For the second straight year, Riverside trustees voted to withhold more than $35,000 in contributions to the village’s municipal employees pension fund. The move will allow the village to use that money to fund operations in 2011. Trustees did the same thing last year in order to keep more cash on hand for expenses in 2010.
The board voted 4-2 in favor of “phasing in” the full amount, including interest, over a period of years. For 2011, Riverside’s full contribution to the Illinois Municipal Retirement Fund (IMRF) will be $205,000. However, Riverside will contribute just $169,000 next year and pay the remaining $36,000 over time. Phasing in the pension payments will end up costing the village more in the long run, but allows for greater cash flow in the short term.
Voting in favor of the plan were trustees James Reynolds, Mark Shevitz and Lonnie Sacchi and President Michael Gorman. Trustees Ben Sells and Jean Sussman voted against the phase-in. Trustee John Scully was absent from the meeting.
Last year, the village board voted to withhold between $35,000 and $40,000 in contributions to the IMRF. All village employees, except for police officers, qualify for pensions through Riverside’s participation in the IMRF.
Sussman called the action “highly irresponsible.”
“One big reason is the longer we postpone it, the more it accumulates,” Sussman said. “It’s highly risky. … At some point we’re going to have to catch up.”
But Sacchi, the village’s finance chairman, said funding pensions is a statewide problem and that the village is meeting its obligation for funding employee pensions with the phase-in.
“I know it will cost more over the long term,” Sacchi said. “This is a huge statewide problem. … Until it addresses it forthrightly, I don’t think the village of Riverside should solve this problem on our own.”
Unlike the separate police pension fund, which gives the village latitude in funding levels, members of the IMRF are required by that organization to pay a certain amount to the fund each year.
For the first time ever in 2009, in response to catastrophic losses on investments in 2008, the IMRF gave members the option of paying the full amount or phasing in part of it over time. The IMRF repeated the phase-in option in 2010.
In the years preceding 2008, Riverside’s IMRF pool was funded near or above 100 percent. In 2008, Riverside’s fund lost 30 percent of its total value – nearly $1 million. According to the village’s 2009 audit, the fund received slightly last year and the pension pool is funded at a rate of about 80 percent.
In that sense, by allowing municipalities to phase in contributions, the IMRF is giving members a way to hedge their bets, because of the volatile market. While the IMRF’s investment returns historically have been strong, the phase-in option is recognition of the 2008 disaster.
“The IMRF can invest in securities and stock market-type things, which traditionally have had a better upside,” said Kevin Wachtel, Riverside’s finance director. “But there is that risk.”