Every year, IMRF holds the Annual Employer Rate Meeting to provide employers with an update on the previous fiscal year and explain how investment returns will impact their future employer rates.
Here are some key points to help you understand how decisions about Employer Rates are made and why this is important to IMRF members and retirees.
#1 – Accounts for current retirees are ALWAYS kept 100% funded in the Annuitant Reserve Account.
When members and employers make their required contributions to IMRF, these funds go into the employer’s member account and employer reserve account. The funds are deposited and invested for future IMRF benefit payments.
Once someone retires and applies for an IMRF pension, 100% of all the future benefits the retiree and their beneficiaries are expected to receive are calculated and the present value of the future payouts are transferred to the Annuitant Reserve Account.
This means all the money IMRF will ever need to pay to a retiree is set aside and available on day one of their retirement.
#2 – IMRF uses investment returns and Employer Reserve Accounts to ensure Retiree and Member Reserve Accounts are fully funded.
Investment returns from IMRF are used to fund member reserve accounts. The goal is to fund 100% of future retirement benefits.
IMRF has a goal to make an investment return of 7.25% every year. Any amounts over the 7.25% annual target are transferred to the Employer Reserve Accounts. Employers share in returns over or under the annual 7.25% target.
If, during a volatile year, IMRF does not make the expected investment gains, then the employer reserve account is used to ensure retiree accounts are 100% funded upon retirement.
#3 – IMRF uses actuarial data to estimate total future costs.
IMRF uses third-party actuaries to determine how much it will cost to provide retirement, disability, and death benefits. The actuaries consider things like marital status, mortality of active and retired members, disability rates, and pension refunds to determine how much IMRF and each employer needs in their accounts to provide funding for every benefit.
These actuarial assumptions are evaluated every three years, and they are adjusted as circumstances change. For example, IMRF updates the average lifespan of IMRF members based on mortality table changes from the Internal Revenue Service (IRS).
This data helps determine IMRF’s pension funded ratio and is one of the factors that determine how much each employer contributes to IMRF.
