February 26 Board Meeting Highlights

Staff Reviews 2014-2016 Strategic Plan Progress

IMRF has made significant progress towards achieving the five strategic objectives outlined in its 2014-2016 Strategic Plan.

Deputy Executive Director Dan Duquette and Performance Excellence Manager Kathy Goerdt told the IMRF Board of Trustees that the organization executed 22 Action Plans in 2015. These Action Plans were aligned with the five Key Result Areas (KRAs) of the 2014-2016 Strategic Plan.

Key successes within each KRA included:

Financial Health and Sustainability KRA

• Increased communication with employers on programs that impact their rates, such as the Early Retirement Incentive (ERI) program and Pension Spiking

Investment Returns KRA

• Reducing management fees, rebalancing the portfolio, and increasing the utilization of Minority-, Female-, or Person with a Disability Owned Business (MFPDOB) investment firms

Customer Satisfaction and Operational Excellence KRA

• Excellent customer service levels validated by IMRF's "Voice of the Customer" survey program and by two externally benchmarked surveys

Workforce Engagement KRA

• Top decile employee engagement survey results

Modernization KRA

• Launched a new website and implemented the first phase of a technology replacement project

Staff also said that in March IMRF will launch its Triennial Strategic Planning Process. This process will culminate in the creation of the 2017-2019 Strategic Plan. IMRF will begin the process by gathering input from external stakeholders, IMRF staff, and the Board of Trustees using a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis. Staff will analyze those results and develop corresponding Strategic Objectives for the 2017-2019 Strategic Plan.

Employer Accounts Charged Due to 2015 Returns

Chief Financial Officer Mark Nannini reported that employer reserve accounts were charged about $2.62 billion, due to low investment returns in 2015. Last year, IMRF earned about $274 million on its investments, a return of less than 1% on the portfolio. That figure fell short of IMRF's long-term assumed rate of return of 7.5%, which meant employer reserve accounts were required to make up the difference. On average, employers were charged about 21% on their December 31, 2015, reserve balances. This reflects the nature of a defined benefit pension plan, in which employers bear both the risk and reward of investments. Since 1982, when IMRF gained authority to invest broadly in the markets, the IMRF portfolio has returned in excess of 10%.

2017 Death and Disability Rates Set

The Board approved death and disability benefit rates for 2017.

The 2017 average death benefit rate will remain at 0.15% of employer payroll. The rate varies by employer according to the age of its workforce. The funds are used to pay death benefits for active members who die prior to retirement.

The 2017 disability benefit rate will decrease from 0.14% to 0.12% of employer payroll. The rate is the same for all employers. The funds are used to pay temporary disability benefits.

IMRF's goal is to maintain a balance in the death benefit and disability benefit reserves equal to one year's total payments.

Staff Projects 2016 13^th Payment

Each July, eligible retirees and surviving spouses receive a Supplemental Benefit Payment, also known as the 13^th Payment. Chief Financial Officer Mark Nannini estimated that the 2016 13^th Payment will be 32% of a retiree's June benefit payment. This is a decrease from 34% in 2015. The 13^th Payment is funded by an annual employer contribution equal to 0.62% of payroll. The 13^th Payment amount is decreasing annually because the number of retirees continues to outpace the growth in employer payroll.

Payments to Exceed Contributions in 2016

Chief Financial Officer Mark Nannini reported to the Board that benefit payments are projected to exceed contributions by $532.8 million in 2016. The gap – which is to be expected for a mature defined benefit pension plan like IMRF – is largely due to an increase in retirements as the Baby Boom generation reaches retirement eligibility. Over time, IMRF will fund any gap between payments and contributions through investment returns.

Board Hears Update on Endorsed Insurance

IMRF provides pension, disability, and death benefit coverage for participants, but is not authorized by law to provide health insurance. In recognition of the insurance needs of IMRF's retirees, the Board annually endorses a variety of insurance programs with discounted group rates.

Staff reported that 2016 enrollment across the 18 endorsed benefit plans was more than 20,990. This includes a suite of coverage options including health, dental, vision, prescription drug, long-term care, and supplemental life insurance.

The programs are administered by insurance consultant Doyle Rowe, LTD (health, etc.) and by Arthur J. Gallagher & Co. on behalf of NCPERS (term life). 

Retirees should visit the IMRF website later this year for information on 2017 offerings. This information is also always available in the Winter Edition of the Fundamentals newsletter for retirees.

Plans for 75^th Anniversary discussed 

The Board heard an update on plans to celebrate IMRF's 75^th Anniversary.

IMRF, which began operations in 1941, plans to highlight its 75^th Anniversary through a series of communications and activities spread across 2016, said Communications Manager John Krupa. The communications will target multiple audiences, including members, retirees, employers, legislators, the media, and the general public.

Highlights include an anniversary edition of the Fundamentals newsletter, special recognition for IMRF's founding five employers, a commemorative IMRF history booklet, and a special event at IMRF's Oak Brook headquarters. All activities are designed to celebrate the anniversary, and highlight IMRF's long-term success and sustainability.

2016 Board Committees established

The Board set the following committees for 2016:

Audit Committee

• Gwen Henry, Chair
• Sue Stanish, Vice Chair
• Tom Kuehne

Benefit Review Committee

• Natalie Copper, Chair
• John Piechocinski, Vice Chair
• Tom Kuehne
• David Miller
• Sue Stanish
• Sharon U. Thompson

Executive Committee

• Tom Kuehne, Chair
• Sue Stanish, Vice Chair
• Natalie Copper
• Gwen Henry
• John Piechocinski

Investment Committee

• Sue Stanish, Chair
• Gwen Henry, Vice Chair
• Natalie Copper
• Tom Kuehne
• David Miller
• John Piechocinski
• Sharon U. Thompson
• Trudy Williams

Legislative Committee

• David Miller, Chair
• Sharon Thompson, Vice Chair
• Natalie Copper
• Tom Kuehne
• Trudy Williams

Board Hears Legislative Update

The four proposals that make up the Board's 2016 Legislative Agenda all have secured legislative sponsors and have been introduced, according to a report from Legislative Liaison Bonnie Shadid.

The agenda includes four proposals for the General Assembly to consider during the 2016 session. They include:

• Allowing more members to opt to receive a refund of contributions, in place of a relatively small monthly pension.
• Allowing the IMRF Board of Trustees to assess a penalty on employers for certain retiree return-to-work violations.
• Clarifying that IMRF will accept one past service purchase payment after a member's termination, as long as a valid application is received while the member is still active.
• Removing the one-year limitation for the retroactive payment of surviving spouse annuities.

New Units of Government Join IMRF

The Board approved the participation of the following new employers:

• Matteson Area Public Library District
• Genoa Township, DeKalb County

Next Board Meeting

The next regular meeting of the IMRF Board of Trustees will be Friday, May 20, at 9 a.m. at IMRF's Oak Brook headquarters.