Highlights of the July 22, 2011 Board of Trustee Meeting

• Board agrees to phase out Employer Rate Phase-In Plan by 2015
• Board approves policy accepting electronic signatures
• 2011-2013 Strategic Plan Quarterly Update
• 2011 IMRF Trustee Roundtable Update
• Next meeting

Board agrees to phase out Employer Rate Phase-In Plan by 2015

The Board approved revising the Employer Rate Phase-In Plan; all employers will be required to pay the actuarial required contribution by 2015.

In 2009 the Board adopted several actuarial changes in light of the record investment losses suffered in 2008. The most significant change was an employer rate increase phase-in plan which limited year over year employer rate increases to 10% for most employers.

The phase-in plan has worked as intended and has limited employer rate volatility. However, while developing the phase-in rates for 2012, it became clear that for a small number of employers limiting annual increases in employer contribution rates to 10% per year would result in stretching the phase-in period out to more than 10 years.

In some cases, these employers may not be covering the interest costs on their unfunded liability, which would mean their liabilities would continue to grow unchecked.

To address this risk and return all employers to the actuarial required contribution by 2015, the Board approved the following modification to the phase-in plan effective with calendar year 2013 employer contribution rates:

• For 2013 rates: employers who were on the phase-in plan in 2012, their 2013 rate would increase by
  • 10% from their 2012 rate or
  • One third of the difference between their 2012 rate and their actuarial required contribution for 2013, whichever is greater.
• In all cases the total increase would not exceed the actuarial required contribution for 2013.
  
  
• For 2014 rates: employers who were on the phase-in plan in 2013, their 2014 rate would increase by
  • 10% from their 2013 rate or
  • One half of the difference between their 2013 rate and their actuarial required contribution for 2014, whichever is greater.
• In all cases the total increase would not exceed the actuarial required contribution for 2014.
  
  
• For 2015 rates: all employers would pay the actuarial required contribution.

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Board approves policy accepting electronic signatures

The Board adopted a resolution that will allow members and employers to submit data and applications for benefits and beneficiary designations electronically via the IMRF Secure Member and Employer Access websites.

The Illinois Electronic Commerce Security Act provides that electronic signatures can be accepted in lieu of documents that require a signature (with certain exceptions). Thus, Illinois law allows IMRF to accept any of our required forms or information electronically.

Much of the data IMRF collects is highly confidential and susceptible to misuse or fraud. For that reason, IMRF has allowed a limited amount of Web-based data collection and transactions with employers and members.

IMRF also needed time and experience working with our employers and members to be able to design the most user-friendly interfaces and applications that would interact efficiently with our mainframe benefit processing system.

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2011-2013 Strategic Plan Quarterly Update

IMRF Executive Director Lou Kosiba reported on the 2011 second quarter update for IMRF’s current Strategic Plan. He noted the following:

• The IMRF Board’s legislative agenda was successfully introduced with over 62% of the items being approved. (The Board noted that staff should be complimented; this is not an easy thing to do.)
• Lou also noted that some of the pending legislative changes (e.g., requiring employers to pay immediately for increased pension liability resulting from excess salary increases and other anti-spiking initiatives) are good for IMRF’s financial strength over the long term.
• IMRF re-designed our customer satisfaction surveys for all customer transactions, utilizing a process-mapping system to improve focus and add several standard questions across all surveys.
• Lou noted that the re-designed surveys all include three key questions regarding customer satisfaction. Having all the surveys include those questions will better allow IMRF to identify areas for improvement.
• IMRF analyzed our CEM Benchmarking study results and assigned a team to focus on improvement opportunities in the few service areas where our results were not already in the top 10% of all CEM participants. This team is now analyzing the CEM Report for fiscal year 2010.
• The initiative to develop a comprehensive Information Technology Strategic Plan continues on schedule. The Current Systems SWOT Analysis was recently completed and the Options and Alternatives Summary is being finalized. Staff will bring a recommendation to the Board in October
• IMRF met all milestones to date in implementing Tier II requirements into IMRF systems, communications, websites, processes, and training material. As a result, we have successfully enrolled over 5,000 Tier II members year to date, and are prepared to support Tier II wage capping rules.
  
  Lou noted that staff had to work diligently to meet all the milestones and that having accurate member data is critical to providing good customer service

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2011 Trustee Roundtable update

Deputy Executive Director Dan Duquette reported that good progress is being made on the Roundtable agenda. The Roundtable is scheduled for September 22 and 23 in Chicago.

The Board expressed an interest in hearing from individuals who have different opinions about public pensions. Therefore, the Roundtable will include a panel that will discuss the Future of Public Pensions in Illinois. IMRF contacted the following individuals:

Lawrence Msall, President of The Civic Federation (confirmed as a panelist)

The Civic Federation was founded in 1894 and is a tax policy and government research organization which seeks to assist public policy opinion leaders in the Chicago area and to advance issues such as property tax reform, tax simplification, privatization, and joint purchasing with the objective of improving governmental efficiency and financial accountability.

Eric Madiar, Legal Counsel, Office of Illinois Senate President John Cullerton (confirmed as a panelist)

Mr. Madiar drafted a white paper asserting that the pension clause in the Illinois Constitution bars the General Assembly from reducing the pension benefits of current members.

Hank Scheff, Director of Research and Employee Benefits of AFSCME Council 31 (confirmed as a panelist)

(American Federation of State, County, and Municipal Employees, AFL-CIO) Mr. Scheff advises union leadership and staff on all matters pertaining to employee benefits. He assists the union in collective bargaining and serves on several labor/management committees with jurisdiction over employee benefits.

Senator Chris Lauzen, R-District 25, Aurora (not yet confirmed)

From the Senator’s website: Senator Lauzen has had two main legislative priorities: to curb wasteful government spending and to create a business climate in Illinois where the private sector can maintain and create jobs paying higher wages.

The tentative agenda also includes:

• Presentation on the pros and cons of IMRF offering an optional 457-type program (“IMRF Plus”) (Lou Kosiba)
• An overview of the state of the economy (Paul L. Kasriel, Senior Vice President and Chief Economist of The Northern Trust)
• Overview of the relationship between IMRF and The Northern Trust. The Northern Trust is IMRF’s Master Trustee, bank and largest investment manager (index funds)
• Luncheon speaker: Paul Green, Director of the School of Policy Studies and Arthur Rubloff Professor of Policy Studies at Roosevelt University

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Next Board meeting

The next monthly Board meeting will be held at 9 am on Friday, August 26, 2011.

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