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).
Following are some
of the related issues that Louis W. Kosiba, executive
director of the Illinois Municipal Retirement Fund, would be happy to
discuss with you.
Why talk about pensions? Americans are worried about retirement. Recent research by the National Institute on Retirement Security found that
84% of Americans are concerned that current economic conditions hurt their ability to achieve a secure retirement
81% agree all workers should have access to a pension, so they can be independent / self-reliant in retirement
77% agree the disappearance of traditional pensions has made it harder to achieve the “American Dream”
83% agree government should make it easier for employers to offer traditional pension plans
Retirement security benefits everyone Nearly 85% of IMRF retirees choose to stay in Illinois. The money they receive doesn’t go under a mattress. It’s spent in their neighborhoods: the local restaurant, the movies, the gas station, the shoe store and the dentist’s office. In 2013, IMRF paid $1.27 billion to retirees in Illnois.
Experts say our pension payments supported 12,344 jobs and a total of $1.7 billion in total “economic activity.”
Public pensions are a form of deferred compensation for long-serving public employees for the valuable work they do. And these pensions will continue to benefit all Illinois citizens for generations to come.
Where does the money come from? IMRF employers and members both contribute toward future pensions. Employers pay for the retirement benefits of their employees only.
However, if we look at 1982 (when IMRF began investing under the "Prudent Person Rule") through 2012, investment returns fund the largest portion—60%—of retirement benefits. Members contribute 13% and employers (taxpayers) fund 27%.
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). Learn why IMRF’s employers don’t
have that option and about the long-term benefits of this philosophy.
"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.
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 about recent legislation that addresses this issue.
Investment income is IMRF’s primary funding
source. As of December 31, 2013, IMRF had approximately $33.2 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.
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.
Unlike a private
investor who has a limited timeline, such as 10, 20, or 30 years, IMRF
invests for the lifetime of our members.
It is important to remember that IMRF has a long-term investment horizon; we are investing for the 20-year-old who joined IMRF in 2013 as well as the 62-year-old who will retire in 2013.
If we look at investment returns from 1982 (when IMRF was given broader investment authority) through 2013, IMRF's total return was 10.38%.
IMRF hires professional investment firms to manage our assets. As of
December 31, 2011, IMRF had 69 investment firms managing our portfolio.
Our diversified investment strategy results in steady and responsible
returns. IMRF investments include stocks (both domestic and international); bonds; real estate; U.S. Treasury bills; and alternative investments like private equity, hedge funds, agriculture, and timberland.
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.
elected and autonomous 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. The IMRF Board does not include any appointed or "ex-officio" trustees.
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.
Louis Kosiba has
been with IMRF for more than 25 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'
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.
As of December
31, 2013, 2,977 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
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, 2013, 173,481 active members (local government employees)
participated in IMRF and 106,997 benefit recipients were receiving monthly
pension payments. In addition, as of December 31, 2013, more than 117,772 former
(inactive) members have contributions on deposit with IMRF.
Most IMRF members participate in IMRF’s Regular plan. A Regular Tier 1 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).
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,
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.
IMRF Online provides
a brief summary of IMRF benefits and the adminstration of those benefits.
and employers' rights and obligations are governed by
of the Illinois Pension Code.
Statements in these publications are general,
and the Illinois state law governing IMRF is complex and specific.
conflict arises between information in these publications and the law, all
decisions are based on the law.