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2015 Popular Annual Financial ReportFor Fiscal Years Ended June 30, 2015 and 2014

2 Fiscal Year 2014-15

Message from the DirectorDear TRSL Members and Benefit Recipients:

I am pleased to present the 2015 Popular Annual Financial Report (PAFR) for the Teachers’ Retirement System of Louisiana (TRSL). This report is an overview of TRSL’s financial position and investment performance for the fiscal year ended June 30, 2015, and represents the combined efforts of TRSL’s staff and its advisors.

This year we chose to showcase Louisiana hometowns in our summary report. Big, small, and in between, these towns hold a special place in the hearts of so many of our members.

This sense of pride in who we are and where we come from is why we asked members to send us photos of their hometown signs. We received many great photos, and they are featured in our report along with a credit to the members who graciously sent them in.

And it shouldn’t go unmentioned that because most members continue to call Louisiana home after retirement, TRSL retirement dollars are critical investments in every local community’s economy, where retirees purchase goods and services, and pay taxes.

Despite the fluctuations within financial markets toward the end of the fiscal year, TRSL still returned a positive 3.1% (gross of fees) on its investments with portfolio assets holding steady at $17.5 billion. Furthermore, the System’s actuarial funded ratio for Fiscal Year 2015 increased to 60.9% from 57.4% in Fiscal Year 2014.

In this year’s legislative session, TRSL monitored 12 pieces of legislation directly impacting the System. Two bills and a House study request gained final passage. With the passage of Act 149, significant changes were again made to the state’s return-to-work law. The new law expands and restructures the definition of “retired teacher,” and requires employers to comply with new certification and notification processes for critical shortage positions. Information about this and other legislation that passed can be found on page 7.

Operationally this year, TRSL staff undertook a number of projects that had a direct beneficial impact upon the System, its members, and employers.

Our legal department took the lead in preparing a review of our governmental plan qualifications by the Internal Revenue Service (IRS). I am pleased to report that we received notification from the IRS

that our defined benefit and defined contribution retirement plans are in compliance with all federal tax laws.

We also created a one-stop employer services department this year, which provides more efficient and coordinated support to our 200-plus reporting employers. Ultimately, we believe this will continue to enhance the retirement process and experience of our members.

Additionally, TRSL acquired a new comercial-grade printer that has given us the capability to handle more of our printing needs in-house rather than outsourcing them, resulting in increased efficiency and tremendous savings.

These are just a few of this year’s accomplishments that stand as a testament to our staff's hard work, dedication, and commitment to excellence in pension administration and service to our members and employers.

The TRSL Board of Trustees and I encourage you to carefully review the information in this summary report. The financial statements in this publication have been prepared in accordance with Generally Accepted Accounting Principles of the United States, and have been audited by an independent certified public accounting firm on behalf of the Louisiana Legislative Auditor’s Office. More detailed information can be found in our 2015 Comprehensive Annual Financial Report (CAFR), which is also available on our website, www.TRSL.org.

Sincerely,

Maureen H. WestgardTRSL Director

For the last 13 years, the Government Finance Officers

Association of the United States and

Canada (GFOA) has recognized TRSL for

preparation of its summary annual

report.

3 Fiscal Year 2014-15

PHOTO BY CHARLOTTE WALL 5th Grade Teacher | Caddo Parish

Financial InformationTRSL earned a 3.1% market rate of return on investments (gross of fees) at the end of Fiscal Year 2015 with $17.9 billion in net assets.

The chart below shows TRSL’s assets and liabilities over the past three years, as well as the net assets held in trust. The second chart illustrates the additions to and deductions from the plan net assets for the past three fiscal years.

Condensed Comparative Statements of Fiduciary Net Position2015 2014 2013

Cash and cash equivalents $ 236,026,000 $ 205,397,273 $ 199,799,910Receivables 1,690,795,593 1,834,434,326 1,434,471,144Investments (fair value) 17,522,558,265 17,512,657,748 15,178,470,861Securities lending collateral 3,435,153,677 2,257,226,730 1,972,976,370Property and equipment, at cost (net) 4,051,370 4,100,275 4,027,869Total assets 22,888,584,905 21,813,816,352 18,789,746,154

Deferred Outflows of Resources - GASB 68 3,580,678Accounts payable and other liabilities 1,558,387,832 1,656,554,164 1,326,532,924Securities lending collateral 3,435,153,677 2,257,226,730 1,972,976,370Total liabilities 4,993,541,509 3,913,780,894 3,299,509,294

Deferred Inflows of Resources - GASB 68 2,244,396Net position restricted for pensions $ 17,896,379,678 $ 17,900,035,458 $ 15,490,236,860

Condensed Comparative Statements of Changes in Fiduciary Net Position2015 2014 2013

AdditionsMember contributions $ 324,920,644 $ 326,007,091 $ 327,767,936Employer contributions 1,217,466,676 1,174,540,866 1,058,995,111Non-Employer contributions 37,425,629 35,927,881 34,425,127LSU Co-Operative Extension 1,851,985 2,028,819 2,059,554Other operating revenues 12,180,753 8,491,868 4,051,269Total net investment income 443,364,220 2,815,090,995 1,750,935,396Total additions 2,037,209,907 4,362,087,520 3,178,234,393

DeductionsBenefits, refunds, and other 2,011,269,710 1,935,192,090 1,859,220,770LSU Co-Operative Extension 1,754,855 1,746,982 1,633,154Administrative expenses 14,259,428 15,026,969 15,750,180Depreciation expense 384,426 322,881 377,150Total deductions 2,027,668,419 1,952,288,922 1,876,981,254

Net increase 9,541,488 2,409,798,598 1,301,253,139Net position restricted for pensions beginning of year 17,900,035,458 15,490,236,860 14,188,983,721Cumulative effect of change in accounting principle1 (13,197,268)Net position after accounting principle beginning balance restatement 17,886,838,190

Net position restricted for pensions end of year $ 17,896,379,678 $ 17,900,035,458 $ 15,490,236,8601Change in Accounting Principle: The System adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, during the fiscal year ending June 30, 2015. The adoption of this statement required the System to record a beginning net pension liability and the effects on net position of the contributions made by the System during the measurement period (fiscal year ending June 30, 2014). As a result, beginning net position decreased by $13,197,268 for the earliest year presented. The change in accounting principle consisted of the System’s proportionate share of the collective net pension liability as of the beginning of the initial period of implementation of $14,538,436 and was offset by deferred outflows of resources for contributions to the pension plan made between the measurement date of the beginning net pension liability and the beginning of the System’s fiscal year of $1,341,168. The System did not restate beginning balances relating to all other deferred inflows of resources or deferred outflows of resources related to pensions as it was not practical to determine these amounts.

4 Fiscal Year 2014-15

Investment InformationTRSL, like any investor, seeks to maximize returns and minimize risk over the long run. To achieve this, the System continuously monitors and adjusts its mix of investment assets, creating an efficient and diversified portfolio.

As a long-term investor, TRSL spreads its investments across a variety of asset classes such as stocks, bonds, real estate, and private equity to better weather the impact of changing market conditions.

Over the past three years, TRSL’s investments sustained annualized returns of 12.1%, which is 1.5% higher than the median return (gross of fees) for public plans with similar risk and assets greater than $1 billion. This three-year performance ranks TRSL in the top 10 percentile among the same group of public plans.

Investments at Fair Value2015 2014 2013

Domestic bonds $ 1,775,656,703 $ 1,770,055,139 $ 1,611,411,082

International bonds 1,489,882,945 1,667,920,752 1,162,848,924

Domestic stocks 5,478,561,612 5,201,856,937 4,322,095,263

International stocks 3,429,594,486 3,688,369,407 3,148,691,961

Short-term investments 990,777,882 871,504,691 1,005,978,360

Alternative investments 4,358,084,637 4,312,950,822 3,927,445,271

Total investments $ 17,522,558,265 $ 17,512,657,748 $ 15,178,470,861

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2015201420132012201120102009200820072006

10-Year Rates of Return (gross of fees)

14.3% 19.7%-4.8% -22.3%

12.6% 26.8% 0.1% 13.9% 19.9% 3.11%

AlternativeInvestments

29%

Total Stock50%

Total FixedIncome

21%

Target Asset Allocations

PHOTO BY ANDREA “BETSY” MIGUEZ Librarian/Assistant Dean of Public Services

University of Louisiana at Lafayette

PHOTO BY KAREN ROBINSON Retired English Teacher West Baton Rouge Parish School Board

5 Fiscal Year 2014-15

0%

20%

40%

60%

80%

100%

2015201420132012201120102009200820072006

Funded Ratio (2006-2015)

60.9%57.4%56.4%55.4%55.1%54.4%

59.1%

70.2%71.3%67.5%

Actuarial InformationFunding retirements is a long-term process that requires projecting how much it will take to pay benefits years into the future. To do this, TRSL’s actuary calculates its long-term liabilities, which takes into account many assumptions of future events, including mortality and disability rates, salary increases, and termination and retirement rates. All of these assumptions are based upon TRSL’s past experience and help project future funding needs.

The actuary also calculates the actuarial value of the System’s assets. Actuarial value and market value are different. Market value is based on what assets could be sold for on a specific date, which can change daily. To meet its long-term funding obligations, the System needs a reliable way to estimate its assets and liabilities that is not tied to day-to-day market fluctuations.

The actuarial value of assets is based on a technique that “smoothes” short-term market gains and losses over a five-year period. While it approximates market value, the actuarial value removes much of the volatility global markets experience by incrementally recognizing market highs and lows over the course of five years. Using the actuarial value, TRSL can better meet long-term funding needs.

As of June 30, 2015, the System’s actuarial value of assets was $17.4 billion, and its actuarial funded ratio was 60.9%, up from FY 2014 when TRSL’s actuarial value of assets was $16.1 billion and its actuarial funded ratio was 57.4%. The actuarial funded ratio of 60.9% means that TRSL has 60.9 cents to cover the present value of every dollar expected to be paid in future retirement benefits.

Summary of Actuarial Valuation2015 2014 2013

Membership censusRetirees 75,259 73,195 71,031 Active 83,602 82,886 82,910DROP 2,283 2,291 2,451Terminated vested 6,606 6,336 5,991

Actuarial investment return 11.3% 13.1% 13.4%Actuarial funded ratio 60.9% 57.4% 56.4%Annual benefits paid $ 1,956,857,437 $ 1,877,113,903 $ 1,800,166,804

PHOTO BY MARY DENMAN Retirement Specialist | Bossier Parish School Board

PHOTO BY MELANIE DEVILLE Administrative Assistant | TRSL

PHOTO BY GERMAINE COMEAUX Retired Gifted Teacher | Iberia Parish

6 Fiscal Year 2014-15

Revenues and Expenses

RevenuesTRSL’s defined benefit plan is funded by investment earnings and contributions from members and employers. TRSL pools and invests these contributions, and retirement benefits are paid from the System’s investment earnings. TRSL provides retirees with a lifetime monthly benefit based on length of service, final average compensation, and a benefit accrual factor.

Some employees in higher education choose to participate in the Optional Retirement Plan (ORP), a defined contribution plan similar to a 401(k) account. These accounts are credited with employee contributions (less a small administrative fee) and employer "normal cost" contributions. The UAL portion of the employer contribution is included in "Employer Revenues" in the table below.

Income from miscellaneous receipts related to operation of the pension plan, such as litigation settlements and processing fees, is listed in the table below as “Other Operating Revenues.”

Refunds/Other2.6%

Benefits96.6%

Administrativeand PensionExpenses

0.8%

FY 2015 Expenses by Type

PHOTO BY LINDA C. WILSON Retired AP English Teacher | Ouachita Parish

ExpensesIn Fiscal Year 2015, TRSL paid out close to $2.0 billion in retirement benefits. These dollars provide a reliable, monthly income to more than 75,000 retirees and beneficiaries, the majority of whom live in Louisiana. Essentially, 96.6 cents of every dollar went toward benefit payments. Retirement system administrative expenses account for less than one penny out of that same dollar. Furthermore, self-generated funds from investment earnings pay for administrative expenses. “Depreciation Expenses,” as shown below, are based on the loss in value of property over time due to wear or age.

Revenues by TypeFiscal Year Member Employer Non-

Employer*Acts of the Legislature

NetInvestment

Income

OtherOperating Revenues

Total

2012-2013 $ 327,767,936 $ 1,058,995,111 $ 36,484,681 $ — $ 1,750,935,396 $ 4,051,269 $ 3,178,234,393

2013-2014 326,007,091 1,174,540,866 37,956,700 5,578,791** 2,815,090,995 2,913,077 4,362,087,520

2014-2015 324,920,644 1,217,466,676 39,277,614 10,384,806*** 443,364,220 1,795,947 2,037,209,907

*Refers to the Sheriff tax collections and LSU Co-Op Extension**Act 55 of 2014***Act 55 of 2014 and Act 56 of 2015

Expenses by TypeFiscal Year Benefits* Pension

Expense Refunds/Other AdministrativeExpenses

DepreciationExpense Total

2012-2013 $ 1,801,140,949* $ — $ 59,712,975 $ 15,750,180 $ 377,150 $1,876,981,254

2013-2014 1,878,161,735* — 58,777,337 15,026,969** 322,881 1,952,288,922

2014-2015 1,958,543,273* 2,078,530 52,402,762 14,259,428** 384,426 2,027,668,419

*Includes Other Post-Employment Benefits (OPEB) expense and LSU Co-Op Extension.**Investment administrative expenses are excluded from this total in accordance with GASB 67.

7 Fiscal Year 2014-15

Summary of 2014-2015 LegislationReturn-to-work provisions

Act 149 (Sen. Gerald Long) expands the definition of “retired teacher” to include a member who retired on or before June 30, 2010, regardless of whether the member returned to work by that date; adds school counselors, school social workers, and educational diagnosticians to the list of critical shortage positions; restructures how “retired teacher” definitions are organized in law; and requires certain certifications and notifications from employers related to critical shortage positions existing within their school districts on an annual basis.

Supplemental appropriations

Act 56 (Rep. James R. Fannin) appropriates approximately $6.2 million to TRSL from FY 2013-14 surplus (nonrecurring) state funds to be applied to the balance of the initial unfunded accrued liability.

Study request

House Study Request 1 (Rep. Joe Harrison) requests the House retirement committee meet and study the process of funding retirement benefits for K–12 employees, and to investigate potential improvements. Findings to be reported to the House of Representatives prior to the 2016 Regular Legislative Session.

Summary of TRSL Plan ProvisionsREGULAR PLAN: Those employed in any of the classifications defined by law as “teacher.” Regular Plan members contribute 8.0% of salaryMembership before 07/01/1999:• With 2.0% benefit factor: Age 60 with 5 years of service credit1; or any age with 20 years of service credit1

• With 2.5% benefit factor: Age 65 with 20 years of service credit2; age 55 with 25 years of service credit; or any age with 30 years of service credit

Membership between 07/01/1999 and 12/31/2010:• With 2.5% benefit factor: Age 60 with 5 years of service credit 1; age 55 with 25 years of service credit;

any age with 30 years of service credit; or any age with 20 years of service credit (actuarially reduced)1

Membership on or after 01/01/2011:• With 2.5% benefit factor: Age 60 with 5 years of service credit1; or any age with 20 years of service credit

(actuarially reduced)1

PLAN A: Includes school food service workers who were active members of the School Lunch Employees’ Retirement System on July 1, 1983, when it merged with TRSL, and who work in one of the 46 parishes that contribute to Plan A. Plan A members contribute 9.1% of salary.For all Plan A members:• With 3.0% benefit factor: Age 60 with at least 5 years of service credit1; age 55 with 25 years of service credit;

or any age with 30 years of service creditPLAN B: Includes school food service workers who work in the 20 parishes that have not withdrawn Social Security coverage. Plan B members contribute 5.0% of salary and the old-age portion of Social Security.For all Plan B members:• With 2.0% benefit factor: Age 60 with at least 5 years of service credit1; or age 55 with 30 years of service creditBenefit calculation formula: Years of service × final average compensation (FAC)* × benefit factor*Final average compensation (FAC) is the average of your highest years (three or five, depending on your membership date) of salary consecutively earned.1Excludes military service purchased after September 10, 19822Excludes all military service

This is an electronic document. The Teachers’ Retirement System of Louisiana (TRSL) did not incur any printing costs.

Physical address (use for certified mail): 8401 United Plaza Boulevard, Suite 300

Baton Rouge, LA 70809-7017

Mailing address: PO Box 94123

Baton Rouge, LA 70804-9123

Telephone: (225) 925-6446 Toll free (outside Baton Rouge area):

1-877-ASK-TRSL (1-877-275-8775) Fax: (225) 925-4779

Email: web.master@trsl.org Website: www.TRSL.org

Business hours: 8 a.m. - 4:30 p.m. (Monday-Friday, excluding holidays)

No appointment required

Facebook: www.facebook.com/TRSLonline Twitter: @TRSLonline

TRSL is an equal opportunity employer and complies with the Americans with Disabilities Act.

PHOTO BY JACKIE SHARP Retired Assistant Superintendent Webster Parish School Board

PHOTO BY BUCK ABBEY Professor at Louisiana State University Robert Reich School of Landscape Architecture

PHOTO BY ELIZABETH PLAISANCE Social Studies Teacher | Lafourche Parish