DEPARTMENT
OF
AUDITS
AND
ACCOUNTS
270 Washington Street, S.W., Suite 1-156
Atlanta, Georgia 30334-8400
270 Washington Street, S.W., Suite 1-156
Atlanta, Georgia 30334-8400
Russell W.
Hinton
State Auditor
(404) 656-2174
State Auditor
(404) 656-2174
March
23, 2009
The Honorable Bill
Heath
State Senator
State Capitol, Room 109
Atlanta, Georgia 30334
State Senator
State Capitol, Room 109
Atlanta, Georgia 30334
SUBJECT: State
Auditor’s
Certification
Substitute to House Bill 371
(LC 21 0437S)
Substitute to House Bill 371
(LC 21 0437S)
Dear Senator
Heath:
This
substitute bill would amend provisions relating to the Public Retirement Systems
Investment Authority Law. Specifically, this bill would revise the definition
of ‘large retirement system.’ If this legislation is enacted, the
definition would be expanded to include any public retirement system that has
assets in excess of $200 million. Currently, certain public retirement systems
that have assets in excess of $50 million and have an accumulated unfunded
actuarial liability not greater than 25 percent of total assets may be
classified as ‘large retirement systems.’ If this legislation is
enacted, this provision would change. The retirement systems currently affected
by this provision would be required to meet one of the following criteria before
they are defined as ‘large retirement systems.’
- The
system must have an accumulated unfunded actuarial liability not greater than 25
percent of the total of its assets; or
- The
assets of the system must exceed $50 million and the system must have an
accumulated unfunded actuarial liability not greater than 30 percent of the
total of its assets.
Retirement
Certification for Senator
Heath
Substitute to House Bill 371 (LC 21 0437S)
March 23, 2009
Page 2
Substitute to House Bill 371 (LC 21 0437S)
March 23, 2009
Page 2
This
legislation would also revise provisions relating to investments in foreign
corporations or obligations for ‘large retirement systems.’
Currently, ‘large retirement systems’ may
not
invest more than 15 percent of the retirement system assets in such investments. If this legislation is enacted, the limitation would be removed for ‘large retirement systems.’
invest more than 15 percent of the retirement system assets in such investments. If this legislation is enacted, the limitation would be removed for ‘large retirement systems.’
Furthermore,
this substitute bill would revise the investing guidelines for retirement
systems. Currently, a fund may not invest more than 55 percent of retirement
system assets in equities, provided, however, a ‘large retirement
system’ may invest no more than 60 percent in equities. Under the
proposed legislation, ‘large retirement systems’ would be subject to
the following investing limitations:
- · Prior to July 1, 2010, a fund may invest no more than 65 percent of retirement system assets in equities;
- · On and after July 1, 2010, a fund may invest no more than 70 percent of retirement system assets in equities; and
- · On and after July 1, 2011, a fund may invest no more than 75 percent of retirement system assets in equities.
Under
the provisions of this substitute bill, no fund would be authorized to increase
its assets in equities through purchase by more than 20 percent in any fiscal
year. Any fund which is not in compliance with these limitations shall be
granted a two-year period to come into compliance, but no such fund shall
increase the percentage of investments in equities during such
period.
This
is to certify that this substitute bill is a nonfiscal retirement bill as
defined in the Public Retirement Systems Standards Law.
Respectfully,
/s/ Russell W. Hinton
State Auditor
/s/ Russell W. Hinton
State Auditor
RWH/cs