R2003-138 AUTHORIZING ADOPTIONS OF IMRF

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FINANCIAL MANAGEMENT MEMORANDUM ' #2003-21 '� August 20, 2003 To: Honorable Mayor and City Council Members From: Steve G City Manager Beth Cout , inance Director Subject: IMRF Eaxly Retirement Incentive Program (ERI) SUMMARY RECOMMENDATION: Staff recommends adoption of the IMRF Early Retirement Incentive Program (ERI) for the 2004 calendax year. BACKGROUND: The Illinois Municipal Retirement Fund (IMRF) offers an ERI program to Illinois municipalities which may provide reduced payroll costs for IMRF employers. Please see exhibit 1 for a brief ERI program summary prepared by IMRF. The City implemented an IMRF ERI program during 1997, at which time 18 employees took early retirement. The City's employer IMRF rate (the percentage of salaries remitted to IMRF) in 1997 was 9.22%. During 2003, the employer rate is 1%. The decrease in the IMRF rate is due in part to the implementation of an ERI plan and partially due to the substantial increase in investment earnings during 1996-2001. The IMRF rate is expected to increase in 2004, as its investment earnings have declined over the past few years. IMRF identified 59 current City of Decatur IMRF members who would be eligible for the next ERI program. The City distributed a non-binding survey to those employees to determine how many of them were interested in this program. 26 employees responded they may be interested in taking early retirement. The remaining 33 employees either said no or did not respond to the survey. IMRF has provided an actuarial analysis of the potential effect of implementing the next ERI program. Please see exhibit 2. The analysis states that the additional IMRF liability to the City is estimated to be slightly less than $2.8 million ( $279,433 times 10 payments), if paid over ten years, the IMRF assumed amortization period ( please see Exhibit 3). This analysis provided by IMRF is only for the liability side of implementing an ERI program. It is up to the municipality