General Memo 595

2009 Employer Retirement Reserve Statements

February 12, 2010

• Function of the Retirement Reserve Account
• Explanation of entries
  • Additions to the Employer Retirement Reserve
  • Deductions from the Employer Retirement Reserve
• Explanation of Special Journal Entries
• View a Sample Employer Reserve Statement
• Questions

Function of the Retirement Reserve Account

The retirement reserve is used to fund retirement benefits for a unit of government’s active IMRF members when they retire. It is also one component of an employer’s actuarial assets which, along with the accrued actuarial liability, determines the employer’s over- or underfunding balance. The over- or underfunding balance is used when calculating the employer’s contribution rate.

This “Reserve Statement of Account” reflects the accumulation of employer assets available to fund future retirement benefits for active employees.

The Reserve Statement shows:

• Beginning balance
• Employer retirement contributions
• Interest credited or charged
• Adjustments
• Residual investment income or loss
• Less: Employer’s share of the cost for a member’s or survivor’s pension
• Ending balance

The statement reflects calendar year 2009 transactions; it does not reflect a cumulative listing of all the above transactions that impacted an employer’s retirement reserve account.

The actuarial value of assets shown on the Governmental Accounting Standards Board (GASB) Statement (50) Footnote Disclosure, Schedule of Funding Progress, includes the December 31 ending balance of employer assets, plus member contributions and interest, plus an actuarial market value adjustment.

return to top

Explanation of entries

You can view an Addendum that explains the entries that could appear on your Reserve Statement(s).

• Additions to the Employer Retirement Reserve
  • Interest credited or charged on opening balance
    When IMRF earns its investment assumption, we credit interest if the opening balance is positive and charge interest if it is negative. If IMRF earns its investment assumption, the current rate of interest, as established by the IMRF Board of Trustees, is 7.5 percent per annum. 
    
    
  • Employer Retirement Contributions
    This entry is the amount of employer contributions for retirement benefits. The contributions credited are based on your unit of government’s retirement rate (a part of the total employer contribution rate) and its reported wages. Disability, death, and supplemental benefit (“13th payment”) contributions are credited to pooled reserves from which these benefits are paid and are not reflected in the Employer Retirement Reserve Account. 
    
    
  • Residual Investment Income or Loss
    This entry is the amount of investment income available to be credited to employers after interest is allocated to member, annuitant and employer reserves. If in a year, there is insufficient investment income to cover interest to be credited to member and annuitant reserves, a residual investment loss occurs. There will be an entry to allocate this loss among employers.
    
    
• Deductions from the Employer Retirement Reserve
  • Member and Survivor Annuities
    This is the employer cost for the pension. First we calculate the total cost of a lifetime member and survivor benefit based on the final rate of earnings and service credit, the member’s age, the current interest rate assumption, etc.. 
    
    This amount is then reduced by the member’s contributions plus interest. The remainder is the amount charged to the unit of government’s Employer Retirement Reserve Account.
    
    Due to our quick payout system, it is possible for a member to appear in two different years (due to an additional payroll being posted, an adjustment to service, or an adjustment for ERI).A common inquiry from units of government occurs when an unknown member is listed in this section. The most common situations are that the member is an employee who: 
    
    
    • Terminated in the past and began working for some other unit of government that participates in IMRF or for a reciprocal retirement system and proportionate charges for his or her pension are made to the unit of government’s Employer Retirement Reserve Account for services rendered to that unit, or 
    • Participated in IMRF through a dissolved unit of government and that unit’s pension obligation was partially or fully transferred to your unit of government

return to top

Explanation of Special Journal Entries 

Below is an explanation of entries that may or may not appear on your unit of government’s reserve statements.

Miscellaneous ER Adjustment

Correction of ER Contributions

Charge/Credit Emplr Reclassifi 
(Charge/Credit Employer Reclassification)