A Report on the Audit of the Teacher Retirement System's Fiscal Year 2005 Financial Statements
November 2005
Report Number 06-015
Overall Conclusion
In our audit report dated November 8, 2005, we concluded that the Teacher Retirement System's (System) basic financial statements for fiscal year 2005 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America.
Conducting our audit of the System's financial statements enabled us to obtain information on the pension plan's actuarial funding status, which has declined for the fifth consecutive year. In fiscal year 2005, the deficit of the plan's actuarial assets compared with its actuarial liabilities--its unfunded actuarial accrued liability--grew by $5.2 billion to $13.2 billion. However, the pension plan's investment return in fiscal year 2005 exceeded the 8 percent actuarially assumed investment rate of return, and the System is now deferring $4.4 billion in net investment gains. This is an improvement from the $4.6 billion in investment losses deferred in the prior year. The System will recognize these investment gains over the next four fiscal years, which will have a positive effect on the pension plan's actuarial funding status.
The System's actuary concluded that increasing the State's contribution rate from 6.0 to 7.19 percent starting in fiscal year 2006 would position the plan to amortize this unfunded liability over the next 30 years. This would require the State to increase its annual contribution to the pension plan by approximately $250 million.
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