HomeMy WebLinkAboutIII. Pensions Funding Update 02/10/2009
Mount Prospect
INTEROFFICE MEMORANDUM
Village of Mount Prospect
Mount Prospect, Illinois
FROM:
MICHAEL E. JANONIS, VILLAGE MANAGER
DIRECTOR OF FINANCE
TO:
DATE:
FEBRUARY 6, 2009
PUBLIC SAFETY AND IMRF PENSION UPDATE
SUBJECT:
Pension funding relies on contributions from employer and employee contributions as well as
investment income on the pension fund portfolio. In the case of public safety pensions, employer
contributions are determined each year by a licensed actuary. The source of the contribution is the
annual property tax levy. Employee contributions are set by state statute and are made through
payroll deductions of its members. Authorized investments of the pension portfolio are also
directed by state statute and the pension fund investment policy. Portions of both the police and
fire pension investment portfolios are placed in fixed income and equity type investments. As you
can imagine, returns for the equity portion of the portfolio were negative for 2008. This is also the
case for the Illinois Municipal Retirement Fund (IMRF) pension which is provided to general Village
employees. Although pension funding for IMRF is similar to the police and fire pension, the Village
does not levy a direct property tax for its contribution. The Village relies on general revenues to
support this cost. The impact to the pension funding requirements as a result of the losses realized
in 2008 will be considerable absent any changes is current funding requirements.
Included with this memo are materials to be used to follow along with discussion at the February 10
Strategic Planning meeting with the Board. The materials include a copy of a presentation made by
IMRF regarding the impact of 2008 investment returns on employer rates, reserve balances and
funded status. Also from IMRF is a FAQ handout summarizing the IMRF plan and next steps in
addressing the funding issue. I have also prepared historical information on the actuary valuations
for both the police and fire pension funds. Included with this information are the unfunded liability,
funded ratio, employer contribution and levy as a percent of payroll figures for the period 1997-
2007. There are also two summary sheets that illustrate the estimated impact each of the pensions
will have on the 2009 tax levy and 2010 budget. The final numbers for IMRF will be available in
April while public safety pension numbers will be available in June.
Due to the investment losses during 2008, funding levels for the police and fire pension funds
dropped to 60.0% and 63.0% while their contributions as a percent of payroll increased to 28.2%
and 32.0% respectively. For budgeting purposes, we have typically programmed an 8-10%
increase in the publiC safety portion of the levy. For 2009, the police pension levy is estimated to
increase 39.2% while the fire pension levy is estimated to increase 37.3%. The total property tax
levy for 2009, assuming regular growth to the general and refuse portion and increased pension
requirements is projected to increase $1,359,896 or 9.38% from the prior year.
Public Safety and IMRF Pension Update
February 6, 2009
Page 2 of 2
The additional funding requirements for IMRF are considerable as well. The increase in the
employer contributions for IMRF is expected to be in the area of 79.0%. The additional cost to the
Village for IMRF liabilities in 2010 is estimated to be $1,012,757.
There is a coordinated effort in the works by several cities and villages and the Northwest Municipal
Conference to propose legislation that will ease the impact on municipal tax levies for public safety
pensions. Preliminary actuary valuations are currently being performed and more information is
expected shortly as legislation moves through Springfield. IMRF has also presented phase-in
funding options for moderating the impact of 2008 investment losses for 2010 funding obligations
and beyond. The IMRF Board intends to finalize a decision on a strategy at its February 27
meeting. I will report on any developments with proposed legislation or funding options as they
become available.
I will be prepared to discuss each of these items in further detail at the February 10 workshop.
~~O~ ~.._
David O. Erb
Director of Finance
1:\COW\Pension Update - February 2009.doc
-.J
Exhibit I
N
Impact of 2008 Investment Returns
on
Employers' Rates, Reserve
Balances and Funded Status
Louis Kosiba
Richard DeCleene
(~?"'
What We'll Cover Today
. IMRF is a Defined Benefit Plan
. How 2008 Investment Returns Will Impact
Employers
. Options for Dealing with "Rate Shock"
from 2008 Investment Returns
. Impact beyond 2010
2
1
The Good News and the Bad News
. The good news for members and
annuitants - IMRF is a defined benefit
plan
. The bad news for employers -IMRF is a
defined benefit plan
. In a defined benefit plan as contrasted
with a defined contribution plan, the plan
sponsor bears investment return risk.
3
.~
.
How Do Investment Returns Impact
Retiree and Member Benefits?
LKe
. Final benefits are based upon a formula
that covers the final rate of earnings and
years of service.
. IMRF's benefits are guaranteed by the
Illinois Constitution and can only be
changed prospectively by the Illinois
legislature.
4
2
. ......
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How are IMRF Benefits Funded?
. There are only three sources of funding
o Member Contributions
o Employer Contributions
o I nvestment Income
. Since member contributions are fixed by
statute and investment income varies based
upon market returns, employer contributions
need to fund the balance and thus are
variable.
5
· L
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1If;
IMRF in Equilibrium
B=C+I-E
. Benefits = Final Rate of Earnings X Years of
Service
. Contributions = 4.5% from Members and
8.37% from Employers for the Regular Plan
. Investment income (8% return on investments)
less .5% for direct investment and administrative
expenses
6
3
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b'
The Impact of Investment
Returns on Employer Rates
. Changes in employer rates are impacted by:
o Demographic factors such as mortality rates; age at
retirement;
o Benefit changes;
DWage inflation;
o But the most significant is investment returns.
7
-;...
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_~",
2008 Investment Returns
. Dow Jones
. S&P 500
. NASDAQ
. Wilshire 5000
. MSCI EAFE
. Barclay Agg reg ate
. Citigroup gO-Day T -Bill
-33.80Ic>
-37.001c>
-40.5%
-37.20Ic>
-43.40Ic>
5.20/0
1.80/0
8
4
I
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.
IMRF's 2008 Return
. IMRF's investment return for 2008 is
estimated to be -24.8%).
. This translates into an investment loss of
approximately $6.1 billion.
. This contrasts with an expected actuarial
assumed return of 7.5% or $1.7 billion.
. IMRF's investment shortfall in 2008 is
estimated to be approximately $7.8 billion.
9
PnaI}Sis of IMRF Returns
30.00010
97 98 99
20.00010
10.000/0
0.000/0
-10.000/0
-20.000/0
-30.00010
I-+-Actuarial-a-AnnLEI -.-5 YfH Erded -+-10 YfH Erded I
5
. __I
lIII
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Annualized Historical Investment Returns for
IMRF as of December 31
2007 2008
. 1 Year 8.5% -24.8%
. 3 Year 10.3% -2.4%
. 5 Year 13.1% 2.6%
. 10 Year 8.20/0 3.9%
. Since 1/1/95 10.4% 7.4%
11
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IMRF's Long-Term Investment Return
Assumption vs. Other Large Public
Plans' Assumed Returns
Median Return
2007 NASRA Study of
101 Plans
Illinois Plans
8%
8.5%
IMRF's Assumption
7.5%
12
6
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IMRF's Current and Target Asset Allocations
versus Latest Wilshire Study Median
Current Tarqet Wilshire
. Domestic Equity 31.6% 38%
. International Equity 13.1% 20%
. Alternative Investments 5.0% 6%
. Real Estate 3.1% 6%
Equity-like 52.8% 70% 69%
. Fixed Income 45.6% 29%
. Cash 1.6% 1%
Fixed-like 47.2% 30% 31%
13
Is the Current Asset Allocation
Right for IMRF?
. Annually IMRF's investment staff together with its
independent investment consultants review the
investment allocation policy to:
o Determine the optimal weighting to the various asset classes
o Maximize the investment return given the nature of our actuarial
liabilities and funded status while assuming the appropriate
amount of risk.
. The current target asset allocation was adopted by the
Board in the third quarter of 2008.
. Based on information currently available most large
pension systems have not made significant changes to
their asset allocation strategies in reaction to the 2008
market returns.
14
7
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:
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I\i~
What did a Negative 24.80/0
Return Mean for 2008?
. As noted earlier the -24.8% return translates into
an estimated loss of $6.1 billion.
. After covering direct investment and
administrative expenses of $73 million and
crediting $1 billion of interest to annuitant and
member reserves, we charged employer
reserves $7.1 billion.
. This charge represented approximately 67% of
the opening employer reserve balance.
15
. . .'. li[f
rr 24.80~ versus 67O~
(Dollars in Billions)
12/31/07 2008 Activitv 12/31/08 %Chanqe
Net Assets $24.2 $ (6.1) $18.1 (25.2)%
Reserves
Member $ 4.2 $ .3 $ 4.5 7.1%
Annuity 9.4 .7 10.1 7.4%
Employer 10.6 fLll 3.5 (67.0)%
$24.2 $(6.1 ) $18.1
16
8
· po., _f~'
... IMRF's Current Actuarial Techniques That
Significantly Impact Actuarial Funded Status
and Employer Rates
. Five-year smoothing of market returns
o Difference between assumed actuarial return and actual market
return is spread over five years -- $7.8 billion loss in 2008
. 15% Corridor
o Actuarial value of assets must be within 15% of market value -
For example, if market value is $18 8, actuarial value must be
between $15.3 8 and $20.7 8
. Closed amortization method for over and under
funding
o For most taxing bodies, the amortization period is 22 years,
reducing to 10; for non-taxing bodies, the amortization period is
10 reducing to 1 and then resetting at 5
17
. --
.
BP;
The Impact on IMRF's Actuarial Return
Using Current Actuarial Techniques
. While IMRF's 2008 investment return is estimated to be
-24.8% on a market basis, it is estimated to be -10.6%
on an actuarial basis.
. This difference is due to the use of the five-year
smoothing method that spreads the difference between
the assumed return and the actual return over five years
coupled with the 15% corridor.
. Approximately $2.7 billion of unrecognized losses which
arose in 2008 would be recognized in the 2009 - 2012
period.
. These deferred losses would lower the actuarial returns
causing upward pressure on employer rates through
2014.
18
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-I:"
The Impact on Funding Value Using
IMRF's Current Actuarial Techniques
. The five-year smoothing, subject to the 15%
corridor, delays the recognition of both market
gains and losses.
. It is estimated that IMRF's actuarial funding value
in total would decrease from 96.1 % as of year-end
2007 to 80.2% as of year-end 2008.
. On a market value basis, it is estimated that
IMRF's funding level would decrease from 100% as
of 2007 to 69.7% as of year-end 2008.
19
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... Impact of 2008 Investment Returns on 2010
Employer Contribution Rates Using Current
Actuarial Techniques
. Using current rate setting procedures, it is
estimated that the average employer
contribution for the regular plan would
increase from 9.27% to 16.63%>
. This 79%> increase results in "rate shock".
20
10
How Has IMRF Responded to 2010 "Rate
Shock"?
The IMRF Board is reviewing a two-prong
approach to deal with 2010 employer rates:
. Modifying two actuarial techniques:
o Changing the amortization period for over and under
funding to 30-year rolling for taxing bodies and 10-year
rolling for non-taxing bodies;
o Widening the 15% corridor to 20% which allows a greater
amount of investment losses to be carried forward in the
five year smoothing period.
. Adopting a Phase-In plan which would cap most
employer rates at a fixed percentage.
21
. -
.
What's the Estimated Impact on IMRF's
Actuarial Return of the Modified Actuarial
Techniques
. While IMRF's 2008 investment return remains -24.8% on
a market basis, it is estimated that it would be -6.7% on
an actuarial basis.
. The improvement is due to the widening of the corridor
which increases the amount of deferred losses which are
carried forward to future actuarial calculations.
. Approximately $2.9 billion of unrecognized losses which
arose in 2008 would be recognized in the 2009 - 2012
period for actuarial purposes.
. These deferred losses would cause upward pressure on
employer rates through 2014.
22
11
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.
What's the Estimated Impact on IMRF's
Funded Status of the Modified Actuarial
Techniques
. It is estimated that IMRF's actuarial funding
level in total would decrease from 96.1 % as of
year-end 2007 to 83.7% as of year-end 2008.
The higher actuarial funded status is due to the
larger deferred losses from widening the
corridor.
. Actuarial assets would be 20% higher than
market value.
. For market value there are no deferred losses.
. The estimated market funding level would
remain at 69.7% as of year-end.
23
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What's the Estimated Impact on 2010 Employer
Contribution Rates of the Modified Actuarial
Techniques
-%tl
. IMRF's rate setting procedures would include
five-year smoothing of market returns with a
200/0 corridor and 30-year amortization for taxing
bodies and 1 O-year amortization for non-taxing
bodies for any under or over funded balance.
. Using these rate setting procedures, it is
estimated that the average employer
contribution for the regular plan would increase
from 9.27% to 14.00%.
. This represents a 51 % increase versus the 79%
increase using the prior actuarial methods.
24
12
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.
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>
Maximizing Flexibility for Employers
. The IMRF Board realizes that a 510/0
increase would cause undue hardships for
most employers.
. In order to be responsive, the IMRF Board
is poised to adopt a Phase-In plan to
address employer rate increases in 2010
and beyond.
25
....
.....
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Maximizing Flexibility in Dealing with the
Consequences of 2008 Investment Returns
via a Phase-In Plan
. Most employers' rate increase would be capped
at a fixed percentage, excludes ERI and SLEP
enhancement costs.
o For example, if a 10% cap is approved, an employer
with a 10% rate for 2009 would have an 11 % rate for
2010.
. Employers who were over funded in 2007 but
are under funded as of December 2008 would
have to pay the full cost of the IMRF program.
o The full cost of the program in 2009 was 8.37%,
12.58% and 18.02% for the Regular, SLEP and ECO
plans, respectively.
26
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.
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Maximizing Flexibility in Dealing with the
Consequences of 2008 Investment Returns
. Future rapid amortization of over funding would
begin at the 120% actuarial funded level.
. Employers would be encouraged to contribute
the full actuarially required contribution if
possible.
. The IMRF Board would review the phase-in plan
annually and it would be subject to modification
based on future investment returns and other
relevant factors.
27
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_m...' .
Average Employer Rate
Projection for Regular Plan
. There is a two-year lag between investment returns and
their incorporation into employer contribution rates.
. Assuming investment returns of 7.5% for 2009 through
2022 and actuarial liabilities growing consistent with the
actuarial payroll inflation assumption, the following slide
compares the actuarially required contribution (ARC)
rate utilizing the modified actuarial techniques with
optional phase-in rates with a 10%, 7.5% and 5% cap.
. This slide indicates that the lower the phase-in cap the
higher the ultimate employer rate.
28
14
Comparison of PRC to \tcIrious Phase-In %'s
20.00"10
18.00"10
16.00"10
14.00"10
12.00"10
10.00%
8.00"10
6.00"10
4.00"10
2.00"10
0.00"/0
..--x
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
-+- PRC
-+- 10% Phase-In
. .;.'
U
11;'1
Financial Accounting Impact of
Choosing the Phase-In Rate
. Under generally accepted accounting principles for
governmental entities, sponsors of defined benefit
pension plans who contribute less than the ARC are
required to record a net pension obligation on their
books for the difference between what they contribute
and what the ARC would require.
. This accounting provision will impact IMRF employers in
2010.
. Sponsors' auditors should be able to assist in recording
this additional expense.
. IMRF staff will be available to provide needed
information.
30
15
. ....
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_.r
Next Steps by IMRF Board
. At its January 23rd meeting the Board deferred finalizing
its approach for moderating the impact of 2008
investment returns on rates in 2010 and beyond.
. The Board is soliciting additional input from IMRF
stakeholders on its revised approach as outlined in this
presentation.
. Written feedback on the proposed actuarial changes, the
aspects of the proposed phase-in plan, the cap
percentage or other suggestions are welcome.
. The Board intends to finalize its decision on its approach
at its February 27th meeting.
31
--P
Stakeholder Input
. In order to include stakeholder input in the
decision making process, we will need to
receive it by February 13, 2009.
. Written comments can be addressed to:
Richard DeCleene
2211 York Road, Suite 500
Oak Brook, Illinois 60523-2337
or
rdecleene@imrf.org
32
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Preliminary 2010 Phase-In Rate
Notices
. Preliminary 2010 phase-in rate notices will be available
during the week of March 2, 2009 following the February
Board meeting.
. These rates will follow the procedures adopted by the
Board at its February meeting.
. While we believe that these rates will be close to the
finalized phase-in rates, they will be subject to change
based upon the finalized actuarial information that will be
available in April 2009
. These notices will not include preliminary ARC rates.
. Any employers who are still over funded as of December
31, 2008 will not participate in the phase-in plan; IMRF
will not know who is still over funded until it receives the
actuarial information for 2008.
33
. .
..
u
-If
Employer Reserve Statements
. IMRF will provide employer reserve statements
in late February to all employers.
. Statements show employer funds on deposit for
current employees and current year activity.
o Employer retirement contributions
o Charges for interest @ 7.5% and residual investment
loss
o Adjustments, if any
o Reductions for 2008 retirees
. Employers will see dramatic decreases in their
reserve balance; charges for interest and the
2008 investment loss will average 67%.
34
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Preliminary Rate Notices for
2010
. Preliminary rate notices will be available in mid April 2009; final
notices will be available in November 2009.
. These preliminary rate notices will show the full actuarial required
contribution (ARC) rate and the finalized phase-in rate.
. Any employers still over funded as of December 2008 will not be
offered a phase-in rate.
. IMRF employers will be encouraged to contribute the full ARC
rate for 2010.
. IMRF employers will be given the option to contribute based on
the full ARC rate, the phase-in rate or some rate between the two.
. IMRF will assume the phase-in rate is selected unless employers
contact us with a different rate by August 31, 2009.
35
;.,,;
Individual Employer Funded
Status
. GASB disclosures which show the funded status of
each employer plan for the last ten years will be
available in April.
. This disclosure will show the actuarial funded
status reflecting the smoothing of investment
returns and the impact of the corridor which limits
the actuarial value of assets versus their market
value.
. There will be a footnote on this schedule that
discloses the funded status on a market basis.
. Both the actuarial and market funded status will
show marked decreases.
36
18
C'
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.
b
How Can Pension Costs be
Controlled in the Future?
. Many suggested solutions focus on modifying actuarial
assumptions, principles and techniques such as increasing the
amortization period for under funding, lengthening the actuarial
smoothing period, changing the actuarial cost method to back load
costs, setting a statutory employer rate or a statutory cap on
employer rate increases.
. While these types of changes can effect the timing of when pension
costs are recognized, they do not change the amount since the
ultimate costs equal the benefits paid.
. Since most of these changes tend to push cost recognition into the
future, they increase long-term costs while raising intergenerational
equity concerns.
. The only variable that will impact costs in the long term is the level of
benefits provided. Changing the benefits provided would require a
legislative change.
37
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ill
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Are IMRF Benefits Reasonable?
Initial Average Monthly Benefit for Regular Plan Retirees
Average Benefit
AIIIMRF Retirees
Average Benefit
Excluding School
District Retirees
2008
2007
2006
2005
$1,393
$1,154
$1,137
$1,063
$1,743
$1,548
$1 ,493
$1,362
38
19
. _- h) -
· Are IMRF Benefits Reasonable?
CorJ1larison of Benefit FOrTT1Jlas for 75 UIrge PERS
45, (XX)
40, (XX) 1
35, (XX) 7
30, (XX) 3: .~
25, (XX) "11
20, (XX) ......
15,(XX)
10,(XX)
5, (XX)
0
Average 2008lMRF Benefit for Regular Plan, excluding school districts
Final Rate of Earnings $56,465
Years of Service 21
Average Benefit $23,926
Median Benefit $23,715
IMRF Benefit $20,920
39
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.!j
How Could Benefit Changes be
Made?
. Any changes to the IMRF benefit structure
require legislative action.
. Given the "constitutional protection"
provisions, it may be difficult to change
benefits for existing active members or the
rate for active member contributions.
40
20
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Future Communications
. In February employers will receive their 2008 reserve
statements.
. In March employers will receive preliminary phase-in rate
notices.
. In April employers will receive their preliminary rate
notices which will provide both the ARC rate and
finalized phase-in rate.
. In April employers will receive GASB disclosure
information on their funded status
. In late AprillMRF will present two webinars in which
actual year-end financial and actuarial data for IMRF on
a whole and its estimated impact on individual employers
will be discussed.
41
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II' ,
Questions
. I can be reached at:
0630-368-5345
ordecleene@imrf.org
Thank you for coming!
42
21
Exhibit II
Illinois Municipal Retirement Fund
Suite 500 2211 York Road Oak Brook IL 60523-2337
Member Services Representatives 1-800-ASK-IMRF
www.imrf.org
IMRF and 2008 Markets
Focusing on long-term financial soundness, recognizing employers' budget challenges
Since 1941, IMRF has partnered with local units of government to provide modest
financial security to working and retired public sector employees
· Created by the General Assembly in 1939, IMRF administers a program of disability, retirement
and death benefits on behalf of approximately 2,900 local units of government (IMRF
employers).
· Approximately 178,000 working public sector employees (active members) and 87,000 retired
members participate.
· IMRF's defined benefit pension is a form of deferred compensation and is based upon a member's
years of service and salary. It provides a modest retirement benefit, averaging $835 a month.
As a defined benefit pension plan, IMRF has three sources of funding
· Members: contribute a portion of their salary; members in the regular plan contribute 4.5% of
salary. The member contribution is determined by state statute and can be changed only by the
General Assembly.
· Employers: each pays its own unique rate determined by outside actuaries. The rate is based
upon the employer's member demographics (age, gender, years of service, salary, etc.) and the
individual funded status of the employer's plan.
Investment income: historically the largest contributor to the plan. From 1995 through 2008, we
estimate that IMRF averaged a 7.4% annual investment return and earned more than
$11.4 billion in investment income, despite major market downturns in 2000-2002 and in 2008.
IMRF's portfolio is highly diversified, designed to achieve the greatest return with an
acceptable amount of risk, and remains focused on the long term
· Unlike private investors, who may have a five-, 10- or 15-year investment horizon, IMRF's
investment horizon spans the working and retired lifetimes of more than 265,000 members.
· IMRF's investments are diversified by type, geographic region and management style;
67 professional investment firms manage IMRF's portfolio in compliance with the Illinois
Pension Code and IMRF's policies. Independent investment consultants assist IMRF's internal
professional investment staff in the oversight of IMRF assets.
· IMRF's investment managers do not try to "time the market"; they follow disciplined and specific
investment guidelines designed to withstand short-term market variations and ensure steady
returns over the long term.
- over -
Economic events in 2008 were unprecedented in their scope, speed, and depth
· Not only did U.S. markets suffer sharp downturns, international markets suffered significant losses
as well. Sharp drops in domestic and global investment markets resulted in significant losses for all
investors, large and small.
· End-of-year index returns illustrate the effect of contracting economies, disappearing liquidity, and
sharply falling stock values:
Dow Jones Industrial Average -33.8%
S&P500 ~7~%
MSCI EAFE (international markets) -43.4%
· IMRF is not immune to global economic events. We began 2008 with $24.2 billion in net assets and
estimate we will have approximately $18.1 billion at year end. Estimated 2008 return: -24.8%.
· Recent investment losses will not impact IMRF's ability to continue paying our retirees their
monthly retirement benefits.
· Because IMRF's investment horizon extends over many decades, we have time to recover from
2008 investment losses.
Employers will be impacted by 2008 markets in three ways:
· Retirement Reserve: includes employer contributions made, charges for pensions approved, credits
for excess investment earnings, or charges for investment losses. By law, annually IMRF must
credit active member and retired member reserves with 7.5% interest:
When IMRF earns more than 7.5%, IMRF credits employer retirement reserves with the
excess investment income.
When IMRF earns less than 7.5%, IMRF charges employer retirement reserves for the 7.5%
interest credited to member reserves and the investment loss.
Employers will see their reserves decrease; on average IMRF will charge each employer's reserve
67% for interest credited to member reserves and for 2008 investment losses.
· Funding Status: the difference between benefits promised and assets available to pay them. Each
employer has its own unique funding status. With the decrease in employer reserves, employers can
expect their funding status to decrease.
· Employer Contribution Rates: a two-year lag exists between investment returns and their
incorporation into employer contribution rates. Outside actuaries also use a five-year smoothing
technique, subject to a 15% corridor, that recognizes only 20% of a year's investment gains or
losses when calculating employer rates. Under normal rate setting procedures, the average employer
contribution rate would increase from 9.27% in 2009 to 16.63% in 2010 (a 79% increase).
The IMRF Board of Trustees recognizes the budget challenges our employers face and
is poised to adopt a plan to phase in 2010 employer rate increases
· The IMRF Board recognizes that our employers are facing their own budgetary pressures and few
can afford a 79% rate increase. To help our employers, the IMRF Board will adopt a plan to phase
in 2010 employer rate increases.
· The plan maintains IMRF's long-term financial soundness while meeting employers' short-term
budgetary needs by:
Capping most employers' 2010 rate increase at a fixed percentage of their 2009 rate.
Extending the time to payoff any unfunded pension liability to 30 years rolling
for taxing bodies and 10 years rolling for non-taxing bodies.
Widening the corridor between the market (current) value of assets and
the acturial (five-year smoothed) value of assets from 15% to 20%.
Employers will be provided their actuarially required contribution rate and their phase-in plan rate.
Employers can pay either rate or any amount in between the two.
1
Exhibit III
Village of Mount Prospect Police Pension Fund
Actuarial Results - 1997 to 2007
Actuary Calculation Prepared by TWS
Unfunded Liability Funded Employer Levy as %
(Surplus) Ratio Contribution of Payroll
1997 1 ,293,207 95.40% 629,536 15.52%
1998 2,440,031 92.10% 583,037 13.96%
1999 4,535,623 86.40% 708,906 16.37%
2000 4,714,577 86.80% 746,579 15.76%
2001 6,817,484 82.20% 876,003 17.96%
2002 10,142,330 75.30% 1,062,739 20.45%
2003 9,758,113 77.50% 1,077,645 19.84%
2004 12,221,277 74.50% 1,246,954 22.07%
2005 13,049,354 74.10% 1 ,333,283 22.04%
2006 13,081,596 75.40% 1,408,423 21.46%
2007 13,910,721 75.50% 1,515,672 21.41 %
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Exhibit IV
Village of Mount Prospect Fire Pension Fund
Actuarial Results - 1997 to 2007
Actuary Calculation Prepared by TWS
Unfunded Liability Funded Employer Levy as %
(Surplus) Ratio Contribution of Payroll
1997 (874,553) 103.10% 525,314 13.89%
1998 1,826,878 94.40% 575,184 14.99%
1999 4,542,207 86.90% 751,108 19.39%
2000 5,126,868 86.40% 826,905 20.00%
2001 6,055,686 84.50% 925,943 20.88%
2002 8,263,300 80.10% 1,059,381 22.98%
2003 9,425,684 78.80% 1,175,135 24.38%
2004 9,884,559 78.80% 1,159,480 23.36%
2005 11,733,852 76.40% 1,302,011 25.55%
2006 12,190,729 76.70% 1,389,833 25.52%
2007 11,995,230 78.20% 1,414,110 24.54%
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Exhibit V
VILLAGE OF MOUNT PROSPECT AND THE
MOUNT PROSPECT PUBLIC LIBRARY
SUMMARY OF 2009 PROPERTY TAX LEVY
2%
Net Provision Total
2009 2009 Loss and 2009
Levv Abatement Levv Costs Extension
VILLAGE OF MOUNT PROSPECT
General Corporate Fund 7,886,749 0 7,886,749 157,735 8,044,484
Refuse Fund 1,750,000 0 1,750,000 35,000 1,785,000
Police Pension Fund 2,109,000 0 2,109,000 42,180 2,151,180
Firefighters' Pension Fund 1,942,000 0 1,942,000 38,840 1,980,840
Debt Service Funds
Series 2001 (Ord. 5212) 389,235
Series 2003 5301 930,299
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Total Village 15,857,862
MOUNT PROSPECT PUBLIC LIBRARY
Library Operations 0 0 0 0 0
Library Debt Service 0 0 0 0 0
Total Library 0 0 0 0 0
TOTAL - VILLAGE OF MOUNT PROSPECT
AND PUBLIC LIBRARY 15,546,924 0 15,546,924 310,938 15,857,862
SPECIAL SERVICE AREA NO.5 1,515,464 0 1,515,464 30,309 1,545,773
Exhibit VI
Village of Mount Prospect
Pension Funding Requirements
2009 Property Tax Levy - Budget Year 2010
Police Pension
Unfunded Liability Funded Employer Levy as %
(Surplus) Ratio Contribution of Payroll
2007 13,910,721 75.50% 1,515,672 21.41 %
2008 not known 60.00% 2,109,000 28.24%
Percent Increase to Levy 39.15%
Fire Pension
Unfunded Liability Funded Employer Levy as %
(Surplus) Ratio Contribution of Payroll
2007 11,995,230 78.20% 1,414,110 24.54%
2008 not known 63.00% 1,942,000 31.95%
Percent Increase to Levy 37.33%
IMRF Pension
Unfunded Liability Funded Employer Levy as %
(Surplus) Ratio Contribution of Payroll
2007 not known 96.10% 8.89% nla
2008 not known 80.20% 15.95% nla
Impact to General Fund for 2010 1,012,757