Shorewood receives favorable police pension update; funded status rises to 83.2%

At the Aug. 27 board meeting, the actuary presented the Police Pension Fund valuation measured at March 31, 2024. The report showed a funded status of 83.2%, an unfunded actuarial accrued liability of $4.7 million, and a recommended village contribution of $921,007.87 for the plan year.

The presenter emphasized that the actuarial value smooths investment gains and losses over five years; on a smoothed basis the actuarial return was 5.94% while the market value return for the same period was 13.44%. The report highlighted that the $421,000 component of the recommended contribution represents a payment toward the fund's outstanding liability (described in the presentation as a "mortgage" toward unfunded benefits).

"That $34,200,000 number represents the amount of assets that you would need in the fund today to be fully funded on the 43 people that were in the plan on the valuation," the presenter said while explaining the actuarial measures. The presenter also noted the plan's normal cost was roughly $740,000, representing the cost of actives accruing one year of pension benefits.

Board members asked clarifying questions about the smoothed return and the relationship between market and actuarial returns. In response, the actuary explained the smoothing methodology: only 20% of each year's market gain or loss is reflected in the actuarial value so gains/losses are phased in over five years to stabilize contribution requirements.

No action was required beyond receiving the report; board members thanked staff for funding near the recommended amounts and for the fund's above‑80% status relative to many Illinois funds.