Champaign City Council to consider changes to pension payment

By Angelica Lavito

The Champaign City Council will consider extending the time period for firefighter and police pension fund contributions at Tuesday’s meeting.

Currently, Champaign is expected to pay most of its pension obligations by 2020; however, the city expects to see fluctuations in its payments in the next few years.

The new policy would give the city a 15-year period to pay off its obligations, as opposed to having a fixed year to do so.

“The problem is that as you get closer and closer to that fixed pay date, the swing in the markets and other factors also create swing in payment that makes it very hard to deal with,” said Richard Schnuer, Champaign’s finance director.

Schnuer said changes in the stock market impact the city’s pension obligations, which is problematic when making long-range financial plans.

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    Champaign has struggled to fund the police and firefighter pensions due to benefit increases and investment performance, according to the study session report.

    Existing pension contributions will be made by 2020, but future contributions will be subject to the 15-year payback period. Schnuer stressed that the changes will not mirror Illinois’ pension payment plan.  

    “This doesn’t change what we’re doing with our current liability, just that year’s amount,” Schnuer said. 

    The city and the Police Pension Board use different actuarial assumptions. The Police Pension Board assumes a 6.5 percent return on investments, while the city assumes a 7 percent return, according to the report.

    Bill Neumann, Police Pension Board chairman, said the current asset of the police pension fund is $80 million. The indexed expected rate of return is 6.04 percent and the average actual rate of return is 6.83 percent. 

    “The index and actual rate of return are taken from First Midwest Bank’s Greenfield Reports — 13 years of data. The Board’s actuary report uses 6.50 percent assumption for the expected rate of return,” Neumann said in an email statement.

    The percentage is used to calculate Champaign’s contributions. Greater rates of return reduce the city’s contributions, while lower rates increase contributions, according to the report.  

    Schnuer understands Neumann’s concerns, but said the percentages are close and he stressed the importance of changing how the city finances pensions.

    “It’s certainly an important issue, but not the issue we’re bringing before council because even if city figures and Police Pension Board’s figures were the same, there would still be that issue,” Schnuer said.

    The city council will also be asked to allocate $250,000 from the city’s general fund, which is generated from last year’s sales tax increase, to the police and fire pension funds.

    “The bottom line is that we have people who have served in a position and we need to honor those,” Mayor Don Gerard said. “The implications are that we’re going to have to find ways to fulfill our obligations.”

    Angelica can be reached at [email protected].