West Cook News

Village of River Forest Finance Committee met May 14.

Here is the agenda provided by the Committee:

Background: In Fiscal Year 2015 the Village Board approved Pension Funding Policies for the Police and Firefighters’ Pension Funds. The policies were developed after several meetings with the Finance Committee and the Police and Firefighters’ Pension Boards. Todd Schroeder from Lauterbach and Amen led the meetings and the pension funds’ investment consultants also contributed.

The Finance Committee and Pension Funds also agreed upon a five-year transition plan to reach the pension funding policy levels in FY 2019.

The amounts in the chart above shaded in green are the transition plan amounts included in the 2017 Property Tax Levy. The amounts shaded in yellow are the actuarially required contributions for 2017 based on the May 1, 2017 actuarial valuation report. The last column in orange represents the amount originally expected to be levied with the 2018 Property Tax Levy when the Pension Funding Policies were approved in FY 2015. These amounts were supposed to be the full required contribution to be included in the 2018 Property Tax Levy using the approved Pension Funding Policies. The Police Pension Fund 2018 contribution appears to be about on target; however, the Fire Pension Fund contribution looks like it will be significantly higher than anticipated primarily due to investment returns being lower than expected and a change to the mortality tables in 2016 that assumes longer lives.

Discussion: At the time the pension policies were developed a future review of the policies was planned. Because of the apparent discrepancy between actual and expected results for 2018 it was necessary to review the policies prior to the preparation of the actuarial valuation reports for the 2018 Property Tax Levy. Meetings were held during FY 2018 with the Finance Committee, Todd Schroeder from Lauterbach & Amen, and Trustees for the Police and Firefighter Pension Boards. The funds’ pension funding progress and the elements in the Pension Funding Policies were reviewed. In addition, Todd Schroeder presented several funding policy scenarios using a 6.75% and 7.0% percent interest rate assumption and 90% and 100% funding of the actuarial accrued liability. The required contributions and estimated funded percentages assuming each of these scenarios for each fund is included in the attached chart.

The recommended Police and Firefighters Pension Fund Pension Funding Polices are attached to this memo. Both include the assumptions agreed upon by the Firefighter’s Pension Board. The same interest rate assumption is being used because both funds have the same investment restrictions under State Statutes and they use the same investment consultant. Both funds agreed that the level dollar method was preferred to amortize the unfunded accrued liability. With this method, the unfunded accrued liability is paid down in even payments through 2040, like a mortgage. According to Todd Schroeder, most funds use the level percentage of pay method, which increases the amount of the contribution going towards the unfunded liability each year and pushes the liability into the future. The recommended policies include the preferred level dollar method, which increases the Village’s contribution in earlier years, and a 90% funded level by 2040 which is included in the Illinois Statute.

The Fiscal Year 2019 Budget was prepared assuming the approval of the attached recommended Pension Funding Policies. Todd Schroeder, from Lauterbach and Amen, will be at the Finance Committee Meeting to discuss the progress we have made towards improving pension funding since the original policy was approved, why the estimated actual required contributions for Tax Levy Year 2018 differ from the expected values when the original policies were approved, changes included in the new policies, and projected contributions, cash flows and funding levels with the recommended policies. He will also be available to answer any questions the Committee may have. The Finance Committee recommendation will be submitted to the Village Board for approval at their May 14, 2018 meeting.

Requested Finance Committee Action: Recommendation to the Village Board to Approve the Actuarial Funding Policy Statements for the Village of River Forest Police and Firefighters’ Pension Funds.

https://vrf.us/uploads/cms/documents/events/05-14-18_FA_-_Agenda_Memo-_Approval_of_a_Police_and_Fire_Pension_Funding_Policy_042018.pdf