Agenda Item:
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Review of the Village of Glencoe Police and Fire Pension Actuarial Reports that Support the Tax Levy for the Year Beginning January 1, 2026 and ending December 31, 2026
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Staff Contact: Nikki Larson, Deputy Village Manager/Chief Financial Officer, Margaret Schwarz, Assistant Chief Financial Officer
Purpose and Actions Requested: Staff requests review and discussion by the Finance Committee of the Village of Glencoe Police and Fire Pension Actuarial Reports that support the tax levy for the year beginning January 1, 2026 and ending December 31, 2026
Budget Impact: Budgeted
Strategic Priority Addressed: Workplace of Excellence, Economic Vitality
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BACKGROUND AND ANALYSIS
The Village of Glencoe engages with Foster & Foster Actuaries and Consultants, a private actuarial firm, to conduct an annual analysis of the Village’s Police <https://cms6.revize.com/revize/glencoe/Valuation_GlencoePolice_2026_v2_REVISED%20VERSION%20060526.pdf?t=202606051613360&t=202606051613360> and Fire <chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https:/cms6.revize.com/revize/glencoe/Valuation_GlencoeFire_2026.pdf?t=202605291713490&t=202605291713490> Pension Funds to determine the annual required contribution into each fund. A summary of their analysis follows.
Police Pension Fund
The Police Pension Fund report reflects an ending actuarial value of assets in the fund of $48.0 million, which is an increase over last year’s ending balance of $45.5 million, an increase of approximately $2.6 million. It should be noted that the market value of the fund increased from $45.0 million to $52.0 million, an increase of approximately $7.1 million. The reason these two are different is because market value reflects the market price for the investment portfolio at a single point in time (i.e. December 31) and the actuarial value of assets recognizes gains and losses in market value over a five-year period. This means that the $3.4 million gain will be incorporated into the actuarial value of assets over the next five years, smoothing any sharp increases in the levy requirement over that time. The increase in market value is largely attributable to market conditions at the end of Calendar Year 2026, with an investment return that outperformed the benchmark. In addition, the Village’s unfunded liability increased from $31.7 million to $32.1 million because of an increase in normal cost due to filling vacant positions which was offset by positive earnings (investment return of 7.24% vs 6.5% assumption). It is anticipated that the Village’s contribution will begin to rise over the next four years to account for full staffing but will vary based on plan experience.
The actuarial report also enumerates receipts, investment returns, pension payments and funding levels. The results show a funding level of 59.9% from the Village’s actuary, which is an increase from last year’s 58.9% funding level. The funding ratio is not yet available from the Illinois Police Officers’ Pension Investment Fund (IPOPIF), who took over the State of Illinois’ Division of Insurance calculations. However, last year the IPOPIF actuary reflected the Village’s fund at a 63.3% funding level, an increase of 0.7% from the prior year’s calculation.
Fire Pension Fund
The Fire Pension Fund report reflects an ending actuarial value of assets in fund of $4,194, which is a slight increase from last year’s ending balance of $1,427. The Village has one remaining surviving spouse beneficiary in the Fire Pension Fund and has elected to fund benefits for this member on a pay-as-you-go basis. For this reason, the results show a funding level of only 2.3%, as compared to a 0.7% funding level last year. A funding ratio is not available from the Illinois Firefighters Pension Investment Fund (IFPIF), as the Village was not required to consolidate its assets since this pension fund is funded on a pay-as-you-go basis.
Analysis
The private actuary’s funding levels are not the same as the consolidated fund, which is due to differing interest rate assumptions and actuarial cost methods used by the Consolidated Fund’s and the Village’s actuaries.
Several of the assumptions used by the Village’s actuary in their calculation are listed below (and are included in greater detail on pages 25-28 of the Police Pension report):
• Five Year Smoothing of Investment Gains and Losses (to minimize large swings in asset value year-over-year)
• Salary Scale of 3.5%-11%, with a Payroll Growth of 2.50% - this is designed to accelerate the draw down of the Village’s unfunded liability.
• Interest rate assumption of 6.5% per year, compounded annually
• Funding method of Entry-Age Normal Cost Method, which smooths payments toward annual accruals in a level manner, as opposed to the Projected Unit of Cost method used by the Consolidated Fund which backloads annual accruals, deferring payments to future years.
The required contribution for the Fire Pension Fund will remain the same at $48,293 to fund the annuity for the last remaining beneficiary. Pursuant to Illinois Compiled Statutes pertaining to Tier 1 spousal benefits, this benefit will remain unchanged for the remainder of the annuity.
The required contribution level for the Police Pension Fund has increased primarily due to unfavorable plan experience as it relates to the natural increase in amortization payment due to the payroll growth assumption, an increase in normal cost due to an increase in active membership and unfavorable plan experience. The increase was offset in part by Village contributions greater than the recommended amount (due to the timing of property tax distributions and related accrual estimates) and a gain from an investment return of 7.24% (Actuarial Asset Basis) which exceeded the 6.50% assumption. As a reminder, the calculations are based on the market performance on a single day at the end of the last fiscal year, which was December 31, 2025.
Based on census and salary data, as well as mortality and retirement assumptions, the actuary’s calculated recommended contribution for CY 2026 (to be levied for Calendar Year 2027) is $3,573,109 for the Police Pension Fund. This is a 5.67% increase (+$191,712) from the current year contribution of $3,381,397.
In reviewing the actuarial report, several factors should be kept in mind:
• Actuarial valuations determine the timing of contributions not the total costs. By using conservative assumptions, this helps to avoid large pension cost escalations in future years.
• As previously noted, the approximate rate of return for the Police Pension Fund last year was 7.24%, which was more than fund’s 6.5% investment return assumption. As a reminder, the actuary spreads the impacts of investment performance over a five-year period, which mitigates sharp increases or decreases in contribution requirements.
• As of December 31, 2025, the membership of the Police Pension Fund includes 34 active members, with 8 members in the Tier 1 system and 26 members in Tier 2. As the Village has taken on more hires, the Village will continue to experience upward pressure on its required contribution.
• In addition, five retirees are collecting disability benefits from the Police Pension Fund,
36 members are collecting regular retirement benefits, and eight beneficiaries are receiving benefits. As the number of retired members continues to increase, funds required from investment returns and employer contributions will also rise accordingly.
Staff and one of the Village’s actuaries from Foster & Foster will present the results and provide feedback on additional funding considerations for the Village to consider going forward. Both the actuary and staff will be available for questions at the June 16 Finance Committee Meeting.
RECOMMENDATION
Staff recommends that the Finance Committee review and discuss the Village of Glencoe Police and Fire Pension Actuarial Reports.