With new state pension regulations in effect, officials have determined it is time to re-evaluate Evanston’s pension debt.
²|||²
With new state pension regulations in effect, officials have determined it is time to re-evaluate Evanston’s pension debt.
The city’s police and fire pension boards will work with city officials to draft a proposal for a new actuary in the next two to three weeks, Assistant City Manager Marty Lyons said.
An actuary calculates future pension liabilities. The current actuary for Evanston’s police and fire pension funds, Gabriel Roeder Smith & Company, placed the city’s pension debt at $175 million in its most recent report issued March 1, 2010.
However, changes to the Illinois pension code approved by the General Assembly in December require a new calculation of Evanston’s pension funds. The new state law extended the deadline to meet pension liabilities, which will impact how much money the city must give to the police and fire pension funds each year. Evanston now has until the year 2040 to match 90 percent of its unfunded liabilities.
“The years that the mortgage has to be paid over have changed so the payments will go down a little, but they have a lot of debt to pay off, too,” said Timothy Schoolmaster, president of Evanston Police Pension Board .
In addition, the law increased the retirement age for police and firefighters to 55 and reduced benefits for new hires.
Retirement age is one of six key assumptions, including investment returns, salary increases and mortality rates, that actuaries use to calculate anticipated pension debt. The assumed rate of return on pension fund investments became an important issue when stocks struggled during the financial crisis. GRS lowered its investment return assumption to 7 percent in its 2010 report.
Actuaries have played an important role in the recent history of Evanston’s pension funds. When the city switched its actuary to GRS in 2007, the city’s unfunded pension liability grew more than $40 million. A blue ribbon report issued by the city in 2008 determined the spike in expected pension debt was caused by the conservative figures GRS used to analyze the pension funds in comparison to the city’s previous actuary.
Schoolmaster said members of the police and fire pension boards and city officials will narrow a list of actuary applicants and make a final decision based on price and experience. It will be the first time the police and fire pension boards have worked together to select an actuary, said Ron Brumbach, Evanston Fire Pension Board secretary. Previously, the pension funds used figures from actuaries hired by the city.
“We’ve never done this in the past,” Brumbach said.
