Riverside trustees directed village staff to draft a new policy to ensure the village maintains flexibility while proactively meeting the state’s required level of police pension funding by 2040.
Finance Director Yvette Zavala said Riverside, like all Illinois municipalities, must have its pension fund for police officers 90% funded by 2040, adding to the fund year over year while the funds generate interest through an investment pool that has been managed by the state since 2019.
The fund is on track to be 100% funded by 2040 at its expected rate of return on fund investments of 6.5%, but Riverside ought to take proactive action to contribute to the fund as outlined by the forthcoming policy, Zavala said.
In order to ensure the fund continues to grow over time to meet the 2040 target, Zavala said the village’s annual investment returns ought to fully cover the benefits Riverside pays out to retired police. Contributions to the fund from the village and its employees should be left to accrue additional interest to pay off future years’ benefits and decrease the unfunded portion of the pensions, she said.
At the end of 2024, the fund was reported by Riverside’s actuary firm, Lauterbach and Amen, to be around 44.43% funded, while surrounding communities have an average funding level above 60%, Zavala said. Each year since 2014, Riverside has contributed more to the police pension fund than was recommended, she said; the fund grew by about $1.4 million in 2024.
While Riverside has contributed more to the fund than the state has required, further contributions could be needed to lower the ratio of benefits payments to the fund’s fair value of assets below the 6.5% expected rate of return, Zavala said. Last year, Riverside paid out about $1.7 million in benefits payments, she said, while it only earned roughly $1.2 million as a return on the invested funds.
The value of the fund did grow by about $336,000, she said, but the difference between the return on investments and the paid-out benefits could put the fund’s stability at risk in the future.
“We’re doing well, but we can do better,” Zavala said. “The goal is to have your return, your interest made, be able to make your annual payment.”
If that doesn’t happen, part of the yearly contribution must be paid out immediately and cannot be left to accrue further interest.
“Staff recommends taking a proactive approach to this, because if that number keeps growing, the difference, the actuary can come back and say, ‘Now you guys have to decrease your [rate of] assumption,’ and it’s better to have a choice than be forced to do it,” as doing so would leave Riverside to contribute more into the fund each year, Zavala said.
By being proactive and paying additional monies into the fund in years with a surplus, the village can meet its minimum requirements in other years without putting the fund’s future at risk, she said.
