Comprehensive Annual Financial Report which can be obtained from the State Retirement and Pension System of
Maryland at State Office Building, 301 West Preston Street, Baltimore, Maryland 21201.

Plan Description:

The System, which is administered in accordance with Article 73B of the Annotated Code of Maryland,
consists of several plans which are managed by the Board of Trustees for the System. All State employees and
employees of participating entities are covered by the plans.

"Retirement System" — retirement programs for substantially all State employees, teachers, State police and
judges who are not members of the State Pension System.

"Pension System" — retirement programs for employees and teachers hired after January 1, 1980, and prior
employees who have elected to transfer from the Retirement System.

The System provides retirement, death and disability benefits in accordance with State statutes. Vesting begins
after completing 5 years of service. A member terminating employment before attaining retirement age but after
completing 5 years of service becomes eligible for a vested retirement allowance provided the member lives to age
60 (age 62 for the Pension System, age 50 for State Police) and does not withdraw his or her accumulated
contributions. Members of the Retirement System may retire with full benefits after attaining the age of 60, or after
completing 30 years of service credit regardless of age, or at age 62 or older with specified years of service credit.
State police members may retire with full benefits after attaining age 50, or after completing 25 years of service
credit regardless of age.

The annual benefit for Retirement System members is equal to 1/55 of a member's high three-year average
salary multiplied by the number of years of service credit. A member may retire with reduced benefits after
completing 25 years of service, regardless of age. A member of the Pension System shall receive, upon retirement,
an annual service retirement allowance equal to 0.8% of the member's high three-consecutive-year average salary
multiplied by the number of years of service credit, with a provision for additional benefits for compensation
earned in excess of the Social Security wage base. A member may retire with reduced benefits after attaining age
55 and completing 15 years of service. The annual retirement allowance for a State Police member is equal to 1/45
of a member's high three-year average salary multiplied by each year of service up to 25 years, plus 1/90 of the
member's high three-year average salary multiplied by each year of service in excess of 25 years.

Funding Policy:

The State's required contributions are based upon actuarial valuations. Effective July 1, 1980, in accordance
with the law governing the Systems, all benefits of the System are funded in advance. The entry age normal cost
method is the actuarial cost method used to determine the employers' contribution rates and the actuarial accrued
liability. Members of the Retirement System are required to contribute to the System a fixed percentage of their
regular salaries and wages (7% or 5% depending on the retirement plan selected). Members of the Pension System
are required to contribute to the System 5% of their regular salaries and wages which exceed the social security
wage base. State Police members are required to contribute 8% of their regular salaries and wages to the System.
All contributions are deducted from each member's salary, and wage payments are remitted to the System on a
regular, periodic basis.

The contribution requirements of the System members and the State are established and may be amended by
the Board of Trustees for the System. During 1996, the State's and its participating political subdivisions' required
and made contributions were $721,615,438, which was 13.0% of covered payroll. The State makes non-employer
contributions to the System for local school system teachers. The covered payroll amount includes amounts for
employees for whom the State pays retirement benefits, but does not pay the payroll. As of June 30,1996 and 1995,
the State had made all required contributions, and thus as of June 30, 1996 and 1995, the State did not have a net
pension obligation.

Annual Pension Cost and Net Pension Obligation:
Three-Year Historical Trend Information for the System is as follows (amounts expressed in thousands).

	Ann	ual Pension <	3ost
	Fiscal }	fear Ending J	fune 30,
Plan	1996	1995	1994
Teachers' Retirement and Pension System...............................................................................................................	$479,007	$458,035	$429,648
Employees' Retirement and Pension System...........................................................................................................	213,652	202,667	196,450
State Police Retirement System.................................................................................................................................	11,801	11,911	15,236
Judges' Retirement System..........................................................................................................................................	12,361	12,408	12,314
Natural Resources Law Enforcement Officers Pension System......... ..................................................................	4,085	3,667	3,210
Municipal Corp. Law Enforcement Officers and Fire Fighters Pension System........ .......................................	709	656	571

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