Actuary warns Senate Bill 1937 would raise police-pension costs by roughly 20% for Glencoe
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Summary
Foster & Foster actuary Heidi Andorfer told trustees Senate Bill 1937's proposed tier-2 changes (3% simple COLA, expanded DROP, pay-cap adjustments and earlier unreduced retirement) would increase the village's pension contributions roughly 18'9% and raise the present-value contribution burden by several million dollars.
An actuary from Foster & Foster told the Glencoe trustees that proposed state legislation — Senate Bill 1937 — would materially increase the village's police-pension costs if enacted.
Heidi Andorfer, an actuary for Foster & Foster, presented an analysis of Senate Bill 1937 and its likely effects on the village's Article 3 police pension fund. She said the bill contains several benefit enhancements that move tier-2 benefits closer to tier-1, but do not fully revert tier-2 to tier-1.
Key provisions she described include a prescribed 3% simple cost-of-living adjustment (COLA) for tier 2 (more generous than the current 50% of CPI-U with a 3% cap), raising the tier-2 pay cap to the Social Security wage base to avoid safe-harbor failures, a temporary DROP (deferred retirement option plan) with up to a five-year participation window that would expire in 2031, and allowing unreduced retirement at 20 years of service at age 52 (compared with tier-1 provisions). She noted the bill would also result in COLA beginning sooner for some tier-2 retirees under the bill's current language.
Heidi walked trustees through two funding analyses: (1) a statutory funding scenario using projected-unit-credit to a 2040 funding target and (2) an analysis using the village's current funding policy (a 15-year open amortization and a 6.5% assumed rate). Under both approaches, she said the benefit enhancements increased contribution requirements in roughly the 18% to 21% range. On a present-value basis she cited an approximate $6.4 million additional liability from the benefit changes in one statutory scenario and an increase of about $7.8 million (roughly a 20% increase) in the local-policy analysis.
Heidi cautioned that the bill had not passed and that legal and funding details could change. She said some provisions (for example the DROP) are new for Illinois plans and that many suburban funds are coordinating analyses to show aggregated impacts to legislators.
Trustees asked about statewide impacts; Heidi said she had not run a statewide analysis but that comparable funds have seen impacts in the 20% to 25% range and that under different funding bases (IMRF, teachers' funds) impacts could vary. Trustees and staff discussed using multiple municipal projections to aggregate a regional message to lawmakers.
No action was taken by the board on the legislation; the presentation served to inform trustees and to guide future advocacy and budgeting decisions.
