Vernon Hills' pension fund shrinks

Vernon Hills lost ground on its pension obligations for police employees, but still fared above average among communities, village trustees learned this week.

Investments lost 9.4 percent, or nearly $2.2 million, in the year ending May 1, 2009. That increased the village's unfunded liability for the pension plan to more than $11.5 million, according to a report presented to the village board by Finance Director Larry Nakrin.

The village fell well short of its annual target of 7 percent return on investment, but did better than other communities, according to Nakrin.

"We're definitely a lot better than average, but a decade ago, we were fully funded," he said.

The report determines how much the village will have to contribute in the upcoming 2010-11 budget.

Current numbers are more encouraging. Return on investments have been at 7.8 percent so far this year, according to Nakrin.

"We've had a pretty good market from April 2009 onward," he said.

Pension contributions have become an issue in many communities, as investments lag but requirements to fund them grow. Under current state law pensions must be fully funded by 2032, Nakrin said.

Efforts to change the system are intensifying. On Wednesday, supporters of the Pension Fairness for Illinois Communities Coalition convened in Springfield to support two recently introduced reform bills.

The group, initiated by the Northwest Municipal Conference, a consortium of about four dozen communities, says the current system places an "overwhelming burden" on taxpayers.

Vernon Hills trustees agreed Tuesday to spend $1,000 to join the group, as pension contributions are expected to be a continuing concern.

"The idea is to create a modified pension system for new police and firefighters," said Village Manager Mike Allison.

Under state law, police employees aged 50 or over with 20 years of experience receive a percentage of their pay in retirement to a maximum of 75 percent of their final salary.

Employees with eight to 20 years experience can retire at age 60 with 2.5 percent of their final salary for each year of service.

Employees are required to contribute 9.91 percent of their base salary to the pension plan.

In 2009, 46 Vernon Hills employees were covered by the plan. Twelve retirees were paid an average of about $64,000 each and one disabled employee received $35,102.

For Vernon Hills, the poor return on investment dropped the amount of funded pension obligations from about 72 percent to 64 percent.

Nakrin said the general average among communities is in the 50 percent range.