To the editor:
Steven Malanga draws an inaccurate link between the state of Illinois’ unfunded pension liability and the Illinois Municipal Retirement Fund (IMRF), one of the best-funded public-pension plans in the country [“No Bonus for Taxpayers,” Spring 2015]. Illinois has five state-run public-pension systems and more than 650 local police and fire retirement systems, but IMRF is not one of them. IMRF is neither funded nor managed by the state. None of the state’s $100 billion in unfunded pension liability can be attributed to the fund.
Malanga’s article focuses on a practice within the retirement industry to issue modest annual supplemental benefit payments. IMRF’s supplemental benefit, known as the 13th payment, is a pay-as-you-go program and does not increase unfunded liabilities. While some retirement systems fund 13th payments directly from investment income, IMRF’s payment is funded by an annual employer contribution equal to 0.62 percent of payroll.
It’s important to note that IMRF’s 13th payment is not a “bonus” for retirees, as the article states, but part of a negotiated, comprehensive compensation package. The 13th payment provides some measure of protection against the ruinous effects of inflation on retiree income.
IMRF was almost 100 percent funded prior to the stock-market crash in 2008. The plan is currently 93 percent funded and has nearly $36 billion in assets. IMRF will continue to work to regain its fully funded status, which provides a stable retirement for its plan participants and the lowest cost to taxpayers.
Illinois Municipal Retirement Fund
Oak Brook, IL
Steven Malanga responds:
Kosiba begins by observing that the IMRF is better funded than Illinois state retirement systems—though I acknowledged that in my piece—and that IMRF doesn’t bear any of the state system’s $100 billion in debt. But I never said that it did. I said that the overburdened citizens of Illinois, including those in the municipalities served by the IMRF, are left with $100 billion in state pension debt to pay off but are still being assessed for pension bonuses to IMRF retirees.
Kosiba disingenuously describes the 13th-check practice as a pay-as-you-go program with no debt. What this means in plainspeak, however, is that overburdened municipalities participating in the program are assessed additional annual payments to fund the bonuses—last year, to the tune of $42 million.
Kosiba leaves something else out of his letter. The Illinois legislature passed pension reform in 2013, eliminating 13th payments. According to press reports, the only reason his fund was able to continue paying its bonuses was that the legislature overlooked IMRF (which had a slightly different bonus structure from other pension systems). Kosiba himself was quoted as admitting, “The legislature didn’t ask for any input.” A law was subsequently introduced into the Illinois legislature to eliminate the program. However, the Illinois Supreme Court ruling in May, overturning all pension reforms, has made the issue mute for now.
To the editor:
The regulations in disfavor with the hip crowd tend to be local [Aaron M. Renn, “Libertarians of Convenience,” Spring 2015]. The founders, particularly Jefferson, emphasized keeping the large and powerful levels of government as unintrusive as possible and letting local governments do the picky stuff. The great thing about doing it the Founders’ way is that you can vote with your feet without abandoning your country.