Historical Illinois pension information

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The historical Illinois pension information below applies to prior calendar years. The tabs below may contain information from several different fiscal years; for example, the tab labeled "As published 2015" contains information from fiscal years 2013 and 2012 (the most recent data available at the time of initial publication). For more current information regarding Illinois' pension system, click here.

As published 2016

Illinois information (2015)

Total contributions: $12,744,871,000

Employee contributions: $2,738,744,000

Government contributions: $10,006,127,000

Total payments: $17,557,862,000

Total cash and investment holdings: $158,612,893,000

Number of state and local pension systems: 660

Active membership: 601,394

Inactive membership: 365,527

Key terms

Actuarial value of assets (AVA) • Unfunded actuarial accrued liability (UAAL) • Annual required contribution (ARC) • Discount rate • Funded ratio • Rate of return • Active member • Inactive member • OPEB

Hover over the above terms for definitions.

Note: This page utilizes information from a variety of sources. The information presented on this page reflects the most recent data available as of August 2016.

Illinois public pensions are the state mechanism by which state and many local government employees in Illinois receive retirement benefits.

According to the United States Census Bureau, there were 660 public pension systems in Illinois as of 2015. Of these, six were state-level programs, while the remaining 654 were administered at the local level. As of fiscal year 2015, membership in Illinois' various pension systems totaled 966,921. Of these, 601,394 were active members.

HIGHLIGHTS

In fiscal year 2015, the most recent year for which information is available, total contributions of $12.7 billion were made to Illinois' state and local pension systems. Of this amount, $2.7 billion came from employees.

In fiscal year 2015, Illinois' state and local pension systems made payments totaling $17.6 billion.

As of fiscal year 2015, Illinois' state and local pension systems held $158.6 billion in total cash and investment holdings.

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

State pension systems can vary in their organization, management, and accounting principles, making them difficult to compare. The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2015.

General information

See also: Pension data, U.S. Census

According to the U.S. Census Bureau, Illinois had six state pension plans as of 2015:

1. Illinois State Employees Retirement System
2. Illinois General Assembly Retirement System
3. Illinois Judges Retirement System
4. Illinois Teachers Retirement System
5. Illinois University Retirement System
6. Illinois Municipal Retirement Fund

In addition to the aforementioned state-level pension systems, there were 654 locally administered pension systems in Illinois.

The table below provides general pension system information for Illinois and surrounding states.

General pension system information, 2015
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Illinois	6	654	966,921	601,394	62.20%	365,527	37.80%
Indiana	8	239	277,160	226,713	81.80%	50,447	18.20%
Missouri	12	78	388,454	288,204	74.19%	100,250	25.81%
Wisconsin	1	3	439,006	273,091	62.21%	165,915	37.79%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Contributions

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2015, the most recent year for which information is available, total contributions of $12.7 billion were made to Illinois' state and local pension systems. Of this amount, $2.7 billion came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Illinois and surrounding states in fiscal year 2015.

Pension contributions, fiscal year 2015 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Illinois	$12,744,871	$2,738,744	21.49%	$10,006,127	78.51%	$8,117,747
Indiana	$2,228,342	$350,551	15.73%	$1,877,791	84.27%	$1,687,968
Missouri	$3,049,574	$966,078	31.68%	$2,083,496	68.32%	$4,090,531
Wisconsin	$2,089,569	$963,512	46.11%	$1,126,057	53.89%	$5,816,893
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Payments

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2015, Illinois' state and local pension systems made payments totaling $17.6 billion. The table below provides pension payment information for Illinois and surrounding states in fiscal year 2015. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Pension payments, fiscal year 2015 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Illinois	$17,557,862	$16,540,643	$329,865	$687,353
Indiana	$2,891,115	$2,467,535	$185,424	$238,162
Missouri	$5,336,873	$4,585,567	$113,833	$637,474
Wisconsin	$5,474,485	$5,025,773	$42,118	$406,593
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Other post-employment benefits

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits" or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Illinois was reported to have about $34.5 billion in unfunded liabilities for OPEBs. This was equal to about 6.93 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Illinois and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Illinois	$34,488	6.93%
Indiana	$315	0.06%
Missouri	$2,671	0.54%
Wisconsin	$953	0.19%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Cash and investment holdings

See also: Pension data, U.S. Census

Investments are a crucial part of the pension process. The goal is that, by investing pension contributions, the pensioner will receive more money when he or she retires than he or she and the employer were able to contribute. These investments can come in the form of cash investments, short-term investments, securities, or other investments. Cash investments are usually low-risk, short-term investments that have a lower rate of return than other types of investments. Other short-term investments are riskier than cash investments, but have the potential for greater returns. Securities can refer to stocks, bonds, or other types of financial certificates that hold some sort of financial value. As the values of these securities change, they can be traded to make a profit. While there are other applications of securities investments, this represents one of the most common practices.

As of fiscal year 2015, Illinois' state and local pension systems held $158.6 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Illinois and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Total cash and investment holdings, fiscal year 2015 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Illinois	$158,612,893	$6,633,232	$120,898,718	$31,080,943
Indiana	$30,932,604	$1,481,478	$19,833,376	$9,617,750
Missouri	$72,371,692	$3,877,135	$56,595,843	$11,898,714
Wisconsin	$103,155,924	$3,275,384	$97,708,174	$2,172,366
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2015"

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year), and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets), and its five-year rate of return was 7.53 percent.

The table below presents the information collected by MPPI for Illinois and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Illinois represented the median total net assets when compared to surrounding states.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as a percentage of total net assets	Five-year rate of return
Illinois	2012	$57,424,347,944	$57,821,599,899	$313,400,624	0.55%	0.70%
Indiana	2012	$25,755,673,000	$25,564,126,000	$106,484,000	0.41%	0.20%
Missouri	2012	$43,421,121,472	$43,142,177,174	$407,748,659	0.94%	1.60%
Wisconsin	2012	$82,485,576,190	$80,271,452,828	$253,704,610	0.31%	2.10%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure." Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

As published 2015

Public pensions in Illinois

General information (2013)

Total contributions: $10,854,000,000

Employee contributions: $2,671,581,000

Government contributions: $8,182,418,000

Total payments: $15,668,633,000

Total cash and investment holdings: $135,110,275,000

Number of state and local pension systems: 656 (6 state systems, 650 local systems)

Active membership: 607,623

Inactive membership: 354,329

Pension health (2012)

Assets: $64,029,900,000

Actuarial accrued liability (AAL): $158,611,500,000

Unfunded actuarial accrued liability (UAAL): $94,581,600,000

Funded ratio: 40.4%

UAAL per capita: $7,421

Public pensions in the states

Alabama • Alaska • Arizona • Arkansas • California • Colorado • Connecticut • Delaware • Florida • Georgia • Hawaii • Idaho • Illinois • Indiana • Iowa • Kansas • Kentucky • Louisiana • Maine • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Montana • Nebraska • Nevada • New Hampshire • New Jersey • New Mexico • New York • North Carolina • North Dakota • Ohio • Oklahoma • Oregon • Pennsylvania • Rhode Island • South Carolina • South Dakota • Tennessee • Texas • Utah • Vermont • Virginia • Washington • West Virginia • Wisconsin • Wyoming

Public pensions • State public pension plans • Illinois state budget and finances

Note: This page utilizes information from a variety of sources. As such, the currency of the information varies somewhat. The information presented on this page reflects the most recent data available as of March 2015.

Illinois public pensions are the state mechanism by which state and many local government employees in Illinois receive retirement benefits.

According to the United States Census Bureau, there were 656 public pension systems in Illinois as of 2013. Of these, six were state-level programs, while the remaining 650 were administered at the local level. As of 2013, membership in Illinois' various pension systems totaled 961,952. Of these, 607,623 were active members.

According to a 2013 report by Morningstar, an independent financial research group, most states' pension plans continued to be funded below the 80 percent level considered necessary for a healthy fund. Decreased funding and increasing liabilities since the 2008 recession continued to put pressure on local and state budgets, in some cases leading to bankruptcy. Higher pension costs can have the following consequences:

• higher taxes
• less intergovernmental aid for services
• lower credit ratings
• higher interest rates on state borrowing

HIGHLIGHTS

Between fiscal years 2008 and 2012, the funded ratio of Illinois' state-administered pension plans decreased from 54.3 percent to 40.4 percent. The state paid 76 percent of its annual required contribution, and for fiscal year 2012, the pension system's unfunded accrued liability totaled $94.5 billion. This amounted to $7,421 in unfunded liabilities per capita.

Background

The basic information on this page comes from the U.S. Census Bureau, as reported by the states and pension funds themselves for fiscal year 2013. Also included are comparative data from three different reports, which looked at the states' Comprehensive Annual Financial Reports (CAFRs).

General information

See also: Pension data, U.S. Census

According to the U.S. Census, Illinois had six state pension systems as of 2013:

1. Illinois State Employees Retirement System
2. Illinois General Assembly Retirement System
3. Illinois Judges Retirement System
4. Illinois Teachers Retirement System
5. Illinois University Retirement System
6. Illinois Municipal Retirement Fund

In addition to the aforementioned state-level pension systems, there were 650 locally administered pension systems in Illinois.

The table below provides general pension system information for Illinois and surrounding states.

General pension system information, 2013
State	Systems		Total members	Active members		Inactive members
	State	Local		Members	Percent of total	Members	Percent of total
Illinois	6	650	961,952	607,623	63.17%	354,329	36.83%
Indiana	8	61	267,210	225,067	84.23%	42,143	15.77%
Michigan	6	130	337,289	303,422	89.96%	33,867	10.04%
Ohio	5	1	1,263,123	656,904	52.01%	606,219	47.99%
Wisconsin	1	2	437,906	271,534	62.01%	166,372	37.99%
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Contributions

See also: Pension contribution and payment data, U.S. Census

Pension contributions are the funds paid into pension systems. These contributions come from the employer (in the case of public pensions, the government) and employees. Investment earnings are the main source of increases in the fund and are listed separately in the rightmost column in the below table.

In fiscal year 2013, total contributions of $10.9 billion were made to Illinois' state and local pension systems. Of this amount, $2.7 billion came from employees. The remainder came from state and local governments. The table below provides information about pension contributions in Illinois and surrounding states in fiscal year 2013.

Pension contributions, fiscal year 2013 (dollars in thousands)
State	Total contributions from employees and employers	Employee contributions		Government contributions		Earnings on investments
		Contributions	Percentage of total	Contributions	Percentage of total
Illinois	$10,854,000	$2,671,581	24.61%	$8,182,418	75.39%	$17,742,347
Indiana	$2,311,788	$332,774	14.39%	$1,979,015	85.61%	$1,660,212
Michigan	$3,725,093	$715,985	19.22%	$3,009,108	80.78%	$9,446,338
Ohio	$5,998,903	$2,736,098	45.61%	$3,262,805	54.39%	$19,562,292
Wisconsin	$1,722,920	$805,001	46.72%	$917,919	53.28%	$11,271,130
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Payments

See also: Pension contribution and payment data, U.S. Census

Payments are the amounts paid to pension recipients by their pension plans. Pension payments include benefits and withdrawals. Benefits are the regular payments made by a pension plan to the plan's recipients. Pension beneficiaries may also withdraw funds before they are due to receive regular benefits.

In fiscal year 2013, Illinois' state and local pension systems made payments totaling $15.7 billion. The table below provides pension payment information for Illinois and surrounding states in fiscal year 2013. The columns labeled "Benefits," "Withdrawals," and "Other" are subsets of total payments. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Pension payments, fiscal year 2013 (dollars in thousands)
State	Total payments	Benefits	Withdrawals	Other
Illinois	$15,668,633	$14,613,637	$410,648	$644,361
Indiana	$2,493,324	$2,213,893	$99,238	$180,195
Michigan	$8,073,449	$7,822,880	$102,669	$147,901
Ohio	$13,944,898	$12,864,361	$569,022	$511,515
Wisconsin	$5,063,802	$4,686,187	$29,735	$347,880
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Cash and investment holdings

See also: Pension data, U.S. Census

As of fiscal year 2013, Illinois' state and local pension systems held $135.1 billion in total cash and investment holdings. The table below summarizes pension system cash and investment holdings for Illinois and surrounding states. The columns labeled "Total cash and short-term investments," "Total securities," and "Total other investments" are subsets of the grand total. All dollar amounts displayed should be multiplied by 1,000 ($240,000 is equal to $240,000,000).

Total cash and investment holdings, fiscal year 2013 (dollars in thousands)
State	Grand total	Total cash and short-term investments	Total securities	Total other investments
Illinois	$135,110,275	$6,086,279	$114,722,034	$14,301,962
Indiana	$28,263,756	$1,610,487	$20,504,964	$6,148,305
Michigan	$76,494,465	$3,524,150	$60,850,744	$12,119,571
Ohio	$159,749,953	$6,883,200	$120,552,608	$32,314,145
Wisconsin	$89,813,290	$2,782,995	$85,071,137	$1,959,158
Source: United States Census Bureau, "State- and Locally-Administered Defined Benefit Pension Systems - All Data by State and Level of Government: 2013"

Pension health

Pension health is a term used to describe the overall state of pension systems. It can be difficult to gauge pension health in each state, but many studies use calculations to determine the average liabilities, unfunded liabilities, funded ratio and other data. Most experts believe that pension systems need to be funded at least 80 percent to be considered healthy. This information is then used to provide a snapshot of the state's overall pension health. This section provides information from three studies regarding the health of pensions in Illinois and neighboring states. They found the following:

• According to the Pew Research Center, Illinois paid 76 percent of its required contribution and its funded ratio was only 40 percent in fiscal year 2012.
• According to Morningstar, the state had a per capita pension debt of $7,421 and a funded ratio of 40.4 percent in fiscal year 2012.
• According to State Budget Solutions, which assumed a lower rate of return, Illinois had a per capita pension debt of $25,740 and a funded ratio of 22 percent in fiscal year 2013.

Pew research

See also: Pew Charitable Trusts pensions study, 2014

According to a 2014 report by the Pew Research Center, “many states are seeing their pension debt continue to increase, despite reform efforts, because of missed contributions and the continued impact of investment losses.” The funding gap between what state pension systems have promised in benefits (liabilities) and current funding (assets) increased by $158 billion from 2010 to 2012 (14 percent), leaving state-run retirement systems with $915 billion in unfunded liabilities. Only 15 states made at least 95 percent of the required contributions (ARCs) for their pensions between 2010 and 2012; the aggregate shortfall in funding for all state plans was $21 billion. Data on these state pensions come from the Comprehensive Annual Financial Reports (CAFRs) that each state’s pension plan prepared for fiscal year 2012; these reports include actuarial valuations based on “the expected rate of return on investments and estimates of employee life spans, retirement ages, salary growth, retention rates, and other demographic characteristics.”

All dollar amounts displayed should be multiplied by 1,000,000 (e.g., $240,000 is equal to $240,000,000,000).

Pew Charitable Trusts report, 2010-2012 (dollars in millions)
State	2012			Funded ratio			Percent of ARC paid
	Liability	Unfunded	ARC	2010	2011	2012	2010	2011	2012
Illinois	$158,612	$94,582	$6,612	45%	43%	40%	87%	80%	76%
Indiana	$41,884	$16,355	$1,733	65%	63%	61%	94%	84%	88%
Michigan	$80,521	$31,159	$2,395	72%	65%	61%	86%	87%	80%
Ohio	$191,146	$63,143	$4,487	67%	68%	67%	67%	67%	57%
Wisconsin	$78,683	$70	$826	100%	100%	100%	108%	104%	100%
Totals in the U.S.	$3,298,643	$914,653	$87,213	75%	74%	72%	78%	77%	77%
Source: The Pew Charitable Trusts, "The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow"

Morningstar report

See also: Pension data, 2013 Morningstar report

In 2013, independent investment research firm Morningstar released "The State of State Pension Plans 2013," a report detailing various metrics of pension system health in all 50 states. Morningstar found a $1.2 trillion gap in 2012 for the largest 100 U.S. public pension plans (according to the actuarial firm Milliman). Based on two key drivers in Morningstar’s analysis—the funded ratio and the unfunded actuarial accrued liability (UAAL) per capita—the fiscal solvency and management of these plans varied greatly. Overall they found that "more than half of all states fall below Morningstar’s fiscally sound threshold of a 70% funded ratio" and all state plans combined were "72.6 percent funded with a UAAL per capita of roughly $2,600.”

According to Morningstar's research, Illinois' state pension system was funded at a rate of 40.4 percent in fiscal year 2012. The table below provides state pension system health metrics for Illinois and surrounding states in fiscal year 2012. Figures in the columns labeled "Assets," "AAL," and "UAAL" are rendered in thousands of dollars (for example, $2,400,000 translates to $2,400,000,000). Figures in the remaining columns have not been abbreviated. To view the full report, click here.

Pension health metrics from the Morningstar report, fiscal year 2012
State	Assets	Liabilities (AAL)	Unfunded liabilities (UAAL)	Funded ratio	Unfunded liabilities per capita
Illinois	$64,029,900	$158,611,500	$94,581,600	40.4%	$7,421
Indiana	$21,719,459	$37,216,043	$15,496,584	58.4%	$2,415
Michigan	$11,776,300	$17,726,600	$5,950,300	66.4%	$598
Ohio	$66,059,360	$85,577,700	$19,518,340	77.2%	$1,695
Wisconsin	$78,940,000	$79,039,300	$99,300	99.9%	$18
Totals in the U.S.	$2,157,578,916	$2,979,267,860	$821,688,945	72.40%	N/A
Source: Morningstar, "The State of State Pension Plans 2013: A Deep Dive Into Shortfalls and Surpluses," accessed September 16, 2013

State Budget Solutions report

See also: Pension data, State Budget Solutions report

State Budget Solutions is "a nonpartisan, nonprofit, national public policy organization with the mission to change the way state and local governments do business." It should be noted that although the organization is technically nonpartisan, its ideology and mission have conservative leanings. In November 2014, the organization released a research report that used a fair market valuation based on a discount rate of 2.743 percent to determine the unfunded liabilities of public pension plans. The group concluded that "state public pension plans were underfunded by $4.7 trillion in 2014, up from $4.1 trillion in 2013. Overall, the combined plans' funded status ... dipped 3 percentage points to 36 percent. Split among all Americans, the unfunded liability [was] over $15,000 per person."

According to the State Budget Solutions report, Illinois' pension plans were funded at a rate of 22 percent. To read the full report, click here.

Note that all dollar amounts displayed (excluding those under the "Unfunded liability per capita" column) should be multiplied by 1,000 (e.g., $240,000 is equal to $240,000,000).

Pension health metrics from the State Budget Solutions report, fiscal year 2013 (dollars in thousands)
State	Assets	Market liability*	Funding ratio	Unfunded liability	Unfunded liability per capita	Unfunded liability as % of 2013 gross state product
Illinois	$95,040,320	$426,619,820	22%	$331,579,500	$25,740	46%
Indiana	$27,348,958	$75,343,595	36%	$47,994,637	$7,304	15%
Michigan	$57,209,849	$193,562,650	30%	$136,352,801	$13,779	32%
Ohio	$152,370,215	$441,974,046	34%	$289,603,831	$25,028	51%
Wisconsin	$78,613,000	$117,206,900	67%	$38,593,900	$6,720	14%
Totals in the U.S.	$2,679,831,466	$7,416,319,293	36%	$4,736,487,827	$15,052	29%
Source: State Budget Solutions, "Promises Made', Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion"

Other factors

State debt

The degree to which pension funds are funded affects the fiscal health of a state but sometimes the full amount of unfunded pension debt may not be reported on the state balance sheet, according to a study by the nonprofit organization Truth in Accounting. Based on analysis of Illinois' Comprehensive Annual Financial Report from June 30, 2013, and actuarial reports for Illinois retirement plans, the organization concluded that $147.4 billion in promised retirements benefits were unfunded, but only $37 billion of these liabilities were reported on Illinois' balance sheet. With the unfunded pension benefits and unfunded retiree health care benefits included in the total debt, the state had a shortfall of $175.7 billion, or per capita debt of $43,400.

See also: Illinois state budget and finances

Rate of return

According to a 2012 analysis by the Pew Center for the States, most state pension plans assumed an 8 percent rate of return on investments at that time. Proponents argued that an 8 percent rate of return would bear out over the long-term (15-30 years). Critics asserted that this assumption was unrealistic, citing changing market conditions and lower investment returns across the board in preceding years.

Assuming a lower rate of return to predict investment earnings increases current plan liabilities, thereby lowering the percent funded ratio and requiring increased employer contributions (ARCs). This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities. For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion. Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.

Financial crisis

In the wake of the 2008 recession, proponents of a lower assumed rate of return argued that the standard 8 percent assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Jeffrey Friedman, a senior market strategist at MF Global, said, "To target 8 percent means some aggressive trading. Ten-year Treasury [bonds] are yielding around 2 percent, economists say we are headed for a double-dip, and house prices aren't getting back to 2007 levels for the next decade, maybe.".

Advocates of the 8 percent return rate argued that the dip following the 2008 financial crisis did not prove that there was a long-term downward trend in investment returns. According to Chris Hoene, executive director of the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."

The National Association of State Retirement Administrators researched the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20- and 25-year periods ending in 2013 and found it was 7.9 percent over the 20-year period, and exceeded 8 percent for the 1-, 3- and 25-year periods. It is important to note that the NASRA data reported the median returns, which means that median annualized returns of investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.

Studies and reports

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year), and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets), and its five-year rate of return was 7.53 percent.

The table below presents the information collected by MPPI for Illinois and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented.

Public pension fund management fees, 2011-2012
State	Fiscal year	Total net assets at the beginning of the year	Total net assets at the end of the year	Total management fees	Management fees as a percentage of total net assets	Five-year rate of return
Illinois	2012	$57,424,347,944	$57,821,599,899	$313,400,624	0.55%	0.70%
Indiana	2012	$25,755,673,000	$25,564,126,000	$106,484,000	0.41%	0.20%
Michigan	2012	$46,106,071,669	$50,540,016,325	$190,537,882	0.41%	1.50%
Ohio	2012; 2011	$165,091,688,276	$159,507,551,615	$528,693,965	0.32%	1.56%
Wisconsin	2012	$82,485,576,190	$80,271,452,828	$253,704,610	0.31%	2.10%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure." Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," accessed July 1, 2013

Other post-employment benefits

See also: Other post-employment benefits, data

In addition to standard pension payments, some plans may offer pensioners additional benefits. These benefits, sometimes referred to as "other post-employment benefits" or "OPEBs," consist of health insurance, life insurance or other benefits that the pensioner may have received while employed. The cost of these benefits can prove complicated for actuaries to calculate because of the changes in fields like medicine. This, coupled with the normal challenges in calculating and meeting pension requirements, can result in funding shortages for pension plans.

Unfunded liabilities totaled nearly $500 billion throughout the country for OPEBs. Illinois was reported to have about $34.5 billion in unfunded liabilities for OPEBs. This was equal to about 6.93 percent of the country's total unfunded liabilities for these other services.

The chart below displays the unfunded liabilities for Illinois and its surrounding states. All dollar amounts displayed should be multiplied by 1,000,000. For instance, $300 translates to $300,000,000.

Unfunded actuarial accrued liabilities for other post-employment benefits, fiscal year 2013 (dollars in millions)
State	Unfunded liabilities	Percent of total
Illinois	$34,488	6.93%
Indiana	$315	0.06%
Michigan	$9,103	1.83%
Ohio	$13,959	2.8%
Wisconsin	$953	0.19%
U.S. total	$497,693	100%
Source: National Association of State Retirement Administrators, "Retiree Health Care Benefits for State and Local Employees in 2014," accessed April 30, 2015. Note: Although this article was dated for 2014, all figures were reported to have come from fiscal year 2013 reports.

Public pensions in 2012

In fiscal year 2012, according to the systems' Comprehensive Annual Financial Reports, Illinois had a total of 471,920 active members in its retirement systems. Membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries, and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).

The following information was collected from the systems' Comprehensive Annual Financial Reports. The "percentage funded" was calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rate of return used to calculate fund value varied by system in fiscal year 2012 (see "Rate of return" for more information). The Government Accountability Office (GAO) and Pew Research Centers cited a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggested that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater." The column labeled "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis used a rate of return of 3.225 percent, which was based upon the 15-year Treasury bond yield. The organization called this a "risk-free" rate of return that would make it easier for states to achieve their pension funding requirements in the future. Beginning in 2006, all private sector corporate pension plans incorporated market costs into their funding schemes.

Basic pension plan information -- Illinois
Plans	Current value	Percentage funded		Unfunded liabilities		Membership
		State figure	SBS figure	State figure	SBS figure
State Employees' Retirement System	$11,477,264,329	34.7%	N/A	$21,613,921,865	N/A	62,732 active members
Judges' Retirement System	$601,219,999	29.7%		$1,420,495,797		968 active members
General Assembly Retirement System	$56,090,081	18.5%		$247,379,182		176 active members
Teachers' Retirement System	$37,945,397,000	42.1%		$52,079,548,000		162,217 active members
State Universities Retirement System	$13,949,900,000	42.1%		$19,220,300,000		71,056 active members
Illinois Municipal Retirement Fund	$27,491,809,785	84.3%		$5,111,434,314		174,771 active members
TOTALS	$91,521,681,194	47.86%	24%	$99,693,079,158	$287,045,993,000	471,920 active members

Annual Required Contribution

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. According to a report by the Pew Center on the States, in 2010 Illinois paid 87 percent of its annual required contribution.

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014. As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants were instructed to use an actuarially determined contribution or a statutory contribution for reporting purposes.

ARC historical data*
Fiscal year	SERS		JRS		GARS		TRS		SURS
	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed	Annual Required Contribution (ARC)	Percentage contributed
2012	$1,614,834,808	86.2%	$110,923,357	57.4%	$13,365,820	78.6%	$3,429,945,000	74.6%	$1,701,600,000	73.1%
2011	$1,289,002,005	87.5%	$95,490,182	65.4%	$13,086,199	84.4%	$2,743,221,000	84.7%	$1,519,200,000	68.0%
2010	$1,177,313,343	93.1%	$86,916,418	90.3%	$12,064,078	86.3%	$2,481,914,000	90.6%	$1,278,300,000	76.0%
2009	$1,003,432,849	77.2%	$78,386,597	76.5%	$11,129,440	79.5%	$2,109,480,000	75.9%	$1,147,300,000	63.2%
2008	$986,410,891	59.6%	$75,134,070	62.4%	$10,672,535	63.8%	$1,949,463,000	60.0%	$971,600,000	62.7%
*ARC data for the Illinois Municipal Retirement Fund could not be found.

Public pensions in 2011

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for Illinois) instead of the state-reported assumed rates of return (8.50 percent for Illinois' largest pension plan as of July 1, 2011).

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.

The adjusted net pension liability for Illinois in fiscal year 2011 was ranked the highest in the nation. The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Illinois
	Governmental revenue*	Personal income	State GDP	Per capita
State findings	241.1%	23.6%	19.8%	$10,340
National ranking	1st	2nd	2nd	3rd
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.

Historical pension plan data

Historical pension plan data - all systems
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$94,005,561,277	$137,130,208,942	$43,124,647,665	68.55%
2008	$86,301,529,514	$144,695,662,576	$58,394,133,062	59.64%
2009	$86,751,224,247	$153,780,593,142	$67,029,368,895	56.41%
2010	$87,304,507,083	$167,923,503,195	$80,618,996,112	51.99%
2011	$89,264,334,451	$177,422,815,981	$88,158,481,530	50.31%
Change from 2007-2011	-$4,741,226,826	$40,292,607,039	$45,033,833,865	-18.24%

Historical pension plan data - SERS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$12,078,908,954	$22,280,916,665	$10,202,007,711	54.2%
2008	$10,995,366,485	$23,841,280,102	$12,845,913,617	46.1%
2009	$10,999,953,527	$25,298,346,092	$14,298,392,565	43.5%
2010	$10,961,540,164	$29,309,464,296	$18,347,924,132	37.4%
2011	$11,159,836,617	$31,395,007,782	$20,235,171,165	35.6%
Change from 2007-2011	-$919,072,337	$9,114,091,117	$10,033,163,454	-18.6%

Historical pension plan data - JRS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$670,090,950	$1,385,339,573	$715,248,623	48.4%
2008	$612,680,574	$1,457,336,054	$844,655,480	42.0%
2009	$616,849,071	$1,548,509,535	$931,660,464	39.8%
2010	$619,925,786	$1,819,447,826	$1,199,522,040	34.1%
2011	$614,596,203	$1,952,539,400	$1,337,943,197	31.5%
Change from 2007-2011	-$55,494,747	$567,199,827	$622,694,574	-16.9%

Historical pension plan data - GARS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$87,182,175	$231,913,988	$144,731,813	37.6%
2008	$75,405,943	$235,780,071	$160,374,128	32.0%
2009	$71,573,865	$245,226,299	$173,652,434	29.2%
2010	$66,212,244	$251,764,834	$185,552,590	26.3%
2011	$63,161,047	$298,408,371	$235,247,324	21.2%
Change from 2007-2011	-$24,021,128	$66,494,383	$90,515,511	-16.4%

Historical pension plan data - TRS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$41,909,318,000	$65,648,395,000	$23,739,077,000	63.8%
2008	$38,430,723,000	$68,632,367,000	$30,201,644,000	56.0%
2009	$38,026,044,000	$73,027,198,000	$35,001,154,000	52.1%
2010	$37,439,092,000	$77,293,198,000	$39,854,106,000	48.4%
2011	$37,769,753,000	$81,299,745,000	$43,529,992,000	46.5%
Change from 2007-2011	-$4,139,565,000	$15,651,350,000	$19,790,915,000	-17.3%

Historical pension plan data - SURS
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$15,985,700,000	$23,362,100,000	$7,376,400,000	68.4%
2008	$14,586,300,000	$24,917,700,000	$10,331,400,000	58.5%
2009	$14,282,000,000	$26,316,200,000	$12,034,200,000	54.3%
2010	$13,966,600,000	$30,120,400,000	$16,153,800,000	46.4%
2011	$13,945,700,000	$31,514,300,000	$17,568,600,000	44.3%
Change from 2007-2011	-$2,040,000,000	$8,152,200,000	$10,192,200,000	-24.1%

Historical pension plan data - IMRF
Year	Value of assets	Accrued liability	Unfunded liability	Funded ratio
2007	$23,274,361,198	$24,221,543,716	$947,182,518	96.1%
2008	$21,601,053,512	$25,611,199,349	$4,010,145,837	84.3%
2009	$22,754,803,784	$27,345,113,216	$4,590,309,432	83.2%
2010	$24,251,136,889	$29,129,228,239	$4,878,091,350	83.3%
2011	$25,711,287,584	$30,962,815,428	$5,251,527,844	83.0%
Change from 2007-2011	$2,436,926,386	$6,741,271,712	$4,304,345,326	-13.1%

Reforms

Enacted reforms

2013

S.B. 1

On December 5, 2013, Governor Pat Quinn signed into law S.B.1, a series of significant pension reforms that were projected to save the state more than $160 billion over 30 years. Most notably, the enacted legislation, which took effect on June 1, 2014, promised to curb cost-of-living adjustments for retirees and required many current workers to forgo as many as five cost-of-living adjustments when they retire. In addition, the law increased the retirement age for current workers by up to five years (contingent on the employee's current age).

We Are One, a group of unions headed by the state AFL-CIO, blasted the legislation as "attempted pension theft" and "illegal." Public employee unions indicated they would challenge the legislation in court on the grounds that it "diminishes or impairs" an enforceable contract, a violation of the state constitution. Supporters contended that the law will be upheld by the state Supreme Court. In a prepared statement, Quinn called the law "a serious solution to the most dire fiscal challenge of our time."

In light of the reforms, on December 10, 2013, Standard and Poor's Ratings Service elevated the outlook on the state's A-minus credit rating from "negative" to "developing." S&P analyst Robin Prunty said, "Although we view the consensus achieved by Illinois on this difficult issue as positive from a credit standpoint, the developing outlook reflects the implementation risk - legal and budgetary - associated with various provisions of the pension reform as well as the overall structural budget challenges facing the state."

H.B. 1375

H.B. 1375 amended the Downstate Firefighter Article of the Illinois Pension Code to increase, in certain cases where a deceased firefighter left a surviving minor child but no surviving spouse, the pension payable to the guardian of that child from 12 percent to 20 percent of the firefighter's monthly salary.

The bill was signed into law on August 16, 2013.

H.B. 2583

Sponsored by Representative Daniel J. Burke (D-District 1), H.B. 2583 amended the Chicago Teacher Article of the Illinois Pension Code to specify that an employer cannot reclassify a non-hourly employee as an hourly employee in order to evade or avoid its obligations. The bill also provided that any certified teacher or staff employed by a corporate or nonprofit entity involved in the administration of a charter school shall be presumed to be a participant in the fund, unless the organization establishes that the teacher or staff member is not working as a teacher or administrator directly or indirectly with the charter school.

The bill was signed into law on August 16, 2013.

H.B. 2656

H.B. 2656 amended the Illinois Municipal Retirement Fund Article of the Illinois Pension Code, providing that, for service transferred from a downstate police pension fund under a specific provision, credits and creditable service will be granted upon transfer of those credits to the IMRF. The bill further specified that if the Board determines that the amount transferred is less than the true cost to the Fund of allowing creditable service to be established, the member must pay the Fund a contribution equal to the difference.

The governor signed the bill into law on August 16, 2013.

H.B. 2767

H.B. 2767 amended the State Employee Article of the Illinois Pension Code, providing that, for service on or after July 1, 2013, "compensation" does not include any stipend payable to an employee for service on a board or commission.

The bill was signed into law on August 16, 2013.

H.B. 1444

H.B. 1444 amended the Illinois Municipal Retirement Fund Article of the Illinois Pension Code, providing that the governing Board will determine the amortization period to be used in calculating the amount to be contributed by participating municipalities and instrumentalities in order to adjust for changes in the fund's unfunded accrued liabilities. The bill further specified that the amortization period cannot exceed 30 years for participating municipalities or 10 years for participating instrumentalities.

The governor signed the bill into law on August 9, 2013.

H.B. 2993

Sponsored by Representatives Darlene Senger (R-District 41) and Elaine Nekritz (D-District 57), H.B. 2993 amended the Illinois Pension Code to delete references to the State Universities Retirement System from the Tier 2 section of the General Provisions Article and to instead incorporate the Tier 2 provisions into the State Universities Article. The bill also made other administrative changes to provide for a clearer interpretation of the Tier 2 provisions of S.B. 1946 (passed by the 96th Illinois General Assembly) as they apply to SURS.

The bill was signed into law on July 17, 2013.

S.B. 1366

Sponsored by Senators Daniel Biss (D-District 9) and Pamela Althoff (R-District 32), S.B. 1366 amended the Downstate Teacher Article of the Illinois Pension Code, providing that the early retirement without discount option will be extended to July 1, 2016 with certain changes. These included increasing the required employee and employer contribution and requiring the employee to obtain the approval of the last employer.

Governor Pat Quinn signed the bill into law on June 28, 2013.

2012

H.B. 3813

On January 4, 2012, Governor Pat Quinn signed into law H.B. 3813, which The Chicago Tribune called "a major crackdown on lucrative public pension abuses that saw top union officials land hefty retirement packages, double dip and substitute teach for one day but win benefits for life."

The law aimed to put a stop to the practice whereby some municipal and labor organization employees took leaves of absence from their municipal jobs, moved to full-time positions within their labor unions and then collected pensions from both. The enacted legislation mandated that both current and future city employees who leave municipal positions to work for unions will not be able to count union experience toward their pensions. The legislation also sought to close a loophole that allowed two lobbyists for the Illinois Federation of Teachers to enter the Teachers' Retirement System after working as substitute teachers for only one day.

In a statement released on January 3, 2012, Quinn said, "The pension abuses unearthed were flagrant. They needed to be stopped immediately and prevented from ever happening in the future. I'm pleased that the Legislature voted overwhelmingly to address the issue."

Nonetheless, questions remained about the constitutionality of the law, which stood to "retroactively repeal" prior benefits. David Ellis, chief legal counsel to House Speaker Michael Madigan, told legislators, "I understand what people are trying to do. I'm not trying to question anyone's motives here, but from a pure constitution perspective, you can't do that. That violates the constitution, I think, pretty clearly."

See also

• Public pensions in the United States
• Illinois state budget and finances
• Tax policy in Illinois
• Pension statistics
• Public pension health by state
• Public pensions

External links

• Pension Tsunami
• Pension Calculator from Public Sector Inc.
• Center for Retirement Research at Boston College, "How did state/local plans get so underfunded?"
• Illinois State Retirement System Annual Report (2012)
• Illinois State Board of Investment Annual Report (2012)
• Illinois Teachers Retirement System Annual Report (2012)

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