The cost of governmental pensions has received increased scrutiny over the past few years.  The City is committed to meeting its legal and moral obligations to retired City of Lake Forest employees, but this is a critical financial and budgetary issue.  As a municipal employer, the City is required to fund its pension costs through three pension plans:

  • Illinois Municipal Retirement Fund (IMRF) – for non-public safety employees
  • City of Lake Forest Police Pension Fund
  • City of Lake Forest Fire Pension Fund

Local police and fire pension boards administer the police and fire pension funds, while the IMRF is governed by a statewide board elected by plan participants.  The City’s police and fire pension boards administer the respective plan assets, consisting of City and employee contributions as well as earnings on investments.  To aid them in their oversight duties, each pension board contracts with accounting, investing and legal professionals.

INVESTMENT OF PENSION ASSETSProfessional financial advisors are hired to guide board investment decisions in accordance with State Statutes.  Investment returns on the fund assets is a critical component to meeting the pension funding obligations.  While the City Council has no authority over the investment decisions by each of the pension plans, the City is significantly impacted by the performance of the plan investments.  Following is a chart depicting the investment returns for the three pension plans over the past twenty years:
Lake Forest Pension Plans – Investment Returns History

Investment performance is governed primarily by Illinois statutory restrictions on asset allocations.
Lake Forest Police and Fire Pension Funds – Investment Allocations as of 4/30/21

Public Act 101-0610 effective January 1, 2020, mandates the consolidation of the investment assets of local police and fire pension funds into two investment funds – one for police officers and one for firefighters.  Pension fund assets are combined for investment purposes only, with local pension boards retaining ownership of the assets and responsibility for all other pension fund business, such as benefit administration.  Public Act 101-0610 is intended to reduce costs and improve investment returns for the local pension funds.

PENSION PLAN FUNDED RATIOSAn important measure related to pension plans is the plan’s funded ratio, or the plan’s fiduciary net position as a percentage of the total pension liability.  At any point in time, it reflects the total assets of the plan divided by the actuarially determined liability for the future cost of current obligations.  As of December 31, 2021, the City’s IMRF plan funded ratio is 99.95%.  As of April 30, 2021, the City’s police pension plan funded ratio is 58.8% and the fire pension plan funded ratio is 78.2%.  The disparity in funded ratios occurs due to a number of factors, including investment performance and changes in benefits approved by the State.

While IMRF is administered at a statewide level, each local police and fire pension fund is administered by a separate and distinct board which may make very different decisions regarding the investment of its assets, as evidenced by differences in the investment returns over time:
Lake Forest Public Safety Pension Fund Analytics (Annual Funded Ratios and Investment Returns)

FUNDING PENSION OBLIGATIONSThe City of Lake Forest will continue to work collaboratively with the local pension boards and independent actuary to fund its pension obligations.  With attention focused on meeting State mandated funding requirements at a minimum, the City is also striving to fund these obligations in a fiscally responsible and sustainable manner.  Currently, the City’s strategy related to the public safety pension plans is to provide funding at a higher level than mandated by the State in an effort to avoid unmanageable increases to pension costs in the future.

ADDITIONAL INFORMATIONPlease select from the following options to access additional information regarding the City’s pension plans:

(Presentation by City Finance Director to Illinois Government Finance Officers Association Public Pension Institute – March 2018)

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Pensions5 documents

  • Resolution in Support of SB1111/HB1571
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  • Pension Subcommittee Update regarding City of Lake Forest Employee Pensions (Part 1)
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  • Pension Subcommittee Update regarding City of Lake Forest Employee Pensions (Part 2)
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  • Pension Primer
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  • Illinois Municipal Retirement Fund's Employer Cost & Participant Information
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