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What is the
Illinois Municipal
Retirement Fund?
“Locally Funded, Financially Sound”
You are a member of the governing body for
a unit of local government which participates
in IMRF.
This handout is intended to provide you with
basic information concerning what IMRF is,
how it operates, and its funding mechanism.
April 2009
What
IMRF was created in 1939 by the Illinois General Assembly. It began
operations in 1941 to provide disability, retirement and death benefits to
employees of units of local government. It covers all non-teaching staff in
school districts (except the Chicago district), all counties (except Cook) and
many cities (except Chicago), villages, park districts, townships or other
entities throughout the state. Over 42 different types of local government
participate, covering nearly 3,000 separate units of government.
Some units of government were mandated into IMRF such as counties
and school districts. Many join voluntarily. In both cases, once a unit
of government joins IMRF, it is a permanent commitment. The Illinois
Supreme Court has ruled a unit of government cannot withdraw.
Currently, IMRF has over 182,000 actively working participants
(members) and approximately 89,000 retirees and beneficiaries. Anyone
expected to work an hourly standard (either 600 hours or 1,000 hours)
in a 12-month period must participate in IMRF. School districts are
under a 600 hour standard. Other employers have an option. Since 1983,
employers joining IMRF could select the 1,000 hour standard (which is
irrevocable).
How
IMRF is governed by an eight-member Board of Trustees. All trustees
have staggered five-year terms. Four trustees are elected by units of local
government, three by active members, and one by annuitants (persons
receiving a retirement benefit). Trustees are members of IMRF and serve
without compensation. They are also fiduciaries which require the highest
level of care established in American law.
One person at your unit of government—known as the Authorized
Agent—serves as a liaison with IMRF. All official communications from
and to IMRF flow through that person. He or she becomes a key link for
the successful implementation of this program.
The IMRF Board of Trustees hires an Executive Director to oversee
operations. Currently, IMRF has 180 employees. Its main office is in Oak
Brook; there is a satellite office in Springfield. Seven field representatives
live throughout the state. They work from their homes and provide
educational and support services to both employers and members. They
are available to meet with you and answer any questions. A toll free 800
number (1-800-ASK-IMRF) and our website (imrf.org) provide additional
accessibility.
Funding
IMRF believes 100% funding is the soundest long-term approach for
managing its assets and liabilities. Working toward 100% funding allows
IMRF to maximize our investment gains and provide benefits to our
members at the lowest possible long-term cost to the taxpayer.
IMRF is funded by three sources: employee contributions, employer
contributions, and investment returns. IMRF receives no funding from the
state of Illinois.
Employee contributions are set by statute and are a percentage of pay
(4.5% for the Regular plan, 7.5% for deputy sheriffs and certain elected
county officials). The Illinois Constitution guarantees these rates for the
current benefit level. Your unit of government also contributes. The amount
is expressed as a percentage of payroll and varies from year to year.
Effectively, each unit of government is a separate pension plan within
IMRF. You fund retirement benefits only for your employees. You have
a separate employer reserve account and a unique employer contribution
rate. In 2009, the average cost to fund benefits under IMRF’s Regular plan
is 9.27% of payroll. Your rate almost certainly will be higher or lower than
that number.
Each year an independent actuarial firm (Gabriel, Roeder, Smith &
Co.) reviews your IMRF assets, liabilities, contributions and deductions to
determine a required employer contribution. Your employer contribution
rate fluctuates as a result of demographic events at your unit of
government and IMRF’s investment returns. Because IMRF is a defined
benefit plan, your unit of government assumes investment risk.
To moderate the impact of the 2008 investment losses on employers, the
IMRF Board of Trustees changed two actuarial techniques and adopted a
phase-in plan for employer contribution rates.
You are notified of the following year’s employer contribution rates
each Spring. The Preliminary Rate Notice in the Spring of 2009 informed
you of employer contribution rates for 2010.
Important IMRF documents related to your unit of government are the
Annual Rate Notices (preliminary and final), a Reserve Statement (contributions
and deductions from your IMRF employer account), and a GASB 27
Footnote Disclosure (reflects funding levels for your unit of government
and is used in your unit of government’s annual financial report). A copy of
IMRF’s annual report is sent to your unit of government annually in June.
If your unit of government has taxing authority, it has additional
authority to levy real estate taxes exclusively to satisfy the employer’s
obligation to IMRF.
continued...
Additional Comments
IMRF benefits are an important tool to recruit and retain qualified
employees. Many individuals who have worked in the public sector will
be attracted to your unit of government because they can earn a benefit
through IMRF. There is a high degree of portability of benefits between
the nearly 3,000 IMRF employers and 12 other public pension plans in
Illinois.
IMRF is financially sound with a well-diversified investment portfolio
managed by independent, professional money managers. The Board
of Trustees, along with a professional investment staff, independent
consultants, and fiduciary legal counsel oversee the investment process.
The underfunding of the state retirement systems (such as State
Employees or State Teachers) does not affect IMRF in any fashion.
IMRF’s financial soundness is based on the financial soundness of your
unit of government, the taxpayers in your jurisdiction and the pooling of
nearly 3,000 units of government throughout the state.
Your IMRF members also participate in Social Security. You can
offer other plans such as 403b and 457 plans to your employees. Those
are voluntary and will supplement IMRF benefits. By law, you cannot
discontinue IMRF and substitute a 401k type arrangement.
Conclusion
As a defined benefit plan, IMRF is a cost-efficient benefit which your
employees appreciate. You can take pride in the benefit package you
jointly fund with your employees. IMRF is pleased to be a part of this
worthy effort.
Illinois Municipal Retirement Fund
IMRF Main Office & Mail Address
2211 York Road, Suite 500
Oak Brook, IL 60523-2337
1-800-ASK-IMRF (1-800-275-4673)
www.imrf.org
Springfield Regional Counseling Center
3000 Professional Drive, Suite 101
Springfield, IL 62703