Review of the Reasonableness of the Tennessee Consolidated Retirement System Fund Balance as of June 30, 1997

EXECUTIVE SUMMARY:

The objective of our review was to determine the reasonableness of the Tennessee Consolidated Retirement System (TCRS) fund balance as of June 30, 1997.

Our review disclosed the TCRS contained assets of over $538 million ($49 million Federal share) in excess of actuarially determined liabilities as of June 30, 1997.

Pension fund assets exceeded actuarially determined liabilities because actual results from TCRS operations significantly deviated from actuarial estimates. Specifically, returns on investments have exceeded expectations, and salary increases for participants have been less than expected.

We are recommending the TCRS consider reducing future pension contribution rates charged to Federal programs. Such a reduction would recognize that assets exceeded actuarially determined liabilities at June 30, 1997. The estimated Federal share of assets in excess of actuarially determined liabilities was $49 million.

In written comments to the draft report, TCRS officials agreed with our findings and recommendation.