2016 PSOY – Public DB-Illinois Municipal Retirement Fund

Headquarters: Oak Brook, Illinois

Total Plan Assets/Participants: $34.7 billion/405,170 active members, inactive members and retirees

Employee Contribution: 4.5% of salary

Employer Contribution: 11.73%

Additional Plan: A second DB plan; up to 10% of pay may be contributed with a guaranteed 7.5% return

In a state with some well-known public retirement system challenges, the Illinois Municipal Retirement Fund (IMRF) is a successful outlier. Independent of the state system in Illinois, IMRF’s defined benefit (DB) plan is 93% funded, according to its last audited data at the end of 2014. The multiemployer public plan, which provides benefits to 2,967 public entities, is continuously managed with an eye toward improving plan governance and funding.

“All the news about Illinois is bad news,” says Gary Findlay, former executive director of Missouri State Employees’ Retirement System (MOSERS)—a Plan Sponsor of the Year in 2013—who nominated the plan for the award. “We never hear about anyone doing things right.”

In a state with more than 650 public pension funds, IMRF does a number of things right—even extremely well. Also recognized as a Plan Sponsor of the Year Finalist in 2011 and 2015, it has made a practice of adhering tightly to benchmarks it establishes and maintaining a laser focus on high-quality customer service and low costs.

A number of organizations seem to agree the organization is a success. IIMRF has received many awards, such as from the Government Finance Officers Association, the Public Pension Council, Illinois Performance Excellence and the National Institute of Standards and Technology.

As Daniel Duquette, the plan’s deputy executive director, points out, IMRF ably covers many lower-paid government employees. “In Illinois public schools, we don’t cover the teachers,” Duquette says. “We cover bus drivers, crossing guards, custodians, and cafeteria and library workers, who had an average salary of $38,788 in 2014. Not a princely sum. Where would these people be in retirement without IMRF?”

A field staff of seven representatives throughout the state provide participant group educational sessions that explain IMRF benefits, and also offer individual counseling sessions to assist participants with unique issues and personal planning. Participants may contact or visit the two call centers; all services are free and available on request.

Says Louis Kosiba, executive director of IMRF, “The one-on-ones are a very personal experience for members, providing a stress-free environment to get instant pension estimates, to better [learn about] their options and to plan for retirement. One-on-ones are an important feature in the IMRF dual approach to be both high-tech and high-touch for our members.”

Services such as these have given the plan high employee engagement scores—in the top decile—and a ranking in the top percentile of the Cobalt Community Research Retirement Satisfaction Survey.

Another key focus for the seven reps, according to plan Communications Manager John Krupa, is to work individually with government units to clarify what they need to do to best administer the plan—a tactic IMRF deploys to provide customer service to the nearly 3,000 employers spread across the state.

According to Duquette, it is unusual for a defined benefit (DB) plan for public entities to have such a large number of employer groups. Employer members range in size from very large to very small—as few as two employees—but all are local units of government, and IMRF must calculate rates for each. “Every employer pays a contribution rate based on its demographics and funding level,” he explains. IMRF fulfills the plan’s recordkeeping itself, gathering contributions and wage data from all units each month.

Duquette notes that the level of sophistication of the governance units can vary widely, from a local cemetery district with one or two employees running the business out of someone’s kitchen, all the way up to a very large unit with a staffer whose sole job is acting as a liaison with IMRF.

To accomplish the monumental task of collecting data, IMRF has an employer specialist within its finance division, as well as a separate wage reports unit. Yet, just two or three people in total keep track of the data flow, he says. One key is the substantial use of online automation.

Duquette calls IMRF’s ability to collect and maintain data on a large scale one of the management’s strongest core competencies. “We have very clean wage information—crucial when you are in business to pay benefits. To do so in a timely and accurate fashion means good data is an essential component.”

Like most defined benefit plans, IMRF’s develops its own systems because no off-the-shelf program can be easily modified to deal with the complexities of defined benefit plan administration, Findlay says. “It’s a common condition on the DB side,” he observes. “These systems had to be developed for the determination of benefits as well as communication.”

“We were probably one of the first to automate the collection of member-age information, and all payments are online as well,” Duquette says, noting that some 25 years ago IMRF received thousands of paper checks each month. “We were an early adopter of using the Internet to collect and automate,” he says. Some employers readily accepted this change. “We nudged along those not as willing to embrace it,” he says.

IMRF celebrates its 75th anniversary this year, and a strategic communications plan is slated to celebrate this milestone—but also to educate external stakeholders. Krupa says the plan has created an anniversary logo and will use social media on Facebook, among other platforms, to promote it and engage with the plan’s followers. Other elements of the celebration include Web-based promotions, and member and retiree profiles in employee newsletters, to illuminate the difference IMRF makes in people’s lives.

Findlay says, in the 1970s, he perceived IMRF to be cutting edge in the way it handled so many individual units of government. “It’s always been a standard-bearer for excellence, and it continues to be. It has reasonable benefit levels and cost-containment initiatives, but, most important, it has a mechanism to establish the required contribution to support the benefits it [offers], and a mechanism to collect those contributions. This may seem fundamental, but it makes IMRF unique in Illinois.”

—Jill Cornfield

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