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IMRF 101


IMRF snapshot
  • 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 $33.2 billion in assets as of 12/31/13
  • Funded status on a market basis as of 12/31/13: 96.7%
  • Funded status on an actuarial basis as of 12/31/13: 87.4%
  • As of December 31, 2013
    • 176,481 active members
    • 106,997 benefit recipients
    • 117,772 inactive members
    • 2,977 employers (local units of government)
    • Member retiring in 2013: average age of 63, with approximately 20 years of service, a final salary at retirement of $44,079, and receiving a $19,718 annual IMRF pension.
  • Public Act 96-0889 created a second tier of IMRF benefits
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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 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%.

  • 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). 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 about recent legislation that addresses this issue.

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How is IMRF funded?
IMRF is not funded by the state of Illinois. IMRF is funded by three sources: employee contributions, employer contributions, and investment returns. However, investment returns fund the greatest portion of pension costs—60 percent.

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.

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Investment returns and the impact on employer
IMRF employer rates are on a "two-year lag." Information from 2013 is sent to external acturiaries in 2014; actuaries use that information to calculate 2015 employer contribution rates.

The 2013 investment return was 20% after expenses. Looking back 30 years—from 1982 through 2013—IMRF earned 10.38%

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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.

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.

You can read more about IMRF’s investments in our Annual Financial Reports.

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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 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.

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 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' 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, 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 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, 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.

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The IMRF pension
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).

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.
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Need more information? Contact us.

 


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IMRF Online provides a brief summary of IMRF benefits and the adminstration of those benefits. IMRF members' and employers' rights and obligations are governed by Article 7 of the Illinois Pension Code. Statements in these publications are general, and the Illinois state law governing IMRF is complex and specific. If a conflict arises between information in these publications and the law, all decisions are based on the law.

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Page Last Updated by JK on 03-04-14