The Board of Trustees voted to make several technical or housekeeping changes to the Public Employee's Retirement Act effective July 1, 2003. The Board is proposing no benefit changes or other modifications to PERS' law that would have a fiscal impact on the System.

PERS' technical bill (BDR 563) makes several definitional and clarification changes to the Public Employees Retirement Act. Below is a summary of the certain important modifications to be found in the request:

• A proposed limitation to the exemption from PERS' reemployment restrictions due to critical labor shortages. The proposal requires an employer to re-certify a position as "critical" every 2 years. This recommended change is consistent with the rationale used for providing the exemption for reemployment of certain retirees. They are filling positions for which there is an urgent need due to a critical labor shortage, but the duration of the shortage may be for a limited time. Two years is a reasonable time frame for the employer to re-examine and re-designate the position as meeting the criteria to be considered in determining a critical labor shortage. This change is not anticipated to have any cost impact to the plan and would be incorporated into the actuary's experience study scheduled for 2004
• A modification to PERS' new single survivor benefit to allow for multiple payees. PERS' single survivor benefit was effective January 1, 2002. This benefit is designed to provide unmarried members with a survivor benefit for an individual of their choice in the event of their death before retirement. PERS is proposing to continue the designation of a single individual upon whose expected life benefits would be paid (as part of the annuity calculation), but allow the member to designate multiple alternate payees to receive certain percentages of the benefit as specified by the member. The benefit would cease, as it does today, upon the death of the named single survivor beneficiary.
• Other minor technical changes to the Retirement Act and the Judicial Retirement Act.

When this Bill Draft Request is introduced PERS will update the PERS' website with any developments.

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The importance, and at times severity, of market cycles is reinforced by the performance of U.S. stocks in the last few years. As detailed in the chart below, the U.S. stock market has been marked by both above average and disappointing periods of performance, most notably in the past few years. In fact, it has been 50 years since U.S. stocks have experienced three consecutive years of negative returns.

In comparison to the U.S. stock market, PERS' returns exhibit a more stable pattern of results. PERS' allocation to stocks is 45% of our total portfolio, relatively low by institutional pension fund standards. We use other asset classes, such as bonds and real estate, to diversify risk and stabilize returns.

Statistically, we are taking advantage of an investment concept known as correlation. In other words, when one asset class (i.e., U.S. stocks) is performing poorly, another asset class (recently, U.S. and non-U.S. bonds) performs well, stabilizing overall returns. So while on an absolute basis short term returns have fallen below our long term objectives, we effectively captured what is available from the market. Validating that point, PERS' recent results are very competitive versus other public pension plans.

Volatility continues at the individual security level in the wake of recent corporate collapses. While losses are part of investing, we believe over the long term the stock market will contribute positively to our returns. Diversification at the security level will prevent losses in individual positions from unduly harming the fund as a whole.

Overall, we remain focused on ensuring the fund continues to meet its long-term objectives.

The Retirement Board, at its November meeting, approved the June 30, 2002, Actuarial Valuation report submitted by the System's actuary. The report shows the contribution rates needed to fully fund the System by the year 2024.

A very challenging investment environment coupled with other non-investment losses requires an increase in contribution rates for regular members effective July 1, 2003. Police and fire contribution rates will remain at their present levels.

Beginning July 1, 2003, the contribution rate for regular members under the employer pay contribution (EPC) plan will increase from 18.75% to 20.25%. The cost of this increase shall be shared equally by the member and public employer. For regular members under the joint employee/employer contribution plan, the matching contribution rates will increase to 10.5% from 9.75%.

The System remains on sound financial footing with a funding ratio of 82% and on track for full funding by 2024.

In order to better serve our customers, PERS recently reorganized our lines of business. Two departments were created in the reorganization: Employer and Production Services and Member and Retiree Services.

Employer and Production Services is the technical department responsible for wage and contribution reporting, calculations related to service retirement estimates, survivor and disability estimates, preliminary calculations for all account types and final calculations for all account types. This department also handles all paperwork regarding refunds, repayment of refunds, purchases of service credit and much more.

Member and Retiree Services is the department focused on providing information to our members, retirees, and the public. This group handles all counseling responsibilities, both on the telephone and in person. They are also responsible for creating and administering a systematic program of presentations designed to inform and educate our members on their PERS benefits. PERS' informational video, liaison officer training, newsletters, the PERS website and other communications fall under the duties of this department.

The reorganization helps PERS administer the benefits of our members and retirees with greater efficiency and supports PERS' operational goal:

Dedicated to delivering accurate and timely service!

The Retirement Board welcomes two new members: L. Mark Balen and David F. Kallas. These individuals replace outgoing members Eldon "Andy" Anderson and Earl Greene. The Public Employees' Retirement System thanks these departing members for all their dedication and hard work!

Look for biographies of our new Board members on the PERS website - www.nvpers.org.

If you are planning on receiving both full Social Security benefits and your PERS' benefit, you need to know about two offsets administered by Social Security. Offsets are reductions that may apply to your Social Security benefit because you also receive a benefit from PERS. The two offsets are:

1. The Government Pension Offset - It 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.
2. The Windfall Elimination Provision - This provision reduces the pension you earned under Social Security because you also receive a pension from work covered by PERS.

Despite efforts of some members of Congress on behalf of public employees, Congress has failed to pass legislation to repeal or reduce these offsets.

Find out before retirement. Find out ahead of time if these offsets might apply to you. Contact the Social Security Administration using their toll-free number 1-800-772-1213. Ask for the fact sheet entitled "Government Pension Offset" or for the fact sheet entitled "A Pension from Work Not Covered by Social Security."