HomeMy WebLinkAboutTeachers' Retirement System of Oklahoma - Public Financial ReportA Record Year
Popular Annual Financial Report of the
Teachers' Retirement System of Oklahoma
A COMPONENT UNIT OF THE STATE OF OKLAHOMA
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
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TABLE OF CONTENTS
Fiduciary Net Position
Benefits Paid to Members
Investments
Funding
Postemployment Benefits
Economic Impact
Dear Members,
TRS proudly pre-
sents the Popular
Annual Financial
Report (PAFR) for
FY2021. This truly
has been a record
year. This past year
will go down in TRS
history as a one of tremendous growth
on all fronts. We are pleased to have
achieved an exceptional 32.95% net
return on investments directly
resulting in an increase in our actuarial
funded ratio from 67.3% in FY2020 to
71.5% in FY2021.
While we certainly celebrate our
investment performance from the past
year, TRS is a long-term investor with a
focus on long-term returns. We are
happy to report our ten-year
annualized return remains strong at
10%, exceeding our actuarially
assumed rate of return of 7%. With
over $1.3 billion in benefits payments
made to more than 58,800 in-state
retirees in FY2021, TRS plays a
significant role in the economic
stability of the State of Oklahoma.
Our history: TRS was established in
1943 by the Oklahoma Legislature as a
pension plan for Oklahoma’s public
education employees. As of June 30,
2021, the Plan consisted of
approximately 600 participating
employers comprised of state
institutions of higher education, state
education entities, local school districts
and career tech districts. The
membership includes 89,945 active
members, 13,650 inactive vested
members 13,562 inactive non-vested
members and 67,016 retirees and
beneficiaries for a total of 184,173
members.
Our initiatives: In addition to our fiscal
growth, we have set strategic initiatives for
further advancements at TRS through
focused efforts on communications with
our membership and community
stakeholders, employee engagement with
our staff, digital transformation of our
pension administration system, and
cybersecurity.
Our mission remains the same: We
collect, protect and grow assets to
provide a secure retirement income for
public education employees. We strive
every year for excellence and will work
to keep TRS fiscally strong for many
years to come.
Sincerely,
Sarah Green,
Executive Director
This publication is a summarized version of TRS’ Annual Comprehensive Financial
Report (ACFR), written in lay-person's terms. It is not presented in a manner which
conforms with generally accepted accounting principles (GAAP). While shorter than
the ACFR, this PAFR still contains the most important statistics of the TRS Plan. TRS’
ACFR is prepared to conform to GAAP and is available online at
https://oklahoma.gov/content/dam/ok/en/trs/documents/publications/FY2021-ACFR.pdf.
2 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
FIDUCIARY NET POSITION
The “Fiduciary Net Position” is calculated by taking the amount of assets of
TRS and subtracting liabilities restricted for payment of monthly retirement
benefits and other qualified distributions. A summary of net position restricted
for benefits on June 30, 2021, 2020, and 2019, is shown below. As of June 30, 2021,
TRS’ net position was approximately $22.05 billion. For simplicity, the 401(a) and
OPEB assets & liabilities on these schedules are combined.1 A separate
schedule for the OPEB plan is on page 8 of the PAFR.
1 TRS' 403(b) plan was terminated on January 29, 2021 and is no longer included in the TRS financial reports.
CONDENSED SCHEDULE OF FIDUCIARY NET POSITION
JUNE 30
ASSETS: 2021 2020 2019
Cash $25,803,234 $26,064,064 $22,473,742
Receivables 211,491,831 247,307,733 309,141,320
Investments 22,025,570,560 16,950,754,948 17,377,415,760
Securities lending assets 1,349,706,322 1,032,139,775 1,400,061,005
Capital assets, net 3,943,725 4,201,234 4,419,523
Total assets 23,616,515,672 18,260,467,754 19,113,511,350
LIABILITIES:
Other liabilities 214,740,249 298,713,441 589,414,537
Sec. lending collateral 1,349,706,322 1,032,139,776 1,400,061,005
Total liabilities 1,564,446,571 1,330,853,217 1,989,475,542
Ending net position
restricted for pensions
$22,052,069,101 $16,929,614,537 $17,124,035,808
3 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
CHANGES IN FIDUCIARY NET POSITION
TRS is funded through a combination of investment earnings, member
contributions, employer contributions, and dedicated state revenue. For
FY2021, the fiduciary net position increased by $5,122,454,564 or 30.3% -
primarily due to exceptional investment performance. Deductions to fiduciary
net position are generally incurred for the purpose for which TRS was created:
namely the payment of benefits to retirees. In FY2021, payments for retirement,
death and survivor benefits increased $88,697,933 or 6.2%. Refunds and
withdrawals decreased by $3,243,890 or -9.2%, as fewer participants withdrew
their contributions. Administrative costs increased by $205,413 or 3.9%.
CONDENSED SCHEDULE OF CHANGES IN FIDUCIARY NET POSITION
JUNE 30
ADDITIONS: 2021 2020 2019
Member contributions $343,474,401 $340,057,646 $325,766,148
Employer contributions 464,336,615 458,306,002 447,039,679
Matching contributions 34,371,572 28,745,259 27,969,601
Dedicated tax revenue 276,918,852 330,620,451 343,701,556
Investment income (net) 5,556,807,673 113,622,021 802,034,690
Sec. lending income (net) 4,590,080 6,612,523 6,282,180
Total additions 6,680,499,193 1,277,963,902 1,952,793,854
DEDUCTIONS:
Benefits payments 1,520,628,861 1,431,930,928 1,414,686,012
Refunds of member
contributions
31,939,815 35,183,705 38,002,018
Administrative Expenses 5,475,953 5,270,540 5,198,970
Total deductions 1,558,044,629 1,472,385,173 1,457,887,000
Net increase (decrease) in net
position
$5,122,454,564 $(194,421,271) $494,906,854
4 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
BENEFITS PAID TO MEMBERS
The Schedule of Benefit Payments below provides information on the total
benefit expenses incurred by the Plan consisting of age and service, dis ability,
and beneficiary death benefits. These totals have risen rapidly from $1.25
billion in FY2016 to $1.52 billion in FY2021. Members qualify for full retirement
benefits at their specified normal retirement age or, for any person who
became a member prior to July 1, 1992, when the sum of the member’s age
and years of credited service equals or exceeds 80 (Rule of 80), and for any
person who became a member on or after June 30, 1992, when the
member’s age and years of credited service equals or exceeds 90 (Rule of
90). Normal retirement age under the Plan is 62 or Rule of 80/90 if the
participant became a member prior to November 1, 2011, or age 65 or Rule of
90 minimum age 60 if the participant became a member on or after
November 1, 2011.
$1,257
$1,312
$1,361
$1,415 $1,432
$1,520
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
2016 2017 2018 2019 2020 2021
(IN MILLIONS)
SCHEDULE OF BENEFIT PAYMENTS
5 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
INVESTMENTS
The Board of Trustees follows the “Prudent Investor”
standard which is considered the highest standard in
making investment decisions for the Plan. The Board
and its advisors invest the Plan’s assets for the sole
interest of our members and their beneficiaries.
Funds are diversified to minimize the risk of large
losses, unless under the circumstances it is clearly
prudent not to do so. For fiscal year 2021, the System
earned a 32.95% rate of return, outperforming the
benchmark return of 31.33%, and ended the year with a total
market value of $21,955,763,042.
Relative to a peer group of U.S. Public Pension Plans with assets over $1 billion, the Fund
placed in the top 3rd percentile, representing a remarkable outperformance versus our
peer funds. Plan returns are primarily determined by how investments are
diversified across asset classes. The Rate of Return table above right reflects
overall net investment returns for the Plan over the past five fiscal years.
48.58%
3.34%
40.41%
1.17%
52.06%
21.36%
44.16%
1.12%
37.74%
7.37%
68.25%
-0.33%-5%
5%
15%
25%
35%
45%
55%
65%
75%
Relative Performance FY2021
Teachers' (Net)Benchmark
RATE OF RETURN
YEAR
ENDING
JUNE 30
RETURN
(NET)
2021 32.95%
2020 0.77%
2019 5.22%
2018 9.69%
2017 14.79%
It is also necessary to
compare TRS returns
with benchmark returns
of various indices.
Returns were positive
across asset classes. The
System’s domestic equity
composite returned 48.58%,
outperforming the bench-
mark due to an over-weight
to small-cap securities. Total
fixed income returned
3.34%, outperforming the
benchmark due to an over-
weight to U.S. investment
grade and high yield credit.
International equities re-
turned 40.41%, out-
performing the benchmark
due to an overweight to
small-cap and emerging
market securities.
6 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
INVESTMENTS, continued…
The alternative asset classes
include real estate, private
equity, and special
opportunities. Private equity
led the alternative asset
classes returning 52.06%,
while real estate and
special opportunities
returned 1.17% and 21.36%
respectively.
Benchmarks for each
asset class are listed in
the chart to the left.
Asset allocation
The chart below
represents TRS’ total
investment portfolio of
$22.05 billion as of June
30, 2021.
Asset Mix
U.S. Equity 46.4%International Equity 17.8%
Fixed Income 20.7%Real Estate 5.7%
Private Equity 7.6%Special Opportunities 1.2%
Cash 0.6%
BENCHMARK
RETURNS (FY2021)
ASSET CLASS RETURN
(NET)
U.S. Equity 48.58%
Russell 3000 44.16%
Fixed Income 3.34%
Bloomberg U.S. Universal 1.12%
International Equity 40.41%
MSCI All Country World ex-U.S. IMI 37.74%
Real Estate 1.17%
NCREFI Property Index 7.37%
Private Equity 52.06%
Russell 2000 + 4% 68.25%
Special Opportunities 21.36
Bloomberg U.S. Aggregate -0.33%
7 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
FUNDING
A pension fund is well funded when it has enough money in reserve to meet
all expected future obligations to participants. It requires revenue sources
sufficient to keep up with future obligations. The funding objective for TRS is
to meet long-term benefit promises through contributions that remain
approximately level as a percent of member payroll. The greater the level of
funding, the larger the ratio of assets accumulated to the actuarial accrued
liability and the greater the level of investment potential.
The advantage of a well-funded plan is that the participants can look at assets
that are committed to the payment of benefits. The actuarial accrued liability
(the amount the System owes) and actuarial value of assets (the amount the
System has) of TRS as of June 30, 2021, amounted to $ 27.033 billion and $19.33
billion, respectively, for an unfunded actuarial accrued liability (UAAL) of $7.703 billion
in FY2021. This is a significant improvement in decreasing the UAAL of $8.64 billion from
FY2020.
FUNDED RATIO
TRS’ funded status was 71.5% as of June 30, 2021, compared to 67.3% on June
30, 2020. The primary cause of the increase was strong investment returns for the
year. The System is expected to eliminate the current UAAL in 17 years.
65.70%
70.40%
72.90%72.40%
67.30%
71.50%
2016 2017 2018 2019 2020 2021
8 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
GASB ACCOUNTING STANDARDS FOR OTHER POSTEMPLOYMENT
BENEFITS (OPEB)
TRS provides a monthly health insurance subsidy to its retirees who keep their
employer-based health insurance in retirement. The amount varies from
$100-$105 based on the credited service years of the retiree and their benefit
amount. It is paid directly to the insurer or the retiree’s former employer.
CONDENSED SCHEDULE
OF OPEB NET POSITION
JUNE 30, 2021
Assets $593,165,453
Liabilities $39,886,737
Net Position for
OPEB
$553,278,716
CONDENSED SCHEDULE
OF CHANGES IN OPEB
NET POSITION
JUNE 30, 2021
Additions $147,879,849
Deductions $35,189,626
Net Increase in
OPEB Net
Position
$112,690,223
TRS must follow accounting standards
established by the Governmental
Accounting Standards Board (GASB). In
FY 2017 TRS implemented a new
accounting standard called GASB 74 that
applies to accounting for “other
postemployment benefits” or OPEB.
GASB 74 requires TRS to treat this
supplemental benefit like a separate
benefit plan for accounting purposes.
The liabilities to TRS from these OPEB
payments must be separately stated,
and an amount of assets must be
identified that are available to pay the
benefits. Below are condensed schedules
of the TRS OPEB “net position” and the
“changes in net position”. As previously
noted, these assets and liabilities are
included in the main schedules for the
total plan. In FY 2018 GASB 75 was also
implemented statewide meaning that
many TRS employers had to reflect
their proportionate share of OPEB
liabilities in their financial statements.
TRS Awarded for Excellence in Financial Reporting
For the 6th consecutive year, TRS has received the GFOA award for Outstanding
Achievement in Popular Annual Financial Reporting for its Popular Annual
Financial Report for fiscal year ending June 30, 2020. This award is a prestigious
national award recognizing conformance with the highest standards of
creativity, presentation, understandability, and reader appeal for governmental
presentation of popular reports. TRS has received this award for each year we
have produced a popular annual financial report.
9 2021 Teachers’ Retirement System of Oklahoma POPULAR ANNUAL FINANCIAL REPORT
ECONOMIC IMPACT
TRS contributes to Oklahoma’s economy through the benefits it pays to its
members, who may then spend that money in the communities in which they
live. TRS paid out approximately $1.3 billion in benefit payments to our 58,810
in-state retirees in FY2021.
Of the $1.3 billion paid, retirees are projected to return 89.2% or $1.16 billion
back into the economy.
County Annual Payment County Annual Payment County Annual Payment County Annual Payment
Oklahoma $248.4M Carter $15.0M Kingfisher $6.1M Major $3.5M
Tulsa $193.1M Stephens $14.9M Woodwar $5.7M Tillman $3.1M
Cleveland $97.6M Mayes $14.8M Johnston $5.6M Dewey $2.9M
Payne $58.6M Custer $14.4M Choctaw $5.4M Alfalfa $2.4M
Canadian $40.5M Kay $13.9M Haskell $5.3M Greer $2.3M
Comanche $38.7M Ottawa $13.2M Woods $5.1M Cotton $2.2M
Muskogee $29.2M Caddo $13.0M Atoka $5.0M Nowata $2.2M
Cherokee $24.3M Mccurtain $12.9M Pawnee $4.9M Coal $2.0M
Rogers $24.2M Washingt $12.7M Murray $4.9M Beaver $2.0M
Pottawato $22.6M Delaware $11.4M Latimer $4.8M Love $2.0M
Pontotoc $20.2M Logan $10.9M Texas $4.8M Jefferson $1.9M
Bryan $20.1M Wagoner $10.7M Washita $4.7M Grant $1.9M
Garfield $19.6M Jackson $10.4M Hughes $4.4M Roger $1.8M
Creek $18.3M Lincoln $10.1M Craig $4.3M Harper $1.8M
Le Flore $17.5M Mcintosh $9.4M Kiowa $4.3M Harmon $1.4M
Grady $16.5M Garvin $9.4M Blaine $4.3M Ellis $1.3M
Mcclain $16.4M Adair $9.1M Pushmata $4.2M Cimarron $.8M
Okmulgee $16.0M Seminole $8.8M Osage $4.2M Total $1,312.9M
Sequoyah $15.2M Beckham $7.6M Okfuskee $4.2M
Pittsburg $15.0M Marshall $6.6M Noble $4.0M