HomeMy WebLinkAbout03-253 Resolution No. 03-253
RESOLUTION
TO ADOPT IMRF EARLY RETIREMENT INCENTIVE
WHEREAS, Section 7-141 . 1 of the Illinois Pension Code
provides that a participating employer may elect to adopt an
early retirement incentive program offered by the Illinois
Municipal Retirement Fund by adopting a resolution or ordinance;
and
WHEREAS, the goal of adopting an early retirement program
is to realize a substantial savings in personnel costs by
offering early retirement incentives to employees who have
accumulated many years of service credit; and
WHEREAS, implementation of the early retirement program
will provide a budgeting tool to aid in controlling payroll
costs; and
WHEREAS, the City Council of the City of Elgin has
determined that the adoption of an early retirement incentive
program is in the best interests of the City of Elgin.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ELGIN, ILLINOIS :
Section 1 . The City of Elgin does hereby adopt the
Illinois Municipal Retirement Fund early retirement incentive
program as provided in Section 7-141 . 1 of the Illinois Pension
Code. The early retirement incentive program shall take effect
on March 1 , 2004 .
Section 2 . In order to help achieve a true cost savings,
an employee who retires under the early retirement incentive
program shall lose those incentives if he or she later accepts
employment with any IMRF employer in any position.
Section 3 . In order to utilize an early retirement
incentive as a budgeting tool, the City of Elgin will use its
best efforts either to limit the number of employees who replace
the employees who retire under the early retirement incentive
program or to limit the salaries paid to the employees who
replace the employees who retire under the early retirement
incentive program.
Section 4 . The effective date of each employee ' s
retirement under this early retirement incentive program shall
be set by the City of Elgin and shall be no earlier than the
effective date of the program and no later than one year after
that effective date; except that the employee may require that
the retirement date set by the employer be no later than the
June 30 next occurring after the effective date of the program
and no earlier than the date upon which the employee qualifies
for retirement .
Section 5 . To be eligible for the early retirement
incentive under this Section, the employee must have attained
age 50 and have at least 20 years of creditable service by his
or her retirement date.
Section 6 . The City Clerk shall promptly file a certified
copy of this resolution with the Board of Trustees of the
Illinois Municipal Retirement Fund.
s/ Ed Schock
Ed Schock, Mayor
Presented: September 24 , 2003
Adopted: September 24 , 2003
Omnibus Vote: Yeas : 6 Nays : 0
Attest :
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
Resolution No. 03-255
RESOLUTION
FOR EMPLOYER PICK-UP OF MEMBER CONTRIBUTIONS REQUIRED
FOR PURCHASE OF ADDITIONAL SERVICE UNDER THE IMRF
EARLY RETIREMENT INCENTIVE
WHEREAS, Section 7-141 . 1 of the Illinois Pension Code
allows certain IMRF members to purchase additional service
credit in order to induce those members to retire early; and
WHEREAS, Section 7-141 . 1 of the Illinois Pension Code
requires a member contribution for the early retirement service
credit ; and
WHEREAS, Section 414 (a) of the Internal Revenue Code
provides that contributions designated as member contributions
but picked-up (paid) by the employer shall be excluded from
taxable income until distributed as a refund, annuity or death
benefit ; and
WHEREAS, it is desirable that the member contributions
required by the IMRF early retirement incentive by paid by the
employer.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ELGIN, ILLINOIS, that the member contributions required
by the IMRF early retirement incentive be paid by the City of
Elgin on behalf of all its employees who retire under the IMRF
early retirement incentive .
BE IT FURTHER RESOLVED that the payment shall be made by a
reduction in earnings payments to those employees .
BE IT FURTHER RESOLVED that the pick-up (payment) of member
contributions shall be effective for all employees of the City
of Elgin who retire under the IMRF early retirement incentive
effective March 1, 2004 .
BE IT FURTHER RESOLVED that this resolution shall be in
full force and effect from and after its adoption.
s/ Ed Schock
Ed Schock, Mayor
Presented: September 24 , 2003
Adopted: September 24, 2003
Omnibus Vote : Yeas : 6 Nays : 0
Attest :
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
Resolution No. 03-254
RESOLUTION
TO ADOPT AMORTIZATION PERIOD FOR IMRF EARLY RETIREMENT INCENTIVE
WHEREAS, on September 24, 2003 the City Council of the City
of Elgin adopted Resolution No. 03-253 which established an
early retirement incentive (incentive) through the Illinois
Municipal Retirement Fund for its employees; and
WHEREAS, Section 7-141 . 1 of the Illinois Pension Code
provides that a participating employer may select an
amortization period for the actuarial costs of the incentive
which may be no less than 5 years and no greater than 10 years;
and
WHEREAS, the City of Elgin is prohibited from adopting a
subsequent incentive until the actuarial costs of the previous
programs are paid.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ELGIN, ILLINOIS, that the City of Elgin does hereby
request the Illinois Municipal Retirement Fund to amortize the
cost of the incentive over a period of six years .
s/ Ed Schock
Ed Schock, Mayor
Presented: September 24, 2003
Adopted: September 24, 2003
Omnibus Vote : Yeas : 6 Nays : 0
Attest :
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
. JUL-U1-U3 lut 1 ; P. 05
IMRF Retirement Incentive Window Program
Actuarial Analysis for
03347 • CITY OF ELGIN
(SLED Members)
Summary of Valuation Data and Input Variables
Window Period: 03/01/2004 Through 03/01/2005
EMPLOYEES AFFECTED BY WINDOW *
1. Presently eligible to retire with full or reduced benefits
a. Number 1
b. Annual payroll $122,922
2. Number newly eligible to retire
a. Number 0
b. Annual payroll $O
_INPUT VARIABLES
3. Employees presently eligible to retire,who:
a. Would have retired without this window 0
b. Are induced to retire during this window 1
4. Employees newly eligible to retire who are induced
•
to retire during window period 0
5. Total number assumed to retire during window
period: (3a)+(3b)+(4) 1
6. Across-the-board pay increase since 12/31/02 3.00 %
* Persons covered by Elected County Official benefit provisions with this employer
not included in this study.
7/1/2003-9;00:51 AM 03347 V03,0 -3-
JUL-U1-UJ IUL lb;bi P, 06
IMRF Retirement Incentive Window Program
Actuarial Analysis for
•
•
03347 - CITY OF ELGIN
(SLEP Members)
Summary of Valuation Results
Window Period: 03/01/2004 Through 03/01/2005
IMRF COSTS
1. Additional Liability Created By Window $ 207,747
2. First Year Increase in Employer Contribution to IMRF based on
indicated amortization of liability increase
a. 5 years $ 45,754
b. 6 years $ 38,702
c. 7 years $ 33,669
d. 8 years $ 29,898
e. 9 years $ 26,969
f. 10 years $ 24,629
7/112003-9:00:51 AM 03347 V03.0 .4.
• JUL-01-03 TUE 15:45 P. 05
IMRF Retirement Incentive Window Program
Actuarial Analysis for
03347 - CITY OF ELGIN
(Regular Members)
Summary of Valuation Data and Input Variables
Window Period: 03/01/2004 Through 03/01/2005
EMPLOYEES AFFECTED BY WINDOW *
1. Presently eligible to retire with full or reduced benefits
a. Number 22
b. Annual payroll $1,288,400
2. Number newly eligible to retire
a. Number 19
b. Annual payroll $1,213,181
INPUT VARIABLES
3. Employees presently eligible to retire, who:
a. Would have retired without this window 0
b. Are induced to retire during this window 22
4. Employees newly eligible to retire who are induced
to retire during window period 19
5. Total number assumed to retire during window
period: (3a)+(3b)+(4) 41
6. Across-thc-board pay increase since 12/31/02 3.00 %
* Persons covered by Elected County Official benefit provisions with this employer
not included in this study.
71112003-8:58:44 AM 03347 V03.0 -3-
. JUL-U1 11i 1U1. 15:4b P. 06
IMRF Retirement Incentive Window Program
Actuarial Analysis for
03347 - CITY OF ELGIN
(Regular Members)
Summary of Valuation Results
Window Period: 03/01/2004 Through 03/01/2005
IMRF COSTS
1. Additional Liability Created By Window $ 4,830,144
2. First Year Increase in Employer Contribution to 1MRF based on
indicated amortization of liability increase
a. 5 years $ 1,063,791
b. 6 years $ 899,820 t
c. 7 years $ 782,805
d. 8 years $ 695,135
e. 9 years $ 627,039
f. 10 years $ 572,638
7/1/2003-8:58:44 AM 03347 V03.0 -4-
; .,,• Agenda Item No.�
City of Elgin
E
September 5, 2003 L
G '"" ����
6 101 TO: Mayor and Members of the City Coun it � 011
Y Y 1µ.t .
/A
FROM: David M. Dorgan, City Manager iv,
FINANCIALLY STABLE CITY GOVERNMENT
Olufemi Folarin, Assista t City EF FIC TENT SERV CES,
AND QUALITY INFRASTRUCTURE
Manager
SUBJECT: IMRF/SEEP Early Retirement Incentive Program
PURPOSE
The purpose of this memorandum is to provide the Mayor and
members of the City Council with information to consider
offering Early Retirement Incentive Program to eligible
employees .
BACKGROUND
The Illinois Municipal Retirement Fund allows IMRF employers to
offer Early Retirement Incentive (ERI) to their employees who
meet the criteria established by State Statute . The City of
Elgin took advantage of this statutory provision to offer Early
Retirement Incentive to eligible employees in 1998 .
The program is purely optional but if adopted by the City
Council, will apply to all qualified IMRF and SLEP employees .
Eligibility for ERI is conditional on being fifty (50) years of
age and having twenty (20) years of service credit . Employees
who meet the age and service requirement may purchase between
one month and five years of age and service credit for the
purpose of determining their retirement benefits . The city' s
cost for adopting ERI may be paid over a period of no less than
five (5) years and no more than ten (10) years . An employer can
not adopt later ERI programs until the cost of the previous ERI
has been paid in full . While the city has fully paid the cost of
the ERI offered to eligible IMRF employees in 1998, it still has
a balance of $286, 139 due on the ERI approved for the police
chief under the SLEP program.
A workshop, conducted by the City' s IMRF representative, was
held on June 9, 2003 for the sixty-two (62) eligible employees.
Employees who attended the workshop were surveyed to assess
their level of interest should the program be offered with a
IMRF/SLEP Early Retirement Incentive Program
September 5, 2003
Page 2
window period of March 1, 2004 to March 1, 2005 . The survey
indicates that forty-one of the eligible employees may take
advantage of the program if offered. A list of these forty-one
employees was given to IMRF for cost analysis . An actuarial
analysis showing the potential cost to the city is attached as
Exhibit 1 (One) . A cost benefit analysis based on a six (6) year
amortization of the cost is attached as Exhibit 2 (Two) .
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
All eligible employees identified by IMRF report .
pj1, INANCIAL IMPACT
While the net savings in the first year of the ERI will pay off
the outstanding balance of $286, 139 on the 1998 SLEP ERI , the
actual balance must be paid off before the ERI can be offered.
Therefore, it is recommended that a portion of the proceeds from
r sale of the Hammond Avenue property to Kane County ($600, 000) be
used to fund this initiative. A budget transfer will be
required. Account number 010-6902-719 . 89-98, General Fund, SLEP-
ERI will be charged.
The estimated net savings, amortizing the cost of the ERI over a
six year period and adjusting for the $286, 139 SLEP payoff, will
be $755, 412 . The savings are predicated on the fact that 20% of
the retiring employees are not replaced and the remaining vacant
positions are employed at starting pay levels .
kL IMPACT
None .
ALTERNATIVES
1 . The City could offer early retirement incentive program as
proposed.
2 . The City could elect not to offer an early retirement
incentive program.
IMRF/SLEP Early Retirement Incentive Program
September 5, 2003
Page 3
RECOMMENDATION
It is recommended that the City Council approve Early Retirement
Incentive Program with the window period set at March 1, 2004 to
March 1, 2005 for eligible employees.
Respectfully submitted for Council consideration.
OF
rm.
JUL-0.1-03 TUE 15:44 P. 02
r
Actuarial Analysis of
The Potential Effect of
IMRF's Early Retirement Incentive Program
For
03347 - CITY OF ELGIN
(Regular Members)
1 Year Window Beginning S-61"8'
03/01/2004
r
• . JUL-01-03 TUE 15:44 P. 03
IMRF Early Retirement Incentive Program
Introduction
The accompanying report illustrates the potential effects of the IMRE Early Retirement.Incentive(ERI)Program
on your unit of government.The enclosed report is an estimate which illustrates the additional liability(cost)
created if your employer offers the ERI program.This cost may be partially offset if the ERI results in payroll and
fringe benefit savings.Your employer is in the best position to determine whether or not the ER!will generate any
overall savings.Participation in the ERI by any unit of government is voluntary and at the discretion of the
governing body.
The effect of the ERI on any particular unit of government depends on the
• number of eligible members
• number,of members electing to retire under the ERI
• employer's re-staffing plans
• salary and fringe benefit costs for replacement employees.
Because of differing demographics and other local conditions,not all employers will be able to save money
under the ERI program.
Data used to produce the report
The attached report was bascd upon December 31,2002 data(our most current).The data was adjusted to the
extent possible for employees who have already rctircd,who arc expected to retire before the beginning of the ERI
window,or who have service with Illinois reciprocal public pension systems.Independent actuaries Gabriel,
Roeder,Smith and Company created the software for this report.Your unit of government provided input variables
that were selected for this report.If the input variables do not reflect actual practice if/when your employer adopts
the program,the results may vary considerably.
Timing of costs
Increased retirement costs due to ER!are reflected in future IMRF employer contribution rates.If your
employer adopts the ERI program,the cost of the ERI will be based on actual experience and will be reflected in
the second calendar year's rate.For example,if your employer adopts ERI in 2003 and one of your employees
retires under it.the cost for ERI will begin to be reflected in your 2005 employer rate.
We will charge your employer a minimum of 7.50%interest every January 1st that your employer has an
outstanding ERI balance.In the above example,the first interest charge would be January 1,2004.This report
reflects estimated employer costs of the ERI.
Summary of Provisions
Eligible Members
To be eligible to retire under ERI,a member must be at least age 50 years old and have 20 or more years of
IMRF service credit by their date of retirement.The 20 years of service can include service credit earned with
another 1MRF employer and/or reciprocal service credit.These ERI requirements apply to regular IMRF members,
Sheriff's Law Enforcement Personnel(SLEP)members,and Elected County Officials(ECO),
Eligible members include 1MRF members who were actively participating in IMRF on the effective date of their
employer's ERI program.A member is considered active if he or she is on layoff status with right of re-
employment,on TMRF Benefit Protection Leave of Absence,or receiving IMRF disability benefits for less than
two years.
Rev.6/03 Page 1
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. JUL-01-03 TUE 15:45 P. 04
Retirement Incentives •
Eligible members may purchase up to five years of IMRF service credit.The member's age at retirement will be
increased by thc amount of service credit purchased.For example,if a 50-year-old member purchases five years(or
60 months)of service credit.his or her age will be increased to age 55 for the purposes of determining IMRF
retirement benefits
Note:A regular IMRF member receives thc maximum pension after earning 40 years of service credit.
Therefore,regular members with less than 35 years of service credit should purchase all five years of ERI service.
Member Cost
For each year of service credit the member purchases,he or she will pay 4.5 percent(6.5 percent for SLEP,,
7.5%for ECO)of the member's highest 12 consecutive months of salary within the final rate of earnings penod.
For more information on member cost,please refer to the member ERI booklet that can be downloaded at
www,imrforg.
Retirement Dates
The ERI legislation provides flexibility for employers by allowing the governing body to determine when a
member retires(terminates employment).Employers are to give a member at least 30 days notice of his or her
designated termination date.The member may waive the 30-day notice.
A member may terminate up to one year from the effective date of the employer's ERI program.However,a
member must file his or her Notice of Intent to Retire Under ERI(IMRF Form 5.21)with the retirement application
(IMRF Form 5.20).
Example:
Board meeting adopting program December 15,2003 Member files Notice of Intent by retirement date*
Effective date of ERI program December 31,2003 Last eligible termination date:December 31.2004#
•
•
* Best practice:Encourage the member to file a"Leiter of Intent"(IJt4RF Form 5.21)as soon as your
(Mk employer adopts the 13RI and the member decides to retire under it.
# If a member requests to retire on or before June 30.so he or she can receive the following year's
Supplemental Benefit Payment("13th check"),your employer is required by law to allow thc member
to do so.
Cost estimate
Your IMRF field representative must prepare a cost estimate and you must share that cost estimate with your
employer's governing body before it adopts ERI.
Also,the cost estimate must be based on the same time period as the ERI being considered by your governing
body.If your employer does not know when it will offer the ERI,your IMRF Field Representative can prepare
multiple cost estimates each using a different time period.
The ERI resolution has been revised to acknowledge the cost estimate requirement.The cost estimate must be
submitted with the resolution.
For more information on cost estimates,please refer to the employer ERI booklet that can be downloaded at
www.imrf.org.
Future ERI programs
An employer cannot adopt later ERI programs until the cost of the previous ERI is paid in full,
•
Rev.6/03 Page 2
JUL-01-03 TUE 15:45 P. 05
IMRF Retirement Incentive Window Program
Actuarial Analysis for
03347 - CITY OF ELGIN
(Regular Members)
Summary of Valuation Data and Input Variables
Window Period: 03/01/2004 Through 03/01/2005
EMPLOYEES AFFECTED BY WINDOW *
1. Presently eligible to retire with full or reduced benefits
a. Number 22
b. Annual payroll $1,288,400
2. Number newly eligible to retire
a. Number 19
b. Annual payroll S1,213,181
INPUT VARIAB ES
3. Employees presently eligible to retire, who:
a. Would have retired without this window 0
b. Are induced to retire during this window 22
4. Employees newly eligible to retire who are induced
to retire during window period 19
5. Total number assumed to retire during window
period: (3a)+(3b)+(4) 41
6. Across-the-board pay increase since 12/31/02 3.00 %
*Persons covered by Elected County Official benefit provisions with this employer
not included in this study.
7/1/2003-8:58:44 AM 03347 V03.0 -3-
JUL-01-03 TUE 15:46 P. 06
IMRF Retirement Incentive Window Program
Actuarial Analysis for
03347 - CITY OF ELGIN
(Regular Members)
Summary of Valuation Results
Window Period: 03/01/2004 Through 03/01/2005
IMRF COSTS
1. Additional Liability Created By Window $ 4,830,144
2. First Year Increase in Employer Contribution to IMRF based on
indicated amortization of liability increase
a. 5 years $ 1,063,791
b. 6 years $ 899,820
c, 7 years $ 782,805
d. 8 years $ 695,135
e. 9 years $ 627,039
f. 10 years $ 572,638
7/1/2003-8:58:44 AM 03347 V03.0 -4-
•
Savings Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Totals
20% reduction savings
Wages 492,869 507,655 522,885 538,571 554,728 571,370 3,188,078
Fringe 171,863 177,019 182,330 187,800 193,434 199,237 1,111,683
Total 664,732 684,674 705,215 726,371 748,162 770,607 4,299,761
80% retention @ step 1
Wages 504,298 446,068 380,223 306,064 222,835 129,717 1,989,205
Fringe 97,279 86,046 73,345 59,040 42,985 25,022 383,717
Total 601,577 532,114 453,568 365,104 265,820 154,739 2,372,922
Total Savings 1,266,309 1,216,788 1,158,783 1,091,475 1,013,982 925,346 6,672,683
Expenses
1MRF 899,820 899,820 899,820 899,820 899,820 899,820 5,398,920
SLEP -Miller 38,702 38,702 38,702 38,702 38,702 38,702 232,212
Total Expenses 938,522 938,522 938,522 938,522 938,522 938,522 5,631,132
Net Savings(Cost) 327,787 278,266 220,261 152,953 75,460 (13,176) 1,041,551
*SEEP- Gruber 286,139 0 0 0 0 0 286,139
*The balance of the cost for the previous SLEP early retirement incentive offered 5 years ago must
be paid before the new eri proposal can be offered,
_________ _ _ _