(A) Introduction.
(1) The purpose of this policy statement is to define the manner in which the village funds long-term costs of pension benefits to Illinois Municipal Retirement Fund (IMRF) plan participants. The ultimate goal of this policy is to ensure that pension benefits can be paid, employer costs can be managed, and the plan to fund pensions is clear.
(2) Funding a defined benefit pension plan requires a long-term horizon. Assumptions and inputs into the policy should focus on long-term trends, not year-to-year shifts in the economic or noneconomic environments. Generally, assumptions or inputs should be evaluated and changed if long-term economic or non-economic inputs have fundamentally changed or are no longer reasonable. As such, the village will review this policy as part of the annual budget process to determine if changes are needed to ensure adequate resources are being accumulated in Bellwood’s IMRF account. The village reserves the right to make changes to this policy and change funding practices, at any time, if the financial condition of the village warrants, and it is deemed appropriate by the Village Board of Trustees.
(B) General funding policy objectives. The fundamental financial objective of a public employee defined benefit pension plan is to fund the long-term cost of benefits provided to the plan participants. To assure the plan remains sustainable, the plan should accumulate adequate resources for future benefit payments in a systematic and disciplined manner during the active service life of the benefitting employees.
(1) Actuarially determined contributions. A pension funding plan should be based upon an actuarially determined contribution (ADC) incorporating both the cost of benefits in the current year and the amortization of the plan’s unfunded actuarial accrued liability.
(2) Specific cost assumptions. The village does not obtain a separate actuarial report for IMRF and instead relies on the information provided by IMRF. IMRF costs are allocated to the budget activities in which the related salary expenditures are recorded. Most IMRF costs are funded by the village’s IMRF property tax levy. The Water and Sewer Fund pays the village’s IMRF costs from revenues dedicated to that purpose.
(3) Funding discipline.
(a) A commitment to make timely, actuarially determined contributions to the retirement system is needed to ensure sufficient assets are available for all current and future retirees.
(b) Specific policy objectives and considerations.
1. As required by state statute, the village will, at a minimum, fund the Illinois Municipal Retirement Fund (IMRF) in the amounts determined by IMRF. The village will consider funding IMRF at higher levels when anticipated property tax revenue exceeds actual contributions to the fund.
2. Employer contributions - Property tax receipts will be electronically deposited to IMRF on a monthly basis.
3. Employee contributions - Employee contributions obtained through payroll deductions will be electronically deposited to IMRF on a monthly basis.
(4) Intergenerational equity.
(a) Annual contributions should be reasonably related to the expected and actual cost of each year of service so the cost of employee benefits is paid by the generation of taxpayers who receives services from those employees.
(b) Specific policy objectives and considerations. Fully funding pension benefits over the average future service period of employees reasonably aligns the cost of the benefits of the public services with the taxpayers who benefit from those services.
(5) Accountability and transparency.
(a) Clear reporting of pension funding should include an assessment of how and when the plan sponsor will ensure sufficient assets are available for all current and future retirees.
(b) Specific policy objectives and considerations.
1. The village’s Annual Financial Report (AFR) shall be published on its website, uploaded to the State Comptroller’s Office; and hard copies made available at the Village Hall. The AFR includes various financial reports related to the village’s Retirement Fund and the village’s annual contribution to the Pension Plan.
2. The village’s annual budget shall be published on its website and hard copies made available at the Village Hall. The budget shall include the village’s contribution to the village’s IMRF account as well as this funding policy.
(Ord. 15-5, passed 2-18-15)