A Primer in Public Pensions CITY OF GENEVA CITY COUNCIL MEETING FEBRUARY 20, 2018

Transcription

1 A Primer in Public Pensions CITY OF GENEVA CITY COUNCIL MEETING FEBRUARY 20,

2 Pension Authority Illinois State Statue Police 40 ILCS 5/3-140 Firefighters 40 ILCS 5/4-126 IMRF 40 ILCS 5/7 2

3 Public Safety (Police and Firefighters ) Pensions 3

4 Pension Board Composition Police 5 Pension Trustees (2 year terms)* 2 Elected Active (Carbray, Yates) 1 Elected Retired (Burton) 1 Exofficio (City Treasurer) 1 Mayoral Appointee (currently Finance Manager) Firefighters 5 Pension Trustees (3 years terms)* 2 Elected Active (Affrunti, Lohse) 1 Elected Retired (Olson) 1 Exofficio (City Treasurer) 1 Mayoral Appointee (currently Finance Manager) *Pursuant to State Statute 4

5 Pension Board Responsibilities Investing Pension Fund Assets Disbursing Pension Fund Assets Adjudication of Disability, Retirement and Survivorship Claims Collection of Required Contributions and Property Tax Levies Conducting Trustee Elections Hiring Necessary Expert Assistance Rule Making Authority Continuing Education 5

6 Investing Pension Fund Assets Investment Mix Funds over $10 Million in Assets (40 ILCS 5/ (a)) Not to exceed 65% US Stocks Mutual Funds (Domestic and International) Variable Annuities No more than 5% of can be invested in a single corporation Not to exceed 35% Bonds, Cash and Cash Equivalents Policy language found in respective pension audit documents 6

7 Disbursing Pension Fund Assets Both pensions use Lauterbach & Amen for their accounting services Monthly Financial Report Disbursement of monthly pension checks Printing and reporting of 1099-R Account for employer and employee contributions 7

8 Collection of Required Contributions and Property Tax Levies The Pension Board is required to review the contributions from the employees and employer. If the contributions are not being made by the City, per PA , the State Comptroller can intercept funds due to the City and deposit those funds into a underfunded pension fund. 8

9 Actuarial Valuation Definition - Statement of the status of a Pension Fund at a Specific Point in Time. Required by State Statue 40 ILCS 5/3-125 (Police) & 40 ILCS 5/4118 (Fire) Completed by a enrolled actuarial Report for the following year based upon prior year numbers (i.e. Report as of April 30, 2017 dated May 1, 2017-April 30, 2018) Must be completed on an annual basis 9

10 Actuarial Valuation Invariable Date of valuation Market Volatility/Prices Entry Age Normal Cost Variables Demographic Mortality and Disability Rates Retirement Rates Termination of Employment Marriage Percentage Economic Assumptions Investment Return Salary Increases Inflation Payroll Growth 10

11 Pension Law Mandates Actuarial calculations must use the Projected Unit Credit Method to determine the statutory minimum Assets must be valued at a specific actuarial smoothing method. House Bill 5088 Municipal Compliance Report 11

12 IMRF (Illinois Municipal Retirement Fund) 12

13 IMRF IMRF Board of Directors (5 year terms) 4 Elected by participating governments (~3,000 gov ts) 3 Elected by IMRF Members 1 Elected by IMRF Annuitants Valuation dated as of December 31st IMRF manages investments IMRF disburses pension payments IMRF adjudicates disability process IMRF decides the actuarial assumptions 13

14 Comparisons 14

15 Comparison Police Pension Fire Pension IMRF Employee Contribution 9.91% 9.455% 4.5% Employer Contribution (as of 2/15/18) 41.6% * 23.7% * 11.71% Base Wages Salary Salary Salary + Overtime # of Participating Employees (4/30/17) Valuation Date April 30 April 30 December 31 CY 2017 Return (unaudited) 15.94% 12.94% 15.73% Asset Value (4/30/17) $20.3 Million $14.1 Million $41 Billion * Based upon FY 2018 year to date projections 15

16 Investment Returns Public Safety 16

17 Investment Returns - IMRF 17

18 City Contributions Police 18

19 City Contributions Firefighters 19

20 City Contributions - IMRF 20

21 The Future 21

22 Effect of Tier 1 vs Tier 2 Tier 2 for hires after 1/1/2011 (All three pensions) Same contributions with reduced benefits Estimated up to 75% of normal cost per member Normal cost is the cost to fund the benefit Employee contributions Employer contributions Investment earnings 22

23 Pension Reform IML Public Safety pension proposals (1) Consolidation into the Illinois Municipal Retirement Fund (IMRF), with the regular IMRF pension formula applying to all new employees hired after a certain date. (2) Consolidation of the various downstate police and firefighter pension funds into the Illinois Municipal Retirement Fund (IMRF), maintaining all current characteristics of the funds but under the management and administration of IMRF (3) Consolidation of investments (only) by the transfer of assets and investment authority from the current police and firefighter pension funds into the Illinois Municipal Retirement Fund (IMRF) and maintaining the local pension boards for each fund 23

24 Pension Reform IML Public Safety pension proposals (Cont.) (4a) Consolidation of all downstate police pension funds into one Downstate Police Pension Fund, with one statewide pension board that would carry out all aspects of the fund s management, thereby eliminating the local pension boards for each individual fund (4b) Consolidation of all downstate firefighter pension funds into one Downstate Firefighter Pension Fund, with one statewide pension board that would carry out all aspects of the fund s management, thereby eliminating the local pension boards for each individual fund 24