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What is the CAFR?

Last week, we published the latest Comprehensive Annual Financial Report (CAFR). This annual report gives a clear view about how both NYSLRS and the New York State Common Retirement Fund (Fund) are managed. This year’s CAFR covers our last State fiscal year, from April 1, 2015 through March 31, 2016.

The CAFR and Transparency

Each year when the CAFR is prepared, we strive to make sure the data is accurate, complete, and clear. For example, the financial section was prepared in keeping with accounting principles established by the Governmental Accounting Standards Board, and reporting requirements outlined by the Government Finance Officers Association of the United States and Canada. These principles set standards for financial accounting and reporting. By following them, we can see how we compare with other government entities using the same standards, ensure our data is consistent between accounting periods, and provide reliable financial statements to the public.

Comptroller DiNapoli is responsible for the Fund’s management. He ensures that investment policies and practices follow the highest levels of ethical conduct and transparency. The CAFR aids in transparency by providing historical data and extensive detail about the Fund’s audited assets, liabilities, investments, and transactions.

The CAFR provides many facts and figures about both NYSLRS and the Fund. Here are some statistics from the past fiscal year:

  • As of April 1, 2016, there were a total of 647,399 NYSLRS members; 612,294 in the Employees’ Retirement System (ERS) and 35,105 in the Police and Fire Retirement System (PFRS).
  • As of April 1, 2016, there were 440,943 NYSLRS retirees, 78 percent of whom live in New York.
  • As of April 1, 2016, there were a total of 3,040 participating NYSLRS employers.
  • The largest holdings in the Fund’s portfolio include:
    • Apple, Inc.
    • General Electric Company
    • AT&T, Inc.
    • Exxon Mobil Corp.
    • Microsoft Corp.
  • The Fund has invested approximately $9 billion with minority- and women-owned business enterprises since Comptroller DiNapoli took office in 2007.

This fact sheet (PDF) summarizes many other NYSLRS statistics you’ll find in the new CAFR. You can also find back issues of the CAFR on our website.

A Quick Look at the NYS Common Retirement Fund

Comptroller Thomas P. DiNapoli is the trustee of the Common Retirement Fund, which is the third largest public pension fund in the country. The Fund’s assets come from three main sources: member contributions, employer contributions, and investment returns. The Fund has two main goals:

  • Provide the means to pay benefits to NYSLRS’ participants; and
  • Minimize employer contributions through an investment program designed to protect and enhance the long-term value of the assets.

Over the last 20 years, 79 percent of benefits have been funded from investment returns. When you retire from NYSLRS, your monthly pension benefit—and the benefits of many others—will be drawn from this fund. Ethical management and a long-term, diversified investment strategy has made NYSLRS one of the best managed and funded plans in the nation.
Common Retirement Fund Assets

Strategic Long-Term Investments

The Fund’s investment program is designed to weather the ups and downs of an increasingly volatile global market. Our long-term target allocation for our investment portfolio is 22 percent in fixed income assets (bonds and Treasury Inflation Protected Securities [TIPS]) and 78 percent in equities, which includes:

  • Domestic and international public equities
  • Real estate
  • Real assets
  • Absolute return strategies
  • Mortgages
  • Private equity investments
  • Opportunistic funds

A diversified investment strategy helps us meet the funding needs for our current and future retirees while also helping to control risk.

The Fund is Well-Managed

An independent review of the Fund commended Comptroller DiNapoli and NYSLRS for strong policies and ethical management. By adhering to the highest standards of accountability and transparency, our members, retirees, and beneficiaries can be confident the Fund is being managed wisely.

The Common Retirement Fund: Invested In New York

As the third largest public pension fund in the country, the New York Common Retirement Fund (Fund) is in an excellent position to help strengthen the New York economy. One way it accomplishes this is by investing in New York businesses. Like all of the Fund’s investments, businesses are evaluated on their potential to earn a solid return for the Fund. Under New York State Comptroller Thomas P. DiNapoli’s direction, the Fund uses several programs to invest in New York businesses:

  • The In-State Private Equity Investment Program
  • The New York Business Development Corporation (NYBDC)
  • The New York Credit Small Business Investment Company (SBIC) Fund

By making money available through these programs, the Fund supports local businesses and creates jobs across the state.
The Fund—Invested in New York

The In-State Private Equity Investment Program

With the In-State Program, the Fund looks for companies in need of expansion capital. Businesses use the Fund’s investment to expand their operations and hire workers. The Fund has invested $820 million in over 300 New York businesses, with almost $325 million returned on exited investments. The companies in the In-State Program have also created or kept more than 4,500 jobs around the state.

The New York Business Development Corporation (NYBDC)

The Fund works with NYBDC to provide loans to small businesses in New York. These loans help small businesses buy property and equipment, expand, or start up. They also help create or retain almost 9,000 jobs each year. By borrowing from NYBDC, small businesses can receive lending terms that are often more favorable than other lending terms. Since the Fund partnered with NYBDC, they’ve loaned $362 million to 1,082 small businesses.

Invested in New York — Comptroller DiNapoli at Versa-Tel

Since teaming up with New York Business Development Corporation in 2007 to offer small business loans to returning military veterans, the New York State Common Retirement Fund has made nearly $1.5 million in loans to military veterans. On Veterans Day, Comptroller DiNapoli visited Versa-Tel, a veteran-owned telecommunications company based in Long Island, which received one of those loans.

The New York Credit Small Business Investment Company (SBIC) Fund

Last week, State Comptroller DiNapoli introduced a program that will make $200 million available for in-state investing. The SBIC fund offers credit financing to eligible New York companies, which provides another way to help smaller businesses expand their operations. The Fund is one of the first public funds to offer state-focused credit financing.

The Fund has New York’s best interests in mind by investing in local businesses and the result is two-fold: New York businesses receive the financing they need to succeed, and the Fund receives solid returns that get passed on to its members and retirees.

A Snapshot of NYSLRS

Each year, we publish our Comprehensive Annual Financial Report (CAFR) to explain how the Common Retirement Fund is managed and provide statistics about NYSLRS’ financial activities. This allows the public to see what we do behind the scenes to make sure the Fund stays well-funded and secure for the years to come.

NYSLRS by the Numbers

Retirees-in-US_Top-States The CAFR features many figures about NYSLRS and the Fund. At the end of the 2014–15 fiscal year, the Fund was valued at $184.5 billion. Prior to the recession, in fiscal year 2006–07, the value of the Fund was at $154.6 billion. Overall membership in NYSLRS is currently at 1,073,486, with membership being comprised of 643,178 members and 430,308 retirees and beneficiaries.

Of those 430,308 NYSLRS retirees, 78 percent of them — 337,406 — have chosen to live in New York. This is important because the pension money paid to retired state and local public employees flows directly back into our communities, stimulating and growing our local economies. During 2014, NYSLRS retirees were responsible for $12 billion in economic activity in New York State.

Here are some other facts you may not be aware of:

  • The state with the fewest number of NYSLRS retirees and beneficiaries is North Dakota, which only has 18 retirees and beneficiaries.
  • Florida has 35,014 retirees and beneficiaries, coming in second place to New York;
  • The county with the most retirees and beneficiaries is Suffolk County, with a total of 32,555. Erie County comes in second with 28,342 retirees and beneficiaries, and Nassau County comes in third with 21,947. The county with the fewest retirement and beneficiaries? Hamilton County with 411.
  • There are 717 NYSLRS retirees and beneficiaries who live outside the United States.

An Award-Winning Publication

NYSLRS received a Certificate of Achievement for Excellence in Financial Reporting for the 2014 CAFR. The Certificate of Achievement is a national award recognizing excellence in the preparation of state and local government financial reports. NYSLRS has won this award for the last 11 years.

You can check out CAFRs from past years by visiting our website at http://www.osc.state.ny.us/retire/about_us/financial_statements_index.php#cafr.

Keeping the Pension Fund Funded

People are living longer, which means that recent retirees are spending more time in retirement than in previous generations. This also means that they are collecting a benefit for a longer period of time. That’s why Comptroller DiNapoli, administrator of the New York State and Local Retirement System (NYSLRS), ensures that the most accurate and current data available is used to project how long our members and retirees are expected to live. In doing so, NYSLRS lessens the risks of underfunding the benefits of its current and future retirees.

How the Pension Fund Plans Ahead

The pension fund’s assets come from member contributions, investment income, and employer contributions. Each year, NYSLRS calculates the funds it needs to pay current and future benefits. NYSLRS can’t know for certain how long a member will pay into the pension fund before retiring or how long a retiree will receive a pension. What NYSLRS can do, though, is make assumptions about each of these scenarios.

In this case, an assumption helps NYSLRS predict the expected future payments over the lifespan of its members and retirees based on their age and gender. By estimating how long NYSLRS can expect to pay its retirees, it can plan ahead and determine how much money the pension fund will need.

A New Direction on Assumptions

In August of 2014, NYSLRS’ actuary recommended a change in our mortality assumptions (pdf-icon PDF) based on the completion of a much anticipated study and report from the Society of Actuaries. This new approach to creating these assumptions considers the age and gender of members and retirees, and also their birth year. Birth years provide a more accurate way of looking at life expectancy as not all generational groups share the same life expectancy. A baby boomer who retires at age 62 may live until a certain age, but that doesn’t mean a millennial retiring at 62 will live until the same age. Using more realistic models of life expectancy gives NYSLRS a better understanding of what benefits to pay out over time.

NYSLRS can expect to pay out more benefits in the future as its retirees live longer, but it won’t come as a surprise. By planning ahead, NYSLRS is making sure the benefits you worked for will be there for you during retirement.

Contributing Towards Your Retirement

What are Member Contributions?

Most New York State and Local Retirement System (NYSLRS) members contribute a percentage of their gross earnings to the New York State Common Retirement Fund (Fund). These member contributions, in addition to employer contributions and investment earnings, help make sure the Fund stays well-funded to support the retirement benefits earned by members and retirees.

Types of Member Contributions

Membership-Contributions_TimelineYour tier and retirement plan determine if you must contribute and what percentage of your earnings you contribute. At NYSLRS, there are two types of member contributions: required and voluntary. If you belong to a retirement plan with required contributions, you must make member contributions for the length of time stated in your retirement plan. If you make voluntary contributions, you belong to a retirement plan where you don’t have to make contributions, but you can volunteer to make contributions.

To help you understand how much you are supposed to be contributing, here is some useful information regarding contributions, broken down by what system you are in:

Employees Retirement System (ERS)

  • Most ERS Tier 1 and 2 members are not required to contribute, but may contribute voluntarily. ERS Tier 1 and 2 members receive an annuity based on their voluntary contribution balance in addition to their pension at retirement.
  • All ERS Tier 3 and 4 members are required to contribute 3 percent of their gross earnings until they’ve been NYSLRS members for ten years, or have ten years of service credit (whichever comes first).
  • ERS Tier 5 members are required to contribute 3 percent of their gross earnings for their entire career.
  • ERS Tier 6 members are required to contribute for their entire career a specific percentage of their earnings based on their salary.

ERS Exceptions

  • Though most ERS Tier 5 and Tier 6 members are required to contribute for all their years of service, the contributions of State Correction Officers in these tiers are limited to 30 years of service.
  • ERS Tier 5 Uniformed Court Officers and Peace Officers employed by the Unified Court System must contribute 4 percent of their salary for all their years of public service.

Police and Fire Retirement System (PFRS)

  • Most PFRS Tier 1 and Tier 2 members, as well as PFRS Tier 3 (Article 11) members, are not required to contribute, but may contribute voluntarily.
  • PFRS Tier 3 (Article 14) members must contribute 3 percent of their gross reportable earnings for 25 years or until retirement (whichever comes first).
  • PFRS Tier 6 members are required to contribute a specific percentage of their earnings based on their salary for their entire career.

PFRS Exceptions

  • Though most PFRS Tier 5 members must contribute 3 percent of their gross reportable earnings for all their years of public service, PFRS Tier 5 members enrolled in a retirement plan limiting the amount of creditable service they may accrue will not be required to contribute once they reach the maximum amount of service allowed by their plan.
  • If a union-negotiated collective bargaining agreement in effect on January 9, 2010 required an employer to offer a 20- or 25-year plan, any new employees who join while that agreement is in place will not have to contribute.

New York State Common Retirement Fund’s Emerging Manager Program

The New York State Common Retirement Fund (the Fund) can owe much of its high performance to its investment strategy, but another lesser-known investment approach that helps the Fund is its Emerging Manager Program. This program gives newer and smaller investment managers – people or firms who make investments on behalf of clients – the opportunity to invest for the Fund. And as you’ll see in this video, The Fund’s emerging managers deliver solid results.

8/7/14 Correction to video: We misstated the company name for interviewee Thurman White. Thurman White is from Progress Investment Management Co., not Program Investment Management Co.

The Emerging Manager Program: A Diverse Approach to Investing

The Fund’s Emerging Manager program started 20 years ago, when it granted almost $50 million to the public equity Emerging Manager platform. Today, in 2014, the Fund has provided $1.6 billion to that platform. The Fund is one of the few state pension funds in the country that features an emerging manager program across all major asset classes (private equity, public equity, hedge funds and real estate).

The goal of the program is to invest some of the Fund’s assets with smaller, newer managers, most of which are minority- and women-owned firms. By investing with emerging managers, who tend to focus on the smaller ends of the market, the Fund’s investment portfolio becomes more diverse, and ultimately, more sustainable. In turn, the emerging managers gain the capital and experience they need to become larger, best-in-class investment managers.

At this year’s emerging manager conference, Comptroller Thomas P. DiNapoli summed up the benefit of the Fund’s Emerging Manager Program. “When you look at our program, and the success of it, and the overall strength of the Fund, it’s proof that expanding opportunities and access, to women-owned firms, to firms of color, to emerging managers – it’s not only the right approach, but it’s certainly the best approach.”

Visit the Division of Pension Investment & Cash Management on our website for more information on the Fund and the Emerging Manager Program.

The New York Common Retirement Fund – A Long Term Track Record of Investment Success

The New York State Common Retirement Fund (the Fund), has a solid track record of exceptional long-term market performance. The Fund’s historical success is principally due to a sound investment strategy that is based on the Fund’s asset allocation and diversification.

The objective of the Fund, which is the third largest public pension fund in the country, is to achieve long-term growth, while meeting the cash flow needs to pay benefits to the New York State and Local Retirement System (NYSLRS)’s 422,405 retirees and beneficiaries and to meet the needs of future retirees. To accomplish this, New York State Comptroller Thomas P. DiNapoli has implemented a diversified investment strategy designed to meet current funding needs and future growth requirements while controlling risk.

How Pensions are Funded

The Fund’s assets come from three main sources: member contributions, employer contributions and investment earnings. Over the last 20 years, from April 1, 1993 through March 31, 2013, 80 cents of every dollar paid in benefits has come from investment earnings.

The Fund’s Investment Strategy Is The Key

Investments are made in a well-balanced variety of assets classes, which include global equity, domestic equity, core fixed income, real estate, private equity and absolute return strategies portfolios as well as Treasury Inflation Protected Securities.

The sound investment framework provided by the Fund’s asset allocation and diversification strategy enabled it to generate a 13.02 percent rate of return on its investments during the 2013-14 fiscal year. As of March 31, 2014, the Fund was valued at $176.2 billion. Since 2009, the Fund has seen five consecutive years of investment earnings growth. Prior to the recession, in fiscal year 2006-07, the value of the Fund was $154.6 billion.

For more detailed information on the Fund, visit the Division of Pension Investment and Cash Management.

The Fund – Strength Through Strategy

The New York State Common Retirement Fund (the Fund) holds assets in trust for all NYSLRS members and retirees. As trustee, State Comptroller Thomas P. DiNapoli is accountable for the performance and management of the Fund and ensures that investment policies and practices adhere to the highest levels of ethical conduct and transparency. Comptroller DiNapoli seeks the input of a wide-range of internal and external advisors to determine the best allocation of assets and investment choices for the Fund.

The Fund also relies on an extensive network of outside advisors, consultants and legal counsel to provide the Comptroller with independent advice and oversight of all investment decisions. Outside advisors and internal investment staff are part of the chain of approval that must sign off on all investment decisions before they reach the Comptroller for final approval.

An independent review released in February 2013 found that the Fund is one of the most transparently and ethically managed public pension funds in the country. The review also found that the Fund is well run, invests effectively on behalf of its members and operates with industry-leading openness.

Vicki Fuller is the Chief Investment Officer of the Fund, and as she notes in this video, the Fund has remained strong for the NYSLRS members and retirees who depend on it. The consistent performance of the Fund can be attributed to a long-term investment strategy and asset allocation policy that balances a maximum level of return with an appropriate level of investment risk.

For more detailed information on the Fund, visit the Division of Pension Investment and Cash Management.

For extensive historical data and detailed information about how the Fund is managed, visit the Comprehensive Annual Financial Reports section of our website.

Defined Benefit Plans like NYSLRS Work

Fewer workers today have access to a retirement plan that provides specific benefit payments when they retire. Many workers have had their traditional pension plans replaced by 401K-style plans, which has been discussed in New York. Let’s take a breath and consider why defined benefit plans like the New York State and Local Retirement System (NYSLRS) work.

For more than 90 years, NYSLRS has done what a pension system is supposed to do, provide retirement security for our members. Our pension system is among the best funded and best run in America. With a solid 2012-13 annual return of 10.38 percent, the New York State Common Retirement Fund is now valued at more than $160 billion. And despite the market’s recent volatility, the Fund remains well positioned for the future.

As Comptroller Thomas P. DiNapoli notes in this video, NYSLRS is as strong as it’s ever been and serves as a powerful counterweight to the arguments that public pension systems are unsustainable.