IMRF 101

• IMRF is not funded by the state of Illinois
• IMRF is not related to local police and fire pension funds.
• IMRF is managed by an independent Board of Trustees elected by IMRF employers and members.
• IMRF is funded by member and employer contributions and primarily by investment income
• Approximately $22.3 billion in assets (as of 12/31/09)
• 2009 investment return: 24.5%
• 2009 investment income: $4.4 billion
• Funded status on a market basis as of 12/31/09: 81.4%
• As of December 31, 2009:
  • 181,380 active members
  • 92,058 retired members
  • 2,950 employers (local units of government)
  • $16,668 average annual pension for a member retiring in 2009 with 19 years of service credit
  • $11,038 average annual pension for all retired members in 2009
• Public Act 96-0889 creates a second tier of IMRF benefits

What is IMRF?

IMRF is a “multi-employer public pension fund” that administers a program of disability, retirement, and death benefits for employees of local governments in Illinois (excluding the City of Chicago and Cook County).

IMRF began operations in 1941. IMRF is established by Article 7 of the Illinois Pension Code (40 ILCS 5/).

You can read more about IMRF including an FAQ (pdf) and our Ethics Policy.

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IMRF Issues Brief

Following are some of the related issues that Louis Kosiba, executive director of the Illinois Municipal Retirement Fund, would be happy to discuss with you.

• Defined Benefit Plans — Dinosaurs or destined to survive?
  There’s much debate in pension circles about whether defined benefit plans, the predominant form of retirement benefits for employees of state and local governments in the United States, are still a viable way to provide public employees with secure retirements. Find out the benefits to employees and taxpayers of retaining this long-fought-over form of deferred compensation.


• Underfunding of Pension Plans — The whys and wherefores:
  Some public pension plans are fully funded; others are funded at varying levels. Gain insight on the reasons for the discrepancy and what needs to be done to stop it.


• Retirement Planning — More to it than a pension:
  Most financial experts advise that retirement funding should rest on the three-legged stool of Social Security, personal savings and pensions. But as personal savings dwindle and Social Security benefits seem uncertain, many Americans rely more heavily on their pensions. Find out more about the retirement dilemma we’re facing in Illinois, and in our nation, and what could help address this issue.


• B=C+I-E — How defined benefit pension funding and returns are calculated:
  This is the central equation for any defined benefit pension plan. Learn how this equation demonstrates the relationship between the health of the market and employer contributions. Benefits (constant) = Employee Contribution (constant) + Employer Contribution (variable) + Investment Returns (variable) – Expenses (constant) |


• IMRF vs. State-Funded Plans — What’s the difference and why it matters:
  There are five state-funded pension plans in Illinois: Teachers’ Retirement System (TRS); Illinois State Universities Retirement System (SURS); State Employees Retirement Systems (SERS); Judges’ Retirement System of Illinois (JRS); and General Assembly Retirement System (GARS). The main difference is the state-funded plans’ employer (the state) can choose to underfund if it can’t fit payments into its budget. Learn why IMRF’s employers don’t have that option and about the long-term benefits of this philosophy.


• The "So What" Factor — The real rationale for retaining DB:
  A defined benefit plan is a form of deferred compensation to public servants. It helps attract and retain the most qualified candidates, decreasing turnover in positions vital to a functioning government such as law enforcement, school and park employees. In addition, it is estimated that 2 percent of the GDP in Illinois is tied to the economic impact of public servants who retire and stay in state. Hear why defined benefit plans are good for all Illinoisans.


• Pension Abuse — How does it happen and what does it mean?
  The size of a retiree’s monthly check is normally determined by his or her final rate of earnings and years of service credit. On rare occasions, individuals work in concert with employers to artificially inflate their salaries during the end of their careers in order to provide a larger payout upon retirement. Find out how this practice can be met head-on if we are to preserve the integrity of pension plans.

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How is IMRF funded?

IMRF is not funded by the state of Illinois. IMRF is funded by contributions from members, employers, and from investment income.

Investment income is IMRF’s primary funding source. As of December 31, 2009, IMRF had approximately $22 billion under management. These assets are held in trust; they are not public money to be spent for any other purpose other than for IMRF members’ disability, retirement, and death benefits.

In 2009, IMRF earned an estimated 24.5% on our investments. This return translates into investment income of approximately $4.4 billion and, on an estimated basis, resulted in IMRF's ’s funded status increasing to 81.4% on a market value basis.

Each IMRF employer builds it own account to fund the pension benefits of its own employees. Each IMRF employer has it own unique contribution rate, which is calculated annually. An employer’s contribution rate is based upon its employees’ salaries, ages, years of service credit, etc. as well the return on IMRF’s investments. You can read more about how an employer’s contribution rate is calculated.

Most IMRF members participate in the Regular plan; these members contribute 4.5% of their salary toward their future pension. Members do not contribute toward the cost of their IMRF disability or death benefits.

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Investment returns and the impact on employers

IMRFemployer rates are on a "two-year lag." Information from 2008 is sent to external acturiaries in 2009; actuaries use that information to calculate 2010 employer contribution rates.

Economic events in 2008 were unprecedented in their scope, speed, and depth. Sharp drops in domestic and global investment markets resulted in significant losses for all investors, large and small. IMRF is not immune to global economic events.

The investment losses IMRF suffered in 2008 impact 2010 employer contribution rates. The IMRF Board of Trustees recognize the budget challenges our employers face and adopted a plan to moderate the impact of the 2008 investment losses on employers.

With the aid of the unprecedented government stimulus program, financial markets rebounded sharply in 2009. In 2009 IMRF earned 24.5% versus a negative 24.8% in 2008.

Even though IMRF employers and members both contribute to IMRF, earnings on IMRF's investments are the major contributor. In 2009, IMRF earned $4,424 million--this amount represents 81.8% of Plan Additions for the year.
As of December 31, 2009, IMRF's investments totaled $22.3 billion, up from $18.4 billion at the end of 2008.

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How does IMRF invest its assets?

Unlike a private investor who has a limited timeline, such as 10, 20, or 30 years, IMRF invests for the lifetime of our members.

IMRF hires professional investment firms to manage our assets. As of December 31, 2009, IMRF had 70 investment firms managing our portfolio. Our diversified investment strategy results in steady and responsible returns. IMRF investments include stocks, bonds (both domestic and international), real estate and U.S. Treasury bills.

You can read more about IMRF’s investments in our Annual Financial Reports You can also read a memorandum that provides more detail regarding IMRF’s 2009 investment return.

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IMRF believes in full funding

Studies have shown that better funded plans earn higher returns on their investments. Higher returns on investments translate to lower employer contribution rates.

With full funding, current taxpayers pay for the benefits of municipal workers that are providing services to them. If a plan is underfunded, future generations must pay for the benefits of municipal workers that are no longer providing municipal services.

You can read more about funding and IMRF’s 100% funding goal.

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Who governs IMRF?

An independently elected Board of Trustees governs IMRF. Four “executive” trustees are elected by employers (participating units of local government), three “employee” trustees are elected by active members (employees) and one “annuitant” trustee is elected by retired members.

Board members serve without compensation and are elected to staggered five-year terms. Employee and executive trustees must be active members of IMRF. The annuitant trustee must be receiving an IMRF pension.

IMRF’s Executive Director, Louis W. Kosiba, manages a staff of 176 employees. Most work out of IMRF’s Oak Brook office; three Member Service Representatives work out of IMRF’s Springfield office.

IMRF also has seven Field Representatives located across the state who work with employers and members. You can read more about Field Representatives and locate the Field Rep for your area.

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Executive Director Louis W. Kosiba

Louis Kosiba has been with the IMRF for more than 20 years, and has served as executive director since 2001. Prior to his appointment as executive director, Kosiba was the IMRF general counsel from 1990 to 2001, and manager for the Field Services Department from 1988 to 1990.

Before coming to IMRF Kosiba was general counsel to the Illinois Teachers' Retirement System.

Kosiba has a juris doctor degree and a master's in business administration from the University of Illinois in Urbana-Champaign. He earned a certified employee benefits specialist designation from the International Foundation of Employee Benefit Plans and the Wharton School of the University of Pennsylvania, and is currently working on a certificate of achievement in public plan policy through the International Foundation.

Kosiba was one of the founders of the National Association of Public Pension Attorneys (NAPPA) in 1987, and served on its board of directors. He is an active member of the National Association of State Retirement Administrators (NASRA), a leading public pension industry group.

As executive director of the IMRF, Kosiba speaks throughout Illinois and nationally on retirement issues, oversees a staff of 176 and reports directly to the eight-member IMRF board of trustees.

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Who participates in IMRF?

As of December 31, 2009, 2,950 units of local government participated in IMRF. Government types include school districts, cities, villages, townships, counties (except Cook), fire protection districts, library districts, and park districts. To learn which local governments participate in your area, visit our Employer Search page.

Please note: although IMRF covers school districts, teachers and other positions that require teaching certificates do not participate in IMRF. Those employees participate in the Illinois State Teachers Retirement System.

As of December 31, 2009, 181,380 active members (local government employees) participated in IMRF and 93,298 retired members were receiving monthly pension payments. In addition, as of 12/31/2009, more than 112,148 former (inactive) members have contributions on deposit with IMRF.

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The IMRF pension

For a member retiring in 2009, the member had 19 years of IMRF service and received a monthly pension of $1,389.

Most IMRF members participate in IMRF’s Regular plan. A member needs at least eight years to vest (be eligible) to receive an IMRF Regular plan pension. The earliest age a member can receive a pension is age 55 (reduced) and at age 60 (full pension).

The pension amount is calculated by a formula that includes the member’s years of service credit and an average of the member’s final salary.

The Regular plan formula is 1.67% of the final salary for each year of service up to 15 years and 2% thereafter.

Example:
A member has 22 years of service and a final average salary of $33,600 a year.

1.67% x 15 years = 25%
2.00% x 7 years = 14%
Total 39% x $33,600 = $13,104 annual pension

IMRF is established by Article 7 of the Illinois Pension Code (40 ILCS 5/). To change IMRF’s benefits, the Illinois General Assembly must pass legislation changing the Pension Code. You can read more about IMRF’s legislative initiatives.

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PA 96-0889 IMRF Second Tier: reduced benefits for new members

On April 14, 2010, the governor signed Senate Bill 1946 (Public Act 96-0889). This new law creates a second tier of IMRF benefits for members who are first enrolled in IMRF's Regular Plan on or after January 1, 2011.

We created a chart that provides a comparison between the Regular Plan Tier 1 and Tier 2.

This new law does not affect members currently participating in IMRF or members who ever participated in IMRF or in a reciprocal system prior to the effective date of this legislation. These members remain in Tier 1.

This new law made no changes to benefits payable to current or future members of IMRF's Sheriff's Law Enforcement Personnel (SLEP) plan.

Our actuaries estimate that the initial normal cost of the Regular Plan Tier 2 will be 4.67%, a 38.4% decrease from the current cost of 7.58%. Over time, this reduction will increase.

The impact of Tier 2 on an individual employer's rate will depend on the number of Tier 2 members in its workforce.

Employers will see the impact of Tier 2 beginning with their 2013 rates.

Need more information? Contact us.