Bridget Gainer: June 19 2013 Pension Committee Report

Cook County Pension Fund
FY2012 Report
Actuarial Valuation Report
as of December 31, 2012
Cook County Pension Committee – June 19, 2013
Commissioner Bridget Gainer
Chair Cook County Pension Committee
www.BridgetGainer.com
www.OpenPensions.org
312-603-4210
Info@BridgetGainer.com

Cook County Pension Fund Facts
• The Cook County Pension Fund is 53.5% funded.
▫ FY 2012 – 57.5%
• The unfunded liabilities of the Pension Fund have increased $1.6B since 2010
• FY 2012 unfunded liability $6.79 billion
• The FY 2012 Actuarially Required Contribution (ARC) was $529 M
▫ The statutory/actual employer contribution was $190,575,229
• A $66.8 million increase in the difference between contribution and ARC from FY2011
• The FY12 investment return:
• 12.5% on a market basis
• 3.1% on an actuarial basis (five year smoothing).
▫ The fund assumes 7.5% annual returns.
▫ FY11 return was 1.2% (market) and 1.7% (actuarial)
• The Fund is projected to go insolvent in 2034 – 21 years.
2
Cook County Pension Report
Commissioner Gainer – June 19, 2013
Buck Consultants Actuarial Valuation Report as of December 31, 2012

Comparing Current Employees, Current Retirees & Current Inactives
Inactive Members: Not current employees, but have qualified for a benefit in the future
3

Cook County Funded Status
Commissioner Gainer
4

Breaking Down The
Increase in Unfunded
Liability
Unfunded liability increased by
$969,457,746 in FY12 due to:
$376,601,751 ( 40%)
Due to lower than assumed
investment returns.
$305,896,670 (32%)
Due to other sources, largely
increased retiree healthcare
liabilities
$252,886,106 (27%)
Due to difference between the
Statutory Contribution and
normal cost + debt on
unfunded liability. (ARC)
$34,073,219 (4%)
Due to Salary Increases higher
than assumed. The County
reduced headcount by 539,
but salaries rose by $21M
.
5
$946,457,746 Increase

Incoming Revenues/ Contributions
Additions – FY12 Additions – FY11
6
Total FY12 additions: $1,219,169,583
Total FY12 outflows: $600,477,205
Outflows – FY12 Outflows – FY11
Total FY11 additions: $423,230,443
Total FY11 outflows: $556,640,805

Cook County Pension Fund &
Retiree Healthcare
Actuarial Valuation Report
as of December 31, 2012
312-603-4210

Retiree Health Care
Overview
• Since 1991 the Cook County and Forest
Preserve Pension Funds have provided
subsidized health benefits to annuitants
and their eligible dependents.
▫ Not state law
• 8,179 retirees ( 60% of total ) participated
in the health care plan in FY12.
▫ 91% of dependents participated
• 2012 Total Cost to the Fund: $44,951,460.
▫ 1991 cost to the fund: $1M
• Cost of promised benefits $1,845,609,132.
as of FY 2012.
• The actuaries assume 70% of future
retirees elect medical benefits at
retirement.
Health Benefits Subsidy History
2011 2012 2013
Member Fund Member Fund Member Fund
Medicare
eligible
Retiree
45% 55% 45% 55% 46% 54%
Non-
Medicare
eligible
Retiree
45% 55% 50% 50% 51% 49%
Survivor
HMO all
and PPO
Medicare
30% 70% 30% 70% 31% 69%
Survivor
PPO Non-
Medicare
30% 70% 35% 65% 36% 64%
8

Health Care & Total Unfunded Liability
9

The key drivers behind
this increase are:
The Future Cost of promised Retiree
Health Care benefits are $1.8B – an
$167M increase from FY11.
10

Health Care Eligibility
Requirements & Plans
Requirements
• Tier 1: age 50 with 10 years
• Tier 2: age 62 with 10 years
• All active employees who separate with
10+ years can receive health care
• Surviving dependents of actively
employed members and surviving
dependent
• Eligible annuitants may cover their
spouses and dependent children under
the age of 26.
*CEABF pays approximately 55% of the total premium for retiree annuitants, including the cost
of family coverage, and approximately 70% of the total premium for survivor annuitants,
including the cost of family coverage
11
Segal Report to Pension Fund Board of Trustees Health Benefits Committee

Projected Health Care Costs with
existing benefit plan
12
Segal Associates Report to the Health Benefits Committee of the Cook County Pension Fund.
Segal is the Plan design consultant retained by the Pension Fund Board of Trustees.

Benefit Changes valued by Segal as directed by the Health
Benefit Committee: coverage, deductible and out-of-pocket
Plan Provision Current Benefit Proposed Change Est. Annual Savings
Deductible In: Individual: $200 / Family: $400
Out: Individual: $400 / Family: $800
In: Individual: $300 / Family:
$600
Out: Individual: $600/ Family:
$1,200
$1,661,592
First Year
Savings
$2,33,853
Annual
Savings By
2020
Coinsurance In-Network: 90%/ Out-of-Network:
70%
In-Network: 85%/ Out-of-
Network: 60%
In-Network Out-of-
Pocket Limit
Individual: $1,500 / Family: $3,000 Individual: $2,000 / Family:
$4,000
Out-Network Out-of-
Pocket Limit
Individual: $5,000 / Family: $10,000 No limit
Skilled Nursing
Facility Benefit
120 days 90 days
Deductive Carryover
Provision
States that “if you have any expenses
during the last three months of a benefit
period which were or could have been
applied to that benefit period’s
deductible, these expenses will also
count as a credit toward the deductible
of the next benefit period.”
Remove provision
13

Benefit Changes valued by Segal as directed by the
Health Benefit Committee:
Example of a Subsidy Tiers by Years of Service
• Applying a tiered contribution
strategy based on years of
service will ensure that
appropriate coverage is
provided and subsidized for
‘career’ annuitants. Segal Report to Health
Benefits Committee April 11, 2013.
• If the fund implemented the
proposed changes effective e
1./1/2014, the projected 2014
savings are $1.7mm, increasing to
$16.2m in 2023. Segal Report to Health Benefits
Committee April 11, 2013.
Years of
Service
Current
Subsidy
Amount
Possible
Subsidy
Amount
0 – 9 55% 0%
10 – 15 55% 15% -24%
16 – 20 55% 25.8% - 33%
21 – 25 55% 34.8% - 42%
26 – 30 55% 43.8% - 51%
31 – 34 55% 52% - 55%
35+ 55% 56%
14

Illinois General Assembly &
Pension Reform
15
312-603-4210

Overview
• Governor Quinn has called a special session that
convenes today – June 19, 2013.
• Legislative Conference Committee.
▫ Made up of five members each from the House
and Senate.
▫ Operating on an early July deadline.
• Current pension reform packages:
▫ SB 2404 (Cullerton Bill)
▫ SB2404 HA #1 (Madigan Bill)
▫ SURS
16

17
Cook County Tier 1 Cook County Tier 2 SB2404 HA#1 SURS Plan
Changes for Hired before January 1, 2011 Hired after January 1, 2011 Tier 1, current & future retirees Only SURS Tier 1
Funding Goal None None 100% by 2044
"Reasonable closed
amortization period"
Defined Benefit Yes Yes Yes Yes
Hybrid Plan (DC plan) No No No Yes for all new EE
Employee Contributions 8.50% 8.50% Tier 1: 2% increase over two years
Tier 1 EE - 2% increase over
four years
Employer Contributions 13.09% 13.09% No change None
Investment Rate of Return 7.50% 7.50% 7.50%
Equivalent to 75 basis points
above 30 year Treasury Bonds
Additional Revenue None None $1B annually None
Cost Shift N/A N/A N/A
Universities & colleges will
contribute up to 6.2% of normal
cost
Cost of Living (COLA) 3% Lessor of 3% or 1/2 CPI
3% of $1,000 per each (cap) year
of service 1/2 CPI-U
COLA Compound or Simple Compound Simple Simple Simple
COLA Delay None None
Until 67 or until fifth retirement
anniversary None
Service Credit Formula 2.4 2.4 No change No change
Retirement Age 60 (50 w/30 years) 67
Age 40 -4 4 +1 year - Age 35 to 39
+3 years- Below 35 +5 years No change
Minimum Retirement Age
50 w/10 years, 1/2% reduction for
every month before 60
62 w/10 years, 1/2% reduction for
every month before 67 No change
Final Average Salary 48 months 96 months No change
Cap on Pensionable Wages None Same as SS ($113,000 in 2012) Same as SS ($113,000 in 2012 No change
Pensionable Wage Cap None Lessor of 3% or 1/2 CPI Lessor of 3% or 1/2 CPI No change
Retiree Health Care Subsidy 45 - 55% 45 - 55% Can not be paid out of pension fund No change
Legal Recourse None None Yes Yes
Unfunded liability payment
schedule No No No
Yes;
straight-line amortization

Background & Assumptions
FY12 Actuarial Valuations for the

Pension Plan Overview
• The County Pension Plan is codified in Title 9 and 10 of the Illinois General
Assembly Pension Code.
• The Pension Board of Trustees has 9 members: 4 elected by current
employees, 3 elected by retirees, 1 appointed by the Treasurer, and 1
appointed by the Comptroller.
• The Pension Fund Board chooses investment managers and consultants.
• The Pension Fund Board also sets the healthcare subsidy amount and
oversees the type of plan being offered.
19

Current Benefit Structure
Tier 1 Tier 2
Employee Contributions 8.5% 8.5%
Employer Contributions 13.09% 13.09%
Cost of Living Adjustment
(COLA)
3% Lessor of 3% or ½ CPI
COLA (Simple or Compound) Compound Simple
Service Credit Formula 2.4 2.4
Retirement Age 60 (50 w/ 30 years) 67
Minimum Retirement Age 50 with 10 years, ½% reduction
for every month before age 60
62 with 10 Years, ½% reduction for
every month before age 67
Final Average Salary 48 months 96 months
Cap on Pensionable Earnings None 96 months
Growth of Cap on PE None $113,000 in 2012
Retiree Healthcare Subsidy 45-55% Lessor of 3% or ½ CPI
Employees Hired before 1/1/11 Employees Hired after 1/1/11
20

Current County
Employees
2012 2011
Number of Active Employees 21,447 (-590) 22,037
Average Age 47.5 47.3
Average Years of Service 14 13.7
Total Annual Salary $1,478,253,368 (+21M) $1,456,444,123
Average Annual Salary $68,926 $66,091
• Between 2011 and 2012, employees decreased by 590, total payroll increased by $21,809,245.
The 5.2% increase was higher than the 5% increase used for actuarial assumptions.
21

Current Inactives
2012 2011
Total inactive members 11,856 12,584
Average Age 44.8 44.7
• This group represents members who did not elect to receive their
accumulated contributions when they left County employment.
This is a 5.8% decrease from the previous year.
22

Assets vs. Liabilities
23

Actuarial Unfunded Liability
The unfunded liability is the difference between the actuarial value of assets and liabilities
24

Current Retirees
& Dependents
2012 2011
Retirees Receiving an Annuity 13,609 13,023
Spouses and Dependents
Receiving an Annuity
2,565 2,532
Total 16,174 15,555
Average Age of Annuitant 71.2 71.1
Average Annual Pension $35,795 $34,332
Average Monthly Pension Benefit $2,982 $2,893
586 people retired in 2012, representing a 4% increase from 2011
25

Expenditures v Revenues
2011
Expenditures
$556,640,805
Revenues
$423,230,443
2010
Benefit Payments
$511,640,181
Contributions + Investment
Returns
$1,156,807,879
2012
Expenditures
$600,477,205
Revenues
$1,219,169,583
26

Investment Returns 1981-2012
Average Return
1 year: 3.1%
5 years: 2.2%
10 years: 6.04%
15 years: 5.23%
20 years: 6.76%
25 years: 7.71%
30 years: 8.51%
27
Returns calculated using five year smoothing

Retiree Health Care
• “The Cook County Pension Fund Board considers the healthcare premium subsidy an
additional retirement benefit, with no contribution rate or asset allocation associated
with it.” (Dec. 31 2010 County Employees and Officers Annuity and Benefit Fund of Cook County Financial Report prepared by
Legacy Professionals LLP p.20)
• If the retiree health care expenses were not subtracted from the Pension fund the
2012 overall funded status would be approximately 66.4%, instead of 53.5%.
• Only Cook County and CPS pay retiree health benefits from the pension fund.

Health Benefits Cost Review
“While total spend continues to increase, the Fund spend has declined
since 2011 and Member spend has increased.”
Segal Report to Pension Fund Board of Trustees Health Benefits Committee February 14, 2013

30
Total Annuitants Receiving a
Health Care Subsidy

Average Health Care Cost Per Retiree
Medicare Eligible vs. Non-Medicare Eligible
• Monthly premium for retirees
under 65: $1,304.03
▫ Annuitants: 1,952
▫ Covered Dependents: 749
• Monthly premium for retirees
over 65: $271.57
▫ Annuitants: 6,227
▫ Covered Dependents: 1,585
• The premium for Non-Medicare
eligible employees is twice that of
the Medicare eligible population.
• These numbers do not include
pharmacy costs.

Health Insurance Coverage
by Retiree Age
Cook County Pension Report Commissioner Gainer
32

Bridget Gainer: June 19 2013 Pension Committee Report

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