Nevada Retirement News

Public Employees Retirement System
Spring 2002

Each year the System publishes an annual report, which is submitted to the Governor, members of the Nevada Legislature, public employers, and employee and employer associations. The following is some of the pertinent information contained in our 2001 annual report. Any member who would like a copy of the report should contact the System. Member/Retiree Demographics - The annual report shows interesting trends in membership and retirement data, as follows:

Member/Retiree Demographics - The annual report shows interesting trends in membership and retirement data, as follows:

	1991	2001	Annual Compound Increase (%)
Active Members	54,516	82,890	4.3
Public Employer Payroll (millions)	$1,551.1	$3,168.9	7.4
Average Annual Salary:   Regular   Police/Fire	$27,650 $34,377	$36,615 $50,587	2.9 3.9
Retirees & Survivors	12,468	24,077	6.8
Ratio: Active Members /   Retirees & Survivors	4.4	3.4
Average Annual Retirement Benefit *   Regular   Police/Fire	$11,594 $17,895	$20,628 $30,996	5.9 5.7
Total Benefits (millions)	$141.1	$477.3	13.0

*Excludes survivors and beneficiaries.

In 1991, the System had 4.4 active members for everyone drawing a benefit, which decreased to 3.4 in 2001. We anticipate that this trend will continue to decrease to about 3 active members per retiree in the next five years. A comparison of active members by employer type for 1991 and 2001 follows:

June 30	1991	2001
State & University	14,389	18,165
School Districts	20,521	34,429
Counties	10,512	10,862
Cities	5,768	7,897
Miscellaneous	3,326	11,537
Totals	54,516	82,890

Contribution plans were as follows:

Contribution Rates:	7/1/01
Employer Pay   Regular   Police/Fire	18.75% 28.50%
Employee/Employer (Matching Rates)   Regular   Police/Fire	9.75% 14.75%

Contribution rates will remain the same through June 2003 for all members regardless of contribution plan.

Investments - The Systems funding objective is to provide a total rate of return which exceeds the Consumer Price Index (CPI) by 3.5% each year over the long-term future. Our investment objective to achieve that funding is to capture market returns for each asset class. For domestic common stocks, it is the return of the S & P 500; for U.S. bonds, the Lehman Aggregate; and for real estate, the National Council of Real Estate Investment Fiduciaries (NCREIF) index. International stocks are measured against the Morgan Stanley Europe, Australia, Far East Index; non-U.S. Bonds against the Salomon Bros. Non-Dollar Government Bond Index. Total return for the year was -1.5%.

Financial - During the 2001 fiscal year, the total fund balance changed as follows:

($ in millions) Fund Balance July 1, 2000			$13,367.3
Revenues:	Contributions Investments Other   Total	$716.1 (217.0)  1.9  $501.0
Expenses:	Benefits Refunds Administration   Total	7.6  $494.9	$477.3 10.0
Excess, Revenues over   Expenses			6.1
Fund Balance June 30, 2001			$13,373.3

Legislation

The 2001 Nevada Legislature passed several measures of importance to the System. Senate Bill 349 (SB 349), the System's fiscal legislation, contained the following benefit enhancements:

• An increased multiplier for all service earned after July 1, 2001. All service earned after July 1, 2001, will be earned at the rate of 2.67% of pay for each year of service credit. Service credit earned before July 1, 2001, will remain at the rate of 2.5% of pay. This boost in the benefit multiplier applies to members in both the regular fund and the police/fire retirement fund.
  
  
• Beginning January 1, 2002, single members of the plan were able to designate a named beneficiary to receive survivor benefits in the event of the member's death prior to retirement. The named beneficiary will receive the same benefits available to spouses of our married members.
  
  
• Members of the police/fire retirement fund were able to retire with 25 years of service at any age beginning July 1, 2001. This benefit is consistent with the public policy behind the Police and Firemen's Retirement Fund, which is, "to promote a youthful and vigorous front line public safety workforce."

Assembly Bill 555 (AB 555) contained several important technical changes and pension reforms. They included:

• New reemployment provisions designed to assist our employers with reemployment of retirees in areas of critical labor shortage became effective July 1, 2001. This benefit change is the result of a study conducted under Assembly Bill 74 (AB74) of the 1999 legislative session. The System surveyed pension systems across the country regarding retiree reemployment and held well-attended employer and employee association meetings. This collaborative process resulted in the passage of this important legislation.
  
  
• Beginning January 1, 2002, active members could purchase service with monies from 457 and 403(b) retirement savings plans. These deferred compensation savings programs are used by many public employees to supplement their PERS' retirement benefits. This change provides added flexibility for the use of these funds to enhance the retirement security of our membership.

Assembly Bill 431 (AB 431) directs the System to conduct a study of lump sum optional retirement plans to include deferred retirement option plans, also known as DROP. The purpose of the study is to determine whether such programs would be beneficial for the members of the System and the Systems participating public employers. The System will submit a final report of the study to the Legislative Commission on or before August 1, 2002.

Finally, Assembly Bill 4 (AB 4) of the 17th Special Session of the Nevada Legislature established a Judicial Retirement System that is to be funded on an actuarial reserve basis. An initial lump sum contribution of $5 million was made on July 1, 2001. Monthly contributions and benefit payments from the trust are scheduled to begin January 1, 2003. At that point, the System will also become responsible for the administration of the Judicial Retirement System.

Technology Improvements
Operations remained focused on C*A*R*S*O*N, our computer implementation project. During fiscal year 2001, the System converted the benefits computer system to the C*A*R*S*O*N environment. Additionally, the System worked successfully with our quality assurance vendor (L.R. Wechsler Ltd.) in monitoring deliverables under the contract. C*A*R*S*O*N continues to be on time and on budget. The System is currently in the warranty and support phase of this project.

System staff is also engaged in the conversion of the file room to optical image file storage. This project began in 2001 with a two-phase 10% conversion to establish the proper methodology and quality assurance process. Both initial phases were completed successfully and within budget. On July 1, 2001, we began the third phase with conversion of the remaining 90% of the file room.

Strategic Planning
Strategic and tactical planning are key to the successful management of the System. These plans must address both external and internal elements ranging from financial market analysis, to federal legislative efforts, to member relations.

As part of the strategic approach to investment management, the System heightened attention to policy compliance, diverse and superior management, and stability of portfolio structure. These measures will serve to enhance investment return stability.

The Economic Growth and Tax Reform Reconciliation Act of 2001 provided enhanced retirement savings opportunities for our members. The System responded to the increased retirement savings options through modifications to our benefit structure. AB 555 of the 2001 legislative session provided the Board with the opportunity to modify benefits to comply with federal law through the Retirement Boards policy making authority. The System prepared policy changes to meet the needs of our membership, in keeping with this new federal legislation.

Finally, the System will begin creation of the infrastructure to support the statutory requirements of the new Judicial Retirement System passed by the 2001 legislative session. Technology issues, publications, counseling requirements, investments, payment structure as well as accounting matters are part of this process and will be addressed. Assumption of the administrative duties associated with this System will take place in an orderly fashion on January 1, 2003.

Market indices are important monitoring tools within the PERS' fund. The use of specific, broad market indices not only assists in the portfolio construction process, but also provides a defined, measurable benchmark to gauge the success of the PERS' investment program and its components over time.

In developing our asset allocation strategy, risk and return expectations for various broad market indices serve as the basis for our long-term assumptions. These assumptions provide the foundation for our investment strategy optimization process. The fund's current asset allocation and market objectives are listed below.

Target Allocation	Asset Class	Market Objective
35%	Domestic Equity	Standard & Poor's 500 Common Stock Index
10%	International Equity	Morgan Stanley Capital Int'l Europe, Australia, Far East (MSCI EAFE) Index
35%	Domestic Bonds	Lehman Aggregate Bond Index
10%	International Bonds	Salomon Bros. Non-Dollar Government Bond Index
10%	Real Estate	National Council of Real Estate Investment Fiduciaries (NCREIF) Index

Success within each asset class is determined by evaluating whether the benchmark is captured over varied time periods. Additionally, individual investment managers are measured against the appropriate market index to ensure they are successfully contributing to the overall objective.

In summary, if each component of the PERS' fund is individually achieving its objective, we can reasonably assume the long-term goals will be met.

The Social Security Act created certain limitations on benefits for individuals qualified for both a Social Security benefit and a pension from a System such as Nevada PERS. These offsets are reductions that may apply to your Social Security benefit and are defined below:

• The Government Pension Offset Ð Affects you if you receive a benefit from PERS and are also eligible to receive a spouse's or surviving spouse's (widow or widower's) benefit from Social Security.
  
  
• The Windfall Elimination Provision Ð Reduces the pension you earned under Social Security because you also receive a pension from work covered by PERS.

The Social Security Administration established several rules to determine whether or not either offset might apply to a PERS member. These rules relate to the length of your service in employment covered by Social Security and the date a member was first eligible to retire from Nevada PERS.

Contact the Social Security Administration using their toll-free number 1-800-772-1213. Ask for the fact sheet entitled Government Pension Offset (for government workers who will also qualify for Social Security benefits based on their spouse's work record); or for the fact sheet entitled A Pension from Work Not Covered by Social Security (for workers in jobs not under Social Security who also qualify for benefits on their own work records).

PERS recently began a system-wide consolidated communications initiative, including coordination and review of all current communications such as forms, letters, newsletters, web site content, member and employer programs. One goal of the initiative is to reach as many members as possible for educational purposes. To accomplish this, PERS' staff is presenting workshops throughout the State entitled "Planning Ahead for Your PERS Retirement." The workshop is approximately one hour long and describes the base benefits available to members of PERS (service retirement, disability retirement and survivor benefits). Other topics include changes resulting from federal legislation, primarily the ability to use certain types of retirement accounts (401(a), 401(k), 403(b), 457 and IRAs) to purchase service in PERS.

If you are interested in attending a presentation, talk to your employer and ask that they schedule this program in the 2003 fiscal year, beginning July 1, 2002.

By now, all active members (not retirees) of the Public Employees' Retirement System should have received notice of the availability of the new survivor benefit for unmarried members of the plan, and the form necessary to obtain the benefit. In order for PERS to pay a beneficiary under this provision, PERS must have a properly completed single survivor form on file at PERS at the time of the member's death.

If you have not yet filled out a single survivor form, we urge you to visit the PERS web site at www.nvpers.org for a printable version of the form entitled "Member Demographics." This form can be used to designate a single survivor beneficiary or to update your current designation. Please sign and return the form to PERS so that in the event of your untimely death, a benefit will be available for your chosen beneficiary.