Actuary recommends $2.51 million contribution to Antioch police pension; urges layered amortization to reduce volatility

Kevin Cavanaugh, an actuarial consultant at Lonerbach and Neiman, told the Antioch Village Board that his firm’s recommended contribution to the Antioch Police Pension Fund for the coming year is $2,509,707, an increase of about $121,300 (5.08%) from last year.

Cavanaugh said the fund’s assets stood at $19,760,100 and that the unfunded liability was $23,099,800, leaving the plan roughly 46% funded. “One way to think about that is how much it would take to get the fund to be fully funded, tomorrow,” he said, summarizing the figures in the written report distributed to trustees.

Why it matters: that contribution will be a significant line-item for the village budget. Cavanaugh told trustees the recommended payment reflects several drivers this year, including larger-than-expected salary increases for officers and an assumption-change that anticipates higher retirement rates at younger ages, which shortens the time to invest for benefits and lengthens payout periods.

Board context: Illinois statute currently sets a minimum funding expectation (90% by 2040) for local police and fire pensions. Cavanaugh said his recommendation intentionally targets 100% funding by 2040 rather than following the statutory minimum. He also presented an alternative contribution that would meet the statutory 90% target at a lower annual cost ($2,000,086.04 in the firm’s model) and warned of the trade-offs.

On policy options, Cavanaugh explained two approaches trustees could consider. Under the village’s current single-point amortization (a fixed payoff date), unexpected adverse experience near the target year can produce dramatic contribution spikes. “For example, if you get a negative investment year close to the payoff date, you may have to fund that loss over one year,” he said, illustrating how contribution requirements can jump.

He recommended the board consider a layered (15-year) amortization for changes in unfunded liability, which would hold the village’s existing payoff schedule for the liability that exists today while paying future changes over a rolling 15-year period. That approach, he said, reduces the risk of very large one-year contribution increases in stressed investment scenarios.

Trustees pressed for details on the data behind the higher retirement rates. Cavanaugh said the firm’s study looks at “downstate Illinois” funds (excluding Chicago) and the experience observed across roughly 200 police funds that the firm serves. He also described sensitivity scenarios that include periodic negative returns; in an illustrative stress run the single-point policy could require a contribution spike near $8.6 million in a worst-case scenario, whereas the layered approach would lower that hypothetical peak substantially.

Next steps: Cavanaugh said he will present the layered-amortization option to the local police pension board in the fourth quarter; any change to the pension board’s amortization policy would alter future funding recommendations but not the consultant’s recommendation for the current year. The village board did not take immediate action on policy change at the meeting.

The village administrator said the actuarial materials and projection scenarios would be circulated to trustees and to staff for further review before the tax-levy and budget process.