Clarifying some points on pensions

Clarifying some points on pensions

I’d like to clarify four points about defined benefit public pensions and the Illinois Municipal Retirement Fund in response to the article titled, “Pressure building to reform public pensions,” published in the Daily Herald on Sept. 7.

First, IMRF serves 2,960 municipal employers across the state, but that does not include Cook County commissioners, as one might infer from the story. In fact, the fund does not cover any municipal workers in the city of Chicago or Cook County.

Second, at one time, elected county officials participating in IMRF could elect to participate in an enhanced program if their county employer adopted it. However, in early August, the General Assembly and Gov. Pat Quinn closed that program to new members as part of a pension reform package (Public Act 97-0272). In addition, the General Assembly closed the Cook County program to new members as of Jan. 1, 2008.

Third, Christina Tobin, vice president of the Taxpayers United of America, misrepresented the sustainability levels of defined benefit pension plans. We can’t speak for other funds, but at the end of last year, IMRF was 86 percent funded. That’s considered very healthy by pension standards. Further, the average benefit payment to an IMRF member retiring in 2010 is $17,052.

Defined benefit plans are also more cost-effective than defined contribution plans, such as a 401(k). Because a defined benefit plan only needs to save for an average life expectancy, it avoids oversaving. It also enjoys higher annual returns due to professional asset management and lower investment manager fees.

Lastly, in 2010, the state took important legislative steps toward pension reform. This will help ensure defined benefit plans such as IMRF continue to guarantee public workers a modest and fair retirement income at the most reasonable cost to taxpayers.

Louis W. Kosiba

Executive director

Illinois Municipal Retirement Fund

Oak Brook