The Illinois Municipal Retirement Fund reported a 95.8% funded ratio for 2024. Other Illinois plans would benefit from following its practices.
The Illinois Municipal Retirement Fund remains one of the state’s strongest pension systems, reporting a 95.8% funded ratio for 2024 – far better than Illinois’ other public retirement systems, which have only a few cents on hand for every dollar owed.
The fund covers a range of local government employers, with 51.3% of members working for school districts, 15.5% for counties, 10% for cities, 7.8% for villages and the remainder for other entities.
IMRF offers three pension plans:
- Regular plan: members earn 1.66% of their final rate of earnings for each of the first 15 years of service credit, plus 2% for each year over 15 years.
- Sheriff’s Law Enforcement Personnel Plan: members earn 2.5% per year of service, capped at 80% of the final average salary, or 75% for Tier 2 employees.
- Elected County Officials Plan: members receive 3% for the first eight years, 4% for years eight through 12, and 5% thereafter, with a maximum benefit of 80% of the final average salary.
The funding ratio across municipal plans has had regular success. In 2023, they had a funding ratio of 96.6%, and even boasted a 107.2% in 2000.
The overall well-funded nature of municipal pensions didn’t happen by accident. IMRF’s Board of Trustees established a funding policy to “help ensure the systematic accumulation of assets needed to pay for future benefits.” Objectives such as progressing toward a goal of 100% funding, rather than the 90% objective set by other Illinois pension systems, prioritizes the fiscal health of the system.
They also finance the plan so this year’s taxpayers cover what’s being handed out in promised benefits. A commitment to fully funding benefits rather than implementing a ramp means basically no unfunded liability because the money to cover earned benefits is being collected in real time.
State-level pensions have historically resorted to undercutting the system by projecting payments on to future generations of taxpayers, allowing the unfunded debt to grow more and more each year.
“There are systems which have a design for deferring contributions to future taxpayers,” the actuaries write, criticizing the other Illinois systems. “Lured by a lower contribution rate now, they put aside the consequence that the contribution rate must then relentlessly grow to a level much higher than would be required if a level contribution pattern were followed.”
That debt racked up over time is hard to recover from. As a result, Illinois’ five state pensions are some of the worst funded in the nation, with about 44 to 46 cents on hand for every dollar owed. Experts say funding below 40% is beyond recovery.
But the municipal pensions demonstrate government pensions can be responsibly administered in Illinois. Among the 3,124 regular municipal retirement fund employers, 949 plans have 100% of the money on hand to pay what is owed, and then some. There are 224 of those plans with $1.50 or more on hand for every dollar owed. There are also 48 of the 225 employers in the sheriff’s law enforcement personnel plan with funding ratios over 100%. For elected county leaders, 19 are fully funded or better.
The strong overall funding ratio is a bright spot in Illinois’ pension landscape. Other Illinois pension systems should use the municipal fund’s management as a model to ensure better funding for pension systems across the state and less peril for future taxpayers.
