Actuary reports show gradual funding improvement for Evanston police and fire pensions; city keeps 6.5% assumption for now

City actuarial reports presented to the Finance & Budget Committee showed modest year‑over‑year improvements in both Evanston pension plans but reaffirmed remaining long‑term liability and the need to maintain recommended contributions.

Heidi Andorfer, the actuary who presented the police and fire valuations, led the committee through the one‑page summaries that front‑load funded status, contribution requirements and plan experience. For the police fund, she reported an actual accrued liability and an unfunded accrued liability of roughly $130.6 million and a funded ratio of 59.5%. For the fire fund the funded ratio was 53.6% with an unfunded accrued liability of about $111.1 million. Andorfer said both funds benefited from favorable five‑year smoothed investment returns and from the city’s continued contributions.

Andorfer described drivers of the changes: higher‑than‑anticipated salary increases raised normal costs; lower than expected inactive mortality (fewer deaths) increased liabilities; and favorable investment performance on a smoothed basis reduced the funding gap. She also noted that the actuarial firm updated software and coding, which produced a one‑time refinement to liability calculations during this valuation.

Committee members discussed the investment return assumption (discount rate). Andorfer said the 6.5% assumption in the valuation is on the conservative side relative to some peers and that consolidated investment options may change future expected returns, but she recommended observing consolidated‑fund experience before moving the assumption upward. Council members and committee members asked follow‑up questions about how the assumption is set, the difference between corporate and public discounting approaches, and how reassessments and salary changes affect eligibility and contributions.

The committee and actuarial presenter also discussed the Illinois statutory funding methodology tied to a 2040 funding target. Andorfer noted many Illinois plans have relied on the statute in the past and that the statute’s 2040 target has been moved in prior years; she advised the city not to chase any future statutory date changes and instead to rely on the city’s funding policy (which targets full funding and uses entry‑age normal amortization to reduce volatility). “You are currently tied to statute here,” Andorfer said, and the committee discussed the city’s deliberate choice to use entry‑age normal and a 100% funding target to promote intergenerational equity.

After discussion, committee members said they would keep the 6.5% assumption for the current valuation and monitor consolidated fund performance before reconsidering. The committee also requested five‑year projections, scenario comparisons (for example, 6.5% vs. 6.75%), and copies of related analyses from the pension fund presidents to better understand the path to full funding and the expected contribution schedule.

Ending: The actuarial reports show funding progress but substantial unfunded liabilities remain. The committee will keep the current actuarial assumption and directed staff to return with additional projections and materials before any change in the assumption or funding policy.