annual compounded increase of 4% is given after 12 years of receiving benefits and 5% after 14 years. Prior to passage of this measure, retirees received 2% after the 3rd year of receiving benefits, 3% after 6 years, and 3.5% after 9 years. Included in the study was a comparison of post-retirement increases granted by other state retirement systems and an analysis of retiree purchasing power.

Two interim legislative studies were also initiated by the 1997 session of the Nevada Legislature. The first is a review of how PERS computes service credit and average compensation for part-time employees and those working "non-traditional" workweeks, (ACR 15). The second is to address funding the judges' retirement plan on an actuarial reserve basis (SB 36). PERS will present recommendations for each study to the 1999 session of Nevada Legislature.

Finally, the 1997 session of the Nevada Legislature incorporated funds into PERS' biennial budget to add new staff and begin a business systems replacement project. Eleven employees are being added to PERS' existing staff to provide better service to PERS' members and benefit recipients. The business systems replacement project, known as C*A*R*S*O*N, will be completed over a 4-year period. It too will result in better service for PERS' members and retirees through more accurate record keeping and timely access to critical member information.

BOND REVIEW COMPLETE

In 1997, we reported that the Retirement Board was embarking on a review of the management structure of PERS fixed income (bond) portfolio. That review is now complete. The strategy has been modified and new managers hired and funded.

The Board allocates 50% of the System's assets to bonds. The portfolio is diversified using different management styles. The prior structure included:

Part of the examination included whether to continue using the Lehman Aggregate Index as the System's performance benchmark. The Board determined that index has wide institutional acceptance and represented a reasonable performance goal.

The styles included in the review were active duration, core, defensive, enhanced index, intermediate and mortgage specialist. Once the portfolio optimization was completed, it was determined that in fact it was reasonable to believe the current structure would deliver PERS long-term real return expectations. We did however, believe modest adjustments to management would enhance the probability of achieving our long-term goals. The Board therefore approved the following structure:

While our research supported increasing the international component of the bond portfolio to a maximum of 30%, the Board modestly increased the non-U.S. exposure from 15% to 20%. Their rationale was that the System now allows U.S. bond managers to invest up to 25% of their portfolios in non-U.S. instruments. In total, therefore, exposure reaches 30% periodically. We eliminated our defensive bond position and shifted those assets to a core-plus strategy which has been successful for many years. These changes resulted in the Retirement Board authorizing manager searches as follows:

At this point, managers have been hired and funded. The following chart shows the incumbents, new managers, and dollar amounts under management as of January 1998.

* New Manager

With this project largely behind us, we are moving to an examination of our stock management structure. We will focus on this effort in a future article.

IT'S TAX TIME AGAIN!

Do you know what that means in terms of your PERS benefit? It means you should consider whether you need to increase or decrease your federal income tax withholding. If you wish to change your withholding instructions, send us a letter indicating the new amount to be deducted, or contact us for a form to authorize withholding based on your marital status and number of withholding exemptions. When you write to us, please include your signature, the date, your printed name, and your Social Security number.

PURCHASE OF SERVICE

Any member who has five years of creditable service may purchase up to five years of service. Purchases can be paid in a lump sum or through an installment plan which currently includes 8% interest over the contract period. Payments may be made directly to the Retirement System or through payroll deduction. Any interest paid will not be credited to the individual member account upon completion of the terms of the contract.

The cost to purchase service is based on the average compensation times the number of months purchased, times the percentage determined by age. "Average Compensation" is defined as the monthly average of the Member's 36 highest consecutive months of salary. The cost to purchase service is different for everyone since the cost is based on age and salary. Below is an example of how to estimate the cost to purchase service:

Average Monthly Compensation = $2,000.00

Average Yearly Compensation (x 12) = $24,000.00

Percentage Based on Age (at age 56) x33.2%

Total Lump Sum Cost (Principal) = $7,968.00

PERS IS REPLACING ITS COMPUTER SYSTEM

The Retirement System recently embarked on a business system replacement project, coined the C*A*R*S*O*N (Computer Automated Retirement System of Nevada) Project. PERS’ existing computer system was developed in the early 1980s. While the system was well designed for the times, both technology and business issues have changed in the decade since implementation. The new system will be integrated so that information will come to the system once and each subsystem will access it, thus enhancing accuracy and work flow.

By way of background, in 1997 the System completed an assessment of current systems and organization with the assistance of L.R. Wechsler, Ltd. Wechsler was hired to assist in the assessment by offering a fresh perspective on technology issues facing Nevada. After that assessment was complete the decision was made to move to a phased system replacement. An extensive RFP was issued and Claremont Technology Group was selected as the vendor.

Over a four and one-half year period, Claremont will replace the PERS financial accounting system, membership system and benefits system. Wechsler is continuing as consultant, this time in a quality assurance capacity.

To effectively manage a project of this magnitude, PERS is using a five-tiered approach to project monitoring, beginning with a user group designed to enhance communication with the vendor. A project management committee reviews priorities and staff/vendor resources and a steering committee evaluates contract issues. PERS assigned a full time project manager to manage the vendor relationship and the quality assurance consultant reviews all deliverables. The contract includes several provisions designed to insure project success. Examples include the phasing of the project, as well as a performance bond which will remain in full force for the life of the contract.

This project will help PERS better serve our members and retirees through the streamlining of processes and better computer functionality. As we move through this system upgrade we will periodically report on our progress.

BULLETIN

Our Attorney General has recently advised us that when a check has been endorsed and then lost by the payee, IT IS JUST LIKE LOSING CASH, and PERS cannot reissue the check under these circumstances. Be sure only to endorse your check while you are at the counter where you intend to cash or deposit it.