IMRF responds: Pay spiking against the rules

From Louis Kosiba
Executive Director, Illinois Municipal Retirement Fund

I would like to address several issues and questions you raised in your recent editorial [April 22 issue, “Rockford Park District deserves better”.

  1. The Rockford Park District was one of the five original units of government that joined IMRF in 1941. IMRF has never sought to have the District removed from IMRF participation.  The District is held in high esteem for the important work it does and for its innovative programs. It has been honored by IMRF for being one of those five employers which founded this pension plan.
  2. Neither I nor IMRF have questioned the integrity of Tim Dimke.
  3. IMRF’s role has been to interpret the Illinois Pension Code and to identify issues which arose as a result of Tim Dimke’s planned retirement.
  4. The plan to save the District $65,000 a year apparently did not take into consideration pension costs.
  5. Given an April 30, 2015 retirement date, a review of reported wages for Mr. Dimke indicates the District undertook a deliberate program which would spike Tim’s wages and would result in a spike in his pension and add new costs for the District.  The District was circumventing provisions in the Illinois Pension Code to prevent spiking.
  6. That spiking program is against public policy and would require Rockford to conform to an accelerated payment of actuarial costs payable within three years.
  7. In 2014, Tim was paid in 26 installments of approximately $6,156 each or about $12,300 per month. Two months had 3 pay checks, so those months were about $18,500 each. In January 2015, his pay spiked to approximately $31,500; in February and March,  each month was about $36,300. This is a spiking pattern that IMRF has seen in the past. To calculate the expected actuarial cost of this program, IMRF projected another $32,3000 month for April, 2014. This generated the approximate $220,000 figure you referenced in your editorial.
  8. Recently, the attorney for the District asked IMRF what Rockford’s cost would be if payouts of $16,731.10 for unused vacation or sick leave were divided evenly over April 17,  May 1 and May 15. It is unclear to me if that was the original payout plan or if that was a revised payout plan that reflected the accelerated payment cost information IMRF provided earlier to the District’s attorney.  Regardless, this resulted in the $109,000 number you also referenced. It was based on a new set of assumptions.
  9. To say the ”real“  IMRF actuarial cost is $109,369 as opposed to the $220,000 number ignores the fact that Rockford changed the assumptions behind Mr. Dimke’s retirement package.
  10. After calculating the accelerated payment cost based on actual payments through March, 2015 and the distribution of unpaid vacation and sick leave in April and May as provided by the attorney for the District, IMRF is now estimating the employer accelerated payment cost at $177,000 if Tim Dimke retired April 30, 2015.
  11. Based on the above, I think there are several take aways:

– When calculating savings, an employer needs to take into consideration all the pension costs.- Estimates and projections are only as good as the assumptions and data provided IMRF; change the assumptions/data and you change the outcome. Numbers need to be placed in context.

– At the end of the day, the costs will be what the parties have actually done.

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