REPORT DIGEST

FINANCIAL AUDIT
For the Year Ended:
June 30, 1998






Release Date:
January 27, 1999

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

• The unfunded liability of the System was $2,277 million at June 30, 1998. The System's funded ratio at that date was 75.6%.

Unfunded Liability at June 30, 1998 Totals $2,277 million

New benefit formula

INTRODUCTION

This digest covers our financial audit of the System for the year ended June 30, 1998. A compliance audit covering the year ending June 30, 1998 is being issued separately.

It should be noted that, pursuant to the Illinois Pension Code, investments of the System are managed by the Illinois State Board of Investment.

UNDERFUNDING OF THE SYSTEM

The actuarial accrued liability was valued at $9,342 million at June 30, 1998. The actuarial value of assets (at market) totaled approximately $7,065 million at June 30, 1998. The difference between the liability and the assets of $2,277 million reflects the unfunded liability of the System at June 30, 1998. The State Employees' Retirement System had a funded ratio of 75.6% at June 30, 1998.

CHANGE IN BENEFIT FORMULA

On July 7, 1997, the Governor signed Public Act 90-0065 which contained numerous provisions affecting the System. The most significant change involves the System's transition from a step rate retirement benefit formula to a flat rate retirement benefit formula covering nearly 60,000 members of the System. The increased retirement benefit formula is applicable to all eligible members with a retirement effective date on and after January 1, 1998.

AUDITORS' OPINION

Our auditors state that the June 30, 1998 financial statements of the System are fairly presented.

_____________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

McGladrey & Pullen, LLP were our special assistant auditors for this audit.