7.22 How Costs are Reflected to Employers

The following basic example shows how the rate is calculated for an employer for the 2024 Regular plan. Assume the actual payroll is $93,996.

Present value of benefits

$343,975

Less:  Member assets

60,346

Future member contribution

46,369

Employer assets

36,090

Future normal contributions

71,511

Unfunded obligation liability

129,659

Multiplied by the 20-year amortization factor

.079457

Required annual contribution

$10,302.32

Divide by estimated annual payroll

93,996

Unfunded amortization

10.96%

 

2023 Total Rate Regular Plan

 

Payment

Normal cost

4.96%

$4,662.20

Unfunded amortization

10.61%

9,972.98

Death benefit rate

0.17%

159.79

Disability rate

0.08%

75.20

Supplemental rate

0.62%

582.78

 

 

 

Total Rate

16.44%

$15,452.95

 

As illustrated above, the unfunded amortization rate depends not only on the size of the unfunded liability but also on the size of the payroll. An employer’s unfunded amortization rate may increase not because the unfunded liability increased, but because the payroll decreased sharply. This situation often arises for small employers when a long-term employee leaves and is replaced by someone with a much lower salary. Unless the long-term employee takes a refund, the present value of benefits does not decrease. However, because the estimated payroll has decreased markedly, the unfunded rate goes up. The reverse can happen if an employer increases its payroll dramatically.

Contributions are not earmarked for specific members. Employer contributions are accumulated for those members who may qualify for IMRF pensions in the future.

Employers with no employees and negative employer assets may be assigned a minimum monthly contribution.