RISING TO THE CHALLENGE

2020

RISING TO THECHALLENGE

The Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2020 A COMPONENT UNIT OF THE STATE OF ILLINOIS

INTRODUCTION

1 A Message from Our Executive Director 5 Letter of Transmittal 9 Board of Trustees 10 Organizational Chart 10 Executive Team 11 Consulting and Professional Services

FINANCIAL SECTION

14 Independent Auditor’s Report 16 Management’s Discussion and Analysis

FINANCIAL SECTION

20 Statement of Plan Net Position 21 Statement of Changes in Plan Net Position 22 Notes to the Financial Statements (An Integral Part of the Financial Statements)

REQUIRED SUPPLEMENTARY INFORMATION

47 Schedule of Changes in Employer Net Pension Liability and Related Ratios 47 Schedule of Net Pension Liability 48 Schedule of Investment Returns 48 Schedule of Contributions from Employers and Other Contributing Entities

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION

(An Integral Part of the Required Supplemental Information) 49 Schedule of Changes in Net Pension Liability 49 Actuarial Assumptions and Methods

OTHER SUPPLEMENTARY INFORMATION

50 Summary Schedule of Administrative Expenses 51 Summary Schedule of Consultant Payments 52 Summary Schedule of Investment Fees and Administrative Expenses – Defined Benefit Plan

INVESTMENT SECTION

56 Letter of Certification

57 Report of Investment Activity

INVESTMENT SUMMARY

59 Investment Policy

59 Investment Objectives

59 Investment Strategies

61 Investment Results

INVESTMENT ALLOCATION

64 Self-Managed Plan

65 Defined Benefit Plan

SUPPORTING SCHEDULES

67 Largest Holdings 68 Summary Schedule of Domestic Equity Investment Commissions 69 Summary Schedule of International Equity Investment Commissions 70 Summary Schedule of Global Equity Investment Commissions 71 Summary Schedule of Fixed Income Investment Brokerage

ACTUARIAL SECTION

74 Letter of Certification

ACTUARIAL REPORT

77 Pension Financing 77 Actuarial Asset Valuation 77 Actuarial Cost Method 77 Employee Data 78 Valuation Results 78 Analysis of Financial Experience 78 Change in the Unfunded Actuarial Accrued Liability 79 Summary of Major Actuarial Assumptions

ANALYSIS OF FUNDING

81 Funding Objective 82 Schedule of Employer Contributions 82 Schedule of Funding Progress 83 Schedule of Increases and Decreases of Benefit Recipients 83 Active Participant Statistics 84 Analysis of Change in Membership 84 Schedule of Retirees and Beneficiaries Added to and Removed from Rolls

TESTS OF FINANCIAL SOUNDNESS

85 Schedule of Contributions from Employers and Non-Employer Contributing Entity 85 Funding Ratios 86 Percentage of Benefits Covered by Net Position 87 Payroll Percentages 87 Changes in Plan Provisions

STATISTICAL SECTION

FINANCIAL SCHEDULES

90 Changes in Plan Net Position – Defined Benefit Plan 91 Schedule of Benefit and Refund Deductions – Defined Benefit Plan 92 Changes in Plan Net Position – Defined Contribution Plan

STATISTICAL ANALYSIS

93 Schedule of Benefit Recipients – Defined Benefit Plan 93 Number of SURS Employees

BENEFIT SUMMARY

94 Schedule of New Benefit Payments – Defined Benefit Plan 95 Schedule of Average Benefit Payments – Defined Benefit Plan 96 Number of Covered Employees by Employer – Defined Benefit Plan 96 Number of Covered Employees by Employer – Defined Contribution Plan 97 Schedule of Benefit Recipients by Type of Benefit – Defined Benefit Plan 98 Participating Employers

TABLE OF CONTENTS

A COMPONENT UNIT OF THE STATE OF ILLINOIS 1

RISING TO THE CHALLENGE | SURS 20

A MESSAGE FROM THE EXECUTIVE DIRECTOR This has been a challenging year, but SURS staff did an outstanding job adapting by quickly adopting new work parameters. In March when we were faced with the pandemic and the need to pivot the entire staff to working remotely, our IT team made the transition as quick, smooth and painless as possible. Our staff developed and orchestrated SURS “Work from Home” plan that provided more than 140 staff

the ability to work from home all within a time frame of two to three days. The transition required the procurement and coordination of hundreds of pieces of equipment needed for off-site work, technical support and online training. This was all done without any interruption to member services.

In the middle of the COVID-19 work transition, staff successfully redesigned SURS Self-Managed Plan - renamed the SURS Retirement Savings Plan (RSP), created a new Plan Choice microsite and began work on the new SURS Deferred Compensation Plan (DCP).

Working with Voya, Alliance Bernstein and Cammack, staff members from the SMP team, Investments, Member Services, IT, Applications Development, Communications, Legal and Finance helped create and implement the new RSP. The redesigned plan is managed by a single recordkeeper and offers defined contribution members a custom investment solution along with traditional member-directed funds.

The new Plan Choice microsite provides new web experiences for our members to choose their retirement plan, select beneficiaries, and make enhanced and informed income investment decisions.

We are excited to offer a new voluntary 457(b) supplemental savings plan, called the SURS Deferred Compensation Plan, beginning in 2021. The plan will provide members an avenue to save more and generate additional income in retirement. Most active SURS members employed by a state university, community college or other government entity will be able to participate. Participation will be voluntary, but encouraged.

To increase our efficiency, SURS began to replace outdated technology systems and add new programs. Our 25-year-old pension administration system (PAS) is obsolete and difficult to support. We worked with Linea Solutions to assess our needs and develop a long-term PAS replacement strategy. We also modernized our finance, human resources (HR), compliance tracking and contract management systems.

SURS continued our commitment to diversity this year with a search for our first chief diversity officer. The addition of a chief diversity officer will advance our efforts to create awareness and belonging amongst staff; develop important relationships with key leaders, communities and organizations; and build upon our existing money manager diversity program.

For the eighth consecutive year, SURS received its full annual certified state contribution. The fiscal year 2020 payment was $1,854,692,000 with the final payment being received in early July. However, the defined benefit plan continues to be severely underfunded due to shortfalls in prior year contributions from the state. Our staff has and will continue to work with legislators and the governor’s office to help ensure future funding.

I want to thank our incredible staff and board of trustees for their hard work and commitment to providing excellent service to all members during this difficult year. We are committed to securing and delivering the retirement benefits promised to our members.

Martin NovenExecutive Director

Teamwork, proactive steps and new work environments help SURS succeed during pandemic.

5 Letter of Transmittal9 Board of Trustees

10 Organizational Chart and Executive Team11 Consulting and Professional Services

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The Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2020

AWARDS

SURS ANNUAL REPORT 20204

LETTER OF TRANSMITTAL

December 11, 2020

Board of Trustees and Executive Director State Universities Retirement System 1901 Fox DriveChampaign, IL 61820

I am pleased to present the 79th Comprehensive Annual Financial Report for the State Universities Retirement System of Illinois (SURS or the System, a component unit of the State of Illinois) for the fiscal year ended June 30, 2020.

The System was established in 1941 for the benefit of the employees of the state universities, community colleges, and certain other state educational and scientific agencies, and the survivors, dependents, and other beneficiaries of those employees. Our vision is to continue to be a respected leader among public pension funds. The SURS staff works hard to perform at the highest customer service level for our members who dedicate their careers to education.

The management of SURS is responsible for the compilation and accuracy of the financial, investment, actuarial, and statistical information contained in this report. To the best of our knowledge and belief, the enclosed information is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of SURS.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. SURS’ internal controls over financial reporting are designed to provide reasonable assurance regarding safekeeping of assets and reliability of financial records in accordance with generally accepted accounting principles. These controls include appropriate segregation of duties and responsibilities, and sound practices in the performance of those duties. The cost of a control should not exceed the benefits likely to be derived. The valuation of costs and benefits requires estimates and judgments by management. The objective of internal controls is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

SURS maintains an internal audit program that employs the services of three internal auditors to determine that all controls implemented are as designed. The internal audit personnel use a detailed internal audit program to provide a continuing review of the SURS internal controls and to report audit findings and recommendations for improvements to the SURS Board of Trustees. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and the circumvention or overriding of controls.

The Illinois Pension Code requires an annual audit of the financial statements of the System by independent accountants selected by the State Auditor General. This requirement has been complied with, and the independent auditor's unmodified report on the System's 2020 financial statements has been included in this report.

Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The System’s MD&A can be found starting on page 16 of the report.

ProfileSURS is the administrator of a cost-sharing, multiple-employer public employee retirement system established July 21, 1941, to provide retirement annuities and other benefits for employees, survivors and other beneficiaries of those employees of the state universities, community colleges, and certain other state educational and scientific agencies. SURS services 61 employers and approximately 241,000 members and annuitants. The plans administered by SURS include a defined benefit plan established in 1941 and a defined contribution plan established in 1998. SURS is governed by an 11-member board of trustees that includes four members elected, two annuitants elected, and five members appointed by the Governor, of which one is the appointed chair of the Illinois Board of Higher Education.



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FundingSURS is funded through contributions from non-employer, employer and employee contributions as well as investment earnings. The State of Illinois, a non-employer contributing entity, provides funding from two sources: the General Revenue Fund and the State Pensions Fund, which is funded with proceeds from unclaimed property. Annually, the SURS actuary determines the annual "statutory contribution" needed to meet current and future benefit obligations in accordance with the Illinois Pension Code, which sets forth the manner of calculating the statutory contribution under the Statutory Funding Plan. The Statutory Funding Plan requires the state to contribute annually an amount equal to a constant percent of pensionable (capped) payroll necessary to allow the System to achieve a 90% funded ratio by fiscal year 2045, subject to any revisions necessitated by actuarial gains or losses, or actuarial assumptions. All of the $1.85 billion statutory contribution for fiscal year 2020 was received by July 8, 2020. As of June 30, 2020, the plan net position as a percentage of the total pension liability was 39.05%. The funding issue confronting SURS continues to represent a challenge to the System. Although the statutory contribution requirement was met in fiscal year 2020, the Statutory Funding Policy creates a perpetual contribution variance of underfunding the System in earlier years. In later years, the statutory contribution would exceed a contribution equal to normal cost plus a 30-year closed period level percent of pay amortization of the unfunded liability. Further information is presented in the Required Supplementary Information related to employer contributions and the funding of the plan.

InvestmentsInvestments are made under the authority of the prudent expert rule, which states that fiduciaries must discharge their duties with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under conditions prevailing at the time. This standard has enabled the System to invest in different types of asset classes seeking to increase return while lowering risk through diversification.

The System retains professional investment firms who serve as fiduciaries and are afforded full discretion to manage the assets entrusted to them in accordance with written policies and guidelines established by the SURS Board of Trustees. The goal is to optimize the long-term return of the System's investments.

Since the coronavirus outbreak, markets have been experiencing a period of heightened uncertainty. It is important to understand that pensions are long-term investments. SURS has a diverse investment portfolio designed to protect against market risk and produce steady returns over a long-term period.

The SURS defined benefit assets held in trust decreased slightly to $19.6 billion. The SURS defined contribution (Self-Managed Plan) assets increased from $2.7 billion to $3.0 billion. Taken as a whole, the SURS portfolio of investments produced a return of 2.64%, net of fees, for the year ended June 30, 2020.

The “Investment” section of this report contains yield information, a summary of SURS’ investment portfolio, and a summary of the investment objectives and policies.

LegislationDue to the public health emergency caused by the coronavirus, the General Assembly held a condensed, special legislative session from May 20 through May 24 in Springfield. Among other items, the General Assembly approved an operating budget for fiscal year 2021, the Governmental Emergency Administration Act, and information about the proposed graduated income tax constitutional amendment.

Three bills comprised the operating budget for fiscal year 2021: Public Act 101-630, which provides revenues; Public Act 101-637, which makes appropriations; and Public Act 101-636, which makes changes in the law necessary to implement the appropriations. Revenues for the budget are provided by borrowing up to $5 billion from the federal government to be repaid within a 10-year period.

Public Act 101-640, The Governmental Emergency Administration Act makes changes necessary to facilitate governmental operations during the public health emergency caused by the coronavirus. Specifically, it allows meetings under the Open Meetings Act to be conducted remotely via audio or videoconference, without a physical quorum of the members of the public body present, if certain requirements are met to provide transparent meeting access to the public.

Public Act 101-610 Suburban and Downstate Police/Fire Investment Consolidation allows Tier II police officers and firefighters to retire at age 60 (instead of age 67) without a reduced retirement annuity under the special formula for police officers and firefighters. It also requires the Governor to designate the chairperson of the SURS Board of Trustees (instead of the chairperson of the Illinois Board of Higher Education automatically serving as the chairperson of the SURS Board of Trustees) and makes a technical change related to the accelerated pension benefit payment option for Tier I and Tier II vested, inactive members.



Major Initiatives and ChangesIn March of 2020, SURS closed to the public and most of the staff began working from home to protect their health. Our staff has risen to the work challenges caused by the coronavirus outbreak and will continue to change and adapt when necessary. As we have adopted new working conditions, our members have seen the same excellent service, delivery of benefits and fiduciary responsibility they have come to expect. Benefit checks are going out on time, our call center is fully operational and retirement counselors are conducting appointments remotely.

Although we are coping with the COVID-19 pandemic, we continue to move forward with major initiatives and changes at SURS.

● The following changes occurred to SURS Board of Trustees in fiscal year 2020

● In August 2019, Mitchell Vogel, SURS annuitant and former board member, was selected to fill a vacancy on the SURS Board of Trustees by the elected SURS trustees. The vacancy was created when elected annuitant board member John Engstrom resigned after the June 2019 board meeting.

● In March 2020, Gov. Pritzker appointed Scott Hendrie to the board. Trustee Hendrie’s term will expire in June 2021.

● SURS staff worked diligently to complete IT, administration and member service projects.

● Several new software packages were implemented to assist the administrative support teams.

○ Sage Intacct – a cloud-based financial management and services software

○ ADP – cloud-based human capital management solution

○ Agiloft - software for contract lifecyle management that will be used for legal and compliance

● A pension administration system assessment was done by the consulting firm Linea. This was the first step of many as SURS moves forward with the replacement of the pension administration system.

● Renovations to the Champaign headquarters began. The call center and the counselor offices are being restructured to make more room for the growing staff. Just under 6,000 sq. ft. are being renovated.

● New security and life safety tool updates, such as perimeter and interior monitoring of the main office, were completed.

● Work continued on the redesign of the Self-Managed Plan (SMP) and implementation of a new supplemental plan. On Sept. 1, 2020, we launched the redesigned SMP, renamed the SURS Retirement Savings Plan (RSP). The new SURS Deferred Compensation Plan (DCP) will be rolled out in 2021.

Awards and Recognition The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to SURS for its component unit financial report for the fiscal year ended June 30, 2019. This is the thirty-sixth consecutive year the System has earned this award.

To be awarded the Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report whose contents conform to program standards. The report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only.

We believe our current report continues to conform to the Certificate of Achievement Program requirements, and we are submitting it to GFOA to determine its eligibility for another certificate.

The Public Pension Coordinating Council (PPCC), a coalition of three national associations that represents more than 500 of the largest pension plans in the U.S., awarded SURS the Public Pension Standards Award for Funding and Administration. Public Pension Standards are a benchmark to measure public defined benefit plans in the areas of retirement system management, administration and funding.




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AcknowledgementsThis report was prepared through the combined effort of the SURS staff under the leadership of the SURS Board of Trustees. It is intended to provide reliable information to its users for making decisions and for determining responsible stewardship for the assets contributed by the members and the State of Illinois.

The report is made available to the Governor, the State Auditor General, the members of the General Assembly, participating employers and to other interested persons by request. We thank all those whose impact on Illinois’ universities and community colleges guide the future. We hope they will find this report informative. A copy of this report and our Annual Report Summary will be available on our website, www.surs.org.

Respectfully submitted,

Tara R. MyersChief Financial Officer



Mitchell VogelElected

Jamie-Clare FlahertyAppointed

Scott HendrieAppointed

John AtkinsonChairpersonAppointed

Steven RockElected

Antonio VasquezElected

Collin Van Meter Vice ChairpersonElected

John LyonsTreasurerAppointed

Aaron AmmonsElected

Richard FigueroaAppointed

J. Fred GiertzElected

BOARD OF TRUSTEES



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Executive Director ............................................................................................................Martin Noven

Chief Investment Officer ...............................................................................................Doug Wesley

General Counsel ...............................................................................................................Bianca Green

Chief Technology Officer ...............................................................................................Jefferey Saiger

Chief Financial Officer ....................................................................................................Tara Myers

Chief Benefits Officer .....................................................................................................Suzanne Mayer

Chief Human Resources Officer ..................................................................................Brenda Dunn

Chief Internal Auditor .....................................................................................................Jacqueline Hohn

SURS Board of Trustees

Outside Legal Counsel

Executive Director

Actuarial Consultant

External Auditors

General Counsel

Chief Technology Officer

Chief Financial Officer

Chief Benefits Officer

Chief Human Resources Officer

Chief Investment Officer

Chief Internal Auditor

Investment Consultant

ORGANIZATIONAL CHART

EXECUTIVE TEAM


ActuaryGabriel, Roeder, Smith & Co.

AuditorBKD, LLP (Acting as Special Assistant Auditor for the Illinois Office of Auditor General)

Legal CounselFoley & Lardner LLPIce Miller LLPMayer Brown LLPReinhart Boemer Van Deuren

Consultants and Other VendorsA&R Mechanical Contractors Inc.Advanced Audio and LightingBarber & Deatley, Inc.enChoice, Inc.Ernst & Young Global LimitedGlass, Lewis & Co., LLCHuber & Associates, Inc.Levy, Ray & Shoup, Inc.Linea Solutuions, Inc.Mesirow Insurance ServicesMRC Information Technology, Inc.Seico, IncStocks Office FurnitureZones, LLC

Master Trustee and Custodian The Northern Trust Company

Investment Consultants, Measurement and CounselCallanMeketa Investment Group

Manager Diversity Program Investment AdvisorsARP InvestmentsAtivo Capital ManagementBasis Investment GroupChanning Capital ManagementEARNEST PartnersFairview Capital PartnersFranklin Templeton Real Estate AdvisorsGarcia Hamilton & AssociatesGladius Capital ManagementGlobeFlex CapitalLM Capital GroupLombard Odier Asset ManagementLong Wharf CapitalLongTail AlphaMatarin Capital ManagementMuller and Monroe Asset ManagementPugh Capital ManagementRamirez Asset ManagementStrategic Global AdvisorsXponance

Investment AdvisorsAdams Street PartnersAksia TorreyCove PartnersAlinda Capital PartnersAQR Capital ManagementAspect CapitalBivium Capital PartnersBlackRock Institutional Trust CompanyBlackstone GroupBlue Vista Capital ManagementBrookfield Asset ManagementCabot PropertiesCampbell & CompanyCarlyle Property PartnersColchester Global InvestorsCredit Suisse Asset ManagementCrow HoldingsDeutsche BankDune Capital ManagementFranklin Templeton Real Estate AdvisorsHeitman Capital ManagementJ.P. Morgan Asset ManagementKKR PrismaMacquarie CapitalMesirow Financial Investment ManagementMondrian Investment PartnersNeuberger BermanNorthern Trust Asset ManagementOaktree Capital ManagementPacific Alternative Asset Management CompanyPacific Investment Management CompanyPantheon VenturesParametric CliftonPrudential Fixed IncomeRhumbLine AdvisersStepStone Real Estate GroupT. Rowe PriceUBS Realty InvestorsWellington Management CompanyWestbrook PartnersXponance

Bivium Manager Investment AdvisorsGIA PartnersIntegrity Fixed Income ManagementLM Capital GroupNew Century AdvisorsRVX Asset Management

Xponance Manager Investment AdvisorsARGA Investment ManagementBrown Capital ManagementDenali AdvisorsForsight GlobalMartin InvestmentsRondure GlobalSolstein CapitalStrategic Global Advisors

Self-Managed Plan Service ProvidersFidelity InvestmentsTeachers Insurance Annuity Association

CONSULTING AND PROFESSIONAL SERVICES

Schedule of Fees and Commissions can be found in the Investment Section Supporting Schedules, pages 68-70.



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14 Independent Auditor's Report16 Management's Discussion and Analysis20 Financial Statements22 Notes to the Financial Statements47 Required Supplementary Information49 Notes to Required Supplementary Information50 Other Supplementary Information

FINANCIAL

13




Independent Auditor’s Report

Honorable Frank J. Mautino Auditor General State of Illinois and The Board of Trustees State Universities Retirement System of Illinois

Report on the Financial Statements

As Special Assistant Auditors for the Auditor General, we have audited the accompanying Statement of Plan Net Position of the State Universities Retirement System of the State of Illinois (System), a component unit of the State of Illinois, as of June 30, 2020, and the related Statement of Changes in Plan Net Position for the year then ended, and the related notes to the financial statements, which collectively comprise the System’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accountingprinciples generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the System’s preparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the System’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net position of the System as of June 30, 2020, and the respective changes in plan net position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Summarized Comparative Information

We have previously audited the System’s 2019 financial statements, and we expressed an unmodified audit opinion in our report dated December 11, 2019. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2019, is consistent, in all material respects, with the audited financial statements from which it has beenderived.











Opinion














Opinion




AUDITOR'S REPORT



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Emphasis of Matter

The actuarially determined pension liability, calculated as required by GASB Statement No. 67, is dependent on several assumptions including the assumption that future required contributions from all sources are made based on statutory requirements in existence as of the date of this report. These assumptions are discussed in Note V of the financial statements. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the schedule of changes in the employer net pension liability and related ratios, the schedule of net pension liability,the schedule of investment returns, the schedule of contributions from employers and other contributing entities, and notes to the required supplementary information as listed in the table of contents be presented to supplement the financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriateoperational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit for the year ended June 30, 2020 was conducted for the purpose of forming an opinion on the System’s basic financial statements.

The other supplementary financial information in the financial section and the accompanying introductory, investment, actuarial, and statistical sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The other supplementary financial information in the financial section, as listed in the table of contents, has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, the other supplementary financial information in the financial section, as listed in the table of contents, is fairly stated, in all materialrespects, in relation to the basic financial statements as a whole.

We have also previously audited, in accordance with auditing standards generally accepted in the United States of America, the System’s financial statements as of and for the year ended June 30, 2019 (not presented herein), and have issued our reportthereon dated December 11, 2019 which contained an unmodified opinion on those financial statements.

In addition, the introductory, investment, actuarial, statistical and plan summary and legislative sections, as listed in the tableof contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements.Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Decatur, Illinois December 11, 2020

AUDITOR'S REPORT


This section presents management’s discussion and analysis of the State Universities Retirement System’s (SURS or the System) financial statements and the major factors affecting the operations and investment performance of the System during the year ended June 30, 2020, with comparative reporting entity totals for the year ended June 30, 2019. Please read this section in conjunction with the Letter of Transmittal included in the Introductory Section, the financial statements, and other information that is presented in the Financial Section of the Comprehensive Annual Financial Report.

Financial Highlights ● Contributions from the State and employers were $1,917.0 million, an increase of $203.8 million, or 11.9% from fiscal year 2019.

● The System’s benefit payments were $2,744.1 million, an increase of $126.9 million or 4.8% for fiscal year 2020.

● The System’s return on investment, net of investment management fees, was 2.6% for fiscal year 2020.

● The System’s net position at the end of fiscal year 2020 was $22.6 billion, an increase of $193.2 million or 0.9%.

Overview of Financial Statements and Accompanying InformationThe Financial Section comprises of four components: (1) Financial Statements, (2) Notes to the Financial Statements, (3) Required Supplementary Information, and (4) Other Supplementary Information.

● The financial statements presented in this report are the Statement of Plan Net Position as of June 30, 2020 and the Statement of Changes in Plan Net Position for the year ended June 30, 2020. The difference between the System’s assets and liabilities is defined as Plan Net Position. These statements present separate totals for the defined benefit plan and the Self-Managed Plan.

● The Statement of Plan Net Position details the net position (assets less liabilities equals net position). The Statement of Plan Net Position reports the funds available to pay benefits.

● The Statement of Changes in Plan Net Position presents the additions and deductions from the plan net position. Over time the increase or decrease in net position is a useful indicator of the health of SURS financial position.

● The Notes to the Financial Statements are an integral part of the financial statements and provide facts and detailed information to assist the reader in understanding the statements. Disclosures include the description of the plan, summary of significant accounting policies, and detailed presentations of major assets and liabilities.

● Required Supplementary Information presents schedules related to employer net pension liability, employer contributions, and investment returns.

● Other Supplementary Schedules consist of detailed information supporting administrative and investment expenses and fees paid to consultants.

General Market RiskSURS is exposed to general market risk. This general market risk is reflected in asset valuations fluctuating with market volatility. Any impact from market volatility on SURS investment portfolios depends in large measure on how deep the market downturn is, how long it lasts, and how it fits within fiscal year reporting periods. The resulting market risk and associated realized and unrealized gains and losses could significantly impact SURS financial condition.

Financial Analysis of the SystemThe State Universities Retirement System serves 216,122 members in its defined benefit plan and 24,416 members in its Self-Managed Plan. The funds needed to finance the benefits provided by SURS are accumulated through the collection of member and employer contributions and through income on investments. The total net position of the System increased from $22.4 billion as of June 30, 2019 to $22.6 billion as of June 30, 2020. This $0.2 billion change was due to the following: an increase in cash and short-term investments, an increase in pending investment sales, an increase in payables to brokers-unsettled trades, and an increase to securities lending collateral.

MANAGEMENT'S DISCUSSION AND ANALYSIS

DEFINED BENEFIT PLAN 2020 2019

Traditional Growth

Global Equity 44.0% 52.0%

Stabilized Growth

Credit Fixed Income 14.0 16.2

Core Real Assets 5.0 4.4

Options Strategies 6.0 4.0

Non-Traditional Growth

Private Equity 8.0 7.1

Non-Core Real Assets 3.0 2.6

Inflation Sensitive

U.S. TIPS 6.0 3.7

Commodities - 1.9

Principal Protection

Core Fixed Income 8.0 8.1

Crisis Risk Offset

Systematic Trend Following 2.1 -

Alternative Risk Premia 1.8 -

Long Duration 2.1 -

TOTAL 100.0% 100.0%

SELF-MANAGED PLAN

Equity 71.0% 73.7%

Fixed Income 27.2 24.5

Real Estate 1.8 1.8

TOTAL 100.0% 100.0%



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Plan Net PositionThe summary of plan net position for the System is presented below:

The investment allocation strategy for the plans making up the reporting entity as of June 30, 2020 and 2019 is as follows:

Condensed Statement of Plan Net Position

REPORTING ENTITY ($ IN MILLIONS) 2020 2019 Change

Amount %

Cash and short-term investments $ 1,266.8 $ 819.4 $ 447.4 54.6

Receivables and prepaid expenses 188.9 224.4 (35.5) (15.8)

Pending investment sales 1,952.1 360.5 1,591.6 441.5

Investments and securities lending collateral 22,651.6 22,510.7 140.9 0.6

Capital assets, net 10.4 9.8 0.6 6.1

Total assets 26,069.8 23,924.8 2,145.0 9.0

Payable to brokers-unsettled trades 2,013.9 483.3 1,530.6 316.7

Securities lending collateral 1,381.5 876.6 504.9 57.6

Other liabilities 34.3 118.0 (83.7) (71.0)

Total liabilities 3,429.7 1,477.9 1,951.8 132.0

TOTAL PLAN NET POSITION $ 22,640.1 $ 22,446.9 $ 193.2 1.0

Investment Allocation Strategy



Changes in Plan Net PositionThe summary of changes in plan net position for the System is presented below:

Condensed Statement of Changes in Plan Net Position

REPORTING ENTITY ($ IN MILLIONS) 2020 2019 Change

Amount %

Employer contributions $ 62.3 $ 58.1 $ 4.2 7.2

Non-employer contributing entity contributions 1,854.7 1,655.2 199.5 12.1

Member contributions 378.1 368.6 9.5 2.6

Net investment income 765.8 1,292.4 (526.6) (40.7)

Total additions 3,060.9 3,374.3 (313.4) (9.3)

Benefits 2,744.1 2,617.2 126.9 4.8

Refunds 104.4 115.0 (10.6) (9.2)

Administrative expense 19.2 16.7 2.5 15.0

Total deductions 2,867.7 2,748.9 118.8 4.3

NET INCREASE (DECREASE) IN PLAN NET POSITION $ 193.2 $ 625.4 $ (432.2) (69.1)

AdditionsAdditions to plan net position are in the form of employer and member contributions and returns on investment funds. For fiscal year 2020, non-employer contributing entity contributions increased by $199.5 million due to higher contributions from the State of Illinois. Employer contributions increased by $4.2 million or 7.2%. Member contributions increased by $9.5 million or 2.6%. Net investment income for fiscal year 2020 was $765.8 million for the System, representing a $526.6 million decrease from the prior year. For the defined benefit plan, the overall rate of return was 2.6% (net of all investment management fees).

Given the long-term orientation of the SURS defined benefit investment program, it is important to track investment returns over several time periods to correctly assess performance, especially given recent market volatility. The defined benefit plan returns are as follows:

TIME PERIOD 1-YEAR 3-YEAR 5-YEAR 10-YEAR 20-YEAR 30-YEAR

Annualized Return 2.6% 5.6% 5.8% 8.5% 5.6% 7.9%

The total rate of return over a 30-year period of 7.9% was higher compared with the actuarial rate of return assumption of 6.75% in effect for fiscal year 2020. Under the direction of the Illinois Auditor General, the State Actuary recommends that the Board annually review the interest rates, payroll growth, and inflation assumption should changes in market conditions or plan demographics call for such an adjustment. Public Act 99-0232 signed August 2015 requires SURS to have an experience study performed by the System actuaries every three years.


Proper implementation of the investment policy requires that a periodic adjustment, or rebalancing of assets, be made to ensure conformance with policy target levels. Such rebalancing is necessary to reflect sizable cash flows and performance imbalances among investment managers who are hired to manage assets with a specified strategy. SURS rebalancing policy calls for rebalancing, as soon as practical, if a strategy exceeds or falls below its target allocation by three percentage points. Ongoing rebalancing of the investment portfolio occurred as needed during the year with the assistance of the System's cash flows. The allocation of assets within the Self-Managed Plan is totally determined by the individual members and also reflects gains or losses over the past year.



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DeductionsThe expenses of the System relate to the provision of retirement annuities and other benefits, refunds to terminated employees, and the cost of administering the System. These expenses for fiscal year 2020 totaled $2.9 billion, an increase of $118.8 million or 4.3% over expenses for 2019. This increase is primarily due to the $126.9 million increase in defined benefit plan and defined contribution plan retirement and survivor annuity payments. Portable lump sum distributions and refunds decreased by $10.6 million or 9.2%. Administrative expenses increased by $2.5 million or 15.0% from fiscal year 2019 to 2020.

Accelerated Pension Payment Programs Public Act 100-0587 was signed into law June 4, 2018, and contained the following:

● Offers a buyout equal to 60% of the present value of pension benefits for vested inactive members.

● Offers a buyout equal to 70% of the present value of the difference between the Tier 1 Automatic Annual Increase (AAI) and a reduced and delayed AAI (1.5% simple, delayed until the later of age 67 or 1 year after retirement) for Tier 1 members.

● Authorizes the issuance of $1 billion worth of bonds to finance the buyout payments.

SURS implemented the two voluntary pension buyout programs starting July 1, 2019. By the end of fiscal year 2020, $4.2 million had been received from bond proceeds and paid to members that elected to participate in the accelerated pension payment programs. The programs are available until June 20, 2024.

Future Outlook The experience review for the years June 30, 2014 to June 30, 2017, was performed in February of 2018 and the assumptions adopted as of June 30, 2018. The next experience study will be performed in early 2021. Public Act 96-0889 caps Tier 2 members’ earnings at $115,929 in 2020 and future cost of living adjustments at the lesser of 3% or one-half of the change in the Consumer Price Index. This modification of Tier 2 members’ earnings decreases the anticipated amount of future payroll and contributions.

The employer contributions for fiscal year 2021, mainly provided by the State of Illinois, are projected to increase by approximately $141.1 million or 7.6%.

Benefit payments are projected to continue to grow due to increasing numbers of retirees, the 3% annual increase, and the impact of salary increases at the participating agencies. SURS will continue to structure its portfolio with the objective of maximizing returns over the long term to help offset the shortage in employer contributions.

In fiscal year 2019, preliminary work began to redesign the Self-Managed Plan and implement a new supplemental plan. On Sept. 1, 2020, SURS launched the redesigned SMP, renamed the SURS Retirement Savings Plan (RSP). The new SURS Deferred Compensation Plan (DCP) will be rolled out in 2021.

Requests for Information This financial report is designed to provide a general overview of the System’s finances. For questions concerning the information in this report or for additional information, contact State Universities Retirement System, 1901 Fox Drive, Champaign, Illinois 61820.


2020

Defined Benefit Plan

Self-Managed Plan

Total

2019

ASSETS

Cash and short-term investments $ 1,266,766,677 $ - $ 1,266,766,677 $ 819,413,471

Receivables

Members 11,158,593 4,559,763 15,718,356 17,067,516

Non-employer contributing entity 116,889,698 2,074,606 118,964,304 152,988,640

Federal, trust funds, and other 6,687,733 28,535 6,716,268 6,983,445

Pending investment sales 1,952,064,461 - 1,952,064,461 360,501,773

Interest and dividends 47,440,102 - 47,440,102 47,226,953

Total receivables 2,134,240,587 6,662,904 2,140,903,491 584,768,327

Prepaid expenses 133,923 - 133,923 147,246

Investments, at fair value

Equity investments 6,684,436,960 48,304,182 6,732,741,142 10,512,849,950

Fixed income investments 5,467,304,396 40,073,020 5,507,377,416 4,880,148,427

Real estate investments 1,124,007,562 8,341,514 1,132,349,076 1,195,261,337

Alternative investments 4,977,446,278 35,007,388 5,012,453,666 2,451,664,597

Mutual fund and variable annuities - 2,884,738,092 2,884,738,092 2,592,580,384

Total investments 18,253,195,196 3,016,464,196 21,269,659,392 21,632,504,695

Securities lending collateral 1,381,940,165 - 1,381,940,165 878,205,520

Capital assets, at cost, net of accum deprec $20,508,432 and $20,143,800 respectively 10,388,424 - 10,388,424 9,796,210

TOTAL ASSETS 23,046,664,972 3,023,127,100 26,069,792,072 23,924,835,469

LIABILITIES

Benefits payable 12,718,437 - 12,718,437 10,467,190

Refunds payable 3,601,916 - 3,601,916 5,200,177

Securities lending collateral 1,381,486,080 - 1,381,486,080 876,550,517

Payable to brokers for unsettled trades 2,013,885,643 - 2,013,885,643 483,348,912

Reverse repurchase agreements 512,000 - 512,000 85,456,713

Administrative expenses payable 17,445,290 - 17,445,290 16,856,965

TOTAL LIABILITIES 3,429,649,366 - 3,429,649,366 1,477,880,474

PLAN NET POSITION $ 19,617,015,606 $ 3,023,127,100 $ 22,640,142,706 $ 22,446,954,995

Statement of Plan Net Position as of June 30, 2020With Comparative Reporting Entity Totals as of June 30, 2019

The accompanying notes are an integral part of the financial statements.

FINANCIAL STATEMENTS



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Self-Managed Plan Total 2019

ADDITIONS

Contributions

Employer $ 52,968,295 $ 9,378,893 $ 62,347,188 $ 58,133,608

Non-employer contributing entity 1,785,817,785 68,874,215 1,854,692,000 1,655,154,000

Member 282,367,290 95,728,110 378,095,400 368,588,213

Total Contributions 2,121,153,370 173,981,218 2,295,134,588 2,081,875,821

Investment Income

Net appreciation

in fair value of investments 213,670,350 223,640,319 437,310,669 958,763,679

Interest 191,342,519 - 191,342,519 155,798,932

Dividends 200,038,867 - 200,038,867 237,287,406

Securities lending 5,597,401 - 5,597,401 5,191,144

610,649,137 223,640,319 834,289,456 1,357,041,161

Less investment expense

Asset management expense 67,967,190 - 67,967,190 64,109,736

Securities lending expense 504,180 - 504,180 468,824

Net investment income 542,177,767 223,640,319 765,818,086 1,292,462,601

TOTAL ADDITIONS 2,663,331,137 397,621,537 3,060,952,674 3,374,338,422

DEDUCTIONS

Benefits 2,676,192,703 67,927,971 2,744,120,674 2,617,196,859

Refunds of contributions 69,001,514 35,408,462 104,409,976 115,051,659

Administrative expense 18,469,275 765,038 19,234,313 16,662,874

TOTAL DEDUCTIONS 2,763,663,492 104,101,471 2,867,764,963 2,748,911,392

Net increase (100,332,355) 293,520,066 193,187,711 625,427,030

Plan Net Position

Beginning of year 19,717,347,961 2,729,607,034 22,446,954,995 21,821,527,965

PLAN NET POSITION

END OF YEAR $ 19,617,015,606 $ 3,023,127,100 $ 22,640,142,706 $ 22,446,954,995

Statement of Changes in Plan Net Position for the Year Ended June 30, 2020With Comparative Reporting Entity Totals for the Year Ended June 30, 2019

2020

The accompanying notes are an integral part of the financial statements.

FINANCIAL STATEMENTS


I. Description of SURSThe State Universities Retirement System (SURS or the System) is the administrator of a cost-sharing, multiple-employer defined benefit plan and a multiple-employer defined contribution plan. The SURS Board of Trustees consists of six elected and five appointed board members. Legislation effective January 1, 1998, required SURS to introduce a portable benefit package to the existing defined benefit plan and to offer a defined contribution plan. The portable benefit package and the defined contribution plan are available to all members whose employers elect to make the options available. As of June 30, 2020, the two options available in the defined benefit plan are the traditional benefit package and the portable benefit package. The defined contribution plan is known as the Self-Managed Plan. The membership, contributions, and benefit provisions related to these plans are presented in the following summary of the provisions of SURS in effect as of June 30, 2020, as defined in the Illinois Compiled Statutes. Interested parties should refer to the SURS Member Guide or the statutes for more complete information.

A. Defined Benefit PlanSURS was established on July 21, 1941, to provide retirement annuities and other benefits for employees of the state universities, certain affiliated organizations and certain other state educational and scientific agencies and for survivors, dependents, and other beneficiaries of such employees.

SURS is included in the State of Illinois’ comprehensive annual financial report as a component unit. SURS is governed by Chapter 40, Act 5, Article 15, of the Illinois Compiled Statutes. These statutes assign the State Legislature the authority to establish and amend the benefit provisions of the plan. Operation of the System and the direction of its policies are the responsibility of the Board of Trustees of the System. It is also these statutes that define the scope of SURS reporting entity. There are no statutory provisions for termination of the System. The Illinois Constitution provides that the pension obligation of the State shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

1. MembershipParticipation is required as a condition of employment. Employees are ineligible to participate if (a) employed less than full-time and attending classes with an employer; (b) receiving a retirement annuity from SURS; or (c) excluded by subdivision (a)(7)(f) or (a)(19) of Section 210 of the Federal Social Security Act from the definition of employment given in that Section.

2. Benefit ProvisionsA traditional benefit plan was established in 1941. Public Act 90-0448 was enacted effective January 1, 1998, which established an alternative defined benefit program known as the portable benefit package. This option is offered in addition to the traditional benefit option. The traditional and portable plan Tier 1 refers to members who began participation prior to January 1, 2011. Public Act 96-0889 revised the traditional and portable benefit plans for members who begin participation on or after January 1, 2011, and who do not have other eligible Illinois reciprocal system services. The revised plan is referred to as Tier 2. New employees are allowed 6 months after their date of hire to make an irrevocable election. The following is a summary of the benefit provisions as of June 30, 2020.

At June 30, 2020 and 2019, the number of participating employers was:

2020 2019

Universities 9 9

Community Colleges 39 39

Allied Agencies 11 11

State Agencies 2 2

61 61

Note: Excluded from the employer totals above is the State of Illinois, a non-employer contributing entity.

At June 30, 2020 and 2019, defined benefit plan membership consisted of:

2020 2019

Benefit Recipients 69,172 67,842

Active Members 63,206 62,589

Inactive Members 83,744 83,044

216,122 213,475

38.8% 32.0%

29.2%

BENEFITRECIPIENTSINACTIVE

ACTIVE


NOTES TO THE FINANCIAL STATEMENTS



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Retirement Vesting

Retirement Age Requirement

Final Rate of Earnings (FRE)

Retirement Benefit AAI (Automatic Annual Increase)

Survivor Benefits

Survivor AAI(Automatic Annual Increase)

Traditional Plan - Tier 1

5 years of service

Age 62, with at least 5 yearsAge 60, with at least 8 yearsAt any age with at least 30 years

Average earnings during 4 highest consecutive academic years; or

Average of the last 48 months prior to termination.

The AAI is 3% compounded annually.

An eligible survivor receives a minimum of 50% of the member’s earned retirement annuity.

The AAI is 3%, compounded annually.

Traditional Plan - Tier 2

10 years of service

Age 67, with at least 10 years of service

Average earnings during 8 high consecutive academic years of the last 10; orAverage of the high 96 consecutive months of last 120 months (if applicable).

The AAI is calculated using the lesser of 3% or one-half of the change in the consumer price index. The increase will not be compounded.

An eligible survivor receives 66 2/3% of the member’s earned retirement annuity.

The AAI is calculated using the lesser of 3% or one-half of the change in the consumer price index. The increase will not be compounded.

Portable Plan

5 years of service (Tier 1) and 10 years of service (Tier 2)

Tier 1-Same as Traditional Plan Tier 1 Age Requirement

Tier 2-Same as Traditional Plan Tier 2 Age Requirement

Tier 1-Same as Traditional Plan Tier 1 FRE

Tier 2-Same as Traditional Plan Tier 2 FRE

Tier 1-Same as Traditional Plan Tier 1 AAI

Tier 2-Same as Traditional Plan Tier 2 AAI

Based upon selection at retirement of 50%, 75% or 100% of the member’s earned retirement annuity.

Tier 1-Same as Traditional Plan Tier 1 Survivor AAI

Tier 2-Same as Traditional Plan Tier 2 Survivor AAI

Public Act 101-610, effective January 1, 2020, allows Tier II police officers and firefighters to retire at age 60 (instead of age 67) without a reduced retirement annuity under the special formula for police officers and firefighters.

SURS also provides disability, death, and refund benefits as authorized in Chapter 40, Act 5, Article 15, of the Illinois Compiled Statutes.

Disability benefits are payable to all members with at least 2 years of service credit if they are unable to reasonably perform the duties of their assigned position due to a physical or mental impairment as certified by a physician. The benefit becomes payable when sick leave payments are exhausted or after 60 days of the disability, whichever is later. The benefit is payable at a rate of 50% of the monthly rate of compensation on the date the disability began. Disability benefits are reduced by any payments received under the Workers’ Compensation or the Occupational Diseases Act. If a member remains disabled after receiving the maximum benefits due, they may be eligible for a disability retirement annuity equal to 35% of the monthly rate of compensation on the date the disability began.

Death benefits are payable to named beneficiaries upon the death of any member of this System. Under the traditional benefit package, monthly survivor benefits may be paid to eligible survivors if the member established a minimum of 1.5 years of service credit prior to the date of death. If no qualified survivor exists at the date of retirement, the member is paid a refund of all survivor contributions plus interest. Under the portable benefit package, survivor benefits are available through a reduction of the retirement annuity calculated as described above. No refund of survivor contributions is available if there is no qualified survivor at the time of retirement. These provisions are designed to allow the impact of the portable benefit package’s enhanced refund opportunity to be cost neutral.

Upon the death of an annuitant, SURS will pay either a death benefit to a non-survivor beneficiary or a monthly survivor benefit to an eligible survivor. The amount of the monthly survivor benefit will differ depending upon whether the annuitant had selected the traditional benefit package or the portable benefit package.

Upon termination of service, a lump sum refund is available to all members. Under the traditional benefit package, this refund consists of all member contributions and interest at 4.5%. Under the portable benefit package, this refund consists of all member contributions and total interest credited, plus for those members with greater than or equal to 5 years of service credit, an equal amount of employer contributions. Under both defined benefit plan options, a member with 5 or more years of service credit who does not apply for a refund may apply for a normal retirement benefit payable at age 62.



B. Self-Managed PlanSURS is the plan sponsor and administrator of a defined contribution plan established as of January 1, 1998, by the Illinois General Assembly as an amendment to the Illinois Pension Code through Illinois Public Act 90-0448. This plan is referred to as the Self-Managed Plan (SMP) and is offered to employees of all SURS employers who elect to participate. This plan is a qualified money purchase pension plan under Section 401(a) of the Internal Revenue Code. The assets of the SMP are maintained under a trust administered by the SURS Board of Trustees in accordance with the Illinois Pension Code, and are made up of the account balances of individual members.

1. MembershipA member may elect participation in the SMP if (a) all participation criteria for the defined benefit plan are met; (b) the employer has elected through Board action to offer the Self-Managed Plan; (c) the employee is on active status at the plan offering date; and (d) the employee is not eligible to retire as of the employer plan offering date. The member election is irrevocable. New employees are allowed 6 months from the date of hire in which to make their election. If no election is received, members are considered to be part of the defined benefit plan, under the traditional benefit option.

2. Benefit ProvisionsThe SMP provides retirement, disability, death, and survivor benefits as authorized in Chapter 40, Act 5, Article 15, of the Illinois Compiled Statutes, and amended by Public Act 90-0448.

Retirement benefits are payable to members meeting minimum vesting requirements of 5 years of service credit at age 62, 8 years of service credit at age 55, or 30 years of service credit regardless of age. The distribution options available upon reaching retirement eligibility are the following: a lump sum distribution consisting of all employee and employer contributions and related investment earnings; a single life annuity; a 50% or 100% joint and survivor annuity; a single life annuity with a guaranteed period of 10, 15, or 20 years as elected by the member; and a 50% or 100% joint and survivor annuity with a guaranteed period of 10, 15, or 20 years as elected by the member.

Disability benefits are payable to all members with at least 2 years of service credit if they are unable to reasonably perform the duties of their assigned position due to physical impairment as certified by a physician. The benefit becomes payable when sick leave payments are exhausted or after 60 days of the disability, whichever is later. The benefit is payable at a rate of 50% of the monthly rate of compensation on the date the disability began. Disability benefits are reduced by any payments under Workers' Compensation or the Occupational Diseases Act.

Upon termination of service with less than 5 years of service credit, a lump sum distribution is available which consists of employee contributions and related investment earnings. The employer contributions and related investment earnings are forfeited. Upon termination of service with greater than 5 years of service credit but where the member is not yet eligible for retirement, a lump sum distribution is available which consists of employee and employer contributions and related investment earnings.

Note: Excluded from the employer totals above is the State of Illinois, a non-employer contributing entity.

At June 30, 2020 and 2019, the number of SMP participating employers was:

2020 2019

Universities 9 9

Community Colleges 39 39

Allied Agencies 8 8

State Agencies 2 2

58 58

At June 30, 2020 and 2019, the SMP membership consisted of:

2020 2019

Benefit Recipients 1,007 871

Active Members 13,129 12,531

Inactive Members 10,280 10,033

24,416 23,435

4.1%

BENEFITRECIPIENTS

53.8%ACTIVE42.1%

INACTIVE

Self-Managed Plan




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Death benefits are payable to named beneficiaries upon the death of any member of this plan. If the member has less than 1.5 years of service credit, the death benefit payable is the employee contributions and related investment earnings. If the member has 1.5 or more years of service credit, the death benefit payable is the employee and employer contributions and related investment earnings.

II. Summary of Significant Accounting Policies

A. Reporting EntityThe System is a component unit of the State of Illinois. As defined by accounting principles generally accepted in the United States of America established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of a primary government as well as its component units, which are legally separate organizations for which the elected officials of the primary government are financially accountable, or for which the nature and significance to the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or otherwise incomplete. Financial accountability is defined as:

1. Appointment of a voting majority of the organization’s board and either (a) the ability to impose will by the primary government or (b) the possibility that the organization will provide a financial benefit to or impose a financial burden on the primary government; or

2. Fiscal dependency on the primary government and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Based upon the required criteria, the System has no component units.

B. Measurement Focus and Basis of AccountingFor both the defined benefit plan and the Self-Managed Plan (SMP), the financial transactions are recorded using the economic resources measurement focus and accrual basis of accounting. Member and employer contributions are recognized as revenue when due pursuant to statutory or contractual requirements. Benefits and refunds are recognized as expenses when due and payable in accordance with the terms of the plans.

C. Use of EstimatesThe preparation of the System’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates and those differences could be material. The System uses an actuary to determine the actuarial accrued liability for the defined benefit plan and to determine the actuarially determined contribution.

D. Risks and UncertaintiesThe System invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near-term, and those such changes could materially affect the amounts reported in the Statement of Plan Net Position.

As a result of the spread of the SARS-CoV-2 virus and the incidence of COVID-19, economic uncertainties have arisen which may negatively affect the fiduciary net position of the System. The duration of these uncertainties and the ultimate financial effects cannot be reasonably estimated at this time.

E. Cash and Short-Term InvestmentsIncluded in the $1,266,766,677 of cash and short-term investments presented in the Statement of Plan Net Position is $78,598,629 of short-term investments with original maturities less than 90 days. For purposes of the various data tables presented in Note IV, this group of short-term investments is included as part of fixed income investments. Short-term investments are generally reported at cost, which approximates fair value.



F. InvestmentsInvestments are governed by Chapter 40, Act 5, Articles 1 and 15, of the Illinois Compiled Statutes. The most important aspect of the statutes is the prudent expert rule, which establishes a standard of care for all fiduciaries. (A fiduciary is any person who has authority or control with respect to the management or administration of plan assets.) The prudent expert rule states that fiduciaries must discharge their duties with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under conditions prevailing at the time. Purchases and sales of securities are recorded on a trade-date basis. Interest income is reported on the accrual basis. Dividends are recorded on the ex-dividend date.

For the defined benefit plan, investments are generally reported at fair value. Marketable securities (stocks, bonds, warrants, and options) are traded on public exchanges. The Northern Trust Company, SURS custodial bank, establishes these prices using third-party pricing services. Generally, these values are reported at the last reported sales price. Certain investments that do not have an established market value are reported at estimated fair value obtained from a custodial bank or investment management firm. These investments include commingled investment pools, where the underlying assets are individually marked to market (i.e., estimated fair value) on a daily basis and individually traded on publicly recognized exchanges. The investment manager, using methods approved by the CFA Institute or other industry standards, values non-marketable securities (real estate and private equity). These methods generally include detailed property level appraisals and discounted cash flow analysis.

For the SMP, investments are reported at fair value by the service providers. These investments include both mutual and variable annuity funds where the underlying assets are marked to market (i.e., estimated fair value) on a daily basis and individually traded on publicly recognized exchanges. Generally, the values on the underlying investments are reported at the last reported sales price.

G. Capital AssetsCapital assets are recorded at historical cost and depreciated over the estimated useful life of each asset. Monthly depreciation is computed using the straight-line method.

H. Administrative ExpensesSystem administrative expenses (which include amounts for both the defined benefit and defined contribution [Self-Managed] plans) are budgeted and approved by the System’s Board of Trustees. Funding for these expenses is included in the non-employer contribution as determined by the annual actuarial valuation and appropriated by the State of Illinois.

I. Prior Year Comparative InformationThe financial statements include certain prior-year summarized comparative information in total, but not at the level of detail required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the System’s financial statements as of and for the year ended June 30, 2019, from which the summarized comparative information was derived.

J. New Accounting PronouncementsGASB Statement No. 84, Fiduciary Activities, was originally effective for financial reporting periods beginning after December 15, 2018. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. SURS does not have activities which fall within the scope of Statement No. 84; therefore there is no impact on its financial statements.

GASB issued Statement No. 87, Leases, was originally effective for financial reporting periods beginning after December 15, 2019. The objective of this Statement is to improve the accounting and financial reporting for leases by governments. This statement will require recognition of certain lease assets and liabilities for leases that previously were categorized as operating leases and recognized as inflow of resources or outflows of resources based on the payment provisions of the contract. This Statement is not considered to have a material impact on the System’s financial statements.

GASB Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance, was issued in May 2020. The primary objective of this Statement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective dates of certain provisions in Statements and Implementation Guides that first become effective or scheduled to become effective for periods beginning after June 15, 2018, and later. Statement No. 84, Fiduciary Activities, is postponed by one year. Statement No. 87, Leases, is postponed by 18 months.




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III. Contributions and Plan Net Position Designations

A. Defined Benefit Plan

1. Membership ContributionsIn accordance with Chapter 40, Act 5, Article 15, of the Illinois Compiled Statutes, members of the traditional benefit package contribute 8% of their gross earnings; 6.5% of those are designated for retirement annuities, 0.5% for post-retirement increases, and 1% for survivor benefits. Police officers and fire fighters contribute 9.5% of earnings; the additional 1.5% is a normal retirement contribution. Members of the portable benefit package contribute 8% of their gross earnings; 6.5% of those are designated for retirement annuities, 0.5% for post-retirement increases, and 1% for enhanced refund benefits. Police officers and fire fighters contribute 9.5% of earnings; the additional 1.5% is a normal retirement contribution. These Statutes assign the authority to establish and amend the contribution provisions of the plan to the State Legislature. The member contributions are picked up by the employer and treated as employer contributions for income tax purposes. Retirement contributions are based on the gross earnings before the employer pick-up and are included in earnings. All contributions on pre-1981 earnings and service credit payments, plus future other public employment, prior service, refund repayments, leave payments, military service payments, and the employee portion of Early Retirement Option payments, are considered as previously taxed, unless qualifying funds are rolled over to SURS to make these purchases, or unless the payments are made in installments through employer deductions from payroll. Previously taxed contributions will be recovered tax-free when distributed to the employee in the form of benefits or payments or to his or her beneficiary as a death and/or survivor benefit.

2. Interest Credited on Member ContributionsFor the traditional and portable benefit packages, the interest rate credited is fixed by the Board of Trustees and is 6.5% for the year ended June 30, 2020. For purposes of lump sum refunds to former members, the traditional benefit package offers an interest rate of 4.5%, compounded annually, and the portable benefit package offers an interest rate equal to the credited rate, compounded annually. A change brought forth by the enactment of Public Act 94-0004 and effective July 1, 2005, calls for the Comptroller of the State of Illinois to set the interest rate credited to member contribution balances for purposes of the calculation of retirement annuities under the money purchase formula. That rate is 6.5% for the year ended June 30, 2020 and 6.0% for the year ended June 30, 2021.

Members certified after July 1, 2005 will not be eligible for the money purchase formula calculation. Rather, their retirement annuity will be calculated using the general formula.

3. Employer ContributionsOn an annual basis, an actuarial valuation is performed in order to determine the amount of statutorily required contributions from the State of Illinois (non-employer contributing entity) and the normal cost. Public Act 99-0232 requires an actuarial experience study is performed every 3 years to determine the assumptions to be used in the annual valuation. The last actuarial experience study was performed in February 2018. To determine the funding method, Public Act 88-0593 was passed by the Illinois General Assembly in 1994. This Act, which took effect on July 1, 1995, provides a 50-year schedule of State contributions to the System designed to achieve a 90% funded ratio by fiscal year 2045. This plan requires the State as the non-employer contributing entity to make continuing appropriations to meet the normal actuarially determined cost of the System, plus amortize the unfunded accrued liability. The fiscal year 2020 State contributions were $1,785,817,785 for the defined benefit plan and $68,874,215 for the Self-Managed Plan. The employer normal cost calculation is based on the same actuarial results, assumptions and methods used to calculate the State contribution. This is the employer contribution rate that is to be applied to all earnings paid from federal, grant and trust funds. The Board of Trustees has adopted 13.02% of covered earnings as the employer normal cost for fiscal year 2020. In compliance with Public Act 94-0004, employers must pay the System the present value of the increase in benefits resulting from the portion of the increase in earnings that is in excess of 6%. In compliance with Public Act 100-0023, employers must pay the System the normal cost of the portion of an employee’s earnings that exceed the amount of salary set for the Governor. The fiscal year 2020 employer defined benefit contributions were $52,968,295.

81.3%Retirement Benefits

6.2%Cost of Living Increases

12.5%Survivor Benefits

Member Contributions



4. Net Position AccountsThe System maintains two designated accounts that reflect the assignment of net position to employee and benefit accounts: a. The Employee Contribution account records the pension assets contributed by each employee and the interest

income earned by those contributions.b. The Benefits from Employee and Employer Contributions account records the net position available for annuities

in force and available for future retirement, death and disability benefits, the undistributed investment income, the unexpended administrative expense allocation, and the variations in actuarial assumptions.

Balances in these designated accounts as of June 30, 2020 are as follows:

Employee contributions $6,650,950,105

Benefits from employee and employer contributions 12,966,065,501

TOTAL NET POSITION $ 19,617,015,606

5. Ownership of Greater than 5 Percent of Net Position Available for BenefitsThere are no significant investments in any one organization that represent 5% or more of plan net position available for benefits.

B. Self-Managed Plan1. Membership ContributionsIn accordance with Chapter 40, Act 5, Article 15, of the Illinois Compiled Statutes, members contribute 8% of their gross earnings. These statutes assign the State Legislature the authority to establish and amend the contribution provisions of the plan.

The member contributions are picked up by the employer and treated as employer contributions for income tax purposes. Retirement contributions are based on the gross earnings before the employer pick-up and are included in earnings.

Service credit purchase payments are considered as previously taxed, unless qualifying funds are rolled over to SURS to make these purchases. Previously taxed contributions will be recovered tax-free when distributed to the employee in the form of benefits or refunds, or to his or her beneficiary as a death and/or survivor benefit.

2. Employer ContributionsThe State of Illinois (non-employer contributing entity) shall make the employer contribution to SURS on behalf of SMP employers on a monthly basis in accordance with the applicable provisions of the Illinois Pension Code. The fiscal year 2020 defined contribution plan State contributions were $68,874,215 and employer contributions were $9,378,893. In accordance with Chapter 40, Act 5, Article 15 of the Illinois Compiled Statutes, employer contributions credited to the SMP participant are at a rate of 7.6% of the member’s gross earnings, less the amount retained by SURS to provide disability benefits (0.25% as of July 1, 2018).

3. Net Position AccountsThe SMP maintains three designated accounts that reflect the assignment of net position to employee contributions, disability benefits, and employer forfeiture accounts:

a. The Employee Contribution account records the pension assets contributed by each employee and the corresponding employer contribution, and the investment income earned by those contributions.

b. The Disability Benefits account reflects the pension assets contributed by the employer and held to fund member disability benefits.

c. The Employer Forfeiture account reflects the pension assets contributed by the employer but forfeited from member accounts due to termination prior to reaching 5 years of service. Future employer contributions are reduced by the total forfeitures held by the defined contribution plan.




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The assets related to disability benefits and employer forfeitures are commingled with the investment assets of the defined benefit plan. Investment gain or loss is credited to these balances based upon the annual investment return of the commingled assets. For fiscal year 2020, the investment income credited to these balances was $3,325,070.

Balances in these designated accounts as of June 30, 2020 are as follows:

Employee contributions $ 2,891,397,324 Disability benefits 119,479,653Employer forfeitures 12,250,123

TOTAL NET POSITION $ 3,023,127,100

4. Ownership of Greater than 5 Percent of Net Position Available for BenefitsThere are no significant investments in any one organization that represent 5% or more of plan net position available for benefits.

IV. Deposits and Investments

Fair Value MeasurementThe System categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. Investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) as a practical expedient are not classified in the fair value hierarchy.

In instances where inputs used to measure fair value fall into different levels in the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The System’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The table on page 31 shows the fair value leveling of the investments for the System.

Short-term securities generally include investments in money market-type securities reported at cost plus accrued interest, which approximates market or fair value.

Equity (including real estate investment trust securities) and derivative securities classified in Level 1 are valued using prices quoted in active markets for those securities.

Debt and debt derivative securities classified in Level 2 and Level 3 are valued using either a bid evaluation or a matrix pricing technique. Bid evaluations may include market quotations, yields, maturities, call features and ratings. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Index-linked debt securities are valued by multiplying the external market price feed by the applicable day’s Index Ratio. Level 2 debt securities have non-proprietary information that was readily available to market participants from multiple independent sources which are known to be actively involved in the market. Level 3 debt securities use proprietary information or single source pricing. Equity and equity derivative securities classified in Level 2 are securities whose values are derived daily from associated traded securities. Equity securities classified in Level 3 are valued with last trade data having limited trading volume.

The valuation method for certain equity, fixed income and marketable alternatives investments is based on the investments’ NAV per share (or its equivalent) provided by the investee. The table on page 32 shows the investments of the System measured at the NAV per share.



Commingled Equity FundsThis type of investment consists of equities diversified across all sectors. The fair values of the investments in this type have been determined using the NAV per share of the investments.

Commingled Fixed Income FundsThis type of investment consists of fixed income securities diversified across all sectors. The fair values of the investments in this type have been determined using the NAV per share of the investments.

Hedge FundsThis type of investment includes limited partnerships that engage in various alternative strategies including long/short credit, long/short equity, event-driven equity, market neutral, managed futures and options strategies. The fair values of the investments in this type have been determined using the NAV per share of the investments.

Private Equity PartnershipsThis type of investment consists of limited partnerships. The types of strategies included in this portfolio are venture capital, buyouts, special situations, mezzanine and distressed debt. Infrastructure fund investments are included in private equity partnerships. Private equity partnerships have an approximate life of 10 years and are considered illiquid. Redemptions are restricted over the life of the partnership. During the life of the partnerships, distributions are received as underlying partnership investments are realized. The System has no plans to liquidate the total portfolio. As of June 30, 2020, it is probable all of the investments in this type will be sold at an amount different from the NAV per share (or its equivalent) of the System’s ownership interest in partner’s capital.

Real Estate FundsThis type includes investments in core open-end funds and non-core real estate funds. Investments in open-end funds have limited redemption availability as redemption opportunities are based on available liquidity. Non-core funds do not offer redemptions. The nature of these investments is that distributions from each investment will be received as the underlying investments are liquidated. The System has no plans to liquidate the total portfolio. As of June 30, 2020, it is probable all of the investments in this type will be sold at an amount different from the NAV per share (or its equivalent) of the System’s ownership interest in partner’s capital.

Self-Managed Plan FundsInvestments in open-end mutual funds and variable annuities whose fair values are determined by quoted prices in active markets for identical assets are categorized as Level 1. One stable value fund and two commingled equity pools, consisting of equities diversified across all sectors, have fair values determined using the NAV per share of the investments.




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Investments and Short-Term Holdings Measured at Fair Value ($ in thousands)

Fair Value Measurements Using

As of June 30, 2020 Level 1 Level 2 Level 3

DEFINED BENEFIT PLAN

Investments by Fair Value Level

Debt securities

U.S. government $ 2,097,737 $ 2,097,737 $ - $ -

U.S. agency obligations 825,888 - 805,093 20,795

U.S. municipal obligations 48,434 - 40,505 7,929

U.S. corporate obligations 1,195,531 - 1,190,553 4,978

U.S. asset backed 202,285 - 143,424 58,861

Foreign obligations 743,743 - 720,150 23,593

Total debt securities $ 5,113,618 $ 2,097,737 $2,899,725 $ 116,156

Short-term securities and cash adjustments $ 15,567 $ 15,567 $ - $ -

Equity securities

U.S. equity securities $ 4,695,526 $ 4,695,211 $ 10 $ 305

Foreign equity securities 1,762,579 1,761,220 - 1,359

Total equity securities $ 6,458,105 $ 6,456,431 $ 10 $ 1,664

Investments Measured at the Net Asset Value (NAV)

Commingled fixed income funds $ 468,936

Commingled equity funds 283,696

Private real estate funds 1,132,349

Private equity funds 1,983,757

Hedge funds 2,910,197

Commodity funds 118,500

Total investments measured at the NAV 6,897,435

Total investments by fair value level and measured at the NAV $ 18,484,725

Investment Derivative Instruments

U.S. fixed income derivatives $ (12,003) $ - $ (12,003) $ -

Foreign fixed income derivatives (143) - (143) -

U.S. equity derivatives (5,675) (5,675) - -

Foreign equity derivatives (3,385) (3,385) - -

Total investment derivative instruments $ (21,206) $ (9,060) $ (12,146) $ -

Invested Securities Lending Collateral

Fixed income securities $ 1,381,940 $ - $1,381,940 $ -

SELF-MANAGED PLAN

Mutual funds and variable annuities

Fixed income funds $ 665,866 $ 665,866 $ - $ -

Equity funds 1,733,559 1,733,559 - -

Real estate funds 43,456 43,456 - -

Total Self-Managed Plan assets by fair value level $ 2,442,881 $ 2,442,881 $ - $ -

Investments measured at the Net Asset Value (NAV) 441,858

Total investments by fair value level and measured at the NAV $ 2,884,739



Investments Measured at Net Asset Value($ in thousands)

(1) Commingled funds. Two fixed income funds, one international equity fund, and one real estate investment fund are considered to be commingled in nature. Each are valued at the net asset value of units held at the end of the period based upon the fair value of the underlying investments.

(2) Private real estate and private equity funds. The real estate investments are 21 core, value-add, and opportunistic real estate funds. The private equity funds are 240 limited partnership interests in equity or debt securities of privately held companies. Core open-end real estate funds generally provide liquidity possibilities through redemption opportunities. Real estate closed-end funds and private equity funds are not eligible for redemption.

(3) Hedge funds. Six funds invest in a select group of underlying managers that implement a number of different alternative investment strategies and invest in a variety of markets through limited partnerships, limited liability companies and other investment entities.

(4) Commodity funds. The fund is invested with one active long/short manager.

(5) Stable value fund. The fund is invested in fixed income securities and shares of money market funds. It is valued at the net asset value of units held at the end of the period based upon the fair value of the underlying investments.

(6) Commingled equity pools. The two pools are commingled in nature. Each is valued at the net asset value of units held at the end of

the period based upon the fair value of the underlying investments.

Custodial Credit Risk for DepositsCustodial credit risk for deposits is the risk that in the event of a financial institution failure, SURS deposits may not be returned. Cash held in the investment-related bank account in excess of $250,000 is uninsured. SURS has a formal policy to address custodial credit risk. Deposits are under the custody of The Northern Trust Company, which has an Aa2 Long Term Bank Deposit rating by Moody’s and an AA rating by Fitch. At June 30, 2020, the carrying amount of cash was $1,266,766,677. The bank balance was $1,191,001,755, of which $8,116,126 was foreign currency deposits and was exposed to custodial credit risk. The carrying amount of cash includes $76,495,936 of short-term bills and notes and $2,102,693 of brokered certificates of deposit, which are considered to be investments for the purpose of assessing custodial credit risk.

Overlay ProgramSURS employs a manager to provide an overlay program to ensure the System’s major asset classes remain within a certain percentage of their targeted weights. Market movements can lead to significant implicit tilts within the portfolio. For example, a sharp decline in equities will many times be accompanied by stability within fixed income. Consequently, the equity position will decrease as a percentage of assets while fixed income will increase. This causes an implicit tilt towards fixed income. The overlay program brings these implicit tilts back within an acceptable band and is a cost-effective way to rebalance assets.

Fair ValueUnfunded

CommitmentsRedemption Frequency

(if Currently Eligible)Redemption

Notice Period


Commingled fixed income funds (1) $ 468,936 $ - Daily, Monthly 1-10 Days

Commingled international equity and global real estate investment funds (1) 283,696 - Daily, Monthly 2-5 Days

Private real estate funds (2) 1,132,349 247,257 Quarterly, if Eligible45-90 Days, if

Eligible

Private equity funds (2) 1,983,757 1,071,514 Not Eligible N/A

Hedge funds (3) 2,910,197 - Daily, Monthly, Quarterly, Semi-Annually, Annually

3-90 Days

Commodity funds (4) 118,500 - Daily, Monthly 1-30 Days

$ 6,897,435 $ 1,318,771

SELF-MANAGED PLAN

Stable value fund (5) $ 80,058 $ - Daily, Annually 1-365 Days

Commingled equity pools (6) 361,800 - Daily, if Eligible 1 Day, if Eligible

$ 441,858 $ -




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Investment PoliciesInvestments are governed by Chapter 40, Act 5, Articles 1 and 15, of the Illinois Compiled Statutes. The most important aspect of the statutes is the prudent expert rule, which establishes a standard of care for all fiduciaries. (A fiduciary is any person who has authority or control with respect to the management or administration of plan assets.) The prudent expert rule states that fiduciaries must discharge their duties with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use under conditions prevailing at the time. The SURS Board of Trustees has adopted an Investment Policy that contains general policies for investments. The Investment Policy was updated in January 2020 to remove rules-based metrics to evaluate performance of active public markets investment managers. The Investment Procurement Policy was revised in June 2020 to specify procurement requirements for Opportunistic investments recommended by a specialty consultant. The Investment Section of this report contains a summary of these policies. Within the prudent expert framework, the SURS Board of Trustees establishes specific investment guidelines in the investment management agreement of each individual investment management firm and monitors the firms accordingly.

Investment CommitmentsAlternative investment portfolios consist of passive interests in limited partnerships. The System had outstanding commitments to private equity limited partnerships of approximately $1,071.5 million as of June 30, 2020. The System had outstanding commitments of approximately $236.9 million to real estate partnerships and approximately $10.3 million to infrastructure partnerships as of June 30, 2020.

InvestmentsThe carrying values of investments by type at June 30, 2020 are summarized below:

(a) Fixed income investments presented in this table include $78,598,629 of short-term investments with maturities of less than 90 days, which are included in the cash and short-term investments total on the financial statements.

(b) U.S. short-term investments principally consist of money market funds and options. (c) Fixed income investments presented in this table include no short-term investments with maturities greater than 90 days. (d) Fixed income investments presented in this table include commingled funds, derivatives, cash, and cash equivalent holdings.

EQUITY INVESTMENTS

U.S. equities $ 4,979,222,535 Non-U.S. equities 1,762,578,552 U.S. private equity 1,615,491,315 Non-U.S. private equity 368,265,268 U.S. equity derivatives (4,643,807)Non-U.S. equity derivatives (4,416,138)

FIXED INCOME INVESTMENTS

U.S. government obligations 2,021,241,014 U.S. agency obligations 825,887,495 U.S. corporate fixed income 1,589,409,749 U.S. fixed income, other 325,776,623 Non-U.S. fixed income securities 741,640,910 U.S. short-term investments 227,905,931 Non-U.S. short-term investments (133,740,056)U.S. fixed income derivatives (12,002,720)Non-U.S. fixed income derivatives (142,901)

REAL ESTATE INVESTMENTS

U.S. real estate 1,008,609,906 Non-U.S. real estate 123,739,170

HEDGE FUND INVESTMENTS

Hedge funds 2,910,196,814

COMMODITIES INVESTMENTS

Commodities 118,500,269

MUTUAL FUND AND VARIABLE ANNUITIES

Self-Managed Plan mutual funds and variable annuities 2,884,738,092

TOTAL INVESTMENTS $ 21,348,258,021



Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the System will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. SURS has adopted a formal policy specific to custodial credit risk. To minimize custodial credit risk, SURS performs due diligence on service providers, provides investment parameters for investment vehicles, monitors the financial condition of the custodian, endeavors to have all investments held in custodial accounts through specific sources, and requires the custodian to meet certain requirements. At June 30, 2020, no investments were uninsured and unregistered, with securities held by the counterparty or by its trust department or agent but not in the System’s name.

Concentration of Credit RiskConcentration of credit risk is the risk of loss that may be attributed to the magnitude of the System’s investment in a single issue. SURS has not adopted a formal policy specific to concentration of credit risk. However, this area is addressed with each of the relevant investment managers in the investment management agreement between the parties. The System’s investment portfolios are managed by professional investment management firms. These firms must maintain diversified portfolios and must comply with risk management guidelines specific to each of their investment management agreements. Excluding U.S. government and agency issues, the portfolios are limited to a 5% allocation in any single investment grade U.S. issuer. Allocation limits also apply to international issuers. At June 30, 2020, SURS had no investments in any one issuer that represented 5% or more of the System’s total investments.

Credit Risk of Debt SecuritiesCredit risk is the risk that the issuer or other counterparty to an investment will not fulfill obligations. SURS has not adopted a formal policy specific to credit risk of debt securities. However, this area is addressed with each of the relevant investment managers in the investment management agreement between the parties. The quality ratings of investments in fixed income securities of the System as described by Standard & Poor’s rating agency at June 30, 2020 are presented on the next page:




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* Obligations of the U.S. government or obligations explicitly guaranteed by the U.S. government agencies Federal Housing Administration (FHA), Government National Mortgage Association (GNMA), and Small Business Administration (SBA) are not considered to have credit risk. ** Domestic includes $225,676,334 from Self-Managed Plan variable annuities and mutual funds. *** The credit risk by quality ratings does not include commingled funds, derivatives, cash, and cash equivalent holdings for which there is no quality rating.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The System manages its exposure to fair value loss arising from increasing interest rates by diversifying the debt securities portfolio. The System has not adopted a formal policy specific to interest rate risk. However, this area is addressed with each of the relevant investment managers in the investment management agreement between the parties.

At June 30, 2020, the segmented time distribution of the various types of debt securities of the System are as follows:

* Includes $31,539,811 from Self-Managed Plan mutual fund. ** Includes $194,136,523 from Self-Managed Plan variable annuities and mutual funds.*** The segmented time distribution of debt securities does not include commingled funds, derivatives, cash and cash equivalent holdings for which there is no maturity date.

Quality Rating: Standard & Poor’s Domestic ** International Total

AAA $ 91,314,720 $ 21,171,367 $ 112,486,087

AA+ 776,094,681 819,025 776,913,706

AA 44,482,712 6,835,323 51,318,035

AA- 22,930,020 4,077,045 27,007,065

A+ 18,736,346 11,002,534 29,738,880

A 35,878,801 13,114,948 48,993,749

A- 104,785,575 54,369,931 159,155,506

BBB+ 160,015,302 75,906,283 235,921,585

BBB 118,138,588 104,054,669 222,193,257

BBB- 213,041,568 92,687,744 305,729,312

BB+ 87,795,466 64,450,851 152,246,317

BB 89,854,846 31,471,281 121,326,127

BB- 94,465,372 82,434,429 176,899,801

B+ 69,646,421 48,419,787 118,066,208

B 89,798,919 67,703,510 157,502,429

B- 64,703,780 19,995,345 84,699,125

CCC+ 28,839,163 20,470,407 49,309,570

CCC 15,292,884 405,360 15,698,244

CCC- 1,125,275 3,202,113 4,327,388

CC 6,710,229 1,707,797 8,418,026

C - 177,810 177,810

D 3,354,145 1,711,034 5,065,179

Not Rated *** 279,379,066 17,555,011 296,934,077

Total credit risk: debt securities $ 2,416,383,879 $ 743,743,604 $ 3,160,127,483

U.S. government & agencies * 2,179,166,843 - 2,179,166,843

TOTAL DEBT SECURITIES INVESTMENTS $ 4,595,550,722 $ 743,743,604 $ 5,339,294,326

Type

2020 Fair Value

Less than 1 year

1 to 5 years

5 to 10 years

10 to 20 years

More than 20 years

U.S. government & agency fixed income * $2,955,164,254 $116,290,547 $1,101,305,554 $539,538,598 $318,207,147 $879,822,408

U.S. corporate fixed income ** 1,640,386,468 25,919,440 582,144,969 643,043,056 185,057,470 204,221,533

Non-U.S. fixed income 743,743,604 14,941,870 358,129,781 217,732,887 42,236,687 110,702,379

TOTAL *** $5,339,294,326 $157,151,857 $2,041,580,304 $1,400,314,541 $545,501,304 $1,194,746,320

Maturities in Years



Currency Equity Fixed Income * Total

Argentine peso $ - $ 384 $ 384

Australian dollar 35,594,892 (17,663,614) 17,931,278

Brazilian real 18,365,700 1,847,402 20,213,102

British pound sterling 234,026,876 33,719,667 267,746,543

Canadian dollar 52,594,637 (3,449,992) 49,144,645

Chilean peso - (39) (39)

Chinese yuan renminbi - 120 120

Colombian peso - (142,805) (142,805)

Czech koruna 1,411,947 (4,757,699) (3,345,752)

Danish krone 15,238,804 4,482 15,243,286

Euro 540,133,164 29,053,354 569,186,518

Hong Kong dollar 86,811,134 312,982 87,124,116

Indonesian rupiah 11,870,452 (279,795) 11,590,657

Japanese yen 306,432,810 61,989,601 368,422,411

Mexican peso 2,593,912 3,581,181 6,175,093

New Israeli shekel 4,356,161 36,058 4,392,219

New Taiwan dollar 20,016,112 (29,972) 19,986,140

New Zealand dollar 5,482,638 (12,746,045) (7,263,407)

Norwegian krone 2,524,668 15,479,840 18,004,508

Peruvian nuevo sol - (11,479) (11,479)

Polish zloty 3,964,953 1,794 3,966,747

Singapore dollar 24,124,853 57,187 24,182,040

South African rand 7,186,886 138,680 7,325,566

South Korean won 23,347,187 20,944 23,368,131

Swedish krona 45,351,760 18,160,557 63,512,317

Swiss franc 102,319,815 (23,473,459) 78,846,356

Thai baht 2,003,404 11,073 2,014,477

Turkish lira - (3,493,174) (3,493,174)

Total securities subject to foreign currency risk $ 1,545,752,765 $ 98,367,233 $ 1,644,119,998

Foreign investments denominated in U.S. dollars 2,921,835,683 509,390,719 3,431,226,402

TOTAL FOREIGN INVESTMENT SECURITIES $ 4,467,588,448 $ 607,757,952 $ 5,075,346,400

Foreign Currency RiskForeign currency risk is the risk that changes in currency exchange rates will adversely affect the fair value of an investment or a deposit. SURS has not adopted a formal policy specific to foreign currency risk. However, this area is addressed with each of the relevant investment managers in the investment management agreement between the parties. International investment management firms maintain portfolios with diversified foreign currency risk for SURS. The System’s exposure to foreign currency risk derives from its positions in foreign currency and foreign currency-denominated equity and fixed income investments.

At June 30, 2020 the System’s exposure to foreign currency risk is as follows:

* Includes Swaps, Options and Short-Term Investments. These derivatives and pending transactions have resulted in negative totals for certain currencies.




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Notional Value Fair Value Change in

2020 2020 Fair Value

Forwards $ - $ (4,102,421) $ (3,016,997)

Rights and Warrants $ 527,527 $ 26,347 $ (186,506)

FuturesEquity

Long $ 86,335,630 $ 1,509,430 $ 1,411,389 Short (7,895,350) 7,601 560,112

Fixed incomeLong 383,748,491 (259,329) (694,138)Short (146,915,966) 283,717 431,041

CommodityLong 8,519,230 124,910 324,628 Short (12,860,098) (209,768) (209,768)

Foreign exchangeLong 55,911,213 40,454 40,154 Short (23,680,166) (191,744) (181,811)

Total futures $ 343,162,984 $ 1,305,271 $ 1,681,607

Options

EquityCall $ (383,270) $ (4,249,979) $ (2,952,656)Put (383,270) (4,836,314) (3,154,372)

Fixed incomeCall - - 29

SwaptionsCall (28,000,000) (33,242) (246,218)Put (28,000,000) (16,473) (112,773)

Total options $ (56,766,540) $ (9,136,008) $ (6,465,990)

Swaps

Credit defaultBuying protection $ - $ - $ 485,434 Selling protection 269,438,009 30,351 (241,759)

Inflation-linkedReceive fixed - - (48,837)

Interest ratePay fixed 136,065,171 (10,602,688) 198,323Receive fixed 35,977,160 (1,523,569) (275,252)

Total swaps $ 441,480,340 $ (12,095,906) $ 117,909

Derivative Securities The System invests in derivative securities through its investment managers. A derivative security is an investment whose value is derived from other financial instruments such as commodity prices, bond and stock prices, or a market index. The System’s derivatives are considered investments. The fair value of all derivative financial instruments is reported in the Statement of Plan Net Position, and the change in the fair value is recorded in the Statement of Changes in Plan Net Position as net appreciation (depreciation) in fair value of investments.

In the case of an obligation to purchase (long a financial future or a call option), the full value of the obligation is held in cash or cash equivalents. For obligations to sell (short a financial future or a put option), the reference security is held in the portfolio. Derivative transactions involve, to varying degrees, credit risk and market risk. Credit risk is the possibility that a loss may occur because a party to a transaction fails to perform according to terms. Market risk is the possibility that a change in interest rate risk or foreign currency risk will cause the value of a financial instrument to decrease or become more costly to settle. The market risk associated with derivatives, the prices of which are constantly fluctuating, is regulated by imposing strict limits as to the types, amounts, and degree of risk that investment managers may undertake. These limits are approved by the Board of Trustees and senior management, and the risk positions of the investment managers are reviewed on a periodic basis to monitor compliance with the limits. The System has not adopted a formal policy specific to master netting arrangements. As of June 30, 2020, SURS derivative investments included foreign currency forward contracts, rights and warrants, futures, options, swaps, and swaptions. At June 30, 2020, SURS investments in derivatives had the following balances:



Foreign currency forward contracts are used to protect against the currency risk in SURS foreign equity and fixed income security portfolios. A foreign currency forward contract is an agreement to buy or sell a specific amount of a foreign currency at a specified delivery or maturity date for an agreed-upon price. Fluctuations in the market value of foreign currency forward contracts are marked to market on a daily basis. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in the investment income in the Statement of Changes in Plan Net Position. At June 30, 2020, SURS investments in foreign currency forward contracts are as follows:

Rights and warrants provide SURS investment managers the right, but not the obligation, to purchase or sell a company’s stock at a fixed price until a specified expiration date. Rights normally are issued with common stock and expire after two to four weeks. Warrants typically are issued together with a bond or preferred stock and may not expire for several years. The fair value of rights and warrants is reported in the investments in the Statement of Plan Net Position. The gain or loss from rights and warrants is included in the investment income in the Statement of Changes in Plan Net Position.

Currency

Pending Foreign Exchange

Purchases

Pending Foreign Exchange Sales

Fair Value

2020

Change in Fair Value

Argentine peso $ - $ - $ - $ (88,208)

Australian dollar 1,263,635 (1,480,715) (217,080) (149,394)

Brazilian real 50,772 (180,175) (129,403) (65,528)

British pound sterling - (198,876) (198,876) (88,482)

Canadian dollar 144,283 (395,504) (251,221) (184,664)

Chilean peso 77,402 - 77,402 77,402

Colombian peso - - - (124,340)

Czech koruna - (132,373) (132,373) (132,373)

Euro 677,074 (4,247,948) (3,570,874) (2,811,376)

Hong Kong dollar - (3) (3) (3)

Indian rupee - - - (1,699)

Japanese yen 82,561 - 82,561 132,911

Korean Republic won 13,026 (18,771) (5,745) (5,745)

Mexican peso 212,400 - 212,400 293,272

New Israeli shekel - - - 353

New Taiwan dollar - - - 52,907

New Zealand dollar 202,449 (941,581) (739,132) (739,132)

Norwegian krone 258,078 - 258,078 258,078

Philippine peso - - - (129)

Polish zloty - - - (1,157)

Russian ruble - - - (7,519)

Swedish krona 900,146 - 900,146 900,146

Swiss franc 144,298 (173,304) (29,006) (29,006)

Singapore dollar - - - 46,535

South African rand - (98,986) (98,986) (95,209)

Turkish Iira - (62,055) (62,055) (62,055)

Total securities subject to foreign currency risk $ 4,026,124 $ (7,930,291) $ (3,904,167) $ (2,824,415)

Foreign investments denominated in U.S. dollars 763,256 (961,510) (198,254) (192,582)

Total foreign investment securities $ 4,789,380 $ (8,891,801) $ (4,102,421) $ (3,016,997)




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SURS investment managers use financial futures to replicate an underlying security they wish to hold (sell) in the portfolio. In certain instances, it may be beneficial to own a futures contract rather than the underlying security (arbitrage). Additionally, SURS investment managers use futures contracts to improve the yield or adjust the duration of the fixed income portfolio. A financial futures contract is an agreement to buy or sell a specific amount at a specified delivery or maturity date for an agreed-upon price. Futures contracts are traded on organized exchanges, thereby minimizing the System’s credit risk. The net change in the futures contracts value is settled daily in cash with the exchanges. The cash or securities to fulfill these obligations are held in the investment portfolio. As the market value of the futures contract varies from the original contract price, a gain or loss is paid to or received from the clearinghouse and recognized in the Statement of Changes in Plan Net Position.

SURS investment managers use options in an attempt to add value to the portfolio (collect premiums) or protect (hedge) a position in the portfolio. Financial options are an agreement that gives one party the right, but not the obligation, to buy or sell a specific amount of an asset for a specified price, called the strike price, on or before a specified expiration date. As a writer of financial options, the System receives a premium at the outset of the agreement and bears the risk of an unfavorable change in the price of the financial instrument underlying the option. All written financial options are recognized as a liability on the System’s financial statements. As a purchaser of financial options, the System pays a premium at the outset of the agreement and the counterparty bears the risk of an unfavorable change in the price of the financial instrument underlying the option.

SURS fixed income managers invest in swaps and swaptions to manage exposure to credit, inflation, interest rate, and volatility risks. Swaptions are options on swaps that give the purchaser the right, but not the obligation, to enter into a swap at a specific date in the future. Swap agreements are privately negotiated agreements with a counterparty to exchange or swap investment cash flows, assets, foreign currencies, or market-linked returns at specified, future intervals. In connection with swap agreements, securities or cash may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default, bankruptcy, or insolvency. Swaps are marked to market daily based upon values from third party vendors or quotations from market makers to the extent available and any change in value is recorded as an unrealized gain or loss. SURS investment managers have entered into credit default, inflation-linked, and interest rate swap agreements.



Counterparty Credit Rating

Notional Value 2020 Fair Value 2020 Fair Value 2019

Change in Fair Value

Swaps

Credit default AA $ - $ - $ (5,586) $ 5,586

A - - 75,351 (75,351)

BBB - - (341,555) 341,555

No Rating 269,438,009 30,351 58,466 (28,115)

269,438,009 30,351 (213,324) 243,675

Inflation-linked No Rating - - 48,837 (48,837)

- - 48,837 (48,837)

Interest rate No Rating 172,042,331 (12,126,257) (12,049,328) (76,929)

172,042,331 (12,126,257) (12,049,328) (76,929)

$ 441,480,340 $ (12,095,906) $(12,213,815) $ 117,909

Swaptions A $ (56,000,000) $ (49,715) $ 207,929 $ (257,644)

BBB - - 101,499 (101,499)

No Rating - - (153) 153

$ (56,000,000) $ (49,715) $ 309,275 $ (358,990)

Forwards No Rating $ - $ (4,102,421) $ (1,085,424) $ (3,016,997)

Maturities in Years

Less than 1 year

1 to 5 years

5 to 10 years

10 to 20 years

More than 20 years

Fair Value 2020

Swaps

Credit default $ 2,327 $ 28,024 $ - $ - $ - $ 30,351 Interest rate - (1,456,795) (6,178,964) - (4,490,498) (12,126,257)

$ 2,327 $ (1,428,771) $ (6,178,964) $ - $ (4,490,498) $ (12,095,906)

Swaptions $ (49,715) $ - $ - $ - $ - $ (49,715)

Forwards $(4,102,421) $ - $ - $ - $ - $ (4,102,421)

Swaps and Credit Risk Table

Swaps and Maturities Table




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Credit default swap agreements involve one party making a stream of payments (the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the referenced entity, obligation, or index. The seller of protection generally receives from the buyer of protection a fixed rate of income throughout the term of the swap, provided there is no credit event. The seller effectively adds leverage to its portfolio as it is subject to investment exposure on the notional amount of the swap.

Inflation-linked swap agreements involve a stream of fixed payments in exchange for variable payments linked to an inflation index. These swaps can protect against unfavorable changes in inflation expectations and are utilized to transfer inflation risk from one counterparty to another.

Interest rate swap agreements involve the exchange of a set of variable and fixed-rate interest payments linked to a referenced interest rate without an exchange of the underlying principal amount. These agreements are used to limit or manage exposure to fluctuations in interest rates or to obtain a marginally lower interest rate than would be available without the swap. Gains and losses on swaps are determined based on market values and are recorded in the Statement of Changes in Plan Net Position.

Volatility swap agreements involve two parties taking opposite sides of the future volatility of an underlying instrument (e.g., an index, individual security or exchange rate) without the influence of its price. Payoff is determined by the future realized volatility. At expiry the holder of the long position in a volatility swap receives (or owes) the difference between the realized volatility and the volatility strike that was agreed upon at contract initiation. Volatility swaps are often utilized to trade the spread between realized and implied volatility or to hedge the volatility exposure of other positions in a portfolio.

SURS Rate Counterparty RateNotional

Value 2020 Fair Value 2020Pay Fixed /

Receive Fixed

1.50% to 2.75% 3 month U.S. dollar LIBOR1 $ 116,600,000 $ (10,473,317) Pay Fixed

0.30% 6 month Japanese yen LIBOR1 19,465,171 (129,371) Pay Fixed

$ 136,065,171 $ (10,602,688)

3 month U.S. dollar LIBOR1 1.5% to 2.75% $ 28,440,000 $ (1,620,067) Receive Fixed

6 month British pound LIBOR1 0.50% 7,537,160 96,498 Receive Fixed

$ 35,977,160 $ (1,523,569)

1 London Interbank Offered Rate (LIBOR)

Derivatives which are exchange-traded are not subject to credit risk. No derivatives held are subject to custodial credit risk. SURS maximum loss that would be recognized at June 30, 2020 if all of its derivatives counterparties failed to perform as contracted is $7.0 million. This maximum exposure is reduced by $1.6 million in collateral SURS holds from its counterparties, leaving net derivatives credit exposure of $5.4 million.



Securities LendingSURS Board of Trustees policies permit the System to lend its securities to broker-dealers and other entities with a simultaneous agreement to return the collateral for the same securities in the future. Deutsche Bank AG New York, the System’s third-party agent lender in fiscal year 2020, lent securities in exchange for cash collateral at 102% for U.S. securities and 105% for foreign securities. Cash collateral received for lent securities is shown on the Statement of Plan Net Position as both an asset (fair value of collateral) and liability (collateral owed to borrower after lent securities are returned). Lent securities are included in total investments on the Statement of Plan Net Position. Types of lent securities include corporate bonds, government and agency bonds, domestic equities and international equities. At year end, the System had no credit risk as a result of its securities lending program as the collateral received exceeded the fair value of the lent securities. The contract with the System’s third-party agent lender requires it to indemnify the System if the borrowers fail to return the securities (and if the collateral is inadequate to replace the securities lent) or fail to pay the System for income distributions by the securities’ issuers while the securities are out on loan. All securities loans can be terminated on demand by either the System or the borrower, although the average term of the loans was 13.39 days. Cash collateral is invested in the indemnified repurchase agreements, which at year end had a weighted average final maturity of 51.51 days, a weighted average reset of 21.77 days, and a fair value of $1,381.9 million.

*Included in net appreciation in fair value of investments in Statement of Changes in Plan Net Position.

Self-Managed PlanThe SMP members have the ability to invest their account balances in 30 mutual funds, variable annuities and commingled pools. These investment options are offered by two providers: Fidelity Investments and Teachers Insurance and Annuity Association (TIAA). As of June 30, 2020, the SMP had investments of $2,884,738,092. A detailed schedule of the funds and balances at June 30, 2020 is located in the Investment Section of The Comprehensive Annual Financial Report.

Reverse Repurchase AgreementsSURS held $512,000 in reverse repurchase agreements at June 30, 2020. Investment guidelines permit certain portfolios to enter into reverse repurchase agreements, which are a sale of securities with a simultaneous agreement to repurchase the securities in the future at the same price plus a stated rate of interest. The market value of the securities underlying reverse repurchase agreements exceeds the cash received, providing the counterparty a margin against a decline in market value of the securities. If the counterparty defaults on their obligations to sell these securities back to SURS or provide cash of equal value, SURS could suffer an economic loss equal to the difference between the market value of the underlying securities plus accrued interest and the agreement obligation including accrued interest. This credit exposure at June 30, 2020 was $273,000.

SURS may enter into reverse repurchase agreements with various counterparties and such transactions are governed by Master Repurchase Agreements (MRA). MRAs are negotiated contracts and contain terms in which SURS seeks to minimize counterparty credit risk. SURS also controls credit exposures by limiting trades with any one counterparty to stipulated amounts. The counterparty credit exposure is monitored daily and managed through the transfer of margin, in the form of cash or securities, between SURS and the counterparty.

The cash proceeds from reverse repurchase agreements are reinvested. The maturities of the purchases made with the proceeds of reverse repurchase agreements are not necessarily matched to the maturities of the agreements. The agreed-upon yields earned by the counterparty were 0.25%. The reverse repurchase agreements had open maturities, whereby a maturity date is not established upon entering into the agreement; however, interest rates on the agreements are negotiated daily. The agreements can be terminated at the will of either SURS or the counterparty.

Collateral as of June 30, 2020 ($ in millions)

Securities on loan as of June 30, 2020 $ 1,357.1

Fair value of cash collateral invested $ 1,381.9

Fair value of collateral received $ 1,381.5

Change in fair value* $ 0.4




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V. Net Pension LiabilityThe net pension liability for the SURS defined benefit plan as of June 30, 2020 is as follows:

Employer Net Pension Liability ($ in millions)

The net pension liability represents the defined benefit plan’s total pension liability determined in accordance with GASB Statement No. 67, less the plan net position. Amounts determined regarding the net pension liability are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The last experience study was performed in February 2018. An economic assumption study was performed June 2017. The total pension liability as of June 30, 2020 is based on the results of an actuarial valuation date of June 30, 2019 and rolled forward using generally accepted actuarial procedures. A summary of the actuarial methods and assumptions used in the latest actuarial valuation are presented below.

Single Discount RateA single discount rate of 6.49% was used to measure the total pension liability as of June 30, 2020. This single discount rate was based on an expected return on pension plan investments of 6.75% and a municipal bond rate of 2.45%. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the statutory contribution rates and the member rate. Estimated contributions of which the majority of the contributions (approximately 97% in 2021) is provided by the State of Illinois are projected to be $2.0 billion in 2021 and growing to $3.9 billion in 2045 based on current statutory requirements for current members. Based on these assumptions, the pension plan’s net position and future contributions were sufficient to finance the benefit payments through the year 2075. As a result, the long-term expected rate of return on pension plan investments was applied to projected benefit payments through the year 2075, and the municipal bond rate was applied to all benefit payments after that date.

Total Pension Liability

Plan Net Position

Net Pension Liability

Plan Net Position as a % of Total Pension Liability

2020 $ 50,236.5 $ 19,617.0 $ 30,619.5 39.05%

Summary of Actuarial Assumptions

Valuation date June 30, 2020Actuarial cost method Individual entry ageActuarial Assumptions Single discount rate 6.49% Expected rate of return 6.75% Municipal bond rate 2.45% (based on fixed-income municipal bonds reported in Fidelity “20-Year Municipal GO AA Index” as of June 30, 2020) Inflation 2.25% Projected salary increases 3.25% to 12.25% including inflation Post-retirement cost of living adjustments 3.0% Mortality table RP2014 White Collar, gender distinct. Projected using MP-2014 two dimensional mortality improvement scale, set forward one year for male and female annuitants.


Defined Benefit Plan Strategic Policy Allocation

Weighted Average Long-Term Expected Real Rate of Return

(Arithmetic)

Traditional Growth

Global Public Equity 44.0% 6.67%

Stabilized Growth



Options Strategies 6.0 4.44




Inflation Sensitive

U.S. TIPS 6.0 0.13

Principal Protection

Core Fixed Income 8.0 (0.45)

Crisis Risk Offset

Systematic Trend Following 2.1 2.16

Alternative Risk Premia 1.8 1.60

Long Duration 2.1 0.86

Total 100.0% 4.84%

Inflation 2.25

Expected arithmetic return* 7.09%


Regarding the sensitivity of the net pension liability to changes in the single discount rate, the following presents the net pension liability calculated using a single discount rate of 6.49%, as well as impact on the net pension liability of increasing the single discount rate by 1% and decreasing the single discount rate by 1%.

Sensitivity of Net Pension Liability to the Single Discount Rate Assumption as of June 30, 2020 ($ in millions)

Long-Term Expected Rate of ReturnThe asset allocation of investments within the defined benefit portfolio is approved by the Board of Trustees in accordance with SURS Investment Policy. Plan assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully-funded status for the benefits provided through the defined benefit pension plan. The table displayed below is the Board-approved asset allocation policy for fiscal year 2020 and the long-term expected real rates of return. The long-term expected rate of return on defined benefit investment assets was determined using a building-block method in accordance with the Actuarial Standards of Practices (ASOP) 27 Section 3.6.2(a) in which best estimate ranges of expected future real rates of return are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage, adjusted for inflation.

1% Current 1%

Decrease Discount Rate Increase

5.49% 6.49% 7.49%

Net Pension Liability $ 36,893.5 $ 30,619.5 $ 25,441.8

*The geometric expected rate of return includes volatility and correlation estimates, while the expected arithmetic return does not.

For the year ended June 30, 2020 the annual money-weighted rate of return on defined benefit plan investments, net of fees was 2.6%. The money weighted rate of return expresses investment performance, net of fees, adjusted for the changing amounts actually invested.




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VI. Capital AssetsCapital assets activity for the year ended June 30, 2020 was as follows:

Beginning Balance

Additions/Transfers in

Disposals/Transfers out

Ending Balance

Land and improvements $ 533,609 $ 1,851 $ - $ 535,460

Office building 8,363,517 3,826,626 - 12,190,143

Information system equipment and software 16,409,081 612,177 337,043 16,684,215

Furniture and fixtures 907,937 276,275 128,976 1,055,236

Constuction in progress 3,725,866 903,055 4,197,119 431,802

Total capital assets 29,940,010 5,619,984 4,663,138 30,896,856

Less accumulated depreciation:

Land and improvements 3,170 231 - 3,401

Office building 4,172,868 442,297 - 4,615,165

Information system equipment and software 15,154,553 273,413 276,412 15,151,554

Furniture and fixtures 813,209 54,079 128,976 738,312

Total accumulated depreciation 20,143,800 770,020 405,388 20,508,432

Capital assets, net $ 9,796,210 $ 4,849,964 $ 4,257,750 $ 10,388,424

The average estimated useful lives for depreciable capital assets are as follows:

Office building 40 years Information systems equipment 5 yearsInformation systems software 10 years Furniture and fixtures 7 years

VII. Compensated AbsencesThe System is obligated to pay employees at termination for unused vacation and sick time. The maximum time for which any individual may be paid is two times the annual earnable hours of vacation, and one-half of unused sick time earned between January 1, 1984 and December 31, 1997. No sick time earned after December 31, 1997 will be compensable at termination.

At June 30, 2020, the System had a liability of $ 1,350,131 for compensated absences, based upon the vesting method used for calculation of sick leave payable. The liability is included in the administrative expenses payable on the Statement of Plan Net Position, and the annual increase or decrease in liability is reflected in the financial statements as an increase or decrease in salary expense.

Compensated absences payable for the year ended June 30, 2020 was as follows:

Beginning Balance

Additions

Reductions

Ending Balance

Estimate Amount Due Within One Year

Compensated absences payable $ 1,107,076 $ 1,031,594 $ 788,539 $ 1,350,131 $ 66,153



VIII. Insurance CoverageThe System is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The employee health claims are administered through the State of Illinois. The System has minimized the risk of loss through private insurance carriers for commercial, business owners, and automobile policies. The deductible for this insurance coverage ranges from $100 to $50,000 per occurrence. There has been no significant reduction of insurance coverage from the prior year. The System has not had any insurance claims filed or paid in the past five fiscal years.

IX. Post-Employment BenefitsThe State provides health, dental, vision, and life insurance benefits for retirees and their dependents in a program administered by the Department of Central Management Services (CMS). Substantially all State employees become eligible for post-employment benefits if they eventually become annuitants of one of the State-sponsored pension plans. Health, dental, and vision benefits include basic benefits for annuitants and dependents under the State’s self-insurance plan and insurance contracts currently in force. Annuitants may be required to contribute toward health, dental, and vision benefits with the amount based on factors such as date of retirement, years of credited service with the State, whether the annuitant is covered by Medicare, and whether the annuitant has chosen a managed health care plan. Annuitants who retired prior to January 1, 1998, and who are vested in the State Universities Retirement System do not contribute toward health, dental, and vision benefits. For annuitants who retired on or after January 1, 1998, the annuitant’s contribution amount is reduced five percent for each year of credited service with the State; therefore, those annuitants with 20 or more years of credited service do not have to contribute toward health, dental, and vision benefits. Annuitants also receive life insurance coverage equal to the annual salary of the last day of employment until age 60, at which time the benefit becomes $5,000.

The State pays the State Universities Retirement System’s portion of employer costs for the benefits provided. The total cost of the State’s portion of health, dental, vision, and life insurance benefits of all members, including post-employment health, dental, vision, and life insurance benefits, is recognized as an expenditure by the State in the Illinois Comprehensive Annual Financial Report. The State finances the costs on a pay-as-you-go basis. The total costs incurred for health, dental, vision, and life insurance benefits are not separated by department or component unit for annuitants and their dependents nor active employees and their dependents.

A summary of post-employment benefit provisions, changes in benefit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which benefit provisions are established are included as an integral part of the financial statements of the Department of Central Management Services. A copy of the financial statements of the Department of Central Management Services may be obtained by writing CMS, Stratton Building, Room 715, 401 E. Spring St, Springfield, IL 62706.

X. Lease AgreementsThe System leases office space in Naperville for its Northern Counseling Center. The commitment for this lease is $13,203 for fiscal year 2020 and fiscal year 2021. In addition, the System leases office space in Springfield for its legislative staff. The fiscal commitment for this lease is $7,200 for both fiscal years 2020 and 2021. In 2019, the System entered into a lease agreement in which a local company will lease a portion of the building purchased at 1801 Fox Drive, Champaign, IL. The income for 2020 was $107,200 and will be $110,396 for 2021.




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Schedule of Net Pension Liability ($ in millions) Fiscal Year

Total Pension Liability

Plan Net Position

Net Pension Liability

Plan Net Position as a %

of Total Pension Liability

Covered Payroll

Net Pension Liability as

a % of Covered Payroll

2014 $ 39,182.3 $ 17,391.3 $ 21,791.0 44.39% $ 3,522.2 618.67%

2015 41,219.3 17,463.0 23,756.3 42.37 3,606.5 658.71

2016 42,970.9 17,005.6 25,965.3 39.57 3,513.1 739.10

2017 43,965.9 18,484.8 25,481.1 42.04 3,458.3 736.81

2018 46,815.6 19,321.1 27,494.5 41.27 3,470.2 792.30

2019 48,437.4 19,717.3 28,720.1 40.71 3,506.7 819.02

2020 50,236.5 19,617.0 30,619.5 39.05 3,642.6 840.59

Note: The System implemented GASB Statement No. 67 in fiscal year 2014. The information above is presented for as many years asavailable. The schedule is intended to show information for 10 years.

2020 2019

TOTAL PENSION LIABILITY

Service cost $ 634,453,468 $ 631,537,687

Interest on net pension liability 3,123,586,563 3,047,548,381

Differences between expected and actual experience 167,491,408 254,283,755

Changes in assumptions 618,763,571 327,945,723

Benefit payments (2,676,192,703) (2,558,990,197)

Refunds of member accounts (69,001,514) (80,538,398)

Net change in pension liability 1,799,100,793 1,621,786,951

Total pension liability - beginning 48,437,419,134 46,815,632,183

Total pension liability - ending $ 50,236,519,927 $ 48,437,419,134

PLAN FIDUCIARY NET POSITION

Member contributions $ 282,367,290 $ 280,017,618

Employer contributions 52,968,295 49,415,109

Non-employer contributing entity contributions 1,785,817,785 1,592,639,155

Net investment income 542,177,767 1,129,812,762

Benefit payments (2,676,192,703) (2,558,990,197)

Refunds of member accounts (69,001,514) (80,538,398)

Non-investment administrative expenses (18,469,275) (16,083,589)

Net change in plan fiduciary net position (100,332,355) 396,272,460

Plan fiduciary net position - beginning 19,717,347,961 19,321,075,501

Plan fiduciary net position - ending $ 19,617,015,606 $ 19,717,347,961

Net pension liability - ending $ 30,619,504,321 $ 28,720,071,173

Schedule of Changes in the Employer Net Pension Liability and Related Ratios



Schedule of Contributions from Employers and Other Contributing Entities ($ in thousands)

Actual Contribution Fiscal Year

Actuarially Determined

Contribution

Employers

Other Contributing

Entities

Contribution Deficiency

(Excess)

Covered Payroll

Actual Contribution as a % of Covered

Payroll

2011 $ 1,259,048 $ 36,547 $ 737,048 $ 485,453 $ 3,460,838 22.35%

2012 1,443,348 45,596 940,219 457,533 3,477,166 28.35

2013 1,549,287 41,874 1,359,607 147,806 3,533,858 39.66

2014 1,560,524 43,899 1,458,965 57,660 3,522,246 42.67

2015 1,622,656 39,934 1,488,591 94,131 3,606,537 42.38

2016 1,811,060 39,348 1,542,946 228,766 3,513,108 45.04

2017 1,864,843 38,386 1,612,165 214,292 3,458,320 47.73

2018 1,862,033 39,659 1,568,221 254,153 3,470,226 46.33

2019 2,239,366 49,415 1,592,639 597,312 3,506,650 46.83

2020 2,299,031 52,968 1,785,818 460,245 3,642,617 50.48


2014 18.15%2015 2.842016 0.122017 12.152018 8.292019 6.072020 2.64

Schedule of Investment ReturnsAnnual money-weighted rate of return, net of investment fees.

Note: The System implemented GASB Statement No. 67 in fiscal year 2014. The information above is presented for as many years asavailable. The schedule is intended to show information for 10 years.



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Schedule of Changes in Net Pension Liability The covered employee payroll is equal to the defined benefit payroll from June 30, 2018 valuation rolled forward with one year of wage inflation at 3.25%. The beginning of the year total pension liability uses a single discount rate of 6.59% and the end of the year total pension liability uses a single discount rate of 6.49%. The difference between the actual and expected experience includes the impact of this change in the single discount rate based on the long-term municipal bond rate of 3.13% as of June 30, 2019 and 2.45% as of June 30, 2020.

Actuarial Assumptions and Methods Used in Determining Fiscal Year 2020 Contributions

Valuation Date June 30, 2018

Valuation Method Projected unit credit

Amortization Method The statutory contribution is equal to the level percentage of pay contributions determined so that the Plan attains a 90% funded ratio by the end of 2045.

Remaining Amortization Period Not applicable. While an amortization payment is not directly calculated, it represents the difference between the total statutory contribution and the employer normal cost contribution.

Asset Valuation Method 5 year smoothed market

Inflation 2.25%

Salary Increases 3.25% to 12.25% including inflation

Investment Rate of Return 6.75% beginning with the actuarial valuation as of June 30, 2018.

Real Rate of Return 4.5%

Retirement Age Experience-based table of rates. Last updated for the 201 8 valuation pursuant to an experience study of the period 2015 - 2017.

Mortality RP2014 mortality White Collar table with gender distinct, projected using MP-2014 two dimensional mortality improvement scale, set forward one year for male and female annuitants.

Other Notes None

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION


Summary Schedule of Administrative Expenses For the Years Ended June 30, 2020 and 2019

2020 2019


Personnel services

Salary and wages $ 9,590,891 $ 8,258,578

Retirement contributions 1,143,873 953,693

Insurance and payroll taxes 2,588,201 2,522,758

13,322,965 11,735,029

Professional services

Computer services 1,826,155 976,790

Medical consultation 4,126 4,422

Technical and actuarial 680,461 977,335

Legal services 288,490 220,495

2,799,232 2,179,042

Communications

Postage 152,641 151,547

Printing and copying 52,561 45,765

Telephone 194,016 131,253

399,218 328,565

Other services

Equipment repairs, rental and maintenance 88,380 56,144

Building operations, maintenance, office rental 265,350 341,138

Surety bonds and insurance 470,152 401,732

Memberships and subscriptions 85,896 78,160

Transportation, travel and conferences 86,985 150,733

Education 39,431 38,402

EDP supplies and equipment 98,094 83,452

Office supplies 43,550 49,426

1,177,838 1,199,187

Depreciation and amortization 770,022 641,766

Total administrative expenses - defined benefit plan $ 18,469,275 $ $16,083,589

SELF-MANAGED PLAN

Salary and wages $ 268,279 $ 288,693

Retirement contributions 34,428 35,971

Insurance and payroll taxes 75,994 91,465

Technical and actuarial 374,987 152,839

Postage 6,491 7,168

Memberships and subscriptions 600 600

Transportation, travel and conferences 2,737 1,287

Printing and copying 1,522 1,262

Total administrative expenses - Self-Managed Plan $ 765,038 $ 579,285

TOTAL ADMINISTRATIVE EXPENSES $ 19,234,313 $ 16,662,874


51


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Technical and actuarial servicesAccenture, LLP $ - $ 298,000 Altec Products, Inc 4,176 3,967 The Berwyn Group 5,040 5,040 CareerBuilder, LLC 5,995 6,294 Chris Brown Photography 2,750 - CoventBridge Group, Inc - 257 Economic Research Institute 6,989 6,989 Federal Companie 11,019 - Gabriel, Roeder, Smith & Company 174,280 218,431 Glass Lewis & Co, LLC 113,400 113,400 Greenwood/Asher & Associates 53,204 - Illinois State Board of Investment - 9,250 Insurance Audit & Inspection 12,152 - Klausner, Kaufman, Jensen & Levinson - 12,876 LexisNexis 2,218 656 LinkedIn Corporation 10,500 10,500 McLean & Co 13,718 - Miscellaneous 3,118 1,312 Monica-Kaye Gamble, ESQ. - 8,901 Open position advertising/ Recruitment - 6,869 PayScale, Inc. - 6,199 Propio Language Services, LLC 563 855 Quality Training Solutions, LLC 15,800 8,000 Reed Group 1,360 1,360 Segal - 50,000 Segal Waters Consulting 26,250 8,750 Sikich LLP 41,788 46,324 Surface 51 18,975 - SurveyMonkey Inc. 360 360 Teachers' Retirement System 5,692 - The Northern Trust Company 71,376 68,553 Vimeo 240 240 Woolard Marketing Consultants, Inc. - 23,952 World Technologies, Inc 19,500 - Zahn Governmental Solutions, LLC 60,000 60,000

680,461 977,335

Legal servicesArea Wide Reporting Service 1,389 2,159 Burke Burns & Pinelli, Ltd. - 63,139 Featherstun, Gaumer, et al. 21,636 19,119 Foley & Lardner LLP 92,853 - Groom Law Group 5,588 - Ice Miller, LLP 49,292 129,011 K & L Gates LLP 3,178 - Klausner, Kaufman, Jensen & Levinson - 3,150 Mayer Brown LLP 4,895 - Meyer Capel 891 3,906 Miscellaneous 1,031 11 Morgan, Lewis & Bockius LLP 19,538 - Ottosen Dinolfo 2,950 - Reinhart Boemer Van Deuren 71,933 - Whitt Law LLC 13,317 -

288,490 220,495

SELF-MANAGED PLAN

Technical and actuarial servicesCammack LaRhette Advisors 157,500 95,000 Crain Communications Inc. - 1,543 Fidelity 75 2,333 Gabriel, Roeder, Smith & Company 11,661 7,672 Ice Miller, LLP 44,789 11,424 Mayer Brown 58,191 34,867 Voya 102,771 -

374,987 152,839

TOTAL CONSULTANT PAYMENTS $ 1,343,938 $ 1,350,670

Summary Schedule of Consultant Payments For the Years Ended June 30, 2020 and 2019



2020 2019

INVESTMENT MANAGER

Adams Street Partners $6,338,526 $5,726,967 Alinda Capital Partners 117,227 202,057 AQR Capital Management 722,613 389,838 Aksia TorreyCove Partners 572,917 - ARP Investments 329,312 - Aspect Capital 367,890 - Ativo Capital Management 762,789 778,271 Basis Investment Group 451,234 696,788 Bivium Capital Partners 443,081 - BlackRock Institutional Trust Company 1,447,923 1,622,806 Blackstone Property Partners 1,584,065 - Blue Vista Capital Management 464,827 415,772 Brookfield Asset Management 941,147 1,078,021 Campbell & Company 271,242 - Carlyle Property Partners 956,202 236,484 CastleArk Management 363,171 746,868 Channing Capital Management 465,232 495,672 Credit Suisse Asset Management 105,139 - Colchester Global Investors 734,302 702,562 Crow Holdings 589,784 715,198 Denali Advisors 232,140 240,563 Dune Capital Management 2,068,218 1,369,813 EARNEST Partners 1,473,724 708,461 Fairview Capital Partners 375,000 373,481 Fidelity Institutional Asset Management 369,511 978,875 Franklin Templeton Real Estate Advisors 442,583 475,830 Garcia Hamilton & Associates 500,968 444,677 Gladius Capital Management 1,351,470 2,172,763 GlobeFlex Capital 987,423 916,192 Heitman Capital Management 1,641,575 1,616,806 Invesco 477,882 1,467,812 J.P. Morgan Asset Management 1,977,271 1,918,478 KKR Prisma 88,829 1,269,503 LM Capital Group 417,886 286,519 Lombard Odier Asset Management 242,920 - LongTail Alpha 190,437 - Long Wharf RE Partners 643,974 - Macquarie Capital 1,448,825 1,487,387 Matarin Capital Management 610,750 659,792 Mesirow Financial Investment Management 838,743 1,221,185 Mondrian Investment Partners 1,395,156 1,324,814 Muller and Monroe Asset Management 821,196 1,055,299 Neuberger Berman 3,360,483 1,398,098 Northern Trust Asset Management 619,865 514,842 Oaktree Capital Management 207,363 157,404 Pacific Alternative Asset Management Company 281,133 1,811,710

Defined Benefit Plan Summary Schedule of Investment Fees and Administrative Expenses For the Years Ended June 30, 2020 and 2019




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Defined Benefit Plan Summary Schedule of Investment Fees and Administrative Expenses (continued) For the Years Ended June 30, 2020 and 2019


Pacific Investment Management Company 5,125,616 4,741,627 Pantheon Ventures 3,319,004 3,166,384 Parametric Clifton 384,390 422,896 Piedmont Investment Advisors 573,788 1,043,783 Progress Investment Management Company 2,002,484 2,377,489 Prudential Fixed Income 1,339,683 1,227,509 Pugh Capital Management 415,677 251,173 Ramirez Asset Management 245,032 - RhumbLine Advisers 189,704 155,054 Smith Graham & Company 25,999 176,642 State Street Global Advisors 12,410 77,992 StepStone Real Estate 207,487 288,751 Strategic Global Advisors 1,067,276 1,088,569 T. Rowe Price 3,378,284 3,377,875 TCW Metropolitan West Asset Management 135,719 889,327 UBS Realty Investors 427,255 1,048,099 Wellington Management Company 3,230,093 2,575,935 Xponance 753,326 -

Total management fees 63,927,175 60,586,713

MASTER TRUSTEE & CUSTODIAN

The Northern Trust Company 1,075,000 1,075,000

INVESTMENT CONSULTANT, MEASUREMENT & COUNSEL

Aksia TorreyCove Partners 277,846 -

Callan LLC 305,250 225,000

Faegre Drinker Biddle & Realth 25,427 -

Ice Miller LLP 141,743 35,111

K&L Gates 56,280 -

Mayer Brown LLP 3,445 2,102

Meketa Investment Group 496,333 526,583

Morgan, Lewis & Bockius LLP 33,395 -

NEPC - 15,000

Squire Patton Boggs 20,012 59,211

Total consultant, measurement & counsel fees 1,359,731 863,007

INVESTMENT ADMINISTRATIVE EXPENSES

Personnel 1,472,597 1,432,724

Resources and travel 65,732 77,205

Performance measurement and database 66,955 75,087

Total administrative expenses 1,605,284 1,585,016

TOTAL INVESTMENT EXPENSES $67,967,190 $64,109,736

2020 2019

56 Letter of Certification57 Report of Investment Activity59 Investment Summary61 Investment Results64 Investment Allocation67 Supporting Schedules

INVESTMENT

55




LETTER OF CERTIFICATION

NTAC:3NS-20

To the Board of Trustees and the Executive Director: The Northern Trust Company as Master Trustee has provided annual Statements of Account for the State Universities Retirement System Master Trust (“Trust”) which, to the best of its knowledge, provide a complete and accurate reflection of The Northern Trust Company’s record of the investments, receipts, disbursements, purchases and sales of securities and other transactions pertinent to the Trust for the period July 1, 2019 through June 30, 2020. In addition to the custody of assets, pursuant to and in accordance with the terms of the agreement establishing the Trust, The Northern Trust Company provided and continues to provide the following services as Master Trustee: 1. Receive and hold all amounts paid to the Trust Fund by the Board of Trustees. 2. Accept and deliver securities in connection with investment transactions in accordance

with the instructions of appointed Investment Managers. 3. Collect dividends and registered interest payments. 4. Collect matured or called securities and coupons to the extent provided in the operating

guidelines of The Northern Trust Company in effect from time to time. 5. Transfer securities to a lending agent appointed by the Board of Trustees pursuant to

directions from such lending agent. 6. Begin, maintain or defend any litigation necessary in connection with the investment,

reinvestment of the Trust Fund and the administration of the Trust. 7. Invest cash balances held from time to time in the individual investment management

accounts in short term-cash equivalent securities. 8. Exercise rights of ownership with respect to securities held in the trust fund, including

but not limited to, proxy voting in accordance with the instructions of appointed Investment Managers; respond to stock subscriptions, conversion rights, and other capital changes pursuant to procedures set forth in the operating guidelines of The Northern Trust Company in effect from time to time.

9. Hold securities in the name of the Trust or nominee form or other means as provided in the agreement establishing the Trust.

10. Use the Federal Book Entry Account System for deposit of Treasury securities, and clearing corporations as defined in Article 8 of the Illinois Uniform Commercial Code for the deposit of other securities.

11. Employ agents with the consent of the Board of Trustees to the extent provided in the agreement establishing the Trust.

12. Provide disbursement services. 13. Provide security fail float income to the extent provided in the operating guidelines of

The Northern Trust Company in effect from time to time. THE NORTHERN TRUST COMPANY

By: _____________________________ Matt Pfaff, Client Service Manager

NTAC:3NS-20

To the Board of Trustees and the Executive Director: The Northern Trust Company as Master Trustee has provided annual Statements of Account for the State Universities Retirement System Master Trust (“Trust”) which, to the best of its knowledge, provide a complete and accurate reflection of The Northern Trust Company’s record of the investments, receipts, disbursements, purchases and sales of securities and other transactions pertinent to the Trust for the period July 1, 2019 through June 30, 2020. In addition to the custody of assets, pursuant to and in accordance with the terms of the agreement establishing the Trust, The Northern Trust Company provided and continues to provide the following services as Master Trustee: 1. Receive and hold all amounts paid to the Trust Fund by the Board of Trustees. 2. Accept and deliver securities in connection with investment transactions in accordance

with the instructions of appointed Investment Managers. 3. Collect dividends and registered interest payments. 4. Collect matured or called securities and coupons to the extent provided in the operating

guidelines of The Northern Trust Company in effect from time to time. 5. Transfer securities to a lending agent appointed by the Board of Trustees pursuant to

directions from such lending agent. 6. Begin, maintain or defend any litigation necessary in connection with the investment,

reinvestment of the Trust Fund and the administration of the Trust. 7. Invest cash balances held from time to time in the individual investment management

accounts in short term-cash equivalent securities. 8. Exercise rights of ownership with respect to securities held in the trust fund, including

but not limited to, proxy voting in accordance with the instructions of appointed Investment Managers; respond to stock subscriptions, conversion rights, and other capital changes pursuant to procedures set forth in the operating guidelines of The Northern Trust Company in effect from time to time.

9. Hold securities in the name of the Trust or nominee form or other means as provided in the agreement establishing the Trust.

10. Use the Federal Book Entry Account System for deposit of Treasury securities, and clearing corporations as defined in Article 8 of the Illinois Uniform Commercial Code for the deposit of other securities.

11. Employ agents with the consent of the Board of Trustees to the extent provided in the agreement establishing the Trust.

12. Provide disbursement services. 13. Provide security fail float income to the extent provided in the operating guidelines of

The Northern Trust Company in effect from time to time. THE NORTHERN TRUST COMPANY

By: _____________________________ Matt Pfaff, Client Service Manager



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REPORT OF INVESTMENT ACTIVITY

December 11, 2020

Board of TrusteesState Universities Retirement System1901 Fox DriveChampaign, IL 61820

Dear Board of Trustees:

I am pleased to present the Investment Section of the SURS Comprehensive Annual Financial Report for the fiscal year ended June 30, 2020, including this report on Investment Activity. SURS maintains both a defined benefit and a defined contribution plan, known as the Self-Managed Plan (SMP). As of June 30, 2020, the assets in the defined benefit plan are valued at approximately $19.6 billion while the assets in the SMP are valued at approximately $3.0 billion.

Fiscal Year 2020 has seen remarkable shifts in economic and financial market performance. Global financial markets entered calendar 2020 on relatively strong footing. In January, the first COVID-19 case was acknowledged by Chinese authorities. By virtue of greater freedom of travel and 21st century globalization, the virus spread far more quickly than was initially expected based on previous viral outbreaks. In March, in an effort to contain the spread, countries responded by enacting stringent lockdowns leading to an abrupt halt in production and consumption. Similarly, businesses were forced to temporarily close and layoffs expanded dramatically and swiftly. The impact on the economy and financial markets was extreme. U.S. equities ended their 10-year bull market, entering bear market territory (defined as a decline of 20%) at the fastest pace in history. From its peak, the S&P 500 declined by 34% in 24 trading days. Other global equity markets also rapidly entered bear market territory and continued their path downward throughout the month of March. With limited data on COVID-19, the pendulum clearly swung towards pessimism regarding the virus’ impact and the likely path of activity going forward. After ending the year 2019 below 14, the VIX fear index spiked above its prior peak during the Global Financial Crisis, briefly breaching 80 in early March. At the depth of the drawdown on March 23, 2020, global equity indices were down more than 30%. Investors universally fled risk assets, in all forms, during the selloff in favor of perceived safer assets like US Treasuries.

To combat the expected significant decline in economic activity, fiscal and monetary authorities globally responded with immediate and historic stimulus measures. The Federal Reserve, in the midst of the March drawdown, immediately cut the Fed Funds Target Rate effectively to zero, and subsequently introduced aggressive stimulus measures, including backstop liquidity, funding programs, and trillions of dollars in promised asset purchases. Meanwhile, fiscal authorities released over $2.4 trillion in targeted stimulus, with the promise of additional measures in the future. Importantly, both the speed of the response, and the breadth of the response, made the joint monetary/fiscal stimulus unprecedented.

Robust stimulus across global developed and emerging economies, coupled with incremental positive news regarding the spread of COVID-19, and economies slowly reopening, set the stage for a relatively rapid rebound in risk assets. The S&P 500 rebounded from March 23 lows and experienced its best 50-day performance in history. In the second calendar quarter of 2020, broad equity markets such as the Russell 3000 (US equities), the MSCI EAFE, (developed market equities), and the MSCI Emerging Markets (emerging market equities) generated total returns of 22.0%, 14.9%, and 18.1%, respectively. Given support from the Federal Reserve and increased risk appetite, credit recovered rapidly as well, with the Bloomberg Barclays US High Yield index generating a return of 10.2%. The broader fixed income market, as measured by the Bloomberg Barclays US Aggregate, benefitted from monetary stimulus, producing a 2.9% total return. While the VIX remained elevated relative to its pre-crisis levels at 30.4 as of June 2020, it had fallen significantly since the peak of the crisis in the first calendar quarter. Given the significant changes to the global economy and capital markets brought about by the COVID-19 pandemic SURS expects to complete an evaluation of the asset allocation during fiscal year 2021.


REPORT OF INVESTMENT ACTIVITY

During fiscal year 2020, the SURS portfolio returned 2.64%, net of fees, exceeding the policy portfolio return of 2.00%. The positive relative performance was especially noteworthy, given the significant portfolio restructuring completed during the fiscal year. As discussed last year, SURS has adopted a risk-based, functional framework for allocating capital. This framework makes use of strategic/functional classes that in-turn utilize underlying asset classes and strategies. As a result, each of SURS’s existing asset classes have been remapped to various risk-based, functional strategic classes. Based on these changes, the verbiage below highlights the performance of the SURS’s new risk-based strategic classes.

The Total Fund’s outperformance relative to the policy portfolio for Fiscal 2020 was primarily due to:

● Strong relative performance by the aggregate Traditional Growth portfolio and the option strategies sub-class of the Stabilized Growth portfolio;

● Strong absolute and relative performance by the Inflation Sensitive class due to a legacy commodities allocation; and

● Outperformance by the newly implemented Crisis Risk Offset class, which was funded during the fiscal year.

From a long-term perspective, the SURS portfolio has performed well, earning an 7.9% annualized rate of return over the past 30 years, exceeding the 7.6% policy portfolio return. This return is also in line with the 8.0% average assumed rate of return in effect over the last 30 years and the current 6.75% assumed rate of return.

Investment performance is calculated using a time-weighted rate of return. Returns are calculated by Northern Trust using industry best practices. Northern Trust calculated performance rates of return by portfolio and all composites used throughout this section.

SURS continues to display a strong commitment to diversity as investments with firms owned by minorities, women, and persons with a disability (MWDB), continue to grow. The search activity and portfolio restructuring completed during the fiscal year presented an opportunity to further demonstrate this important initiative. Assets managed by diverse firms now represent approximately $7.2 billion or 37% of the Total Fund.

Sincerely,

Douglas C. Wesley, CFAChief Investment Officer



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INVESTMENT SUMMARY

The SURS Board of Trustees is charged with the responsibility of investing the assets entrusted to them solely for the benefit of the System’s participants and beneficiaries. The Trustees, in carrying out their responsibilities, adhere to applicable Illinois statutes and the prudent expert rule, which states that the Trustees must act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character with like aims. In carrying out their fiduciary duties, the Trustees have set forth clearly defined investment policy, objectives, and strategies.

Investment Policy The Board approves the Statement of Investment Policy, which outlines the investment philosophy and practices of SURS. The policy describes the organization and division of responsibilities necessary to implement the Board’s philosophy and objectives prudently; establishes a framework for making investment decisions and monitoring investment activity; and promotes effective communication between the Board, staff, and other involved parties.

Investment Objectives The investment objective of the total portfolio is to achieve long-term, sustainable, investment performance necessary to meet or exceed the System’s assumed rate of return, net of all management fees with appropriate consideration for portfolio volatility (risk) and liquidity.

Investment Strategies

Strategic Asset Allocation The purpose of the strategic allocation is to establish a framework that has a high likelihood, in the judgment of the Board, of realizing the System’s long-term funding success. Strategic allocation involves establishing target allocation percentages for each approved strategic class and their sub-class components. The asset-liability study completed in September 2018 resulted in significant structural changes to SURS asset allocation targets. The foundation of these changes consisted of a transition from conventional asset classes to functional asset classes as the basis of portfolio weighting. The transition to functional classes was completed during Fiscal Year 2020.

The functional asset classes are categorized broadly as growth oriented or diversifying. Growth-oriented strategies include risk-taking assets or strategies that produce high total returns relative to other asset classes. The three strategic components within this group are shown and described below.

● Non-Traditional Growth Provide growth in excess of Traditional Growth through exposure to investments driven by exposure to the equity risk and illiquidity risk premiums (i.e. Private Equity and Non-Core Real Assets, which includes real estate and infrastructure)

● Traditional Growth Provide growth in line with traditional public equity markets (i.e. U.S. Equity, Non-U.S. Equity, Global Equity and REITs)

● Stabilized Growth Provide growth through strategies that are exposed to market beta, exhibiting expected returns similar to Traditional Growth but with lower volatility (i.e. Credit fixed income including emerging market debt, options strategies, and Core Real Assets)

Diversifying strategies provide two forms of diversification via anchor strategies and offset strategies. Anchor strategies are characterized by low volatility and high liquidity. Offset strategies, in contrast, tend to be higher volatility strategies that have zero-to-negative correlation to public equity markets. These strategies, described below, are designed to perform well in the event of a prolonged equity market downturn.

● Inflation Sensitive Provide an anchor to the portfolio with minimal exposure to equity risk that is designed to help protect the portfolio during periods of high inflation. (i.e. U.S. TIPS)

● Principal Protection Provide an anchor to the portfolio by exhibiting low volatility with minimal exposure to equity risk. Designed to provide consistent, stable returns during most market environments and preserve principal during periods where growth investments are experiencing significant drawdowns. (i.e. Core Fixed Income)

● Crisis Risk Offset Provide an offset to growth risk through liquid exposures to risk premiums expected to exhibit offsetting behavior to growth investments during periods of significant drawdown (i.e. Long Duration Treasury, Systematic Trend Following, Alternative Risk Premia)


INVESTMENT SUMMARY

RebalancingProper implementation of the investment policy requires that a periodic adjustment, or rebalancing, of assets be conducted as needed to ensure conformance with policy target levels. Such rebalancing is necessary to reflect cash flows and performance imbalances among strategic classes. SURS rebalancing policy calls for rebalancing, as soon as practical, if a strategic class exceeds or falls below its target allocation by 3%. Ongoing rebalancing of the investment portfolio occurred as needed during the year with the assistance of a cash overlay strategy and System cash flows.

The following table shows the sub-asset classes from June 30, 2020 and 2019, mapped into the appropriate functional class:

Each functional group employs one or more investment managers and strategies as a method to ensure overall fund diversification. Each investment management firm is afforded full discretion to diversify its portfolio(s) in a manner deemed appropriate. The Trustees have developed guidelines to direct the investment managers in their execution of the overall investment policy. The guidelines are specific to the asset class and strategy managed.

Functional Asset Class 2020 2019

Traditional Growth 43.9% 52.0%

U.S. Equity 18.8 22.6

Non-U.S. Equity 15.1 19.2

Global Equity 10.0 8.0

REITs - 2.2

Stabilized Growth 24.3 24.6

Option Strategies 6.0 4.0



Non-Traditional Growth 11.2 9.7



Inflation Sensitive 5.4 5.6

U.S. TIPS 5.4 3.7

Commodities - 1.9

Principal Protection 8.5 8.1

Core Fixed Income 8.5 8.1

Crisis Risk Offset 5.5 0.0

Systematic Trend Following 1.7 0.0

Alternative Risk Premia 2.0 0.0

Long Duration 1.8 0.0

Cash 1.2 0.0

Cash 1.2 0.0

Gro

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INVESTMENT RESULTS

Long-Term Investment ResultsFor the 10-year period ended June 30, 2020, SURS total fund earned an annualized total return, net of all investment management expenses, of 8.5%. This matched the policy portfolio benchmark.

The policy portfolio is comprised of market indices which are consistent with the overall asset allocation. The policy portfolio reflects a passive implementation of the investment policy. As of June 30, 2020, the strategic policy portfolio is comprised of the benchmarks shown below.

Policy vs. ActualPercentage

1 S&P/LSTA Lev Loan Index, Barclays Cap Global Agg Credit, JPM CEMBI Broad, JPM EMBI Global Diversified, JPM GBI-EM Global Diversified, and BB Barclays Global High Yield2 CBOE S&P 500 PutWrite Index, CBOE S&P 500 BuyWrite Index, MSCI ACWI ex USA ND, and 90 Day T-Bill 3 NCREIF ODCE + 1.5% and CPI U + 500 bps

Asset Class Benchmark Strategic Policy Portfolio

Traditional Growth MSCI ACWI IMI 44.0%

Stabilized Growth

Credit Fixed Income Custom blended benchmark1 14.0

Core Real Assets NCREIF ODCE 5.0

Options Strategies Custom blended benchmark2 6.0


Private Equity MSCI ACWI IMI +2% 8.0

Non-Core Real Assets Custom blended benchmark3 3.0

Inflation Sensitive BB Barclays U.S. TIPS 6.0

Principal Protection BC U.S. Intermediate Agg x Credit Bond 8.0

Crisis Risk Offset

Systematic Trend Following CS Mngd Fut Liq 15% Volatility 2.1

Alternative Risk Premia 90 Day T-Bill + 2% 1.8

Long Duration BBG Barclays U.S. Long Govt 2.1

100.0%

0%

10%

20%

30%

40%

50%

TraditionalGrowth

StabilizedGrowth

Non-TraditionalGrowth

InflationSensitive

PrincipalProtection

Crisis RiskOffset

Cash

44.0

25.0 24.3 25.0 26.0

11.2 11.0

15.0

5.4 6.0 6.08.5 8.0 8.0

5.5 6.0

20.0

1.2 0.0 0.0

43.9

Asset Allocation (Including Overlay) Interim Strategic Policy Target Long-Term Strategic Policy Target


INVESTMENT RESULTS

Fiscal Year Ended June 30 Annualized

2016 2017 2018 2019 2020Since

Inception 3 yrs 5 yrs 10 yrs

Total FundState Univ. Retirement NEW 0.2% 12.2% 8.2% 6.0% 2.6% 5.6% 5.8% 8.5%SURS Policy Benchmark 0.8 11.7 7.9 6.8 2.0 5.5 5.8 8.5 CPI U 1.0 1.6 2.9 1.6 0.6 1.7 1.6 1.7

Traditional GrowthSURS Total Traditional Growth (2.3) 18.7 11.5 5.3 1.7 6.1 6.7 -Performance Benchmark (2.1) 17.8 11.0 5.8 1.4 6.0 6.5 -

Total U.S. Equity 0.8 18.9 14.9 7.3 4.2 8.7 9.0 13.3 DJ U.S. Total Stock Market TR 2.0 18.5 14.8 8.9 6.4 10.0 10.0 13.7

Non-U.S. Equity (9.6) 20.9 7.4 0.6 (5.0) 0.8 2.3 5.6 SURS Non-U.S. Equity Blend (10.2) 20.5 7.3 1.3 (4.8) 1.1 2.3 5.0

Global Equity (1) (2.4) 21.6 13.6 7.5 8.4 9.8 9.5 10.9 SURS Global Equity Blend (3.7) 18.8 10.7 5.7 1.3 5.9 6.3 9.1

Stabilized Growth (Inception 9/30/2019)SURS Total Stabilized Growth - - - - - (0.7) - - -Performance Benchmark - - - - - (0.6) - - -

Options Strategies (Inception 4/30/2018) - - - 3.0 1.3 2.9 - - -SURS Option Strategies Blend - - - 1.1 (6.2) (1.6) - - -

Core Real Assets (2) 11.8 6.6 6.6 5.6 1.2 4.4 6.4 8.9 NCREIF Open-End Divers Core NT 12.6 7.4 7.1 6.5 3.9 5.9 7.5 10.4

Credit Fixed Income (Inception 9/30/2019) - - - - - (0.8) - - -SURS Credit Fixed Income Blend - - - - - 0.1 - - -

Emerging Market Debt 3.9 7.4 (1.4) 10.8 (3.0) 1.9 3.4 -SURS Total EMD 4.9 6.5 (1.5) 10.4 (1.0) 2.5 3.8 -

Credit Ex Dedicated EMD 3.1 2.7 1.0 7.1 0.5 2.8 2.9 -SURS Credit Ex D. EMD Blend 6.0 (0.3) (0.4) 7.9 3.0 3.4 3.2 -

Non-Traditional GrowthSURS Total Non-Traditional Growth 5.0 11.3 13.8 11.2 1.4 8.7 8.4 -Performance Benchmark 6.4 17.7 14.7 11.1 (4.8) 6.7 8.7 -

Non-Core Real Estate (2) 13.6 9.8 12.4 10.3 (0.6) 7.2 9.3 12.3 NCREIF ODCE + 1.5% (Qtr Lag) 14.1 9.0 8.7 8.1 5.5 7.4 9.0 11.9

Infrastructure (2) 8.8 2.4 2.1 5.4 7.8 5.0 5.1 6.3 CPI U + 500 bps (Qtr Lag) 5.9 7.5 7.5 6.9 6.6 7.0 6.9 6.8

Real Estate Debt (2) (Inception 12/31/2017) - - - 5.5 (6.4) - - -NCREIF ODCE + 1.5% (Qtr Lag) - - - 8.1 5.5 - - -

Private Equity (2) 4.4 12.9 16.5 13.6 0.6 10.0 9.1 11.1 SURS Total PE Blend 2.8 21.6 17.2 11.9 (8.6) 6.2 8.4 13.2

Inflation SensitiveSURS Total Inflation Sensitive 3.9 (1.0) 5.1 1.8 7.4 4.7 3.4 -Inflation Sensitive Blend 4.4 (2.6) 3.8 0.9 6.8 3.8 2.6 -

U.S. TIPS 3.8 (0.1) 2.1 4.9 7.8 4.9 3.7 3.5 BB Barclays U.S. TIPS 4.4 (0.6) 2.1 4.8 8.3 5.0 3.7 3.5



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INVESTMENT RESULTS

Principal ProtectionSURS Total Principal Protection 6.1 (0.6) (0.0) 7.4 6.5 4.5 3.8 -Performance Benchmark 6.0 (0.3) (0.4) 7.9 7.5 4.9 4.1 -

Crisis Risk Offset (Inception 11/30/2019)SURS Total Crisis Risk Offset - - - - - 3.1 - - -Performance Benchmark - - - - - 3.0 - - -

Systematic Trend Following (Inception 11/30/2019) - - - - - (4.4) - - -CS Mngd Fut Liq 15% Volatility - - - - - (9.5) - - -

Long Duration (Inception 12/03/2019) - - - - - 16.6 - - -BBG Barclays U.S. Long Govt - - - - - 16.7 - - -

Alternative Risk Premia (Inception 11/30/2019) - - - - - (2.9) - - -90 Day T-Bills + 2% - - - - - 1.6 - - -

Fiscal Year Ended June 30 Annualized

2016 2017 2018 2019 2020Since

Inception 3 yrs 5 yrs 10 yrs

Return calculations (except for private, infrastructure and direct real estate) were prepared using a time-weighted rate of return methodology in accordance with the Performance Presentation Standards of the CFA Institute.

(1) MSCI World Index through July 2008; asset-weighted benchmark of MSCI World Index and MSCI All Country World Index (ACWI) from August 2008 through November 2008; MSCI ACWI since December 2008.

(2) Private equity returns and direct real estate returns were prepared using an Internal Rate of Return (IRR) methodology which is consistent with industry standards. Additionally, the returns for both the portfolio and the benchmark are reported one quarter in arrears due to the length of the performance reporting cycle.

Self-Managed PlanFiscal year 2020 marks the twenty-second complete year of the Self-Managed Plan (SMP). As of June 30, 2020, the SMP had accumulated plan assets of approximately $3.0 billion. This represents an increase of approximately $294 million since the end of fiscal year 2019. Contributing to the growth in plan assets was a market-related increase of $224 million. During the past several years, SMP participants have continued to maintain a balanced exposure to equities. In aggregate, the total funds invested by SMP participants have an allocation of 71% equity, 27% fixed income, and 2% real estate. This was a 3% decrease in the equity allocation as compared to last year’s position.

A detailed schedule of the funds available in this plan, along with the investment totals for each fund, can be found in the accompanying table.


INVESTMENT ALLOCATIONSelf-Managed Plan Investment Allocation, June 30, 2020

U.S. Equity Non-U.S. Equity Fixed Income Balanced Real Estate Total

Fidelity Funds

Fidelity Managed Income Portfolio Class 2 $ - $ - $ 80,057,210 $ - $ - $ 80,057,210

Fidelity U.S. Bond Index Institutional Premium - - 68,107,884 - - 68,107,884

PIMCO Total Return Institutional - - 58,032,127 - - 58,032,127

Fidelity Puritan Class K - - - 246,457,112 - 246,457,112

Ariel Fund Institutional 30,838,582 - - - - 30,838,582

American Beacon Large Cap Value Institutional 13,556,418 - - - - 13,556,418

Wells Fargo Small Company Growth R6 23,524,943 - - - - 23,524,943

Fidelity Growth Company Commingled Pool 210,523,712 - - - - 210,523,712

Fidelity Extended Market Index Premium 53,647,540 - - - - 53,647,540

Fidelity Contrafund Commingled Pool 151,276,640 - - - - 151,276,640

Fidelity Low Priced Stock Class K 43,898,109 - - - - 43,898,109

Fidelity 500 Index Institutional Premium 284,545,044 - - - - 284,545,044

Fidelity Diversified International Class K - 53,227,943 - - - 53,227,943

Fidelity Global ex-U.S. Index Institutional Premium - 34,786,388 - - - 34,786,388

Fidelity Real Estate Investment - - - - 20,663,580 20,663,580

Fidelity Freedom Index Funds - Inst Premium (1) - - - 423,201,848 - 423,201,848

Fidelity Total 811,810,988 88,014,331 206,197,221 669,658,960 20,663,580 1,796,345,080

62.3%

TIAA-CREF Funds

CREF Money Market Account R3 - - 8,790,956 - - 8,790,956

Vanguard Federal Money Market Fund - - 25,425,760 - - 25,425,760

TIAA Traditional Annuity - - 144,620,520 - - 144,620,520

CREF Bond Market Account R3 - - 67,996,512 - - 67,996,512

CREF Inflation-Linked Bond Account R3 - - 31,539,811 - - 31,539,811

CREF Social Choice Account R3 - - - 60,332,750 - 60,332,750

CREF Equity Index Account R3 106,252,431 - - - - 106,252,431

CREF Growth Account R3 (3) 366,507 - - - - 366,507

CREF Stock Account R3 185,962,539 - - - - 185,962,539

CREF Global Equities Account R3 - 68,329,133 - - - 68,329,133

Dimensional Target Date Ret Inc Fund - Inst (2) - - - 12,067,190 - 12,067,190

TIAA Real Estate Account - - - - 22,791,957 22,791,957

TIAA-CREF Large-Cap Growth Index - Institutional 176,723,716 - - - - 176,723,716

TIAA-CREF Lifecycle Index Funds - Institutional - - - 177,193,230 - 177,193,230

TIAA-CREF Total 469,305,193 68,329,133 278,373,559 249,593,170 22,791,957 1,088,393,012

37.7%

GRAND TOTAL $ 1,281,116,181 $ 156,343,464 $ 484,570,780 $ 919,252,130 $ 43,455,537 $ 2,884,738,092

44.4% 5.4% 16.8% 31.9% 1.5% 100.0%

SMP Forfeiture Reserve (4) 12,250,123

SMP Disability Reserve (4) 119,475,981

Total SMP Investments $ 3,016,464,196

(1) As of June 30, 2020, the Fidelity Freedom Fund (lifecycle) series is the default fund for members who have selected the Self-Managed Plan but have not yet selected individual mutual funds and/or variable annuities.

(2) As of June 30, 2020, the Dimensional Target Date Retirement Income series is the default fund for members who have selected TIAA but have not yet selected individual mutual funds/variable annities/commingled pools.

(3) CREF Growth Account is no longer an approved option for the Self-Managed Plan. Assets remaining in the Account were invested prior to the termination of this option.

(4) These assets are commingled with the SURS defined benefit plan investments and accrue interest equal to the overall annual rate of return of the fund, net of fees.



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Traditional Growth

U.S. Equity ManagersChanning Capital Management $ 78,111 EARNEST Partners 180,665 Matarin Capital Management 79,919 Northern Trust Asset Management 1,112,671 RhumbLine Advisers 1,162,249 Xponance 722,405 T. Rowe Price 300,602 Transition Manager 41,918

Subtotal 3,678,540

Non-U.S. Equity ManagersAtivo Capital Management 269,496 BlackRock 1,853,227 GlobeFlex Capital 284,932 Strategic Global Advisors 310,610 Xponance 223,522

Subtotal 2,941,787

Global Equity ManagersMondrian Investment Partners 574,410 T. Rowe Price 702,779 Wellington Management 648,683

Subtotal 1,925,872

Stabilized GrowthOption Strategies Managers

AQR Global Risk-Managed BuyWrite Fund 283,913 Gladius Capital Management 283,547 KKR Prisma Codlin Fund 9,184 Neuberger Berman U.S. Equity Index PutWrite Fund 591,653 PAAMCO Newport Monarch Fund 6,401

Subtotal 1,174,698

Core Real Asset ManagersBlackstone Property Partners 199,146 Carlyle Property Investors 108,938 Heitman America Real Estate Trust 212,438 JPMCB Strategic Property Fund 228,500 UBS Trumbull Property Fund 85,837

Subtotal 834,859

Emerging Market Debt ManagersColchester Local Markets Debt Fund 143,160 Prudential Emerging Markets Debt Blend 325,777

Subtotal 468,937

Credit Ex Dedicated EMD ManagersNeuberger Berman 954,026 Pacific Investment Management Co - Global Credit 966,019 Bivium Emerging Managers 352,205

Subtotal 2,272,250

Non-Traditional GrowthNon-Core Real Asset Managers

Blackstone Property Partners Europe VI 13,287 Blue Vista Real Estate Partners IV 33,404 Brookfield Asset Management 45,606 Crow Holdings Realty Partners 34,045 Dune Real Estate Partners 147,498 Franklin Templeton Real Estate Advisors 84,991 Long Wharf Real Estate Partners VI 4,504 StepStone REGPF II 39,277

Subtotal 402,612

Real Estate Debt ManagersBasis Investment Group Real Estate Fund I 18,183 Oaktree Real Estate Debt Fund II 17,450

Subtotal 35,633

Defined Benefit Plan Investment Allocation, June 30, 2020 ($ in thousands)

Fair Value



Infrastructure ManagersAlinda Capital Partners $ 23,260 Macquarie Infrastructure Partners 126,418

Subtotal 149,678

Private Equity ManagersAdams Street Partners 925,825 Fairview Capital Partners 80,433 Mesirow Financial Private Equity 111,044 Muller & Monroe Asset Management 89,329 Pantheon Ventures 423,318 Aksia TorreyCove Partners 73,570

Subtotal 1,703,519

Inflation SensitiveTreasury Inflation-Protected Securities Managers

RhumbLine Advisers 1,062,285

Subtotal 1,062,285

Principal ProtectionFixed Income Managers

Cash 337,546 Garcia Hamilton & Associates 421,005 LM Capital Group 368,446 Pugh Capital Management 369,733 Ramirez Asset Management 243,287

Subtotal 1,740,017

Crisis RiskSystematic Trend Following Managers

Aspect Capital 94,800 Campbell & Company 88,040 Credit Suisse Asset Management 87,528 Longtail Alpha 67,322

Subtotal 337,690

Long Duration ManagersRhumbline Long Duration 360,362

Subtotal 360,362

Alternative Risk Premia ManagersARP Investments 82,960 Lombard Odier 102,776 PIMCO Alternative Risk 77,107 PIMCO Commodity Alpha Fund 118,500

Subtotal 381,343

Cash OverlayParametric Clifton 167,224

Subtotal 167,224

SMP Forfeiture/Disability Reserves (131,726)

TOTAL FUND $ 19,505,580

Defined Benefit Plan Investment Allocation, June 30, 2020 ($ in thousands) (continued)

Fair Value

(a)

(b)

(a) These assets are commingled with the SURS defined benefit plan investments. (b) Amount includes net pending transactions of ($61,821) and accrued investment income receivable of $47,440.



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TEN LARGEST U.S. EQUITY HOLDINGS (excludes commingled funds) Shares Carrying Value

Apple Inc 633,005 $ 230,920,224

Microsoft Corp 1,049,605 213,605,114

Amazon.com Inc 68,792 189,784,745

Facebook Inc Class A 370,305 84,085,156

Alphabet Inc Class C 44,770 63,287,320

Visa Inc Class A 327,404 63,244,631

Johnson & Johnson 426,913 60,036,775

Alphabet Inc Class A 40,092 56,852,461

Mastercard Inc Class A 165,626 48,975,608

Procter & Gamble 402,983 48,184,677

TEN LARGEST NON-U.S. EQUITY HOLDINGS (excludes commingled funds) Shares Carrying Value

Nestle SA (Switzerland) 310,930 $ 34,369,488

London Stock Exchange Group (United Kingdom) 285,364 29,469,954

Roche Holdings AG (Switzerland) 77,025 26,691,107

ASML Holdings NV (Netherlands) 66,503 24,417,092

HDFC Bank Ltd (India) 507,872 23,087,861

Sanofi SA (France) 222,397 22,643,028

GlaxoSmithKline PLC (United Kingdom) 995,519 20,131,216

Check Point Software Technologies (Israel) 185,900 19,971,237

Alibaba Group Holding Ltd (China) 88,444 19,077,371

Samsung Electronics Co Ltd (Republic of Korea) 427,085 18,747,215

TEN LARGEST FIXED INCOME HOLDINGS (excludes commingled funds)

Asset Description S & P Rating Interest Rate Maturity Date Par Value Carrying Value

U.S. Treasury Bonds AA+ 3.125% November 15, 2028 $ 81,400,000 $ 98,414,508

U.S. Treasury Notes AA+ 0.375 July 15, 2023 34,674,000 39,780,363

U.S. Treasury Inflation-Indexed Notes AA+ 0.125 January 15, 2023 34,565,000 39,328,160

U.S. Treasury Inflation-Indexed Bonds AA+ 0.625 January 15, 2024 33,690,000 38,986,967

U.S. Treasury Inflation-Indexed Notes AA+ 0.125 July 15, 2024 34,508,000 38,917,744

Federal Home Loan Bank Bond AA+ FLTG September 13, 2021 38,905,000 38,875,715

U.S. Treasury Inflation-Indexed Notes AA+ 0.125 April 15, 2022 35,021,000 37,457,470

U.S. Treasury Inflation-Indexed Notes AA+ 0.250 January 15, 2025 32,692,000 37,229,611

U.S. Treasury Inflation-Indexed Bonds AA+ 0.125 January 15, 2022 31,766,000 36,469,218

U.S. Treasury Inflation-Indexed Notes AA+ 0.125 July 15, 2022 31,473,000 35,915,094

Note: A complete list of the portfolio holdings is available upon request.





2020

Investment Brokerage Firm Commission Shares Traded Commission per Share

Loop Capital Markets $ 106,533 7,019,160 $ 0.02

Goldman Sachs 60,679 2,076,571 0.03

Penserra Securities 50,361 5,175,548 0.01

Barclays 39,938 3,945,326 0.01

Sturdivant and Company 32,413 3,505,387 0.01

Cabrera Capital Markets 22,911 1,140,147 0.02

Williams Capital Group 22,208 951,128 0.02

Robert W. Baird & Company 21,746 791,137 0.03

Siebert Brandford Shank & Company 21,259 1,960,934 0.01

Stifel, Nicolaus & Company 20,061 734,473 0.03

William Blair & Company 16,519 576,840 0.03

Capital Institutional Services, Inc (CAPIS) 12,418 1,035,490 0.01

KeyBanc Capital Markets 12,049 467,428 0.03

Jefferies & Company 11,578 527,038 0.02

Craig-Hallum 11,400 380,011 0.03

Raymond James & Associates 11,051 396,868 0.03

Dash Financial 10,700 1,069,964 0.01

Piper Jaffray & Company 9,996 333,676 0.03

Wells Fargo Advisors 9,072 498,351 0.02

Stephens 8,985 302,673 0.03

Cowen & Company 8,669 341,152 0.03

SunTrust Robinson Humphrey 8,631 276,755 0.03

ITG (Investment Technology Group) 8,523 415,600 0.02

JP Morgan Chase & Company 8,036 276,442 0.03

Seaport Group 7,971 317,852 0.03

RBC Capital Markets 5,598 241,387 0.02

North South Capital 5,299 118,228 0.04

CL King & Associates 5,213 280,935 0.02

Cornerstone Macro 4,830 294,427 0.02

Citigroup Global Markets 4,706 779,090 0.01

Oppenheimer & Company 4,703 156,765 0.03

Needham & Company 4,495 149,823 0.03

CAPIS (Capital Institutional Services) 4,282 163,227 0.03

Liquidnet 4,208 218,829 0.02

Luminex Trading & Analytics 3,679 269,529 0.01

CastleOak Securities 3,311 357,818 0.01

Alex Brown 3,136 128,667 0.02

DA Davidson & Company 3,118 152,828 0.02

Berenberg Bank 2,850 105,464 0.03

Telsey Advisory Group 2,623 111,183 0.02

BMO Capital Markets 2,562 91,012 0.03

Bank of America Securities 2,116 135,820 0.02

Morgan Stanley 2,060 92,289 0.02

Jones & Associates 2,037 65,409 0.03

JMP Securities 1,998 98,946 0.02

MKM Partners 1,979 65,950 0.03

O'Neil Securities, Inc. 1,973 65,770 0.03

Evercore Partners 1,707 92,331 0.02

Northland Securities 1,580 52,669 0.03

BTIG (Bass Trading International Group) 1,546 93,965 0.02

All Other Brokers 22,124 1,264,210 0.02

Grand Total, All Brokers $ 657,437 40,162,522 $ 0.02

Summary Schedule of Domestic Equity Investment Commissions

For the Year Ended June 30, 2020



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SUPPORTING SCHEDULESSummary Schedule of International Equity Investment Commissions


2020


UBS $ 195,351 69,830,772 $ 0.00

Loop Capital Markets 171,618 14,398,127 0.01

North South Capital 144,929 26,617,687 0.01

Instinet 120,395 36,868,134 0.00

Fig Group LLC 118,804 48,185,133 0.00

Credit Suisse 84,566 11,424,488 0.01

Penserra Securities 79,591 20,383,970 0.00

ITG (Investment Technology Group) 61,737 10,123,976 0.01

Morgan Stanley 59,668 8,559,012 0.01

Macquarie Securities 57,138 7,213,618 0.01

Goldman Sachs 37,788 4,514,402 0.01

Jefferies & Company 37,567 6,624,401 0.01

Citigroup Global Markets 34,980 6,353,643 0.01

Liquidnet 30,208 15,185,533 0.00

Bank of America 30,036 2,407,576 0.01


Mischler Financial Group 26,159 4,121,758 0.01

Cowen & Company 23,180 3,142,678 0.01

Merrill Lynch 18,521 2,326,848 0.01

JP Morgan Chase & Company 16,364 967,908 0.02

Royal Bank of Canada 15,642 2,287,812 0.01

Exane 8,890 1,160,558 0.01

CLSA 8,501 1,355,022 0.01

Berenberg Bank 8,432 192,565 0.04

Barclays 8,271 671,479 0.01


Daiwa Securities Group 7,623 245,004 0.03

HSBC 7,084 1,156,823 0.01

Societe Generale Securities 6,169 3,144,873 0.00

INTL FCStone 3,867 193,350 0.02

Numis 3,796 338,906 0.01

Cantor Fitzgerald 3,786 113,187 0.03



Auerbach Grayson & Company 3,423 185,529 0.02

Handelsbanken 2,608 91,382 0.03

SMBC Nikko Securities 2,196 166,574 0.01

Sumitomo Mitsui Banking Corporation 1,648 151,641 0.01

Goodbody 1,496 349,929 0.00

Sanford C. Bernstein 1,425 831,029 0.00

Carnegie 1,418 6,941 0.20

Maybank 1,310 115,000 0.01

BTG Pactual 1,233 216,300 0.01

JMP Securities 1,028 217,880 0.00

Baypoint Trading 991 49,540 0.02

CIBC (Canadian Imperial Bank of Commerce) 961 51,800 0.02

CAPIS (Capital Institutional Services) 684 165,100 0.00

JonesTrading Institutional Services 671 141,000 0.00

Canaccord Adams 622 148,170 0.00

Mizuho Securities 531 31,300 0.02

All Other Brokers 4,630 774,731 0.01

Grand Total, All Brokers $ 1,499,997 335,626,215 $ 0.00



2020


JP Morgan Chase & Company $ 72,803 9,423,886 $ 0.01

Credit Suisse 54,443 4,823,547 0.01

UBS 41,362 3,655,624 0.01

Morgan Stanley 41,151 2,658,121 0.02

Sanford C. Bernstein 41,083 13,338,137 0.00

Goldman Sachs 40,087 5,502,669 0.01

Jefferies & Company 36,471 3,896,377 0.01

Bank of America Securities 34,134 4,662,637 0.01


Instinet 26,592 2,434,318 0.01

CLSA 22,358 9,257,993 0.00

Telsey Advisory Group 22,259 1,133,439 0.02

Penserra Securities 21,639 500,137 0.04

Citigroup Global Markets 21,310 2,319,893 0.01

Loop Capital Markets 18,623 5,512,962 0.00

Nomura 16,808 2,462,995 0.01

Macquarie Securities 14,340 849,370 0.02

Barclays 13,333 754,663 0.02

Virtu Financial Capital Markets 12,025 1,872,846 0.01


RBC Capital Markets 11,129 1,047,448 0.01

Liquidnet 11,103 2,541,707 0.00

Exane 9,567 723,701 0.01

Redburn Partners 8,560 746,043 0.01

Cowen & Company 7,382 743,114 0.01

Berenberg Bank 7,372 145,485 0.05

Siebert Brandford Shank & Company 7,262 287,463 0.03

Mischler Financial Group 7,126 667,615 0.01

Wells Fargo Advisors 6,599 235,464 0.03

Evercore Partners 6,114 419,294 0.01

Credit Agricole 6,098 2,845,359 0.00

BTG Pactual 5,850 401,284 0.01

Drexel Hamilton 5,252 269,342 0.02

Robert W. Baird & Company 4,765 186,783 0.03

HSBC 4,758 3,386,379 0.00

ITG (Investment Technology Group) 4,705 801,169 0.01


North South Capital 4,105 164,213 0.03

Mizuho Securities 2,893 127,771 0.02

Banco Itau 2,879 177,818 0.02

Carnegie 2,791 213,453 0.01

DnB NOR Markets 2,745 128,825 0.02

Williams Capital Group 2,732 109,260 0.03

Daiwa Securities Group 2,630 347,200 0.01

Mediobanca 2,514 20,267 0.12


Samsung Securities 2,445 41,456 0.06

Danske Bank 2,429 58,096 0.04

Keefe, Bruyette & Woods 2,411 122,170 0.02

Wolfe Trahan Securities 2,066 83,758 0.02

All Other Brokers 36,203 5,570,841 0.01

Grand Total, All Brokers $ 784,061 101,460,262 $ 0.01

Summary Schedule of Global Equity Investment Commissions




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SUPPORTING SCHEDULESSummary Schedule of Fixed Income Investment Brokerage


2020

Investment Brokerage Firm Fair Value Traded

Williams Capital Group $ 1,212,171,584

Goldman Sachs 743,365,166

Cabrera Capital Markets 723,301,741

JP Morgan Chase & Company 699,206,511

Loop Capital Markets 644,226,403

Citigroup Global Markets 600,270,550

Bank of America 449,743,563

Wells Fargo Advisors 447,049,238

Morgan Stanley 410,162,689

Barclays 286,563,139

Jefferies & Company 248,710,336

Deutsche Bank 207,658,318

Credit Suisse 199,989,292

MFR Securities 184,083,255

CastleOak Securities 160,681,023

Alamo Capital 120,765,268

UBS 111,805,141

Great Pacific Securities 109,346,596

BNP Paribas 108,018,849

Mizuho Securities 93,931,623

RBC Capital Markets 93,720,912

Mischler Financial Group 89,064,870

HSBC 86,446,604

Nomura 84,359,053

INTL FCStone 82,260,598

MarketAxess 75,547,802

Janney Montgomery Scott 64,220,318

Bank of America Securities 60,482,085

Robert W. Baird & Company 54,296,357

Societe Generale Securities 53,886,802

State Street Bank & Trust 45,143,622

Royal Bank of Canada 44,453,456

Oppenheimer & Company 38,256,672

KeyBanc Capital Markets 37,392,173

Merrill Lynch 35,640,558

First Tennessee 33,312,582

Mitsubishi UFJ Securities 32,964,454

NatWest Markets Securities Inc 31,221,870

BCP Securities 31,049,036

Stifel, Nicolaus & Company 30,125,587

US Bancorp 29,521,400

Westpac Group 27,364,782

Stephens 27,014,991

SunTrust Robinson Humphrey 26,455,465

Standard Chartered 26,215,672

BB&T 25,753,127

Millennium Advisors 23,970,362

TD Securities 21,242,934

Northern Trust Securities 19,151,559

Credit Agricole 18,964,357

All Other Brokers 364,876,853

Grand Total, All Brokers $ 9,475,427,200

74 Letter of Certification77 Actuarial Report81 Analysis of Funding85 Tests of Financial Soundness

ACTUARIAL

73




December 11, 2020 Board of Trustees State Universities Retirement System of Illinois 1901 Fox Drive Champaign, Illinois 61820 Re: Certification of Actuarial Results Dear Members of the Board: At your request, we have performed an actuarial valuation of the State Universities Retirement System of Illinois (“SURS”) as of June 30, 2020. GRS provided the June 30, 2020 actuarial valuation report to the Board of Trustees on October 29, 2020. The purpose of this actuarial valuation, which is performed annually, is to determine the funding status and annual contribution requirements of SURS. GRS has prepared this actuarial valuation exclusively for the benefit of, and at the request of the Trustees of the State Universities Retirement System; GRS is not responsible for reliance upon this actuarial valuation for any other purpose or by any other party. Readers desiring a more complete understanding of the actuarial condition of SURS are encouraged to obtain and read the complete valuation reports. The Actuarial and Financial Sections of this CAFR contain some, but not all of, the information in the valuation reports.

The actuarial valuation is based upon:

a. Data Relative to the Members of SURS – Data for all members, including those participating in the Self Managed Plan, was provided by SURS staff. GRS reviewed such data for reasonableness, but did not verify or audit the data.

b. Assets of the Fund – SURS provides the asset information. The actuary reviewed the information for reasonableness and consistency with prior information, but did not verify or audit the information. First effective with the actuarial valuation as of June 30, 2009, the actuarial value of assets, as defined in statute, smoothes investment gains and losses compared to the actuarial assumption of 6.75% (7.25% for fiscal years 2015‐2018, 7.75% for fiscal years 2011‐2014 and 8.50% for fiscal years 2010 and prior) over a five‐year period, and is calculated by the actuary and used to develop actuarial results.

c. Benefit Provisions – The benefit provisions for members hired on or after January 1, 2011, were changed under Public Act 96‐0889. SURS is currently not moving forward with the implementation of the Optional Hybrid Plan (OHP) created under PA 100‐0023. Additional clarifying legislation is needed for SURS to be able to do so. Therefore, provisions related to the OHP are not reflected in this actuarial valuation. Under the provisions of PA 100‐0023, employers make contributions beginning in fiscal year 2018 for current members who receive pay in excess of the Governor’s pay and under PA 101‐0010 (which rescinded the change to 3% from PA 100‐0587), employers make contributions equal to the present value of the increase in benefit attributable to members who receive pay increases in excess of 6% during the Final Average Salary (FAS) period. Public Act 101‐0610, effective January 1, 2020, added an unreduced retirement eligibility condition at age 60 with 20 years of service for Tier 2 police officers and firefighters. Effective September 1, 2020 the Self‐Managed Plan (SMP) has been renamed the Retirement Savings Plan (RSP).














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Board of Trustees State Universities Retirement System of Illinois Page 2

d. Actuarial Cost Method – The actuarial cost method prescribed in the statute and utilized by SURS is the Projected Unit Credit Cost Method. The objective of this method is to finance the benefits of SURS as such benefits accrue to each member. Any Unfunded Actuarial Accrued Liability (UAAL) under this method is separately financed. All actuarial gains and losses under this method are reflected in the UAAL.

e. Actuarial Assumptions – The actuarial assumptions used in this actuarial valuation are summarized in the next few pages. The actuarial assumptions were reviewed and updated as part of the experience study conducted for the period June 30, 2014 through June 30, 2017, and adopted by the Board first effective for the actuarial valuation as of June 30, 2018. New retirement rates for Tier 2 police officers and firefighters were used for the new retirement eligibility condition at age 60 with 20 years of service first effective with the June 30, 2020 actuarial valuation. 0% of eligible Tier 1 active members are assumed to elect to receive a reduced and delayed AAI benefit at retirement and an accelerated pension benefit option in accordance with Public Act 100‐0587. 0% of eligible inactive members are assumed to elect to receive an accelerated pension benefit option in lieu of an annuity at retirement in accordance with Public Act 100‐0587.

The actuarial assumptions and methods used to calculate the actuarial liabilities, including the economic and demographic assumptions and the actuarial cost method, are in accordance with the Actuarial Standards of Practice. The actuarial assumptions are set by the Board under Section 15‐155(a) of the Illinois Pension Code and the actuarial cost method is prescribed in Section 15‐155 of the Illinois Pension Code. Calculations performed for GASB Statement No. 67 were performed in accordance with the requirements under the Statement, including the use of the Entry Age Normal Cost Method and a single discount rate of 6.49% for fiscal year ending June 30, 2020. Liabilities as of June 30, 2019, projected to June 30, 2020, were used for the GASB 67 schedules.

The trend data in the Financial Section and the schedules and other data in the Actuarial Section are prepared by SURS staff with our input.

The funding objective as defined in the Illinois Pension Code is to collect employer and employee contributions sufficient to provide the benefits of SURS when due and to achieve an asset value equal to 90% of the Actuarial Accrued Liability by the end of fiscal year 2045. The financing objective of SURS and the funding process to reach that objective are set out in Section 15‐155 of the SURS Article of the Illinois Pension Code. Under the provisions of PA 100‐0023, employers make contributions for the portion of payroll for current members in excess of the Governor’s pay.

The statutory funding policy set out in Section 15‐155 of the Illinois Pension Code results in a near‐term contribution requirement that is less than a reasonable actuarially determined contribution. We recommend the development and adherence to a funding policy that funds the normal cost of the plan as well as an amortization payment that would seek to pay off any unfunded accrued liability over a closed period of no less than 15 years and no more than the period of time in order attain 100% funding by 2045 (24 years remaining in the actuarial valuation as of June 30, 2020, which calculates the fiscal year 2022 contribution). Although prior year statutory contribution requirements were met, the statutory funding method generates a contribution requirement that is less than a reasonable actuarially determined contribution. Meeting the statutory requirement does not mean that the undersigned agree that adequate actuarial funding has been achieved.











To the best of our knowledge, this actuarial statement is complete and accurate, fairly presents the actuarial position of SURS as of June 30, 2020, based on the data and actuarial techniques described above and applicable statutes, and has been prepared in accordance with generally accepted actuarial principles and practices, and with the Actuarial Standards of Practice issued by the Actuarial Standards Board, except where otherwise noted. The actuarial valuation report was prepared in accordance with the applicable law.

Future actuarial measurements may differ significantly from the current measurements presented in this actuarial valuation due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status); and changes in plan provisions, contribution amounts or applicable law. Due to the limited scope of the actuary’s assignment, the actuary did not perform an analysis of the potential range of such future measurements in this report.

The actuarial valuation report was prepared using our proprietary valuation model and related software which in our professional judgment has the capability to provide results that are consistent with the purposes of the valuation. We performed tests to ensure that the model reasonably represents that which is intended to be modeled.

The actuarial valuation report reflects the impact of COVID‐19 through June 30, 2020. However, this report does not reflect the longer term and still developing future impact of COVID‐19, which is likely to further influence demographic experience and economic expectations. We will continue to monitor these developments and their impact.

The signing actuaries are independent of the plan sponsor.

Amy Williams and Brian B. Murphy are Members of the American Academy of Actuaries (“MAAA”) and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.

Respectfully submitted,

Amy Williams, ASA, FCA, MAAA Brian B. Murphy, FSA, EA, FCA, MAAA, PhD Senior Consultant Senior Consultant











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Pension FinancingThe System is financed by non-employer contributing entity contributions (State appropriations), employee contributions, employer contributions (trust, federal and grant funds), and investment earnings. Employee contributions are established by the Illinois Compiled Statutes at 8% of pay. Investment earnings and State funding are primary determinants of the System’s financial status. Non-employer contributing entity and employer contributions are determined through annual actuarial valuations. Actuaries use demographic data (such as employee age, salary, and service credits), economic assumptions (such as estimated salary increases and interest rates), and decrement assumptions (such as employee turnover, mortality, and disability rates) in performing these valuations.

Under the Illinois Compiled Statutes (40 ILCS 5/15-155), the required employer contributions (statutory contribution) under the statutory funding plan are calculated by the actuaries on an annual basis. To determine the statutory contribution, the actuary calculates the actuarial accrued liability and the actuarial value of assets. The normal cost for the active members is equal to the portion of the actuarial accrued liability assigned to this year. Any shortfall between the actuarial value of assets and the actuarial accrued liability is referred to as the unfunded actuarial accrued liability. The unfunded actuarial accrued liability is amortized over a 30-year closed amortization period.

Actuarial Asset ValuationThe actuarial value of assets is used in determining the funding progress of the System and in establishing the employer contribution rates necessary to adhere to the statutory funding plan. The actuarial value of assets is based on a smoothed expected income investment rate of 6.75%. Investment income in excess or shortfall of the expected 6.75% rate on fair value is smoothed over a five-year period with 20% of a year’s excess or shortfall being recognized each year beginning with the current year. The use of this actuarial method began with the valuation for the period ending June 30, 2009, as required by Public Act 96-0043, which was signed into law on July 15, 2009.

In addition to an annual actuarial valuation, SURS periodically undertakes an actuarial audit by an independent firm. An actuarial audit is conducted to ensure that the actuarial valuation and other actuarial processes are performed accurately and that the methods and assumptions utilized are reasonable and prudent. An actuarial audit was performed and completed by Segal Consulting May 2016. The results of the audit were favorable and concluded that the calculations, method and assumptions were reasonable. The next actuarial audit is planned for fiscal year 2022.

Actuarial Cost MethodFor financial reporting, the entry age actuarial cost method is applied in accordance with the Governmental Accounting Standards Board (GASB) Statements 67 and 68. For purposes of determining the System’s funding calculation of the non-employer contributing entity and employer contribution, the projected unit credit cost method is used as required by Public Act 96-0043. Under this method, the projected pension at retirement age is first calculated and the value thereof at the individual member’s current attained age is determined. The normal cost for the member for the current year is equal to the value so determined divided by the member’s projected years of service at retirement. The employer normal cost for fiscal year 2020 was 13.02%. The actuarial liability at any point in time is the value of the projected pensions at that time less the value of future normal costs. Any Unfunded Actuarial Accrued Liability (UAAL) under this method is separately financed. All actuarial gains and losses under this method are reflected in the UAAL. For ancillary benefits for active members, in particular disability benefits, death and survivor benefits, termination benefits, and the postretirement increases, the same procedure as outlined above is followed. Estimated annual administrative expenses are added to the normal cost.

Employee DataEmployee data is provided by the administrative staff of SURS. Various tests are applied to check internal consistency as well as consistency from year to year. No calculations are made for employees not yet hired as of the valuation date.

ACTUARIAL REPORT


Valuation Results for Fiscal Year Ended June 30, 2020 ($ in millions)

Actuarial Liability

Analysis of Financial Experience For Fiscal Year Ended June 30, 2020 ($ in millions)

Investments other than 6.75% $ 233.5 Salary increases other than 3.25% 5.4 Age and service retirement differences 6.0 Termination differences 22.3 Mortality and disability differences (0.5)Benefit recipient differences 13.3 New entrants 83.1 Other actuarial differences (27.1)

Total actuarial gain $ 336.0

Change in the Unfunded Actuarial Accrued Liability ($ in millions)

Unfunded actuarial accrued liability at June 30, 2019 $ 26,782.1 Expected increase in unfunded actuarial accrued liability 369.7 Plan provision changes 1.0Impact of change in actuarial assumptions - Total actuarial gain 336.0

Unfunded actuarial accrued liability at June 30, 2020 $ 27,488.8

As of June 30, 2020, the Unfunded Actuarial Accrued Liability (UAAL) to be amortized was $27,488,795,000.

ACTUARIAL REPORT

ACTUARIAL LIABILITY (RESERVES)

For members receiving annuities $ 32,862.0

For inactive members 2,963.4

For active members 11,755.1

Total 47,580.5

Actuarial value of assets available for benefits 20,091.7

Unfunded accrued actuarial liability $ 27,488.8

24.7%ActiveMembers

6.2%InactiveMembers

69.1%Annuitants



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Summary of Major Actuarial Assumptions

Interest6.75% per annum, compounded annually (adopted by the SURS Board effective June 30, 2018) for funding purposes. The actuarial assumption rate credited to member accounts is 6.75% per annum (adopted by the SURS Board effective June 30, 2018).

Net PositionAssets available for benefits are used at market value.

ExpensesAs estimated and advised by the SURS staff, based on current expenses with an allowance for expected increases.

The following assumptions were adopted by the SURS Board effective with the June 30, 2018 actuarial valuation. They were developed based upon an experience study completed in February 2018. These assumptions are the same for financial reporting and funding purposes.

TerminationRates of withdrawal are based upon ages and years of service as developed from plan experience. The table to the right shows termination rates based upon experience in the 2014-2017 period. The assumption consists of a table of ultimate turnover rates by years of service credit.

MortalityMortality rates are based upon the RP2014 Mortality White Collar Table with gender distinct, projected using MP-2014 two dimensional mortality improvement scale, set forward one year for male and female annuitants.

ACTUARIAL REPORT

Termination Rates

Years of Service All Members

0 20.0%

1 20.0

2 15.0

3 14.0

4 13.0

5 12.0

6 10.0

7 9.0

8 8.0

9 7.0

10 6.0

11 5.0

12 4.5

13-15 4.0

16-18 3.5

19-21 3.0

22-24 2.5

25-29 2.0


ACTUARIAL REPORT

Salary IncreasesEach member’s compensation is assumed to increase by 3.25% each year; 2.25% reflecting salary inflation and 1.00% reflecting standard of living increases. That rate is increased for members with less than 34 years of service as shown in the table to the right. The payroll of the entire system is assumed to increase at 3.25% per year for purposes of calculating employer required contributions.

Retirement AgeUpon eligibility, active members are assumed to retire as shown in the table below.

Other AssumptionsThe disability rates are graduated based on age. The Cost of Living Adjustment (COLA) is 3.00% per annum for members hired before January 1, 2011, based on the benefit provision of 3.00% annual compound increases. The assumed rate is 1.13% for members hired on or after January 1, 2011, based on the provision of increases equal to half of the increase in the Consumer Price Index with a maximum increase of 3.00%. The female spouse is assumed to be three years younger than the male spouse.

Years of Service All Members

0 12.25%1 12.252 8.753 7.004 6.255 5.506 5.507 5.508 4.759 4.5010 4.5011-14 4.0015-18 3.7519-33 3.5034 & over 3.25

Annual Compensation Increases

Members Hired Before Members Hired On or AfterJanuary 1, 2011 and Eligible for January 1, 2011 and Eligible for

Age Normal Retirement Early Retirement Normal Retirement Early Retirement

Under 50 50.0% -% -% -%50 50.0 - - -51 40.0 - - -52 40.0 - - -53 35.0 - - -54 35.0 - - -55 35.0 7.0 - -56 30.0 5.5 - -57 25.0 4.0 - -58 25.0 5.0 - -59 25.0 5.5 - -60 11.0 - - -61 11.0 - - -62 12.0 - - 25.0 63 12.0 - - 10.0 64 12.0 - - 10.0 65 15.0 - - 10.0 66 15.0 - - 10.0 67 15.0 - 35.0 -68 15.0 - 15.0 -69 15.0 - 15.0 -70-79 15.0 - 15.0 -80+ 100.0 - 100.0 -

Retirement Rates



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Funding ObjectiveBeginning in fiscal year 1996 the required contribution rates were based upon Public Act 88-0593, which calls for a 15-year phase-in to a 35-year funding plan which provides for adequate annual funding of the employer’s normal cost while amortizing the unfunded actuarial accrued liability. Annual funding under this plan will occur as a continuing appropriation. This method does not conform with the provisions of GASB 67 and 68 for financial reporting. The statutory funding plan requires the State to contribute annually an amount equal to a constant percent of payroll necessary to allow SURS to achieve a 90% funded ratio by fiscal year 2045, subject to any revisions necessitated by actuarial gains or losses, or actuarial assumptions.

The net State appropriation results are based on the projected unit credit actuarial cost method, and on the data provided and assumptions used, for the June 30, 2020 actuarial valuation.

ANALYSIS OF FUNDING

2622

2,142.0 2,215.42,298.6 2,355.0 2,416.9

23 24 25

Employer Contributions Received in Fiscal Year 2020

State appropriations $ 1,570,817,785 State pension fund 215,000,000 Federal/trust/employer funds/other 52,968,295

Total $ 1,838,786,080

Reconciliation to Total State Appropriations

Defined benefit plan-State appropriations received $ 1,785,817,785 Defined contribution plan-State appropriations received 68,874,215

Total State appropriations received $ 1,854,692,000

Projected Required Contribution

Fiscal Year

Assumed % of Payroll

Required Payroll ($ in billions)

Contribution ($ in millions)

2022 43.8% $ 4.89 $ 2,142.0 2023 44.5 4.98 2,215.4 2024 45.2 5.08 2,298.6 2025 45.4 5.18 2,355.0 2026 45.7 5.29 2,416.9

Projected Required Contribution

($ in millions) by FY


ANALYSIS OF FUNDING

Schedule of Employer Contributions ($ in millions)

Fiscal Year Gross ADCMember

Contributions Net ER ADCActual ER

ContributionsER Contribution as

a % of Net ADCTotal Contributions as

a % of Total ADC

2011 $ 1,519.2 $ 260.2 $ 1,259.0 $ 773.6 61.4% 68.0% 2012 1,701.6 258.2 1,443.3 985.8 68.3 73.1 2013 1,794.4 245.1 1,549.3 1,401.5 90.5 91.8 2014 1,843.6 283.1 1,560.5 1,502.9 96.3 96.9 2015 1,890.3 267.7 1,622.7 1,528.5 94.2 95.0 2016 2,090.0 278.9 1,811.1 1,582.3 87.4 89.1 2017 2,143.4 278.6 1,864.8 1,650.6 88.5 90.0 2018 2,144.7 282.7 1,862.0 1,607.9 86.4 88.2 2019 2,519.4 280.0 2,239.4 1,642.2 73.3 76.3 2020 2,581.4 282.4 2,299.0 1,838.8 80.0 82.2

In an inflationary economy, the value of dollars is decreasing. This environment results in employee pay increasing in dollar amounts, retirement benefits increasing in dollar amounts, and then, unfunded accrued liabilities increasing in dollar amounts, all at a time when the actual substance of these items may be decreasing. Looking at just the dollar amounts of unfunded accrued liabilities can be misleading. Unfunded accrued liabilities dollars divided by active employee payroll dollars provides a helpful index which shows that the smaller the ratio of unfunded liabilities to active member payroll, the stronger the system. Observation of this relative index over a period of years will give an indication of whether the System is becoming financially stronger or weaker.

Schedule of Funding Progress ($ in millions)

Fiscal Year

Actuarial Value of

Assets (A)

Actuarial Accrued

Liabilities

Unfunded Actuarial Accrued

Liabilities Funding RatioCovered

PayrollUAAL as a

% of Payroll

2011 $ 13,945.7 $ 31,514.3 $ 17,568.6 44.3% $ 3,460.8 507.6%2012 13,949.9 33,170.2 19,220.3 42.1 3,477.2 552.82013 14,262.6 34,373.1 20,110.5 41.5 3,533.9 569.12014 15,844.7 37,429.5 21,584.8 42.3 3,522.2 612.82015 17,104.6 39,520.7 22,416.1 43.3 3,606.5 621.52016 17,701.6 40,923.3 23,221.7 43.3 3,513.1 661.02017 18,594.3 41,853.3 23,259.0 44.4 3,458.3 672.62018 19,347.9 45,258.7 25,910.8 42.7 3,470.2 746.72019 19,661.9 46,444.0 26,782.1 42.3 3,506.7 763.82020 20,091.7 47,580.5 27,488.8 42.2 3,642.6 754.6

For FY2020, if calculated using Market Value of Assets of $19,617.0, the funding ratio is 41.2%.

(A) Per Public Act 96-0043, beginning fiscal year 2009, measures of financial soundness will be calculated using an actuarial value of assets based on a smoothed investment income rate. Investment income in excess or shortfall of the expected 6.75% rate on fair value is smoothed over a five-year period with 20% of a year’s excess or shortfall being recognized each year beginning with the current year.



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ANALYSIS OF FUNDING

6668 69

18 19 2016 17

6563

Fiscal YearBeginning

Balance Additions SubtractionsEnding

Balance

2011 48,903 4,207 1,740 51,370 2012 51,370 4,782 1,620 54,532 2013 54,532 4,529 1,832 57,229 2014 57,229 4,073 1,896 59,406 2015 59,406 3,511 1,897 61,020 2016 61,020 4,058 1,932 63,146 2017 63,146 3,465 2,066 64,545 2018 64,545 3,764 2,140 66,169 2019 66,169 3,721 2,048 67,842 2020 67,842 3,544 2,214 69,172

Schedule of Increases and Decreases of Benefit Recipients10-Year Summary

Benefit RecipientsPersons (in thousands) by FY

Fiscal Year Males Females Total ActivesPercent Change

Average Salary

Percent Change

Average Age

Average Service Credit

2011 30,448 41,440 71,888 (1.5)% $ 46,402 0.9% 47.4 10.1 2012 30,198 40,858 71,056 (1.2) 47,167 1.6 47.1 9.8 2013 29,963 40,593 70,556 (0.7) 48,276 2.4 47.1 9.9 2014 29,423 40,013 69,436 (1.6) 48,893 1.3 47.1 9.8 2015 29,420 39,961 69,381 (0.1) 50,103 2.5 47.2 10.0 2016 28,041 38,204 66,245 (4.5) 51,115 2.0 47.3 10.2 2017 27,068 37,049 64,117 (3.2) 51,988 1.7 47.5 10.4 2018 26,350 36,494 62,844 (2.0) 53,482 2.9 47.5 10.5 2019 26,010 36,579 62,589 (0.4) 54,263 1.5 47.3 10.3 2020 26,112 37,094 63,206 1.0 55,817 2.9% 47.3 10.2

Active Participant Statistics10-Year Summary


ANALYSIS OF FUNDING

Fiscal YearBeginning Members Additions Retired Died Other Terminations Ending Members

2011 72,996 8,434 2,200 106 7,236 71,888 2012 71,888 9,739 2,553 110 7,908 71,056 2013 71,056 9,188 1,811 118 7,759 70,556 2014 70,556 8,962 2,098 91 7,893 69,436 2015 69,436 9,021 1,425 102 7,549 69,381 2016 69,381 7,443 2,135 92 8,352 66,245 2017 66,245 7,530 1,644 105 7,909 64,117 2018 64,117 7,823 1,737 115 7,244 62,844 2019 62,844 8,602 1,821 101 6,935 62,589 2020 62,589 8,538 1,532 100 6,289 63,206

Analysis of Change in Membership10-Year Summary

Schedule of Retirees and Beneficiaries Added to and Removed from Rolls10-Year Summary

Fiscal Year

Beginning of Year

Balance

Number Added

to Rolls Allowances

Number Removed

from Rolls Allowances

End of Year

Balance

Annual Pension Benefit

Amount

Average Annual Benefit

% Increase in Average

Benefit

2011 48,903 4,207 $ 169,921,275 1,740 $ (40,835,477) 51,370 $ 1,619,615,689 $ 31,528 6.0%2012 51,370 4,782 191,103,116 1,620 (39,279,398) 54,532 1,771,439,407 32,484 3.02013 54,532 4,529 184,239,143 1,832 (46,183,430) 57,229 1,909,495,120 33,366 2.72014 57,229 4,073 166,748,080 1,896 (51,879,123) 59,406 1,984,416,426 33,404 0.12015 59,406 3,511 158,067,006 1,897 (53,610,853) 61,020 2,112,232,941 34,615 3.72016 61,020 4,058 175,156,703 1,932 (56,407,539) 63,146 2,218,653,518 35,135 1.52017 63,146 3,465 156,500,627 2,066 (62,821,394) 64,545 2,319,439,374 35,935 2.32018 64,545 3,764 174,309,588 2,140 (69,500,663) 66,169 2,425,701,962 36,659 2.02019 66,169 3,721 182,356,731 2,048 (67,983,149) 67,842 2,544,107,160 37,500 2.32020 67,842 3,544 184,241,074 2,214 (77,525,203) 69,172 2,662,866,247 38,496 2.7



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The following four exhibits illustrate different measures of the financial soundness of the System. The Schedule of Funding compares State appropriations to the actuarial funding requirements, statutory funding require ment, and System expense.

Schedule of Contributions from Employers and Non-Employer Contributing Entity:Fiscal Year 2011-2020 ($ in millions)

(A) Prior to 2014, the ADC (Actuarially Determined Contribution) was defined in GASB Statements 25 and 27 as the ARC (Annual Required Contribution).

(B) The actuarially determined contribution per note A, less member contributions (2).(C) Contributions from SURS employers from trust and federal funds.(D) Contributions from the State of Illinois.(E) Employer and non-employer contributions divided by the Net ADC (Column 4 and 5 divided by Column 3).

Fiscal YearGross ADC

(1) (A)Member

Contribution (2)Net ADC

(3) (B)

Employer Contribution

(4) (C)

Non-Employer Entity Contribution

(5) (D)

Employer/Non- Employer Percentage

Contributed (6) (E)

2011 $ 1,519.2 $ 260.2 $ 1,259.0 $ 36.5 $ 737.1 61.4%2012 1,701.6 258.2 1,443.4 45.6 940.2 68.32013 1,794.4 245.1 1,549.3 41.9 1,359.6 90.52014 1,843.6 283.1 1,560.5 43.9 1,459.0 96.32015 1,890.3 267.7 1,622.6 39.9 1,488.6 94.22016 2,090.0 278.9 1,811.1 39.3 1,542.9 87.42017 2,143.4 278.6 1,864.8 38.4 1,612.2 88.52018 2,144.7 282.7 1,862.0 39.7 1,568.2 86.42019 2,519.4 280.0 2,239.4 49.4 1,592.6 73.32020 2,581.4 282.4 2,299.0 53.0 1,785.8 80.0

Funding Ratios10-Year Summary ($ in millions)

Fiscal YearNet Position

at CostNet Position at Market/

Actuarial Value of Assets (A)Actuarial Funding

Requirement Cost Market/ Actuarial

2011 $ 13,302.2 $ 13,945.7 $ 31,514.3 42.2% 44.3%2012 12,806.2 13,949.9 33,170.2 38.6 42.12013 13,347.7 14,262.6 34,373.1 38.8 41.52014 14,234.5 15,844.7 37,429.5 38.0 42.32015 14,930.0 17,104.6 39,520.7 37.8 43.32016 15,070.8 17,701.6 40,923.3 36.8 43.32017 15,579.0 18,594.3 41,853.3 37.2 44.42018 16,044.1 19,347.9 45,258.7 35.4 42.82019 16,830.2 19,661.9 46,444.0 36.2 42.32020 17,887.6 20,091.7 47,580.5 37.6 42.2

The Funding Ratios exhibit shows the percentage of the System’s accrued benefit cost covered by net position. This funding ratio is used to assess the System’s ability to make future benefit payments. The exhibit illustrates the ratio of net position to the System’s accrued benefit cost over 10 years, with net position valued both at cost and at market.

(A) Per Public Act 96-0043, the actuarial value of assets is used in determining the funding progress of the System and in establishing the employer contribution rates necessary to adhere to the statutory funding plan. The actuarial value of assets is based on a smoothed investment income rate. Investment income in excess or shortfall of the expected 6.75% rate on fair value is smoothed over a five-year period with 20% of a year’s excess or shortfall being recognized each year beginning with the current year.

Funding Ratio


Fiscal Year

Member Accumulated Contributions

Members Currently Receiving

Benefits

Active/Inactive/

Members/ Employer’s

Portion

Net Position/ Actuarial Value of

Assets% of Benefits Covered by Net

Position/Actuarial Value of Assets

{1} (A) {2} (A) {3} (A) (B) {1} {2} {3}

2011 $ 6,007.4 $ 18,918.1 $ 6,588.8 $ 13,945.7 100.0% 42.0% - 2012 5,962.4 20,651.4 6,556.4 13,949.9 100.0 38.7 - 2013 5,830.1 22,099.9 6,443.1 14,262.6 100.0 38.2 - 2014 6,094.9 24,388.6 6,946.0 15,844.7 100.0 40.0 - 2015 6,196.6 26,042.4 7,281.7 17,104.6 100.0 41.9 - 2016 6,145.8 27,342.2 7,435.3 17,701.6 100.0 42.3 - 2017 6,348.8 28,226.0 7,278.6 18,594.3 100.0 43.4 - 2018 6,516.3 30,710.7 8,031.7 19,347.9 100.0 41.8 - 2019 6,594.1 31,856.5 7,993.4 19,661.9 100.0 41.0 - 2020 6,651.0 32,862.0 8,067.5 20,091.7 100.0 40.9 -

Percentage of Benefits Covered by Net Position10-Year Summary ($ in millions)

(A) A test of financial soundness of the System is its ability to pay all promised benefits when due. The columns are in the order that assets would be used to cover certain types of obligations. Column 1 represents the value of members’ accumulated contributions, which would be refunded first. Column 2 represents the amounts necessary to pay participants currently receiving benefits, which would be covered next. Column 3 represents the employer’s portion of future benefits for active members, which would be covered last. If a System is receiving the actuarially determined contribution amounts, the total of the actuarial values in Columns 1 and 2 should generally be fully covered by assets, and the portion of the actuarial values of Column 3 covered by assets should increase over time.

(B) Per Public Act 96-0043, the actuarial value of assets is used in determining the funding progress of the System and in establishing the employer contribution rates necessary to adhere to the statutory funding plan. The actuarial value of assets is based on a smoothed investment income rate. Investment income in excess or shortfall of the expected 6.75% rate on fair value is smoothed over a five-year period with 20% of a year’s excess or shortfall being recognized each year beginning with the current year.

(C) Per Public Act 96-0043, beginning fiscal year 2010, measures of financial soundness will be calculated using an actuarial value of assets based on a smoothed investment income rate. If the market value of net position is used for fiscal year 2020, the percentage of benefits covered by net position would decrease to 39.5%.

The Percentage of Benefits Covered by Net Position exhibit compares the plan’s net position with the members’ accu mulated contributions, the amount necessary to cover the present value of benefits currently being paid, and the employer’s portion of future benefits for active members.

Benefits Covered by Net Position at Market/Actuarial

Value$ (in millions) by FY

Benefits Earned

Net Position at Market

48444036322824201612840

Funding RatiosPercentage by FY

50454035302520151050

Cost

Benefits Covered by Net Position at Cost

$ (in millions) by FY

16 16 1617 17 1718 18 1819 19 1920 20 20

48444036322824201612840

Benefits Earned

Net Position at Cost

Market

(C)




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Public Act 101-610, effective January 1, 2020, allows Tier II police officers and firefighters to retire at age 60 (instead of age 67) without a reduced retirement annuity under the special formula for police officers and firefighters. The plan summary can be found in the Notes to the Financial Statements.

The final test, Payroll Percentages, compares member payroll to unfunded accrued benefit cost, normal cost, and total required contributions.

Unfunded Accrued Benefit Cost

Employer Cost

Employer Contributions

Fiscal Year

Member Payroll Amount

% of Payroll

Normal Cost (A)

% of Payroll

Amortization of Unfunded

Liability Total% of

PayrollEmp

Cont.% of

Payroll

2011 $ 3,460.8 $ 17,568.7 507.6% $ 463.6 13.4% $ 1,055.6 $ 1,519.2 43.9% $ 773.6 22.4%2012 3,477.2 19,220.3 552.8 465.6 13.4 1,236.0 1,701.6 48.9 985.8 28.42013 3,533.9 20,110.5 569.1 454.6 12.9 1,339.9 1,794.4 50.8 1,401.5 39.72014 3,522.2 21,584.8 612.8 415.1 11.8 1,428.5 1,843.6 52.3 1,502.9 42.72015 3,606.5 22,416.1 621.5 462.3 12.8 1,396.2 1,858.5 51.6 1,528.5 42.42016 3,513.1 23,221.7 661.0 460.7 13.1 1,466.8 1,927.5 54.9 1,582.3 45.02017 3,458.3 23,259.0 672.6 423.2 12.2 1,720.3 2,143.4 62.0 1,650.6 47.72018 3,470.2 25,910.8 746.7 447.6 12.9 1,697.1 2,144.7 61.8 1,607.9 46.32019 3,506.7 26,782.1 763.8 449.3 12.8 2,070.1 2,519.4 71.8 1,642.1 46.82020 3,642.6 27,488.8 754.6 457.3 12.6 2,124.1 2,581.4 70.9 1,838.8 50.5

(A) Actuarially determined normal cost less member contributions.


CHANGES IN PLAN PROVISIONS

Payroll Percentages: Fiscal Year 2011-2020 ($ in millions)

90 Financial Schedules93 Statistical Analysis94 Benefit Summary98 Participating Employers

STATISTICAL

89




18.5 16.1

2,676.22,559.0

69.0 80.5

ADDITIONS

Fiscal YearMember

ContributionsInvestment

Income/(Loss)


TotalAmount % of Payroll

2011 $ 260.2 $ 2,801.1 $ 773.6 22.4% $ 3,834.9 2012 258.2 9.1 985.8 28.4 1,253.1 2013 245.1 1,694.8 1,401.5 39.7 3,341.4 2014 283.1 2,667.9 1,502.8 42.7 4,453.8 2015 267.7 503.2 1,528.5 42.4 2,299.4 2016 278.9 17.0 1,582.3 45.0 1,878.2 2017 278.6 1,994.3 1,650.6 47.7 3,923.5 2018 282.7 1,499.8 1,607.9 46.3 3,390.4 2019 280.0 1,129.8 1,642.1 46.8 3,051.9 2020 282.4 542.2 1,838.8 50.5 2,663.4

Changes in Plan Net Position - Defined Benefit Plan10-Year Summary ($ millions)

The historical trend information presented below is designed to provide information on the System’s progress in accumulating assets to pay benefits when due.

DEDUCTIONS (A)

Fiscal Year BenefitsContribution

RefundsAdministrative

Expenses TotalChanges in Plan

Net Position

2011 $ 1,598.6 $ 71.5 $ 12.3 $ 1,682.4 $ 2,152.52012 1,735.3 73.5 13.2 1,822.0 (568.9)2013 1,914.5 81.5 13.4 2,009.4 1,332.0 2014 2,002.9 82.9 13.8 2,099.6 2,354.2 2015 2,130.0 83.7 14.1 2,227.8 71.6 2016 2,235.8 85.0 14.7 2,335.5 (457.3)2017 2,339.9 89.6 14.8 2,444.3 1,479.2 2018 2,446.3 93.5 14.4 2,554.2 836.3 2019 2,559.0 80.5 16.1 2,655.6 396.3 2020 2,676.2 69.0 18.5 2,763.7 (100.3)

(A) Breakdown of deductions into benefit and refund types has been revised for the 10-year period according to Governmental Accounting Standards Board Statement No. 44 and Governmental Accounting, Auditing and Financial Reporting guidelines.

Additions$ (in millions) by FY

EmployerContributions

MemberContributions

Investment Income

2020 2019

Deductions$ (in millions) by FY

Benefits Refunds Admin Expenses and Bond Interest

2020 2019

FINANCIAL SCHEDULES

542.2

1,129.8

282.4 280.0

1,838.81,642.1



STAT

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BENEFIT DEDUCTIONS BY TYPE (A)

Fiscal YearRetirement

& DRA Survivor Disability DeathPortable Refund

(ER Match) Total

2011 $ 1,468.1 $ 101.1 $ 16.4 $ 2.2 $ 10.8 $ 1,598.6 2012 1,597.5 109.0 15.9 1.7 11.2 1,735.3 2013 1,767.8 116.9 15.9 2.4 11.5 1,914.5 2014 1,843.0 125.4 16.1 2.2 16.2 2,002.9 2015 1,962.4 133.8 16.0 4.9 12.9 2,130.0 2016 2,059.8 142.5 16.4 4.0 13.1 2,235.8 2017 2,152.5 149.9 17.0 6.6 13.9 2,339.9 2018 2,247.2 161.4 17.1 5.3 15.3 2,446.3 2019 2,352.3 174.5 17.3 5.2 9.7 2,559.0 2020 2,460.5 185.4 16.9 4.4 9.0 2,676.2

Schedule of Benefit and Refund Deductions - Defined Benefit Plan10-Year Summary ($ millions)

REFUND DEDUCTIONS BY TYPE (A)

Fiscal Year WithdrawalsSurvivor

Ins RefundsDeath

BenefitsPortable Lump

Sum Retirement Total

2011 $ 38.8 $ 9.3 $ 14.5 $ 8.9 $ 71.5 2012 42.4 11.5 9.8 9.8 73.5 2013 43.4 11.8 15.8 10.5 81.5 2014 50.4 5.4 12.5 14.6 82.9 2015 46.2 10.5 13.5 13.5 83.7 2016 44.5 10.5 15.9 14.1 85.0 2017 50.5 7.6 18.8 12.7 89.6 2018 51.8 6.8 17.6 17.3 93.5 2019 43.3 8.6 18.1 10.5 80.5 2020 37.8 8.7 16.0 6.5 69.0

(A) Breakdown of deductions into benefit and refund types has been revised for the 10-year period according to Governmental Accounting Standards Board Statement No. 44 and Governmental Accounting, Auditing and Financial Reporting guidelines.

FINANCIAL SCHEDULES


223.6

162.6

95.7 88.678.3 71.2

0.8 0.6

67.958.2

35.4 34.5

ADDITIONS

Fiscal YearMember

ContributionsInvestment

Income/(Loss)


TotalAmount % of Payroll

2011 $ 49.8 $ 172.5 $ 44.8 7.6% $ 267.1 2012 54.1 16.7 45.9 7.6 116.7 2013 59.9 147.5 49.2 7.6 256.6 2014 65.5 246.3 57.2 7.6 369.0 2015 72.3 90.5 62.3 7.6 225.1 2016 76.5 3.2 65.3 7.6 145.0 2017 85.2 266.3 66.9 7.6 418.4 2018 84.2 259.0 69.5 7.6 412.7 2019 88.6 162.6 71.2 7.6 322.42020 95.7 223.6 78.3 7.6 397.6

Changes in Plan Net Position - Defined Contribution Plan10-Year Summary ($ in millions)

Fiscal Year Benefits

Administrative Expenses and Bond

Interest (B) TotalChanges in Plan

Net Position

Contribution

Refunds

2011 $ 10.0 $ 16.2 $ 0.3 $ 26.5 $ 240.6 2012 13.3 20.7 0.4 34.4 82.3 2013 19.6 20.1 0.4 40.1 216.5 2014 18.4 24.8 0.4 43.6 325.4 2015 30.9 24.9 0.5 56.3 168.9 2016 46.0 26.6 0.5 73.1 72.0 2017 43.9 29.4 0.5 73.7 344.7 2018 51.6 30.4 0.5 82.5 330.2 2019 58.2 34.5 0.6 93.3 229.1 2020 67.9 35.4 0.8 104.1 293.5

(A) Breakdown of deductions into benefit and refund types has been revised for the 10-year period according to governmental Accounting Standards Board Statement No. 44 and Governmental Accounting, Auditing and Financial Reporting guidelines.

(B) Until FY 2010, SMP administrative expenses were included with the defined benefit plan totals.

The historical trend information presented below is designed to provide information on the System’s progress in accumulating assets to pay benefits when due.

Additions$ (in millions) by FY

EmployerContributions

MemberContributions

Investment Income

Benefits Refunds Admin Expenses and Bond Interest

2020 2019 2020 2019

Deductions$ (in millions) by FY

DEDUCTIONS (A)

FINANCIAL SCHEDULES



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Fiscal Year Survivor DisabilityContribution

Refunds Retirement

Disability Retirement Allowance

2011 7,578 709 4,489 42,682 401 2012 7,870 715 4,618 45,548 399 2013 8,001 688 4,528 48,142 398 2014 8,144 634 4,734 50,237 391 2015 8,342 656 4,144 51,631 391 2016 8,481 671 4,376 53,596 398 2017 8,614 643 4,433 54,902 386 2018 8,844 651 4,269 56,293 381 2019 8,973 599 4,158 57,890 380 2020 9,157 583 3,460 59,060 372

Schedule of Benefit Recipients - Defined Benefit Plan10-Year Summary

Fiscal Year HR & Admin Inv & AcctgMember Svcs

& OutreachIS &

Support Svcs SMP Total

2011 10.55 12.80 62.00 29.75 3.70 118.80 2012 9.90 9.65 65.80 28.75 3.70 117.80 2013 10.90 10.65 69.00 26.75 3.70 121.00 2014 12.00 10.55 67.00 26.25 4.20 120.00 2015 13.00 11.55 72.00 24.25 4.20 125.00 2016 14.00 11.55 73.00 22.25 4.20 125.00 2017 14.00 13.55 73.00 22.25 4.20 127.00 2018 14.00 14.00 68.00 30.00 3.00 129.00 2019 13.00 15.00 75.00 31.00 3.00 137.00 2020 14.00 17.00 82.00 41.00 3.00 157.00

Number of SURS Employees (full-time equivalents)10-Year Summary

STATISTICAL ANALYSIS


Schedule of New Benefit Payments - Defined Benefit PlanJuly 1, 2019 through June 30, 2020

BENEFIT SUMMARY

Retirement Disability Survivor

Age NumberAverage Monthly

Benefit (A) NumberAverage Monthly

Benefit (A) NumberAverage Monthly

Benefit (A)

Under 10 - $ - - $ - 3 $ 209 10-14 - - - - 3 313 15-19 - - - - 10 367 20-24 - - 1 1,611 6 960 25-29 - - 1 1,349 1 2,116 30-34 - - 3 2,126 - - 35-39 - - 5 2,281 2 330 40-44 - - 7 1,782 3 487 45-49 10 3,543 15 1,878 2 440 50-54 83 3,946 15 2,393 15 1,422 55-59 698 2,535 31 2,270 36 1,900 60-64 887 2,473 28 2,080 37 1,867 65-69 666 2,726 6 1,678 73 1,853 70-74 280 2,711 3 1,543 114 2,102 75-79 59 2,675 1 1,323 128 2,297 80-84 15 3,198 - - 136 2,168 85-89 1 6,838 - - 104 2,112 90-94 1 384 - - 45 2,248 95-99 - - - - 8 1,248 Over 99 - - - - 2 2,283

TOTAL 2,700 $ 2,635 116 $ 2,085 728 $ 2,025

Average Age - Retirement 63.1 years Average Age - Disabilitant 54.4 years Average Age - Survivors 74.3 years (A) Total average monthly benefit is calculated based on a weighted average.



STAT

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Schedule of Average Benefit Payments - Defined Benefit PlanFor Retirees as of June 30

BENEFIT SUMMARY

Years of Credited Service

0-10 11-15 16-20 21-25 26-29 30+ Total

Fiscal Year 2011

Number of Retirees 11,081 5,979 6,019 6,821 5,838 6,944 42,682

Avg Monthly Annuity $ 866 1,423 2,373 3,541 4,628 5,874 2,913

Final Average Salary $ 34,140 37,607 46,721 55,154 63,436 70,158 50,029

Avg Service Credit 19.47

Fiscal Year 2012





Fiscal Year 2013





Fiscal Year 2014





Fiscal Year 2015





Fiscal Year 2016





Fiscal Year 2017





Fiscal Year 2018





Fiscal Year 2019





Fiscal Year 2020




Avg Service Credit 6.74 13.31 18.54 23.39 27.96 32.26 18.45


BENEFIT SUMMARY

Number of Covered Employees by Employer - Defined Contribution Plan

Participating EmployerCovered

Employees% of Total SURS

MembershipCovered


Membership

University of Illinois - Chicago 12,344 19.5% 11,455 15.9%University of Illinois - Urbana 9,661 15.3 10,073 14.0City Colleges of Chicago 4,067 6.4 4,919 6.8Southern Illinois University - Carbondale 3,821 6.0 4,492 6.2Illinois State University 2,690 4.3 2,884 4.0Northern Illinois University 2,388 3.8 3,023 4.2College of DuPage 2,118 3.4 1,827 2.5Southern Illinois University - Edwardsville 2,055 3.3 2,108 2.9College of Lake County 1,388 2.2 N/A* N/A*Triton College 1,140 1.8 N/A* N/A*Western Illinois University N/A** N/A** 1,782 2.5Eastern Illinois University N/A** N/A** 1,607 2.2

Total, largest 10 employers 41,672 65.9% 44,170 61.4%

All other employers 21,534 34.1% 27,718 38.6%

GRAND TOTAL 63,206 100.0% 71,888 100.0%

Year ended June 30, 2011

Participating EmployerCovered


MembershipCovered


Membership

University of Illinois - Urbana 3,156 24.0% 1,795 18.5%University of Illinois - Chicago 2,886 22.0 1,699 17.5Southern Illinois University - Carbondale 882 6.7 641 6.6Illinois State University 687 5.2 446 4.6Northern Illinois University 640 4.9 539 5.5Southern Illinois University - Edwardsville 474 3.6 311 3.2City Colleges of Chicago 319 2.4 343 3.5College of DuPage 318 2.4 244 2.5William Rainey Harper College 269 2.0 N/A* N/A*Western Illinois University 247 1.9 251 2.6Eastern Illinois University N/A** N/A** 212 2.2

Total, largest 10 employers 9,878 75.2% 6,481 66.7%

All other employers 3,251 24.8% 3,242 33.3%

GRAND TOTAL 13,129 100.0% 9,723 100.0%

Year ended June 30, 2011Year ended June 30, 2020

Number of Covered Employees by Employer - Defined Benefit Plan

*In FY 2011, this entity did not rank in the Top Ten**In FY 2020, this entity did not rank in the Top Ten

*In FY 2011, this entity did not rank in the Top Ten**In FY 2020, this entity did not rank in the Top Ten

Year ended June 30, 2020



STAT

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BENEFIT SUMMARY

Monthly Amount of Benefit

Total Recipients

General Formula

Money Purchase

Police or Fire Other (A)

Long-Term Disability

Temporary Disability Survivors

$ 0 - 500 11,001 4,495 4,285 - 95 14 10 2,102 501 - 1000 8,560 3,115 3,217 - 20 129 25 2,054 1,001 - 1,500 6,555 2,290 3,011 - - 146 61 1,047 1,501 - 2,000 5,717 1,833 2,806 - - 37 222 819 2,001 - 2,500 4,969 1,425 2,724 - - 18 102 700 2,501 - 3,000 4,417 1,137 2,666 2 - 15 42 555 3,001 - 3,500 4,092 1,008 2,522 5 - 5 44 508 3,501 - 4,000 3,437 880 2,120 12 - 1 19 405 4,001 - 4,500 2,896 835 1,728 13 1 6 15 298 4,501 - 5,000 2,353 713 1,395 13 - - 15 217 5,001 - 5,500 2,060 689 1,190 22 - - 8 151 5,501 - 6,000 1,811 619 1,078 18 - - 7 89 6,001 - 7,000 2,919 1,057 1,728 26 - - 5 103 7,001 - 8,000 2,385 915 1,391 25 - - 2 52 8,001 - 9,000 1,799 686 1,074 9 - - 3 27 9,001 - 10,000 1,312 550 741 6 - - 2 13 10,001 - 11,000 896 415 471 1 - - - 9 11,001 - 12,000 660 318 338 - - - 1 3 12,001 - 13,000 453 232 218 1 - 1 - 1 13,001 - 14,000 292 142 149 - - - - 1 14,001 - 15,000 166 87 78 1 - - - - 15,001 - 16,000 118 68 50 - - - - - Over 16,000 304 176 124 1 - - - 3

TOTAL 69,172 23,685 35,104 155 116 372 583 9,157

Schedule of Benefit Recipients by Type of Benefit - Defined Benefit PlanFor the Year Ended June 30, 2020

(A) Minimum annuity and retirements of participants who terminated prior to 1969.


Black Hawk College

Carl Sandburg College

Chicago State University

City Colleges of Chicago

College of DuPage

College of Lake County

Danville Area Community College

Eastern Illinois University

Elgin Community College

Governors State University

Heartland Community College

Highland Community College

ILCS Section 15-107(I) Members

ILCS Section 15-107(c) Members

Illinois Board of Examiners

Illinois Board of Higher Education

Illinois Central College

Illinois Community College Board

Illinois Community College Trustees Association

Illinois Department of Innovation and Technology

Illinois Eastern Community College

Illinois Mathematics and Science Academy

Illinois State University

Illinois Valley Community College

John A. Logan College

John Wood Community College

Joliet Junior College

Kankakee Community College

Kaskaskia College

Kishwaukee College

Lake Land College

Lewis & Clark Community College

Lincoln Land Community College

McHenry College

Moraine Valley Community College

Morton College

Northeastern Illinois University

Northern Illinois University

Northern Illinois University Foundation

Oakton Community College

Parkland College

Prairie State College

Rend Lake College

Richland Community College

Rock Valley College

Sauk Valley College

Shawnee College

South Suburban College

Southeastern Illinois College

Southern Illinois University – Carbondale

Southern Illinois University – Edwardsville

Southwestern Illinois College

Spoon River College

State Universities Civil Service System

State Universities Retirement System

Triton College

University of Illinois – Alumni Association

University of Illinois – Chicago

University of Illinois – Foundation

University of Illinois – Springfield

University of Illinois – Urbana

Waubonsee Community College

Western Illinois University

William Rainey Harper College

PARTICIPATING EMPLOYERS

1901 Fox Drive • Champaign, Illinois 61820

Toll Free 800-275-7877 • Direct 217-378-8800

www.surs.org

RISING TO THE CHALLENGE

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