Interim report of activities of the Pension Task Force of the Subcommittee on Labor Standards, Committee on Education an...

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Interim report of activities of the Pension Task Force of the Subcommittee on Labor Standards, Committee on Education and Labor, House of Representatives, March 31, 1976
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United States -- Congress. -- House. -- Committee on Education and Labor. -- Subcommittee on Labor Standards. -- Pension Task Force
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I


94th Congress
2d Session


COMMITTEE PRINT


INTERIM REPORT OF ACTIVITIES


OF TIHE


PENSION TASK FORCE


OF TIHE


SUBCOMMITTEE


COMMITTEE


HOUSE


ON LABOR STANDARDS


ON EDUCATION

OF REPRESENt


MARCH 31, 1976


Printed for the use of the Committee on Education and Labor


CARL I). PERKINS, Chairuit


U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1976


65-101














COMMITrTEE ON EDUCATION AND LABOR


CA.RL D. PERKINS, Kntucky, Chairmnan


FRANK THOMPSON, JR.. New Jersey
JOIHIN H. DI:NT, I'ennsylviinia
DOMINICK V. DANII:LS, New Jersey
JOHN BRI.ADE.MAS. Indiana
JAM 3:S G. O'HARA. Michigan
AI'GI'STI'S F. HAWKINS. Californla
WILLIAM D. FORD. Michiga;in
'lATSI'Y T. MINK. Hawaii (on leave)
LLO)YI') M'I:DS. Wnh1ino:tn
I'llI .1,IP BURTON, C:ilifornia
J('-l:I'Il M. G.kYDOS, Peiinnylvnnia
WILLIAM i BILL) CLAY, Misouri
SIlIINrI:Y mII.SI-)LM. New York
MA.1:O BIAGGI, New York
IKI ANDREWS. North Car,,lina
WILLI.AM Li:lNIA.\N. Florida
JAIM.I: EBl:Ni I.:Z. Puerto Rico
MIL'Ci.I:L I;LOI;N, Iowa
IT In.:l;T J. CI:N!:LL, Wisconsin
PAI'IL SIMON, lllin,,is
IEDW\D.\Ir> Bl-'.\l Itldelo T-land
LI~: > ZI:I:Ii: I:'ITI. New York
(;l:OI:'GE MTLIEIU. C.lif,'rziia
RONALD .MIFI'TL. Ohio
TIM II.IL, Illinois


ALBIR:IT H. QI'IE. Minnrsota
JOHN M. ASIIBROOK, Ohio
ALPIIONZO BI:LL, California
JOHN N. ERLENNBORN, Illinois
MARVIN L. ESCH. Michlan
EDWIN D. ESHLEMAN, Pennsylvania
PETER PEYSER, New York
RONALD A. SARASIN, Connecticut
JOHN BUCIIANAN. Alabama
JAME.S' M. JEFFORDS. Vermont
L.ARRY PRESSLI'R. South Dakota
WILLIAM F. GOODLING, Pennsylvania
VIRGINIA SMITH, Nebraska


SI'BCOM.IMITTEE ON LABOR STANDARDS

JOHN H. DENT, Pennsylvania, Chairman


D-)MININ'K V. DA.NITELS, Nw Jt.er.-vy
PIIILLr.,II' BUI'RTON. California
JOSEII'\ M. GAYDOS, Pennsylvania
I\\LI..M (BILL) CLAY. Missouri
MA.\110 BIA.GG;I. New York
JAIME- B'ENITI:Z. Piiurto Rico
I.:O ZI:.RETTI. New York
GEO'RGE MILLI-:R. California
RPOBE-RT J. CORNELL, Wisconsin
IPAUL SIMON. Illinois
CA.\IL I':KI NS, Kentu.ky,
Exi officio


JOH, N N. 1:RLI:NBORN, Illinois
l:O )NALD A. SARALSIN, Connecticut
JOHI' M. ASIIBI;O(K. Olhio
AL.rilONZO BI:LL. Cailifornia
WILLI.AM F. GOODLING, Pennsylvania
AI.IERT H. QUIE, Minnesota,
Ex offlico


(I1'










TABLE OF CONTENTS

Page
Introduction ----------------------- v
Characteristics and operations of public employee retirement
systems -1----------------------------------------- 1
-Number and membership ----------------------------- 1
Defined benefit or defined contribution ----------------2
Contributory or noncontributory --------------------2
Coverage categories and plans by jurisdiction----__------- 2
Social security coverage ------------ --------------3
Benefits and finances ---------------------------------- 4
Sources of data -------------------------------------- 4
Summary ------------------------------------------ 5
Transmittal letter to subcommittee from IHoward M. Zaritsky,
dated February 9, 1976-------------------------------- 13
Governmental pension plans of the State of Illinois: A sum-
mary and analysis------------------------------------- 15
Table of contents: State of Illinois------------------------- 29
Governmental pension plans of the State of New York and of
the City of New York: A summary and analysis----------- 123
Table of contents: State and City of New York -------------- 131
Governmental pension and retirement system of the State of
Hawaii ---------------------------------------------201


(111)









1[' n-", orl K I- 'Ii N'IF.\TA I\I>.'-
CO( Illl.: UN Ui)L .\'rjIN ) .A\NI l.vl.
t i i 'i'ii. ol' LON I \l iI: S EI NA I).\I l).-, PI:.N-I AN T iPA KII :.
WV, ./u;jyou. D.C., .M1:,',1 .;1, 17.W;.
1I,11. C.\I, 1). PlY R K. I N
('//,;'///,,,,//. ijoui/ifff, ,, 1",1,,',J Hfi lfeo ]n lb ql)v (iibor
14, ) /b1)1 /1 JH oul t 0 f 1 i 31f'1i/1

] )I:.AI: M. (I.\IiMAX: Tjio iljominittee on Labor Standairds met
)on Ma-'iah 31, 1'.91; and, a quorum being present. unanimously adopted
th, ;att;ch'cd relprt. ()ni iheliaIlf of tlHie, sl()c:(niittee. I request that
tlii- r-)port bIe printed and niade available to the members of the
c"nIllnlittev. It is clear tl ti;t further invest igati)on is i-cessary to fuliv
ex;iiiiiii public employee retirement systems.
Tl1- 1. )o'rt provides the a'wiirate overview of these plans and will
serve :!-, tir a.is for oiur future studies and abstiacts.
Witli kindest personal regards. I am
Sincerely yours.




Chairman.


(IV)












INTRODUCTION


Pursuant to the directive contained in II. Res. 257, your Subcom-
mittee has undertaken a study of public employee benefit systems
to determine their current status and make recommendations with
respect to the necessity for and desirability of legislating Federal
standards for their operation. In discharging this responsibility the
Subcommittee has directed the staff of the Pension Study Task Force
to compile a statistical overview of the universe of public employee
plans and prepare an in-depth analysis of selected plans. This interim
report contains our initial findings in the nature of an overview of all
public plans and detailed analysis of plans in Illinois, New York and
Hawaii.
In addition to these staff activities your Subcommittee conducted
an extended series of investigative hearings during the course of which
more than 39 individuals and organizations testified. These hearings
utilized H.R. 9155, a bill to extend all of the Titles I and IV standards
of Public Law 93-406 (ERISA) to nonfederal plans, as a vehicle for
focusing attention on the specific implications of legislated Federal
standards.
During the course of these hearings the general characteristics of
State and municipal retirement systems were thoroughly documented.
Although governmental and private plans are in many respects simi-
lar, from this record it is clear that public employee systems are dis-
tinguishable from private plans on a variety of points. Aside from the
obvious differences attributable to the direct involvement of these
plans in the process of local government, other less obvious but equally
important distinguishing features are prevalent.
Our hearings indicate that among the most significant differences
between private and public plans is the impact of the Internal Reve-
nue Code on the operation of the plans. Public plans proceed through
the qualification process only in rare instances, and hence the partici-
pation, nondiscrimination, and other safeguards attained through the
qualification mechanism are not present: nor is there any other sig-
nificant Federal law regulating public plans.
As a result, public plans in general do not appear to be operate ed
within the general financial and accounting parameters established by
custom and practice in the private retirement plan field. The absence
of any external independent review has perpetuated a level of em-
ployer control and attendant potential for abuse unknown in the pri-
vate sector. Numerous instances of the use of plan assets to finance the
operations of the governmental units sponsoring the plan were entered
into the hearing record. In at least one instance the evidence is clear
that the plan purchased indebtedness which was unmarketable because
of the perilous financial circumstances of the issuer. It has never been
the policy of this Subcommittee-to attempt to draw conclusions with
respect to the merits of specific cases or individual actions. We have






always atteitmptedl to maintain a broad perspective ani avoid a too easy
re'OCIllI:'s to 11We use Of "'lori',r storie.-s" to buJlttress legislative fid in,..
I over, it is all to( apparent tll:it I, W1,0 of what is contained
le0,i:i lip1lies to tI' rce'llt eve,'ts which have befallen thle public
e.1pply.,,,I :Ati,-,elit s,.-.%-LiIs of N(\ew Yrk City and New York State.
In lii'it o th!e widelpread puIblicitv given those. events, we think it
:ldvi-:!Me to hlreak with trad:lition and make s 'ecific reference to that
spei,,(ic case in the context of this report. We are not prepared to
()Iyve or disalpprove the action wv4hiel lhas resulted in a diversion
of .A -nbstialdtial l)art of the a::-sets of these plans to nmet the fiscal
ori.s 1)einy experienced by the State and city. We are concerned
a'Ix nit te impli'-ation of this tran-fer- with respect to the continued
abiltx, of tlie plans. to meet their olblirations. ,While a fiscal crisis
haIs .een temporarily averted, the solvency of the plans has been im-
pair,,l aind the participants and pensioners are dependent on the
uncertain fiscal position of the State and city. Borrowing from their
1-,'ion pl;.ns wa;- not a solution invented in New York but unfortu-
rmit"lv is i pr:-tice with a sulstantial history in the history of State
i -l -ul,.rovernmenis. As a matter of general policy we are convinced
that .-'w'h transfers. from retirement pro'rrams to finance local govern-
,,ent1 .1 ol rations unduly impair the stability of tlhe plans, substan-
tial]y increase the cost of providing retirement benefits to the spon-
sorir employers, and reflect an absence of budgetaiy discipline on
the -, rt of those employers. Additionally, whatever advantages might
inure to : 1, investor in tax-exempt State or municipal securities are
in ,.r.v'pernl a,,ent in the case of retirement plans which themselves
are tax exempjt entities. In general, holdings in tax free "municipals"
;ire not the preferred investment medium for retirement plans unless
the .-ite of return i- competitive withthle rates available on "taxable"
investn'r.nt. WTI.ere thoze rates are competitive, i.e.. hiifher than is
iomrn.i! for "ii'iiKp.'il bods," that very often is a reflection of poor
CrT,]'it on the p:v rt of tlie.issuer.
A. r,,,ther ist i n isIin a chnracteristic of governmental pension plans
is 00e un'clar legal status of tlhe participant rights in sucli plans
in,'i.r -tate law. Our liearin.Lrs nmd studies indicate that the exact
nature of the 1articip:,nt's entitlement-couit ract( il. gratuitous, and
so on. is -eldom ,made clear in tlie various governmental plans. Further,
theC(, in'ter'Qfs in tflie plan are frequently sul)joet to various ambiguous
snd conflictin stntutory :1m, constitltionnl provisions, often com-
tponiled( bi'. confi .inc State court interpretations of these provisions.
Th* leral lunertainty al-o lihas been shown to involve othlier elements
of tcr- publli" plan system p1articularly in the areas of (1) standards
which plan ofnicinls must r ieet in their conduct-, and (2) remedies
which *tre nviail'ble to atrrieved pa]rtiei "a nts annd hrnefi-iarie .
The anleiice of any su)bstantive Federal regulation of pullic plans
liecimiu- of (1) tlhe al),ence to dte of any siqxuificant Internal Rmevenue
Se,'vi(e nr oflier Federal oversijhts. and (2) tlhe unclear li',_-ril v1atus
of v':iounl eleienfqts of public phins under State law, lihas produced a
nilmn!,.'er of seriously d(.eficient practices in tlie administration of govern-
mental pension plans.
O)ur efforts to date indicate that some of the most serious dleficiencies
exi-t ii tle reportin.f and fiduciary responsibility areas. Accounting
methods in public plans frequently fall far short of the rigorous





VII

standards required of plans in the private sector and of important
enterprises generally. Actuarial evaluations often fail to meet the high
level of professionalism and competence that private retirement sys-
tems demand. Both of these important shortcomings are reflections of
a larger problem which underlies, much of the public employee retire-
ment systems; namely, a highli level of employer control of the plan
and its assets, with an attendant potential for abit-e unknown in the
private sector.


















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CHARACTERISTICS AND OPERATIONS OF PIuBLIC EMPLOYEE
RErTI:RE-11EINT '7.-'rYsTMS
The pro'ramis making up the public employee retirement :-vstem
(PERS) have been found to be as varied as thlie pension planiis whicl
make up the private pension system. In 1975 over 6,141 federal, state,
and lo'al government retirement systems were identified as covering."
15.3 million civilian and military employees. In addition to thie 6.111
plans are other arrangements made lbv sponsoring" govern Iments to
1)provide retirement income for their employees. These prog'raIIs inclllde
deferred compensation contracts, salary reduction plans, and ( "tax
sheltered" annuities. According to the Institute of Life Insua'anice.
750.000 individuals were covered and 20.000 persons were receiving
benefits in 1974 under 403 (b) tax sheltered annuity plans. It is believed
that at least a majority of the 750.000 persons covered under such
plans were public school teachers and other public employees. The
Employee Retirement Income Security Act of 1974 established an-
other type of tax deferred pension plan, the Individual Retirement
Account and the Individual Retirement Annuity (IRA), which was
available for the first time in 1975 to all employees working in the pub-
lic as well as the private sectors who were not covered under any other
public or private pension plan. It remains to be seen to what extent
pension coverage will be expanded through the use of IRA's by the
1.5 to 2 million public employees not presently covered under any
PERS.
NUMBER AND MEMBERASHIP
The preliminary findings of the Pension Task Force (the final
and more detailed results will be published later in a separate report)
as to the total number and membership of the PERS are shown in
Table I. In 1975, 6,076 pension plans of one type or another were
identified as being maintained by state and local governments for
about 10.3 million full- and part-time workers. Another 2.4 million
persons were receiving retirement. (Iiwa1bility, or survivors benefits
under such plans or were otherwise eligible to receive benefits at a
later date. While data on membership was not sought (or was un-
available) for about 19.5% of all plans, the understatement of total
membership is believed to be less than 1., of 11 ;) (see Table IT. foot-
note 3). It might be noted that the preliminary totals do not include
the Firemen's Relief Association noncontributory plans currently
being maintained by 62 Kansas cities (for which membership data
was not readily available).
In 1975, the federal government, including its agencies and im.t'u-
mentalities, maintained 65 employee pension plans, the larue-.t ones
being. the Military Retirement Systemn (2.1 million active members)
and the Civil Service Retirement System (2.7 million active member-).
The remaining 63 systems have about 161,000 active members or about
(1)





2

..6' of the total active memlbershlip in all federal plans. The roughly
.7 million r.--os pn'M'llt lv receiving or exlpe-tinur to receive benefits
1inler :111 6',- feler:l svsteli represent 5;1'; of the total federal active
Illltiir.i i, iip. By way of contrast. thie correspondlil, insi nactive to active
mIlei bleri-ljip ratio fo r all state and local rovernIent lPERLS is L2?,'.
'h'le nl11ii.Ir oi P ZS lby- size of active iiieviibeiship is sliown in
T:alle II. One striking Ir sill ilaritv wirtli thle private at ien ,ion ssystci
is tl1e lar1e percent ale-. iiearly SO ,- of all PE-S wvilli fewer than
100 ac-tive 11ienliers. At the other extreiwe are tlhe 1,1 plans with
10,0(10 or more active mneiiNliers. WWlile inaki in ill) only 2.8% of the
tot:11 plan-. these plans, wlhen the final results I. lecoie available, are
expelled to cover approximately 8S;'c of tlhe active membership in all
state and local govern -ent pension plans.

DEFINED BENEFIT OR DEFINED CONTRI-PTION
_kAnonr thle 6.141 reiot.vinent systoii ar1e dlefined contribution plans
a. well as the mre typical d(efil;e' 1)ellefit, or 1,cnefit "fornnila" plans.
The largest nUhiber of similar defined c'ontri)ution plans are the 314
plans maintained by cities and counties for their highly mobile man-
a-ers and administrators. These plans are administered by the ICMN
Retirement. Corporation. Since the breakdown of members by em-
ployer was not available, the data on these plans was excluded from
Tables II through IV. At tlhe end of 1974, 605 employees participated
in tloe 314 plans. Tlie next largest group of similar defined contribution
plans are those maintained by institutions of higher education for
faculty and oilither personnel. In 1975, 2S such plans were in operation
(see Table III) and all the plans were funded through Teachers In-
surance and Annuity Association of America-College Retirement
Equities Fund (TIAA-CREF). In addition to the above, public em-
ployees also belongs to a small number of defined contribution plans
most of which are insured and of the money-purchase type.

CONTRIBUTOTRY OPR NON-CONTRIBUTORY
Over 75(7 of all PERS (see Table II) require employees to make
contributions (or did require such contributions prior to the time the
plans were closed to new imembiers). Alout 2...5)r of all systems do not
mandate that employee contributions 1-o made to help finance the sys-
tens. In a small number df systNems, 1.1 of the total, some employees
are required to make contributions and some are not so required. In-
cluIded in the contrilbutory category are 23 systems which are supple-
mental to another more basic PERS. Several universities ilaintain
supplementary systems which are of the noncontributory pay-as-
yog-iro type. Over 4c of the systems were identified as being closed to
new mevibLers which is a direct consequence of the discernible trend
toward the consolidation and merger of smaller systems into larger
public retirement systems.

COVEritAGE CATEGORIES A\ND PLANS BY JU'RISDICTION-
About 75r- of all state and local government retirement systems are
to b)e found in t]le 10 states with the largest number of plans (see Table
IV). With 1,414 plans, Pennsylvania alone has nearly 25% of the total







number of all systems. Among the top five states and following Penn-
sylvania in order are Miiin.:,ota (6,38 plans), Illinois (-165 plans),
Oklahoma (435 plans), and Colorado plansn) By way of contrast
to the decentralized nature of the systems to be found in the majority,
of statt.., is the single statewide plan in Ilawaii covering all public
employees in that state. While the states with the smallest populations
tend to have the least number of plam-, t1hi is not entirely the .ase. It is
obvious that New Mexico (with 4 plans), Ohio (with 7 plan>) and
Oregon (with 9 plans) have achieved major gains in bringing all
public employees in their respective states under a small nanageable
n1l1iber of systems.
Pension plans covering every imaginable description of public em-
ployniient are to be found at all governmental and quasi-goverl(nielital
levels. In size, they range from the 417,000 member New York State
Employees' Retirement System, which is tlie larr>t system at thle state
and locnil level, to the Everreo.il Park Illinois Firenlen s IPehsion
Fund, which at the time the census was taken did not hav-e any active
members. The WVashington Metropolitan Area Transit Authority ( bet-
ter known at METRO) was found to be a "body corporate antid politic"
and( its unique 1.000 member system is included in the 'special district"'
catorory (52) as shown in Table III. Some other systems which cover
unique categories of workers are the Central Intelligence Agency Enm-
ployees Voluntary Investment Proirrainm, the TIAA-CREF Retire-
ment Plan for Faculty Members of the Uniformed Service University
of the Health Scienct-.. the Waterford (California) Irrigation Dis trict
Pension Plan, the Dekalb County Atabama Hospital Annuity and
Benefit Plan. the Salt River Project Agricultural Improvenment P power
District Retirement Plan (Arizona), and the State of South Dakota
Cement Plant Pension Plan.
Generally, public employee retirement systems may be categorized
by level of ad(ilini-tration as being at the federal, state, city. county,
township (borrough), or special district level. As shown in Table III,
over 80% of the plans are administered at the city and township levels,
while the federal and state governments administer 10.7% of the total
plans. Plans covering either policemen or firemen exclusively make up
66.1% of all plans. While 68 plans have been ,categorized as being
"tezclher plans," teachers in 21 state- participate in a statewide system
covering state employees as well as teachers.

SOCIAL SECURITY COVERAGE
While data on Social Security coverage in 1975 for both full-time and
less than full-time public employment will not be available until the
Pension Task Force survey has been completed. Table V does display
limited data obtained from the Census of Governments for Octolbier
1972. Approximately 67% of the 8.6 million state and local govern-
ment employees working full-time in October of 1972 were covered by
the federal Old Age, Survivors. Disability, and Health Insurai.co pro-
grain (OASDHI). Approximately 899c of the full-time employees
were also covered under a public employee pension plan of one type or
another.
While comparable figures for part-time public employment are not
available, it is believed that approximately two-thirds of such workers







ae als~1 ,.ov ered llilci'r OASD)II and tliit )l x about 0-10 arc also
IV., -- I c -rte also
covei'',e Iunder a p1ublid it mlonpf,,yee ret irtvmilt'lt systeIII.

IU.NI'"FiT'S .\ND FIN.AN( '.
Tile lliu-t 'coilprelit'lv-ive data av:ilIble )1lon thlle operations of state
an: 1'al euplovee, retirelilent s.-t.c. is smiiimilarized in Tnlde- VI and
I'II. TFle fi5r'" Y'- --l iiwn aye I ased principallv oi, thle 197- Census of
( ;,tr),i'ilnts and ;iniiiiaii up)l:ates mail,, lIy ti, BIire:ll of tlhe (Cens,,s.
Te(I'r w s d() not repre-ctit tlie PE1KS iii l,'se. si. eJ by design tlhe
IB ur'ci of tlte Celn-lis do,'- not olita.in (Iata on inslired plans or on non-
C(>tril)tcir' plaI- (with -'ver:l ex('xceptions).
In 1974. the a-.,ts of the IERS ihad '-a,:l'Ehl at leant S 9:.9 1)illion,
aril nih,;rlv 1.7 million ,eis,,l.ons N.ven rpeeeii!x beneits amounting to
S(.3 billion. In te'lis of active members-hip ;Itnd the imiinl)ber of per-
sons i,',civim 1>', letfits, the plublic- empl)loyee retilremielt systemii can be)
seen to be albout (4ne-foumth the size of the privailte pension systevi. Ti
<'otrt t, tlihe PEIRS ]as ac<'midl:ited a:-sets at book value equal to
albolt 4.7-48% of thie priiatev pension system. holdinfzs.
Winle the PE US iei mulIersllip Nias 1weln expalninr' anmI'allv at
.I 4 tlie svstemi fmanee- have recently l)een expIa din, 1 at double or
triple that rate. Total en.-fit, payments have been increasing at
apple oxiniately v anni ially \lile contril)itions haave increased at
lialf thliat ,ite. Total bi.-,ts have also i increased rapidly, bunt tlhe rate
of ini ,a,.,-c, 11s la ,w'ed behind that for benefit p1avynents liy 4 to 50r.
As ;t c<'.-c.qu j'ce of tl 'se rn&it' di-piirities, the ratio of assets to bene-
lit, 1',;vments l5 s slow i a decline over recent years from a value of
'20 in'1970 to a ratio of 16.7 in 1974. The unfavorable trend in this
siml)ie C1e:is'iie of funding status certainly wv;airrants continued close
t I tldv.
St IUCES OF DATA
Tlie fiIrures l)p(s(:,nt(el in Tables I throu,,h IV are 1,ased on an
(extenl-sive d(t;it;i ('collection effort eng:,tred in by tlhe Pension Task
1"orce in ord '1er to identify thle ulive'.se of public employee retire'ement.
sv-tCi ,i. Tlie initial amnd mnost comprehensive somree used was tlhe
listing of state and Io ']: public emiployvee reti',relnent system s pre-
1pared I y the B1ric'iUe of tL'1 Ce:i ;s for the 1972 Census of Govern-
menl- suirve v. Tn form ion w\;s also collected b1 mail survey, tele-
p)lole (caniv.-,sii2. a idl frovm a n multitude of ididi,*id :Ia.ls and orgaliza-
tionts ;t the Jate and national levels. Without the willing i'"r c( oeratio,)
of these many individuals and orraniz::tions such an extensive data
c(dllc(tion ('effort would have been imp)(,,sible.
Tl'1 6.,141 pl;'n fiure shown in Table I doe-, not finalize l)by anyv
meanIs the total mimier of pul lic employee retilremlent systems. It is
po--ile ta:t tlii,4 fij'ivi.e 1aiv vet re.et.t as much as a 10 or 15r1- ndler-
reportigr of the t',tal n I iiblr of plaInls. For e'.aiple, in Pennsvlvan ia,







Texas, and West \Virginia, nuimerous jurisd(ict ions that were queried
have vet to resp)on(l. Since care was takel.e to obtain data from the
largest, jurisdictions in each state, it is extremely (Idoubtful that in
terms of active UImlebership the under-rel)portin( will be found to
exceed 75,000 members for tihe entire IUnited States.
As has been stated 1)reviousldy, the figuresslio swn in Tlables V through
VII do( not reflect the totals for tlhe entire universe of state and{ local
government employee retirement systems. While thie Census of (rov-
ernment figures are ba-ed( only on about 40)% of tlhe total plans, there
are early indications that the Census figures may understate the ieni-
bership and finances of the entire universe of plans by less than 0lC.

S 1 MMAKY
The bulk of the plans making up the public employee retirement
system in the United States has been identified and categorized
(many for the first time). Tihe distribution of p)lai)s by state is char-
acterized imainlyv by its distinct lack of uniforiity or regular pattern.
The approaches seem to range from what can only be described as
non-al)pproachies resul tig rn a proliferation and pateshwork of plans
to what appear to be deliberate attempts to achieve a level of coim-
parative simplicity.
While the retirement si-vems are varied and many in number,
their influence as a whole is vast. Over .5 million persons already( de-
pend on 6.141 sys-'ems to hllp meet t1eir retirement income needs.
Another 15.3 million active employees have expectations of receiving
benefits from these systems in the future. The assets of the stare and
local government svysteims alone have in all likelihood already passed
the $100 billion mark. The iiv. -i:ent of tliese enormous and fast
.growing sums of money will continue to have ail important effect
on the securities markets in the U united States.
3.iany additional questions as to the nature of public employee
retirement systems need ro be answered. The Pension Task Force
studies now in progrss will )be instrumental in gathering the needed
Tacts about public l)eC )nsionl iivestmelits, ftun(ling, and benefit struc-
tures. The re:-ilts of the,, studies will be published in separate
reports as their information becomes available.









TABLE 1. -NU'JBER AND ',EMBERSHIP OF FEDERAL. STATE, AND LOCAL PUBLIC EMPLOYEE RETIREMENT SYSTEMS
(PRELIMINARY), 1915

Membership (thousands)
Number of
Level of vo.ernment plans Active Inactive1 Total

St.le and local ....----..-...-......--.......--. 6,076 10.268 2.,374 12. 642
Federal m I,t ir. ...........-.. ................ 1 2.1 1 1, 102 3 253
Federal 0.inm'litai ,').------...---- ........ 64 2.883 1,570 4,453
Total --...-.....--.---. -------------- 6,141 15,302 5,046 20.348

i 'i,.-ti-e." include all oersons receiving, benefits as well as former employees who have acquired a vested right to
receive retirement benefit,_ at a subsequent time.

TAELE II.-riUMBER OF FEDERAL, STATE, AND LOCAL PUBLIC EMPLOYEE RETIREMENT SYSTEMS BY
TYPE AND SIZE (PRELIMINARY), 1975

Number of Percentage
plans I of total

Type .', rflmn:
Wroll, cotributory------------------------------------------------......................................................... 4,157 71.3
Wioll, no icontrihutory...................................................... ----------------------------------------------1,368 23.5
Partially cojtributry (some members make contributions and others do not)...... 64 I. I
Closed plan (no new members are admitted)................................... ---------------------------------238 4.1
Total.--....--. -------------------.... ....----------...---------..-------- 25,827 100.0
Size of active membership:
0 to 4..------------......----.--------------------------------.----- ----.. 800 13.8
5 to 24. ---------- -------------...........-------.--------- -------------- 1,535 26.4
25 to 99-------........---..--... --..-...--------------------------------.------ 1,104 19.0
PH to 199.....-------------------------------.-----.-------...------- ------ 330 5.7
200 to 499---.....-------.-..-------------.-----------------...------------- 303 5.2
560 to 999------........--.--------------------------------------------- 192 3.3
1,i000 to 4,999 ...-----.......------------------------...---...---------..---------------...... 215 3.7
5,0.', to 9,999--- ....---------------------------------------------------. ----..- 65 1. 1
1u.,0ij and over ....----.-------..--------------------------------------- 131 2.3
Unknown---------... ..------. ------------------.----------------- --.. 31,138 19.5
Total......--- -----------------..-------------------------------- 25,813 100.0

I Total number of plans exclude 314 plans for which data by type of plan and size of membership is unav3lable.
2 The active membership was combined for reporting purposes for the 14 plans of the Feleral home lo3n banks.
'The plans for which active membership is unknown are principally local plans for policemen and firemen having
fewer tnan 100 active members.









TABLE III.-PUBLIC EMPLOYEE RETIREMErJT SYSTEMS OF FEDERAL, STATE, AND LOCAL GOVERNIME4TS BY tYPE
OF ADMINISTERING GOVERNMENiT PRELIMINARYAR, 1975


Number
of plans .


Level of administration


Percent


STATEWIDE AND FEDERAL PLANS
State or Federal employees only ... .... ..------------------------ .-----
State en-pl,,ees plus local government employees (including teachers)_ ----
Policemen only--.-------------------------------------------------------------
Firemen only.---------------------------- ----------------------------
Policemen and firemen only---------------------------------------------------------
Teachers-....--------------------------------------------------------------------
Legislators------. ------------------------------------------------------------
Judges ..........-- --.-- --.------ --- --- -------- .---------------------------------
Local government employees (excluding teachers)- ------- ........
Local government employees (incluiip, teachers) _----------- -----
Faculty and others (TIAA-CF.-EF only) ----------- --------
Faculty and others (other than TIAA-CREF) ---..- ----------.- ------------------------
All other statewide and Federal plans.--.- -..-- ..---- .--------.------------- ------


8.7
6.9
5.1
2.1
1.3
5.6
1.3
7.6
3.5
0
46.5
3.2
8.2


Total (10.7 percent of all plans).....--..........--------------------------------...........--------- 622 100.0
CITY PLANS
21 City ernplo,.ees only (excluding teachers)--------......----....--------------------------. 4-15 12.9
22 City employees only (including teachers) ------------- ------ ----------- 5 1
23 Policemen only------.-----------------.. -------------------------------.----.------ '-0 27.3
24 Firemen only------------- ---- -------------------------------------------- 1,710 49.7
25 Policemen and firemen only-----...-........--..----- ----------------------------- . 8.0
26 Teachers-..........---- ---------------------------------- -.------- 23 .7
27 Judges---------------------- ---- --------- --------2 .1
28 All other city administered plans ------.... -----------------.....--------...----------- 40 1.2
Total (59.1 percent of all plans)......---------------------------------------- 3,441 100.0
COUNTY PLANS
31 County employees only (excluding teachers)--.---------------------------------- 181 67.6
32 County employees only (including teachers)------------------------------------- 3 1.1
33 Policpmen only ----- -------------------------------------------- -.' 10.8
34 Firemen only------------ --------- ------------------------------- ---- 22 8.2
35 Policemen and firemen only-------... .. . ..-----..-----------. ---------------- 3 1.1
36 Teachers---- ------ --------------------------------------------- 7 2.6
37 Judges -.--...- --------------------------...------..------------..--------- 4 1.5
38 All other county administered plans --- ------------------------------------ 19 7.1
Total (4.6 percent of all plans)--- -- ---------------------------- 2.----- 100.0
TOWNSHIP PLANS
41 Township employees only (excluding teachers)------------------------------- --- 472 36.1
42 Policemen only --------- -------- -------------------------------------- 772 59.1
43 Firemenonly-------------------- --- ---------------------------------- 34 2.6
44 Policemen and firemen only------------------------------------------------ 9 .7
45 All other township administered plans---.---. --------------------------------- 19 1.5
Total (22.4 percent of all plans). ------ -------------------------------- 1, 306 100. 0
SPECIAL DISTRICT AND OTHER PLANS
51 Teachers ---.-------------.------------------------...---------------------- 3 1.6
52 All other (e.g., transit authorities). ------------------------------------------- 187 98.4
Total (3.2 percent of all plans)......--------------------......---.--------------------.... 190 100.0
ALL PLANS
Faculty and others (11)+(12) ------------------------------------------------- 309 5.3
Police (3)+(23)+(33)+(42) ------------------------------------------------1,773 30. 5
Fire (4)+(24)+(34)+(43) --------------------------------------------------1,779 30.5
Police and fire (5)+(25)+(35)+(44).....-------------------------------------------- 296 5.1
Teacher (6)+(26)+(36)+(51)..--------....---.------------------------------------ 68 1.2
Legislators (7) ------... .....------------------------------..---------.---------------.. 8 .1
Judges (8)+(27)+(37) ----...--.-----------------------..---------------------......... ... 53 .9
Federal and State (1)+(2)+(13) ----------------------------------------------...........................--- 148 2.5
Local (9)+(10)+(21)+(22)+(28)+(31)+(32)+(38)+(41)+(45) ------------------------1,206 20. 7
Other(52) --.................--------------------.-------............------------------------ 187 3.2
Total Federal, State, and local government plans..--------.. ---------------------- 5,827 100.0

I Total number of plans excludes 314 plans for which data by level of administration is unavailable.









TABLI': IV

Nlxm *t'rt" ..f .'edlri1. SlaiwI'. alnt lu'tl iubiilit tenl)hoveit retirei-.nit systems by Staite
41r ,lh r ji sisi-dit.in, (il'liiiiiiiry), 1!975


tumaber
Qf ja:ix~if I


(1)

(5)


(7;)
(7,


(Jill
(311





121
114)
415l
(I2
12')
u17 p
157)


I21fl
I231



275
213
3(Ht
( -a I
<~ ps
( 8ii


St'ztic ',I juri.' i, 'in',


A.\i:lLk1:i; -------------
A l;i -ki. --------------
A iH.Z4 0 l -------------
Ark ,IIi-,i,-;' _------------
i';ili iI -----------
('o 'r.to ------------
C4 1114-1-1i t I -lit ----------
l .h'l;I\\. -----------
1i-triet ,tf C ,l ,diili _-
Fl.,ridl ----------
I-l ',l' ;l
(Imvi~i --------------
HIawaii -----------
LI.il --------
lllii 'is ---,--i
Ii 1ii;iua ----------
I K:lis- _-------------
' cky ---------
T~rii>iai~ -_----------
.\hint- --- --------
Al --ryl;iid --------
M 'I w(ho!-(-I t s - -
I S ll ---S -------
M;.Ii.:.i ----------
-Mi--n-----
i---i-sil i -- ---
31 isstil~ii'i __ _ _ _
,I- -I -ta-- -----
Ne lii ------------
N iCV;/,1;i _ __ _
New a;l- -ir,.---.-.---


C or jurix.'iition-Cni.
(31) New Jersey-__


47



343
1(;5


336
S



1i
I-


o4
2';

1
21

249
7it;
Ial


7


I.)
54
I






103


23
51


10
9


Total ------ :. ,27


'T t l li lH. r of ili:Ls e;xclJudc 314 plans for which data by state s is minavailaible.


St at


Of pitiu *


(32) New M1exic\ --_____- __
(3:3) New Yrk---------

(32) 4 Ntl i i ----
(3.~) ( IrIl ak ii-------
(3(6) O1i(I ------------_--
(3:7d ) ( kli li' t in, __________-

(39) 1' Ivnsylvai; ------1
(40) RlKllme Island_---------
(41) Smiitl Ca;ir ii;i-------
(42) South DaklI ta----
(43) T 'iinr ssLee _____-
(44 ) I'- -xas-_____ ____ --
(45) Utah -------
(4G) Vern it -------
(47) V i,'i ,i;t -----------
(4,) WVl'.ii4.i p,------
(49) W PV t Virgi in --i--
(AN 4 ,) W i.II',ii ___t__ _
(51) W ymin _____ _____
(52) PIicrto it f)----------
(53) Virnin I-aii4ak--------
(54) ;Gua ii---------------
(55) \\W'a-billn,4i Metli',ldi-
tail Area Transit Au-
tli'rity --------------
(5) ledhral _--------


39
4
117
5,S
21
7
43.-1
1
414
.1.,
13
7
27
95
12
31
28
.13

4';
9
,")
1
1


1
C;:-)










TAIL L V. -i' VIRAGE OF STATE AND LOCAL GOVLRN.i1EN f EMPLOYEES UNDER SOCIAL SECURITY AND PUBLIC EMPLOYEE RETIREMENT SYSTEMS, 1972


Level of govc ent
i ; Level o! government


Number of
Y '1 I I1"
mental
units


Number of
contrib-
utory
pension
plans by
type of
adminis-
tration0


Coverage of full-time State and local government employees 4 (thousands)


Sl;de and local go
meant employer
(thousands)


Full Part
time time


V P111-
nent Without
social
.- security
or
Total pension


Social
security
only


Without pen-
sion 5 (6)+(7)

Num- Per-
ber cent


Social
security
plus
pension


Total social
sec.5 (7)+(9)

Num- Per-
ber cent


Pen-
Pension sion
only only
(non- (in-
insured) sured)


Cover-
age
un-
known


Total pension
coverage
(9)-j (11)+(12)


Num-
ber


Per-
cent


(2) (3) (4) (5)


(10)


(11) (12) (13)


I ocal r',, i I InI CIt:
Pn' il,,.l|.ili, ,
I Twnv, hip,,
,":hool di( trictl
S:c cial d(i tricts


11!, ', than teachers'
teachers
Total a ca' government

'ti r r than teacli(t;
loactihes

Total Stale .' ..nineiit
Tolal '1 I,. and local
1 ,,i'l 'I I t i,'I
I' lN,..rI lr.,ii teachiers
1+,tachiers


(Grand t:)tal


3, 044
18, 517
10, 991
15, 781
23, ?, ',


165
1, 18
119
1 6
I)0


1, 177

191
2,710
2' '


2,106 3,812
22 2,454


78,218


1, 369
2, 376
348
3, 587
32/


434 554
104 130


2,128 6,266 1,741 8,007


140 2,016
' 36 21"6


176 2,312 644 2,957


2, 21, 5, ',S8
58 2,720


78, 1


2, 'il 1 8, , 2, 385 10, 91.


1,770 2,205
905 1,009


539 684 13 2,675 3,214


33 97 130 7 1,426
6 15 21 8 196

39 112 151 7 1,622


532 684
119 151

651 835


1,523
211

1,734


13 3,196 3,728
7 1,101 1,220

11 4,297 4,948


67 911
52 Vn

61 1,840


80 378


1, 21
924


67 2,218


711
1,320
67
504
158


495 2,760
525 1,799

1,020 4,559

143 1,773
14 231

157 2,004


i. 9 4, 533
53) 2, ,i

1, 177 6,563


1 i., I avai!ablc.
Sacht of the 50 States has a statewide system to which teachers 1, I i- 36 are teacher systems
at d( 14 aie statewide sy ste s .' ,i.1, teachers and other public ,., I.'', ,.
:; Plan and cover di ita is reported mainly for coitril)ut,)ry ptais and therefore excludes non-
c lntibut iy plan sircl as the lfdliware Stit>' empl')ye's pension plin. the New York :.1 itl Retioe-
mc:nt Systc ,, !',' ,,'!i tnonconttilutory, are in ,luded.


4 The employment and retirement coverage figjrpes are distributed by level of g iveinonii1, and do
not reflect on a line item basis the number of employees enrolle I in the plans shown in col. (2). In
cols. (6) through (14) cover i,,, fi.!',' for local government excl'ide teachers.
5 Petc.iiule shown in cols. (8), (1l), and (14) are based on the known pension and social security
co. .':i fir.ues; coverage is unknown for 13,7 percent of the full-time public p'iilvw''y i i
Source: 1972 Census of GovelnmIents (Bureau of time Census).


(14)

















TABLE VI.-SUMMARY OF OPERATIONS OF CONTRIBUTORY STATE AND LOCAL GOVERNMENT EMPLOYEE RETIREMENT SYSTEMS


[Dollar amounts in millions


Number
active
Year participants


1950 ----.---..---.-....- 2,600.000
1960..- ..--..........----- 4,500,000
1970 ------------------..................... 7,300,000
1971 ..........----------...--------... 7,700,000
1972....................... ------------------8,100,000
1973 ............------------------..... 8,500,000
1974---------..........---.......----- 29,000,000
Approximate percentage an-
nual increase------------- 5-6
Approximate percentage of
private pension system
levels----.........-------..--------- 25


Number
receiving
retired or
disability
benefits


254,000
590,000
1,171,000
1,254,000
1,333,000
1,415,000
1,499,000


Number
receiving
survivor
benefits


40,000
70,000
120,000
125,000
130,000
135,000
146,000


Total
number
receiving
benefits


294,000
660,000
1,291,000
1,379,000
1,463,000
1,550,000
1,645,000
6


23-24


Total
payments
retired or
disability
pensions


Total
payments
survivor
benefits


$274
940
2,905
3,425
4,085
4,780
5,625
18

40-42


Contributi o' s


Total Employer
benefit
payments Amount Percent


$300
1,015
3,120
3,820
4,535
5,315
6,250


$510
1,725
4, 920
5,495
6,050
2 6,600
(1)


56
60
62
63
63
-(1)'


Employee
Amount Perce.it


$395
1, 170
2,975
3,280
3, 570
2 3,800
(1)


44
40
38
37
37
""(1)"


Total


$905
2. 895
7,895
8,775
9. 620
10.,400
(1)


10 8


49-50


9 13-14 - - -


45-48 - - -


I Not available.
2 Estimated.
Sources: Social Security Administration, Institute of Life Insurance, 1972 Census of Governments
(Bureau of the Census), SEC.


Note-Governmental employers pay 63 percent of annual pension contributions in contrast to private
employers who pay about 90 percent.


Assets
(bojk
value)

$5. 154
19 rOj0
58 io0,
64,400
72, 200
81. 600
93, 900


Ratio of
assets to
pension
benefit
p.,yments


18 8
20. 9
20. 0
18.8
17.7
17. 1
16 7










TABLE VII.-FINANCES OF CONTRIBUTORY STATE AND LOCAL GOVERNMErnT EMPLOYEE RETIREMENT SYSTEMS
(FISCAL YEARS ENDING IN 1971-72)
[Dollar amounts in millions]

State Locally
administered administered
systems s,,tenic Total
Item (176) (Z12 ) (2304)

Recept .---..---------------------------------- $9, 235 $3,336 $12, 7',2,-
rnll:jee contributions....--.----------------------- 2,637 763 3,400
Percent----.....---....------..-...---.---.-------------- 28.4 22.9 'j- 9
Government contributions----.-------------------.- 4,026 1,724 5,750
Percent-----------.. ------------------------- 43.3 51.7 45.6
Earnings on investments.---.-------------------- 2,621 849 3,470
Percent---......--.---..-------------------------- 28.2 25.4 27.5
Payments.--------......---.---------------------------- 3,279 1,641 4,920
Benefits------------........--------.------------------ 2,694 1,427 4,121
Percent ------------------- ----------------- 82.2 87.0 83.8
With.dia.. als------------------------------------ 493 154 647
Percent------------------------------------ 15.0 9.4 13.2
Other.......----------------------.- ------------------- 92 60 152
Percent.------------------------------------ 2.8 3.6 3.0
Excess receipts over payments------.------......------------ 6,006 1,695 7,701
192 1972

Cash and security holdings........................... ---------------------------51,158 17,602 23,294 68, 7riJ
Percent in-
Cash and deposits........---------------------........... .8 2.1 1.2 1.1
Federal securities ----------------------...... 4.4 8.4 26.2 5.4
St !e and local government securities --------. 1.3 9.9 17.4 3.5
N'on overnmentJl :ecurries ------------------ 93.5 79.6 55.2 89.9
Corporate stock............... ----------------------------... (i8.0) (19.4) (3.0) (18.3)
Ratio:
Government contributions to employee con-
tributions--..---------..-------------------- 1.5 2.3 1.5 1.7
Government contributions to benefit payments-. 1.5 1.2 1.5 1.4
Re:eipf!o to benefit and withdrawal payments-_ 2.9 2.1 2.6 2.6
Cash and security hlJin;s to benefit payments. 19.0 12.3 18.5 16.7
Investment earnings as a percent of receipts------- 28.2 25.4 20.1 27.5

Source: 1972 Census of Governments (Bureau of the Census).












THlE LIBRARY OF C)ONGRIESI;S,
CONG(IE.SSIO(NAL ESE( I fERI(E.
11 `i.... P Febrary 9.19M .
To: HIouse Commlittee onl Lducation and Lalbor, Subl omonln ittee on
Labor Standards. Pension Task Force
From: Anmerican Law Division.
Subject: State and Local Pension Plans in Illinois, New York, and
Hawaii.
Pursuant to your inquiry of July 17. 1 975., and our conference and
conversations since that date, requestiinc an analysis of thle govern-
mental pension plans of State and local governments in Illinois. New
York. and Hawaii. please find enclosed( three reports and two sum-
maries. The first report is an analysis of the governinental pensiOlo
plans covering employees of the State of Illinois and its local govern-
minents. The report examines coverage, funding, financing and fiduciary
standards. There is also enclosed an analytic summary of this report.
The St-cond report is an analysis of the governmental pension plans
covering" employees of the State of New York and the City of New
York. The report examines coverage, funding, financing and fiduciary
standards. There is also enclosed an analytic summary of this report.
The third report is an analysis of the governmental pension plan
of the State of Hawaii. This report examines coverage, funding, financ-
ing and fiduciary standards.
HOWARD M-. ZA\RITSKY,
Legislat ce Attorney.
(13)















GOVEICNMIENTAL PENSION PLANS OF THE STATE OF ILLINOIS:
A SU_131M.\RY AND ANALYSIS
The State of Illinois has codified a comprehensive system of pension
plans covering the retirement and death benefits afforded employees of
the State government and of various loc, l governments. These plans
comprise and are regulated under the Illinois Pension Code (hiere-
inafter, IPC). 1081/ Ill. Rev. Slat., as amended to date. Onlyv two
pension plans for governmental employees are not included in the
IPC: the pension plan of the Chica'ro Transit Authority ((CTA)
and the pension plan of the Village of Morton Grove, in Cook Couin-
ty. [There also appear to be thl'.r plans of smaller municipalities
which will not be discussed in tins report because of their lack of
sizalble participation: the pension plans of Lake Bluitf, Wood River.
and Sparta Township, Illinois].
This report contains a summary and analysis of the governmental
pension plans in the State of Illinois on points of covera-ge, funding,
financing, and fiduciary standards. An in-depth examination of these
plans on this basis was contained in a prior report of Septenlber 8,
1975, entitled "State and Local Pension Plans for the State of Illi-
nois: Coverage, Funding, Financing, and Fiduciary Standards.' Ref-
erences to Report will be to the aforementioned prior report.

I. COVERAGE
Coverage should, definitionally, contain a number of factors regard-
ing the discussed pension plan. Perhaps the first item for disclussion
would be whether a given pension plan constitutes a "govermnental
plan." The Employee Retirement Income Security Act of 1974
(ERISA), P.L. 93-406, 93d Cong., 2d Sess. (1974) provides that a
"governmental plan" includes any plan
e,:taihlished and maintained for its employees by the Government of the United
States, by the government of any State or political subdivision thereof, or by
any agency or instrumentality of any of the foregoing * *. Int. Rev. Code of
1954 414(d).
The scope of this definition is not entirely clear at this time. There
are, to date, no regulations of either the Departments of the Treasury
or Labor on this section or its equivalent in the Labor portion of
ERISA. See ERISA 2(32). The following factors, however. may
be relevant in weighing the "governmental" qualities of a given pen-
sion plan:
1. Establishment by State statutes, local ordinances, or the
State constitution-such official establishment tends to make the
plan appear governmental;
2. Composition of the body managing the plan-if they are
elected or appointed governmental officials, the plan appears more
likely "governmental;"
(15)







3. PaNIyientt of tle, Sal.iries of covered employees with State or
local1 f d:-,-maiikes tjle pll appe.aj mnore gov'ernmental;
4. R 1i iIt,; of covered eI iployees to strike and bargain collective-
ly-;lare thlse rights i lore like goveriinIenIt emllployees or pri-
\:ite sect()r Iiploy Nees;
5. Surce of il'com, of the employer (is it from State and local
revenulel.'. private activities. or contri'im)itions)-if tlile employer
is sIlupported by Slate or local revenues it appears more govern-
men'ltal ;
6. "Police powers," including taxing, hell by the employing
b1)oly-tin1 imlore of tlIe:-e powers. tlie more likelly it appears that
tie i )lan is ',overiimeital :"
7. Comiplitlic. of the plan with the reqiirements for private
p1i<,ion plais under ERISA-if the plan imeets the ERISA re-
quii',rements, sulistantial as they are to meet. it may be inferred that,
pelealps, the 111it considers the plan nongovernmental; and
8. Function performed by tlhe employer-are they "proprie-
rvly"' or "t, vernmentlal."
Th1-..e points should be consideredl merely factors w-hich may tend
to evid(lence goer etalss" in a pension plan. They shoidd not be
, ,)-idlerd co(1'lusive nor should any single factor be thought enough
to guarantyy governmentala" treatnmet by thle Departments of Labor
and] Trea.sury.
With respect to the State of Il inois,the pension plans covering State
employees would seem the most sure of "governmental" treatment.
since, they take the "governmental" side of every one of tlhe nine cited
elements. TIhe State regulated plans for local entities, delineated in tlhe
Illinois Pension Code, also would appear similarly ituiated. Tlhe pen-
sion plan of the Village of Morton Grove, though not statutorilv es-
tfbl wished, otherwise would seem strongly "governmental." Thle only
)lan which raises any potential difficulties would seem to be the pen-
sion plan of the Chicago Transit Auth6rity.
The CTA's pension plan is statutorily authorized, although not
statutorily related. The CTA provides mass transportation, a func-
tion s.ometilnes performed elsewhere by private enterprise. However,
the CTA is an entity created and regulated by statutes of tlie State of
Illinois. While, as stated, a more confident characterization may be
iiade of the governmentoil character of the other Illinois pension plans
than may be made of the CTA's plan. looking at all the elements noted
al)ove to determin-ie "govermental" plans, the CTA pension plan would
;ip'p1)1:1 more likely to 1e co.0ide(lred governmentala" than nongovern-
1mental.
Thlc second element which may 1be examined under coveragez"
wouldle the icl hision of "part-time personnel within thle. pension
plan. Most of the pension plans for State and local employees in 11-
linoi, coiaii no s.p-ecific direct, ive in tlhis regard. Their lack of specific
sh 1 teniient could !w interpreted as permitting anyone otherwise thought
"e*lployed." though part-time. to 1be covered by tlhe plan. Three
plalls contain specific directive's liiitinl cove,'rage to full-time per-
sonnel: the Pension Plan of the Village of Morton Grove, tlhe
La,,borers' .and Ileti cement Boaird Employees' Annuity and Benefit
Fuid (Cities over .'00,000 Inhabitants), and the Firemen's Pension







Fund (Municipalities 500,000 and Under). Tihe six pension plans con-
taining specific directives permitting nonfull-time personal are:
1. State Universities Retirement System-covers "l-i;il'-timie employmentt" IPC
15-107;
2. Teachers' Retirement System-covers teachers employed on a "permanent
and continuous basis in a pi sition in which services are expected to be rend,'rd
for at least one school year," contrasting this with "full-time'', which is also
covered. IPC 16-106;
3. State Employees..' Retirement System-covers those employed at least 90)
hours a year. IPC 14-108;
4. Policemen's Pension Fund (Municipalities 500,000 and Under)-cove'-
"Part-time policemen." IPC 3-109;
5. Sanitary District Employees' and Trustees' Annuity and Benefit Fund-
covers "temporary" employees. IPC 13-108;
6. Chicago Transit Authority Pension Plan-covers any employee receiving a
"regular and stated compensation."

II. FUNDING

Funding, for the purposes of this aiialysis, means the obligation of
the State and local employers and( the covered employees, to conl-
tribute to the pension trust fund to provide moneys sufficient to pay all
benefits required and accrued. There are a number of factors witlhil
the examination of funding provisions which would seem to warralit
special and independent analysis. These are: (1) the contributory or
non-contributory nature of the plan; (2) the percentage of employee
contributions to the fund; (3) the use of actuarially computed govern-
mental contribution formulae; (4) the methodology and actuarial
assumptions used by the government where actuarial formulae are
adopted; (5) the legal basis for the formula, i.e., statutes, constitution,
or regulations; and (6) the existence of periodic review of the actuarial
procedures adopted.
A. Contributory or noncon t'ibutory nature of the pes.ion plan
All governmental pension plans of the State of Illinois are con-
tributory. The pension plan for the Public Libraries Employees, how-
ever, does not appear to provide for any contributions by the em-
ployer, but seems to be funded entirely from employee contributions.
IPC 19-104. This, however, still would constitute a contributory
pension plan since it does require, and in fact nakes even more neces-
sary, employee contributions.
B. Employee contributions: Salary porecntages
The percentage of salary which employees must contribute for
basic pension benefits varies from plan-to-plan within the goovern-
mental plans of Illinois. The salary contribution percentaeres re-
quired by the various State and local pension plans in the State of
Illinois are:
1. General Assembly Retirement System-7'". IPC 2-126:
2. State Universities Retirement System-6l/.C '. IPC 15-157;
3. Teachers' Retirement System-6,%. IPC 16-152;
4. Judges' Retirement System-7',%. IPC 18-133 :
5. State Employees' Pension Plan-6A1/. (7T%, for policepersons and fire-
persons). IPO 14-171;
6. Policemen's Pension Fund (Municipalities 500,000 and Under)-7,>,'
IPC 3-125;
7. Firemen's Pension Fund (Municipalities 500,000 and Under)-5% of salary.
IPC 4-124-







I',l.li,'.ri's A.ii i ity" a. dl i. '-fit Fund (Citit's over 500.00 )-7%. I PC
9. -'i rt-T,.ii's A.\iniity and Iwtiwfit Fund (Cities over 50().0())-7,,%. I1'C
; l 'ii;;:
111. Il l],,i..,- % t ic'iplj Retir 'nt, ~-- a I '. 1'4 7-173.
11. M iiui, 111.11 lD111 ch s', c lii.er-2, and Offihials' Annuity and Benefit Fund
( 'f it.i Z 1-1, 0.1.11111 Iili;illitan t.)--(5i;.( I C 8-174;
12. ',n',nty i':!1.ii.,s' :11(l tiicrs' Anuity and Benefit Fund (Counties over
5: ,ll,(>i .';,, Il r~it~it ~lf-,)---l1,^: I P C' 9 177 ,
1.;. l',..-i Pr'-.crve Ii-Irict EImployees' Annuity and Benefit Fund-6'.,%.
IP'C 1 0-101;
14. I .;l.Ierr' amld Rfl.irnwqnt Pinard Eminployev.,' Aniliiytv and Benefit Fund
(Cities 1, '.irk I:1 iipl yi)y.*' :;i(l R .tirt ient Board Inqiloyet-,' Annuity and Benefit
F;!r,ICil4) ov'r iI(Kl.3)I)--i ..%. II'C 12-15)0;
10;. S.i :i!riv Di-trict l:iiipilcoy tes aiid Trustees' Annuityi and Benefit Fund-
r;1.'.:. I!' 1.l-170:
17. P1111lic Sii-1(11 'I'e: chilrs' Pension and Retirement. Find (Cities over 35(0,000
I.1i1:i )l i i;-)- ; ,;. Ii'C 17-1:;i ;
1 iin--e ,l, Corr -in Einilloyces' Pensini Fiind-06cr. IPC 19-101;
1 1. Public Lil1-ir: i,- I:iii ',ye,.' Pelnsion F1ii l-, c1. I1'C 19-208(1);
2 l i..i: "l',;i'-il Aiiuthliority Pvnsi in Phin- 7' -.
21. V lla e ol (iIorton Grove Pension Plan-2%.
C. TU//,, of fuii.,J7, for go'','rncfi7 (1r7fl ,)fi op.t
(Ov er`,1i1ntIIl pei:-ion pl and ii_ n-;ct 1:ial m methodss of computing th.? governmental contribu-
tion-. Art l:' trial imH(li(,ls include, geniierally, all forms of computation
I '1i,_"),'i,)tril)t tions in an amount to meet certaiiin stated needs of
flie ])oeiIon plan. SuIch formulae are isilally stated in sterns of the
, ..-. :irv c,:-ts which must 1;;o fundel, s ui'It as past and(l present service
lilabilities. current (0ost and administrative expenses. Non-actuarial
iidlitls, on the other :land. include all othlier forms of contribution
coIpIIuteation fornulae, LVeIe'a"lly requiring" a contribution of a number
of tli 1-s or fr action of the contril)uit ions of the employees in the cur-
rent or liast yeair., or (,termining the contribution biy certain taxes
wAbi1'l will provide it. The non-actuarial methods may have actuarial
b)is., in. that the formula for contributions, though not stated in
at-iil:r'i;il ter 1s. aiy o0riViually have been determinede( actuarially. For
exa1mIple, where tile pe1':ion 1 plan employer is required to contribute
1.5 time- th, contribit ion.- of the employees in the year t wo years prior
to tfie o l ilatioii veir, this is not stated actunarially, but may be
1 i-e;:l on ;ii actuarial comiputaiion which slowed that this was the
re(uiir.d fin )idin level fow s-aife reserves.
()f tlie *orven iet iial pension plans in the State of Illinois. all State
phi1,n:. v actuarial metlhods of contribution computation. Three local
pei, n plans u-4e this method : the Policemen's Pension Fund (.Munic-
ipaliti,.s 5()0.000 and lender) the Firemen's Pension Fund (Munic-
ipaliti i- :.1')J, 00 ;nd Tnder), and the Pension Plan of the Village of
M\orti ii Gro'-e. The formulae used in these plans will be discussed infra.
Sul-e.. ion 1).
T'lie noii-actuarial" f,,rmulae for basic pension benefits utilized by
certain 1o.;il gov(,rnmntal pension plans in Illinois are:
1. Polihriien's Annuity nnAd BIiinfit Funid (Cities over 500,000)-9 5/7% cov-
e i-1.l ;*iijSloyv ,.s' s l;i I' -; C I'( :5-1I90 ;
2. Fir.nwm,'s Annuity :iand Brenefit. Fund (Cities over 5(0).00)-S 1.% covered
employees' s; 1;rie-. IPC 6-16" ;
3. llin.ois Mnivi'ilpal Retirmenitt Fund-equail to covered employees' contri-
butiuis. IIC 7-172;






19

4. Muniicipal Emipl, yces'., Ofters', and Officials' Annuity and Benefit Fund
(Cities over 50,000 Iiilaulitaills)-6% covered employe-' -,la rie-c. IP1C -174;
5. County liinjloyer'- and Otir'ers' Annuity and Benefit Fund (Coiiil i,.-. over
i10,0i,0)-7";) c''VCered employee. ';hli Vi'-. IPC 9-170;
6J. For-t Preserve District LEmployees Annuity and Benefit Fund-1.3 I ,ies
cover,.'l o eml ;o(yee contributions for the ye.itr two years previous. IPC 10-107;
7. Labor,.Is' and Retirement Board Eniploy, .,'' Annuity and I benefit Fund
(Cities over 500,000) lnhabitants)-6% cove red employees' s, vi-is. IPC 11-17i0;
S. PIark Employce.-,' and Retir,',,-;:il B,,.aCd EliilJloye,';' Annuity and ,.'i''.it
Fund (Til;,i ,ivCr 500,000)-1.50 times covered employees' cinil ributions. IPC
12-152,
9. Sanitary District Employees' and Trust-' -' Annuity and Pe1;if Fii!l- -'-;%
covi. ,0 employ.ec-,' salaries. IPC 13-1701);
10. Puiidlie School T;I ciis' P',.:IMion and Retirement Fund (Cili,*- over 1',o.1i0o
lii. iiranis)-Anmomi raised by special tax at .202%/ on all taxable pr1'1 prly
wiin th ie city. IPi' P 17-12.S ;
11. Hou >. of Co:re',,tion Employees Pension Plan-Authorized tax up to
.0o00.9c on all taxable property within thlie jurisdiction. Tax is not ni.,.,i!nory, .o
,-.,:, ribntioms not mniii(d. tory. IPC 19-103;
12. (Chi .ro, Transit Authority-13% covered employ..'- 11.1 tie(.
D. Ac(v''it; '*I!1 m1thodlology (tnd (0RIIpt'/&Ih# ; C Inf *7 II,,/,
bljtion cOP. "M,.1,at;on formiulae
Methodology, for the purpose of this report, means the basic for-
mulae utilized to compute contributions of a governmental em(plover to
a pcesi:on plan utilizino actuarial computation 1. '1thod-. Thie me4h1d-
ology means, generally, the enumerated costs which must be funded.
The methodologies adopted by the various governmental pe',sion
plansm1 using actuarial computation of employer contributions are:
1. Ct-'ieral Assembly Retirement Systh-ni-funds to meet "(a) a:-tii:rial re-
quirements for such f-ar for annuities in excess of the amounts provided for
by accumulated contributions of the individual retired members and the ex-
pe!i'e of iadministration, (b) an amount equal to the contributions made by the
memn ,rs towards thle autoinatic increase in retirement annuity, . and (c) to
create and maintain a reserve at the end of the year of an amount equal to the
estimated amount required to pay annuities, refunds, and expenses duriiig the
sI'"-;"o : "'",<,, year." IPC 2-124;
2. State Vniversities Retirement System-funds to meet estimated costs of
current annnitieo-. survivors' in.-nranee benefits, costs of administration, and to
a: ui iulate ;i-t-ts ,:fiiient to equal the liability for all benefits expe't.,l to be
1 .,iid to then annuitants, their survivors, accumulated additional nortmil and
survivo,-' insurance contributions of c'rretit 1participa-;ts and reasonable re-
serv,-. Furthermore, the State must fund the plan sufficiently to amortize acqui-
sition of land and construction of an office building over 30 yenrs, less annual
rental in,.me. Minimum funding is an amount required to fully fund current
,_rvice costs with actuarial reserves as required, plus interest on unfunded li-
abiliti--. IPC 15-155;
3. Teachers' Retir- nlent System-funds to meet "e.-s for retirement allow-
ance- erned by the members during the fi e;'- yea r, inchl! di igi regular interest on
any St;i-:-e obligations at the beginning of the year for the cost of benefits, ritire-
ment allowance and leniefits earned in prior years and not previously provided
by S.:tte contributions." IPO 16-158. There is also a minimum non-actuarial
coinn-iliution requirement of 1.2 times member contributions. IPC 16-158:
4. Jud-.s1 Retirement. System-fujids to meet "the costs of maintaining this
system in ici-Prordanee with the following method of funding:
The State's contribution applicable to any fiscal year shall be the sum of (1)
the amounts estimated to be required on the basis of actuarial talle; adopted
by the Board . for annuities during the year in excess of the accumulated
contributions of the judl-es retired during thle year; plus (2) the estimated
exp!,-e4s of administration for the year; or (3) an amount equal to the retire-
ment annuity and widow's annuity contributions of the participants during the
year and the estimated amounts required to pay all annuities and expenses for
the succeeding year." IPCO 18-131;






20


.1). State iEmtloyee.'' Pension Plan-funds to meet costs of "nainiitiining and
adillinisltieril lu, the s-ysteill (nll a filln(ded ln sis inll acordilnlice \\illti alua r eil serve
relVJLiremnl S." 1 P( I 14-169. The c int ributi.ons nilil t be t-e1i1al to) or t rValter than
1li<, :liiif i;,l Iverai e i't' the projected expenditures over tilt, iext ten years fior the
pupse ': I State annuity; (2) prior service aunnity (3) the part of
r'tvelrsiInIIry a.1nnliity derived trmin ,t her than inc'umulatedt <'(t4ibutio)s; (4)
dehathl ielnefit exc'1e t accium' ulatleh d l ilt rtlliltltion4s oi ;iny part thereof; 3h5) sur-
viv rs a' s n uity; ( 'lti: l(Sli a cind1i11 il (cittl.i li ltnlitr except tlihit p .irt c<,oi2i .ti niZ of icciiiii lnttd
t',ll ri ili i,,. tl 4 ,r)tf a' s ( I ; tixcci it eixcet p;. t i:,c li-ist ii. of eCiupl-yee.
I l't rib "iiti is t' t l'(1it''P ;1i1 (10) ;in itti iiii s t"i t io t \1p e' FtItt or to i e cltt isidered in tii]in)ta iititn i f a' nti ,ini eex 'tiss ine Iude pro able
1 lntn t r i' t'i'siieits. dlen tit iinterst, aniid eniployiieiit flini.ovter. Il'C 14-1(39.
t. 1'olifii rieii's P' tiisionE FInd (t Mlii icipnliti ,t f.- >00.( 00 la t .il"d Ui .dr)- funds to
cotve, r *. iiiaI r'qtirciiwl is of tit$ police pI lisiilf fluid." le se rve esrail isihed in
a .111 iioln tit at I'nast i,(j'(l to $10,000 for tiili civ'ch p ad iUpisondr. IMW : 1"-125 I:
7. Fit reiiel's Pension Fund ( Mntliciia litics f().(HAO and Under)-Ir' iids ti *( (i)
n'it, the tufo l reiq Innirenients of (lwit ensio nI i f nd and (2L) pnrivide eictuarini
S*,' rvi s for (ite aiii nl itif'- and 1'e.leVits to i'i e ;irn ed by lthe fireminen duilrng. the
ye:,t i. td s;aid act nahil reserve requirements shall be ci to tinited at ai rate of
oit less th.ii 17.53'> of the s1ilaries aild wates to be paiid to lthe firemen for thle
insulinL year; and (3) proli vide for the tii ortiz,'tiii of thle unfruinde( accrue(d
lidilit ies. inclildintg liabilities ofil account of pe;siois :111d ltheinits in force at
sli ,Il date. as deterin.iied as of Decei ber 31. 1'iod. by the Pensionir Division (f
thie Departn ient. of Ins.tanlice . over a period of 40 rs froi such date
.itiP, an interest rate assuiption (of 41cn per a-umt.o IPO 4-1,S.
8. Pe.lsiont Plan of the Village of Morton Grove-funids to keep the phlan actuwr-
ially zolvent. a:i amount eIqual to curreit service c(sts plus interest on inttunded
past service liability.
The actiiarial assumptions are thon.se a-sumlptions which inmist be
iitade in order to comnpute the contriil)ttiois under Ilie Iietlhodology
adopted. Examples of the requisite actuarial assump)tions wvould be.
iss.umptions on life expectancy, job turnover, and pro.-pectii e expan-
sion of the labor force covered by the plan. The actuarial assimiptions
of the various governmental pension plans are not stated in the stat-
uttes delineating tlhe actuarial mnethodologLy or adlopl)ting an actuarial
'o011putation of governmentiital contributions.
E. ..i ftlto 'fz,;f'on for atfuwrh<1 formula
Seven of the eight actuarial formulae used bv Illinois governmental
pension plans are authorized by statute. Therefore, these seven may
only be. chaiinred bv act of the State legislature. The actuarial formula
for the Pension Plan of the Village of Morton Grove. however, is not
statutorily delineated and may be changed by the Village in the same
ma iner as any other cont irt.
F. Rer';,;, of actariail d'f,)l,, a;bf'ors
There is no specific review of actuarial assi iptions or methodology
provided for in the Illinois Pension Code or in the Pension Plan of
th Village of \for toi Grove. However, the Illinois Pension Code
does provide for audits annually of these plans (with the exception
of thie Morton Grove plan). These audits could be used as a cleck
on the actnrial' metholdolozy a;d as-tiimptionii utilized iii the plans,
,tit such .aspect of the audit i- not compelled st:itutorily.

III. FINANCING

Thle safety of tio pelinioih gitrin'teed anll employee of thle State of
Illinois or one of it, political sub!divisions, under tlhe various plans
therein in force, would appear to depend at lcistt in part upon the







financing aspect of thie plans. This may be pairtitilarlv true ;because the
level of benefits, uider a provision of the llinois State Const4itution,
Fnan1ii1 for tilproef
cannot be reduced. See I'Report at 35-46. Financing for tle purpose of
this report, will mean thie various assurance thl e employee i- tlat
thle mIonev to pay his or her benefits will be available. This incliudles thle,
type of obligation tlhe governmental employer hlas to contribute (i.e.,
statutory, contractual, etc.), the sources of the rovernIIIIilental contribul-
tions i.e., general revenues, special taxes, general ol)li2(ation of tHie.
State, etc.), the ability of tie employee to compel coltrii)utions b)v a
writ of mnandalmus, and( tlhe ability of the employer to lraise finds in
excess of tiho-'., specifically delineated as requisite )by thle statutes
where such amounts are inslflicient.
A. O(l;qato1a10s to (ont iute
With the notable exceptions of tihe Pension Plan of tlhe village of
Morton Grove and the (Chicago Transit Authority Pension Plan, tlie
governmental pension plans of the State of Illinois and its political
subdivisions are statutorily obligated by the various provisions of the
Illinois Pension ('ode to make their annual contributions and pay out
benefits. Tlhe ol)ligations of the Chicago Transit Authority and the
Village of Morton Grove are contractual.
B. SoUrces of and limitations o 0 io(l'rnmental con trib;oios
Generally, the taxing powers of the State of Illinois and of its
political subdivisions constitute the sources of tlhe promised pensioli
funds. The State pension funds are paid out of thle general treasury.
which is supported by the taxes raised by the State. The local pen-
sion plans, with the exception of the plans of the Chicao Transit
Authority and tlhe Public Libraries Employees, and to a more limited
extent the plans of tlhe Illinois Municipal Retirement Fund and tilhe
Houses of Correction Employees, are funded by special taxes levied
by the jurisdiction.
With regard to the pension plans of tle State of Illinois itself.
the obligation to make payments of benefits and contributions is made
a "general obligation . of thle State." Lke other general obliga-
tions, it may be enforced by a suit to compel payment. Note, I;ino;.s
State Emp. A.s'sn. v. M[Co rteI, 292 N.E. 2d 901 (111. App. 1973).
Most of the local pension plans go-overned by the Illinois Pension
Code are obligated to contribute only out of funds derived from
special taxes impo-ed for this piurpo-. This would appear to preclude
compelled payment from other sources. One exception to this -t ructure
is the Illinois Municipal Retirenent Fund (IMRF).
The IMRF is statutorily compelled to "appropriate an amount
sufficient to provide for the current muInicil)ality contributions re-
quired . for the fiscal year." IPC 7-171. Tle applicable mu-
nicipality is permitted, thoug-h not compelled, to levy thie necessary
tax to niake the contributions. IPC 7-171. Tihe permissive character
of the tax authorization and the general requirement that tlhe moneys
be "appropriated" would appear to mean that other sources of local
revenues may 1)be used to meet the pension requirements of the munici-
pality.
Two other governmental pension plans for local units are financed
throua&h other than a special tax. The Public School Te;chers' Pension
and Retirement Fund receiv.s- appropriations from the State of IEli-





22

nols. IPC 17-12,. The Firemen s Pension Fund (Municipalities 500n.-
)001) :and ViUn ler) funds its plan partially from "fines imposed for the
violation of fire ordinances. thel enforcement or collection of which
m1vv be ch:1 rode to and be under the supervision of the chief officers or
slordiaate officer' of suzlch fire departments." IPC 4-118.
Even thle jllri1dictions compelled to exercise their taxing power to
fund their pen-sion obligations. do not always have unlimited al)ilitv
tn ta:x for this lplrpose. Five of these .urisdictions may tax only to the
le-z.r of the aim41,,fnt required to fund the plan or a stated percentage
riafe on the taxable property within its jurisdiction. These five rates
are:
1. Firemen's Annuity and Benefit Fund (Cities over 500.000)-.0863Or. IPC
2. Muniipal Employees', Offieer.-', nnd Officials' Annuity and Benefit Fund
(Cit ies over 500.0)0 nhabitants)-.1093%. IPO 8-173 ;
3. Park Emiployees' and Retirement Board Employees' Annuity and Benefit
Fund (Cities over 500.000 Inhabitants)-.0275%. IPC 11-19 ;
4. Public School Tenlihers' Pension and Retirement Fund (Cities over 500.000
Inhabit.-ints)-.20"2 IPO 17-128;
5. I1oiu, of Correction Employees' Pension Fund-.0009%. IPC 19-104.
Ihile a municipality may borrow to pay its retirement fund debts.
this may lie of little valie as protection for the plan's beneficiaries
b)ecane of a provision of the Illinois Municipality and Village Code
that states, in applicable part:
Before, or at the time of incurring any indebtedness, the corporate authorities
shall provide for the collection of a direct annual tax sufficient to pay the intere.-4
on the debt as it falls due. and also to pay and discharge the principal thliereof
within 20 years after contracting the debt. 24 Ill. Rev. Stat. 8-1-3.
W1c( re. therefore, the locality is unable to raise additional revenues bv
tax levy because of the. Pension Code's limitation on its taxing power,
it mby arguably be restricted from doing so indirectly by borrowing
since, that, too. would require levy of a general tax.
Where a locality is unable to meet its obligations to the pension fund
the State has intervened. Polk County, Illinois, fell behind in its
ftndinz- of pension benefits during the past years because of a pre-
1970 Illinois Constitution limitation on its ability to levy property
taxt',. Its tax base had become smaller due to taking of some of its
farm land by the State and the Federal governments. The Illinois
Municipal Retirement Fund, of which the county was a menlmber,
brought suit in 1974 in the Circuit Court of Illinois, in and for
Polk County, to compel payment. The State, however, recently inter-
veneil lV paIsinr levi'lation, signed in 1975, to grant Polk County a
non-interest bearing loan of 4140.000 to assist it in paying its debts,
includ1ini the debt to the pension fund. The suit, however, is still pend-
in'_r. a wa i ii n r paym i n ( t of the debt.
Tl.erefore, while the State employees' pension plans are backed
bothl by ",c2,-er, l oblig:ition" provisions and the general taxing rev-
enis of the State. the local pla.ns. generally, are backed only by the
pnwr of the locality to levy a special tax for the purpose of paying
its pension obl;iationlis.
C. Comp 'llinqg 1' 1rfits
There would appear to le precedents in the pen-ion area to utiliza-
tion of the extraordinary writ of rmnandnus- to compel payment of
pension benefits. See R, port at 35. fn. 2. Similarly, there would appear





23


to be precedents to the use of the same writ to compel levy of a local
tax in order to force payment of benefits and pension obligations. See
Report at 2, fn. 2. With the exception of the Illinois Municipal Re-
tirement Fund plans and the plans for the House of Cor .tions Em-
ployees and the Public Libraries Employees, where the tax is not
mandatorily compelled, tihe writ would appear a viable reiiiedy to
obtain pension benefits.
D. Fund;ng beyond the st'iaftitory minimvUm
If the statutory provision setting forth tlhe funding requirement- of
the governmental employer is not blt-eil on an up-to-date actuarial
determination, there is a po:-sibility that the fund will be iii-iihcient
to pay all required benefits. One example would be where there are
increases in benefit levels, while tlhe level of funding is related to the
level of contributions made by the employees sever;,l years prior to
the benefit increase. In this situation, the fundin(lg could be inadequate.
The capability of the governmental employer to make additional
funding contributions may be a valid point of question. In most of
the. Illinois local governmental pension plans this additional funding
would be available.
The plans governing the municipal organizations of the State of
Illinois generally provide that the Board of Trustees of the plan may
determine at any time that the available revenues are insufficient to
fund the benefits required and may meet their requirements througI
various means. The different provisions on this point allowing the
Board to meet the required deficits are:
1. Policemen's Pension Fund (Municipalities 500,000 and Under)-"If at any
time there are not sufficient moneys in the fund to pay the allowances of the
Board to its beneficiaries, the city council or Board of Trustv,. of the munici-
pality shall make every effort consistent with law to repld-iii-h the fund so that
all beneficiaries may receive the amounts to which they are entitled. If, after
every effort as aforesaid, there remains a deficit in the fund, the beneficiaries
shall be paid pro rata from the available funds, but no allowance or order of the
Board shall be held to create any liability against the municipality, except upon
the fund so set apart as aforesaid for the payment thereof." IPC 3-1!. The
concept of replenishing the fund with "every effort consistent with law" was
probably intended to preclude lvyin .g taxes beyond the old Illinois Constituti':n
limitations. Today, however, this would probably mean levying extra- taxes or
floating additional bonded debt to make the nece<:ry penion contriPitions.
This term, however, is subject to interpretation and might result in litir:ation by
beneficiaries of the pension fund to compel extraordinary taxes or bonds;
2. Policemen's Annuity and Benefit Fund (Cities over 500.000)-"If the funds
available are inituffi.ient during any year to meet the requirements of this
Article, the city may issue tax anticipation warrants against the tax levy for the
current fiscal year." IPC 5-168 (hereinafter, "standard tax warrant provision") ;
3. Firemen's Annuity and Benefit Fund (Cities over 500,000)-"Standard
tax warrant provision." IPO 8-165 :
4. Municipal Employees', Officers', and Officials' Annuity and Benefit Fund
(Cities over 500,000 Inhabitants)-"Standard tax warrant provision." IPC
8-173;
5. County Employees' and Officer-' Annuity and Benefit Fund (Co unties over
500.000 Tnhalbitants)-"Standard tax warrant provision." IPO 9-169:
6. Laborers' and Retirement Board Employees' Annuity and Benefit Fund
(Cities over 500,000 Inlhabl itants) -"Standard tax warrant provision." IPC
11-169;
7. Sanitary District Employees' and Trietpo' Annuity and Benefit Fund-
"Standa rd tax warrant provision." IPO 13-169 ,
8. Public School Teachers' Pension and Retirement Fund (Cities of over
500,000 Inhalitants)-"If in any fiscal year the amounts accruing to the fund
from taxes levied for the purpose of providing revenue for the fund. tonrether
with the amounts received by the fund under Section 34-S7 of 'The School





24-1

C',de' f,'r .-.lel' \Oear. doII n t efiplal the iotal (.ilt rilnitimins miade liy the tlachlers.
for .:11*.1, .e:ir, Or if I le tiotll inii-mne f tlhe fuliind ill aiy lis.eI l yeaI r frIIi all
-*,;i'Te- is It-- I1: 1111t toil explnidi t itues i bVy til full l fl r suiich year. thle Board
1'," l:ic-.!tifi -1i;i1. in t lle next sieelt'dilI year, il addition to dellail(dillg and
dir,.,'iiiiL" t le ;11111 iAl lax 1t\y lir lithe flund, set apart andl appri)npriate from
. N \- ilr.riv\-d or to Ie. derived frimii it-4 tax levy flr ediie;itimoiiil purposes, a
1:u1 wir liil to rerliuve suvli tht-ieiicy or delicienlveies. alnd iproimplitly ply sueli
-i inito l t' lt. Iiilil ill ord r to restll'te ;'i Vy (if their reserves of the tiliud that may
,.,e \'e ,vii "-, temp ararily applied.
I 'ln. 1:iiin not (eliine:ited lierein do not :np)p ar to provide for tihe
|,it)-bility of underl'llndinii', mad it is airiiahl1)e. tlhougli not certain,
tlI,:t tle pr'\isiois c1 :ll 1 inr for ;i tax to filild the plill witliout any
provi -ion f r additional fundinIg are intended to be excl usi ve, preclude -
in :ildd(litionial funding of tile pllln.

IV. FIDI)CIARY STANli.AIDS

Tlie fid(icl'iary standards whiich apply to a pension plai in lay be as
si 'nifr;iit to the solvency and stability of thlie plan as the funding
',,lliilveiielnts. siH ie lli isdealiing by the trustees of the plan can easily
deait ;iiiy requi red(l funding or hinn cinir provisions. Ainoni, the points
which may be exallliied( with reward to any pension plan are: (1)
t1e liliiitations on fiduciary investment activities, (2) the selection and
q(Ai1flicfition of fiduciaries. (3) provisions in the law regarding en-
for(cenment aild policing of tlhe investment prohibitions, inclidin"
auditing, (4) accounting methods required and records requiiired, (5)
prollibl)itions ai nllst self-dealing, and (6) requirements that the fidlu-
ciaries be )bonded.
. 1.,71 ioifOfwn on ni oe.fhi, t o7 ct'/ y
The governmental pension plans of the State of Illinois have a pat-
te'rn of limitations on investment activities by tlie plan fiduciaries.
lE'.ssienti:lly, there are three degrees of statutory limitation, in addi-
tion to the general oblig,-tions imposed by the rules of fiduciary
resl)oniilhility of the cominon law of trust, see Report at 3-4: (1) no
inve1 itent ictivitiev by the Board of Trustees of the plan, this func-
tion beiiLr d(lelegated to the Illinois State Board of Investment, (2)
Lro-ad discretion in investment, utilizing a long list of permitted types
of investment, (3) more narrow investiiient discretion, using a shorter
list of permlittedl tyles of in\ estment.
1. P,/,Ii./ d, IgcIat/ncy the illvetment f,;iirtfou to the IH71Jo's State
Bo011 ,J of I, ,'cf, ,,, it.
T1oie following p plans delegate their investment function to tlie
Illinois State l', ard of Investllent:
4i. Ce-e4.-:i1 A-41.1ilildy Retiremient Systemli. IPC 2-135;
I. iii ad e littireii -l'it Sy 4lim. IPC 1.i -1. :
c. s.-lite Eln yee.,' Penl-ion p];in. IPC 14-179:
d. 1Puilic Schim 'l'e.i-aier.- llvi-,i'm nid lettireinent nFiund (Citie.s over 5)00.000
Ililiil' it'i s)--this i- 'lS an :iltevii;ilive or eoli.elr u'Ilt iniVe.t enlift pri'actiee witli
iliv'-lniieiit of il;1in al-its by tie l-ii's Bl:ird of Trustees. IPC 17-146.1.
2. P7I,,.S grif,;,ig broad ht.e sht, it di.(xc,-('to, to th;dr boards of
f i'itff ,'. Ill -oine plim-. tlie Board of Truste.- has the discretionl to invest
(-'fts and funds of the plan in any of a nlumililer of inve-tllllments, select-
inz froml a list of thirteen or more types. Usually included in thiis list






25


are United States obligations and notes, obligations of Federal Land
Banks, certain State or local bonds where the political unit is at lea.-t
30,000 inhabitants and the locality has a 10% property value debt
limit, corporate bonds of companies with no default history over the
last 5 years, certain Canadian bonds, certain direct obligations of the
State of Israel, certain notes secured under the National Housing Act,
loans to veterans guaranteed under the Servicemen's Readjustment
Act of 1944, common and preferred stock in certain United States
banks, common and preferred stock in certain life insurance com-
panies, common and preferred stock in certain other insurance com-
panies, certain other nationally listed stocks and securities, and real
estate up to $575,000 in value (IPC 15-167).
The following pension plans permit these enumerated investments,
though some with variations permitting, for example, acquisition of
Puerto Rican bonds or shares in certain combined investment funds:
1. State Universities Retirement System. IPC 15-167;
2. Teachers' Retirement System. IPC 16-179;
3. Policemen's Annuity and Benefit Fund (Cities over 500.000). IPC 5-187;
4. Firemen's Annuity and Benefit Fund (Cities over 500,000). IPO 6-183;
5. Illinois Municipal Retirement Fund. IPC 7-201;
6. Municipal Employees', Officers', and Officials' Annuity and Benefit Fund
(Cities over 500,000 Inhabitants). IPC 8-201;
7. County Employees' and Officers' Annuity and Benefit Fund (Counties over
500,000 Inhabitants). IPO 9-194:
8. Laborers' and Retirement Board Employees' Annuity and Benefit Fund
(Cities over 500,000 Inhabitants). IPC 11-190.
9. Park Employees' and Retirement Board Employees' Annuity and Benefit
Fund (Cities over 500,000 Inhabitants). IPC 12-166.
10. Sanitary District Employees' and Trustees' Annuity and Benefit Fund.
IPC 13-189; and
11. Public School Teachers' Pension and Retirement Fund (Cities over 500,000
Inhabitants). IPO 17-146.
The Chicago Transit Authority's Pension Plan grants its fidu-
ciaries large discretion in investment, but through a short restriction
rather than through long lists of authority. The plan states only that
its trustees must at all times keep the fund "prudently invested."
The Pension Plan of the Village of Morton Grove, the Pension
Plans of the Houses of Correction Employees and the Public Library
Employees, and the Forest Preserve District Employees' Annuity
and Benefit Fund contain no restrictions other than the implied re-
strictions of the general fiduciary law of the State of Illinois.
3. Plans granting limited investment discretion to their boards
of trustees
There are a few governmental pension plans in the State of Illinois
which broadly restrict fiduciary investments by permitting invest-
ment in only a few select types of investments. These include the fol-
lowing plans (notations are made as to the permitted investments) :
1. Policemen's Pension Fund (Municipalities 500,000 and Under)-permits
investment in "interest bearing bonds or tax anticipation warrants of the United
States, of the State of Illinois, or of any county, township, or municipial corpora-
tion in the State of Illinois; insured withdrawable capital accounts of the State
chartered savings and loan associations; insured withdrawable capital a.ccun.ts
of federal chartered federal savings and loan associations if the withdrawable
capital accounts are insured by the Federal Savings and Loan Insurance Corpo-
ration; and in savings accounts or certificates of deposit of a national or State
bank .... IPC 3-135;
2. Firemen's Pension Fund (Municipalities 500,000 and Under)-sa.me a< above.
IPO 4-128.
65-101-76- 3





26


B. Selection amd gualificatio, of zfiduc.iaes
Generally, the trustees of the statutory governmental pension plans
in Illinois are a group of between five and seven individuals, composed
of high officials in tlhe employer-agency and/or tlhe municipality par-
ticipl)ating in the plan. as well as a number of beneficiaries of the plans.
Tlie trustees of thle Pension Plan of tlhe Village of Morton Grove are
tlie, writers of tlie "contract." Contineital Assurance Company, Chi-
cago. I llinois.
The trustees of the (C'hicago Transit Authority Pension Plan must
)be "a bank or trust company incorporated under the laws of the United
States or of the State of Illinois," with a combined capital and surplus
of at least $7,000.000, authorized by law to accept and execute trusts of
at least 10 years in duration.
C. I:' nfo1 r it ,f(i,, jlO*1;'61!f of /"f'."rfUt4r.f, on pe/fs.on p/in fiduc;naes
The restrictions on the fiduciaries are not necessarily meaningful un-
less there is some policing and enforcement. Pursuant to this concept
of policing, each governmental pension plan for State employees in
Illinois provides for biennial auditing by a certified public accountant
designated by the Auditor General. Furthermore, each Board of
Trustees is to keep records of its proceedings and accounts.
'iThic statutory governmental pen lion plans covering local emnplovees
in Illinoi- generally require biennial auditing by the Director of In-
slrinllce of the State. annual reports to the City Council (at the time of
requesting a special tax levy), or an audit each year by a certified pub-
lic accountant. In all cases records must be kept.
Tlie Pension Plan of the Village of Morton Grove does not appear
to r-all for any policing of the actions of the fiduciary. The Chicago
Transit Auithority's Pension Plan does provide that the CTA shall
keep records of all data and submit the information to tlhe plan s
Con ittee at any tilie requested.
D. A .ef'o ,tfng r/n, fhlods
None of the .rovernmiental pension plans in Illinois appear to
(leliiliate the Wr.minting procedri.res to be utilized, although accurate
;acco0jntilL metholtlb' would seem to be an implicit part of the basic
fiduciary duty owed any trust by its trustees.
. 'elf-deub^tT 1q
Mo-;t of the governmentalntal pen-ion plans in Illinois contain some
explicit provisiii precluding some for-iis of self-dealing beyond that
preclletl 1,y the general law of triust- as it is applied in Illinois. See
Deport at "0. The provisions generally preclude a trustee or employee
of the Bo;ard of Trustees from receiving any direct or indirect coin-
1)pe(i-tionl or ,*,,ii--ion on any purc4-ise or -ale of properties by the
tri-t. Sucli a priviion may be found in the followinlgr plans:
1. (lonral Assembly Retirement System. IPC 1-152:
2. Juig.es' Retire-ment System. IPC 18-15 9:
3. State Emlloyes: Retirement System. IPC 14-14 ;
4. Pli-emen's Annuity inm Benefit Fund (Cities over 500i.O0). IPC 5-2 .21
5. Fir.inen's Arinnity annd BRe-nefit Fund (Cities -)ove(r 500.000). IPC 6-2151:
(;. Miinicip.-il Emijployees'. Officers', and Officials' Annuity and Benefit Fund
(Citie. ,vr 50(0.0(X) Inlh;abitants). IPC ,-^246;






27


7. Laborers' and Retirement Bar d Employees' Annuity and Benefit Fund
(Cities over 500,000 Inhabitants). IPC 11-225;
8. Park Eiiiployees' and Retirement Board Employ, **.-' Annuity and Belnefit
Fund (Cities over 500,000). IPC 12-186:
9. Sanitary District Emipli.yees' and Truste,-' Annuity and Beniefit Fund. IPC(
13-189;
F. Bondinq of fiduciaries
Although in general members of the Board of Trustees of the va ri-
ous governmental plans of Illinois are not eqluire(l 1yv law to be
bonded, in a significant, numbl)er of tlie-e pension plans the State Trea-
surer or the appropriate City or County Treasurer is madle tle
Treasurer of the plan and required to acquire an adequate bond.
The following is a listing of the plans in which there is an ini(dividlual.
the Treasurer of the applicable area unless otherwise noted, required
to post adequate bond.
1. General Assembly Retiemenit System. IPC 2-145:
2. State Employees Retirement System. IPC 14-185:
3. Firemient's Pension Fund (Municipalities., 500,000 and Under). IPC 4-130;
4. Policemen's Annuity and Benefit Fund (Cities over 500,000). IP(' 5-210;
5. Firemen's Annuity and Benefit Fund (Cities over 500,000). IP(' 6-207:
6. Illinois Municipal Retirement Fund-Utilize-, State Treasurer. IP'C 7-214:
7. Municipal Employees', Officers', and Officials' Annuity and Beniefit Fund
(Cities over 500.000 Inhabitants). IPC 8-223;
8. County Employees' and Officers' Annuity and Benefit Fund (Counties over
500,000 Inhabitants). IPC 9-216:
9. Laborers' and Retirement Board Employees' Annuity and Benefit Fund
(Cities over 500.000 Inhabitants). IPC 11-212;
10. Park Employees' and Retirement Banrid Employees' Annuity and Benefit
Fund (Cities over 500,000)-Bonding applies to the custodian of the fund only.
IPC 12-170;
11. Sanitary District Employees' and Trustees' Annuity and Benefit Fund.
IPC 13-205;
12. Judges' Retirement System. IPC. 18-153.
















STATE AND LOCAL PENSION PLANS FOR THE STATE OF ILLINOIS:
COVERAGE, FUNDING, FINANCING, AND FIDUCIARY STANDARDS

(by Howard M. Zaritsky, Legislative Attorney, American Law Division)



Page
Introduction------------------------------------------------------ 33
State and local pension plans for the State of Illinois: Coverago, funding,
financing, and fiduciary standards--------------------------------- 35
I. The pension plans applicable to employees of the State of Illinois-...--- 36
A. The General Assembly Retirement System------------------ 37
1. Coverage---------------------------------------- 37
2. Funding----------------------------------------- 37
3. Financing--------------------------------------- 37
4. Fiduciary Standards ----------------------------- 37
B. State Universities Retirement System---------------------- 38
1. Coverage---------------------------------------- 38
2. Funding----------------------------------------- 38
3. Financing---------------------------------------- 38
4. Fiduciary standards------------------------------- 39
C. Teachers' Retirement System of the State ------------------ 40
1. Coverage---------------------------------------- 40
2. Funding----------------------------------------- 41
3. Financing---------------------------------------- 42
4. Fiduciary standards------------------------------- 42
D. Judges Retirement System of Illinois ---------------------- 44
1. Coverage---------------------------------------- 44
2. Funding----------------------------------------- 45
3. Financing---------------------------------------- 45
4. Fiduciary standards------------------------------- 45
E. State Employees Pension Plan---------------------------- 46
1. Coverage---------------------------------------- 46
2. Funding----------------------------------------- 46
3. Financing---------------------------------------- 47
4. Fiduciary standards------------------------------- 47
II. The plans applicable to employees of local governments ------------- 47
A. Statutory plans for local employees ------------------------ 48
1. Policemen's Pension Fund (municipalities 500,000 and
under)---------------------------------------- 48
a. Coverage--------------------------------- 48
b. Funding--------------------------------- 48
c. Financing-------------------------------- 49
d. Fiduciary standards ---------------------- 49
2. Firemen's Pension Fund (municipalities 500,000and
under)---------------------------------------- 49
a. Coverage--------------------------------- 49
b. Funding--------------------------------- 50
c. Financing-------------------------------- 50
d. Fiduciary standards----------------------- 50
3. Policemen's Annuity and Benefit Fund (cities over
500,000)------------------------------------- 50
a. Coverage------------------------------- 50
b. Funding---------------------------------- 51
c. Financing--------------------------------- 51
d. Fiduciary standards------------------------- 51
29





30


4. Firemen's Annuity and Benefit Fund (cities over Page
500,00)0)-------------------------------- ------ 52
a. Coverage_ ----------- ------------ 52
b. Funding ------------------------52
c. Finaneliff... 52
c. hnFinan----------------------------------52
d. Fidticiary standards_ ------------------------ 53
5. Illinui. Municil)al Retirement Fund---- ------. 53
a. Covr:age ---------------------------------- 53
b. FmndinigI --------------------------------- 56
c. Finamie'in ,--------------------------------- 57
d. Fiduciary standards ...-----------------------58
6.' Municipal ]in employee', Officers', and Officials' Annu-
ity ;id lcne'fil Fiund (citif- over 500),000) inhalui-
tanIIts) ----------------------------------------- GO
a. Civr---------------------------------- 60
b). FIunding ---------------------------------- 61
c. Financing_-----_ --- - _____- ____ 6 1
d. Fidociary s-,tandards.. .-----------------------61
7. County Eimployec-' and Officers' Annuity and Benefit
Fund (counties ever 500,000 in habit ants) ---------- 63
a. Coverage--------------------------------- 63
b. Funding -------------------------------- 63
c. Financing ----- ----------------------- 63
d. Fiduciary .-tandards.----------------------- 63
8. Forest Pres-erve District Emnpioyees' Annuity and
Benefit Fund----------------------------------- 64
a. Coverage .--------------------------------- 64
b. Funding --------------------------------- 65
c. Financing-------------------------------- 65
d. Fiduciary standards----------------------- 65
9. Laborerr-' and Retiremnent Board Enipliyees' Annuity
and Benefit Fund (cities over 500,000 inhabitants)-- 65
a. Cov\erage_--------------------------------65
b. Funding--------------------------------- 65
c. Financing--------------------------__------ 66
d. Fiduciary standards----------------------- 66
10. Park Employees' and Retirement Board Employees'
Annuity and Benefit Fund (cities over 500,000) --...-- 67
a. Coverage-------------------------------- 67
b. Funding--------------------------------- 67
c. Financing-------------------------------- 68
d. Fiduciary standards----------------------- 68
11. Sanitary District Employees' and Trustees' Annuity
and Benefit Fund----------------------------- 69
a. Coverage-------------------------------- 69
b. Funding--------------------------------- 70
c. Financing -------------------------------- 70
d. Fiduciary Standards----------------------- 70
12. Public School Teachers' Pension and Retirement
Fund (cities of over 500,000 inhabitants)-------- 72
a. Coverage-------------------------------- 72
b. Funding--------------------------------- 72
.c. Financing-------------------------------- 72
d. Fiduciary :.tandards----------------------- 72
13. The Cl.osed Funds (for the house of correction em-
ployees and for the public library employees)------ 75
a. Coverage-------------------------------- 75
b. Funding --------------------------------- 75
c. Financing -------------------------------- 75
d. Fiduciary standards----------------------- --76








Page
B. Nonstatutory local plans --------------------------------- 76
1. The Chicago Traniit Authority Pension Plan--------- 76
a. Coverage--------------------------------- 76
b. Funding---------------------------------- 76
c. Financing--------------------------------- 77
d. Fiduciary standards------------------------ 77
2. The Pen-ion Plan of the Village of Morton Grove----- 77
a. Coverage--------------------------------- 77
b. Funding----------------------------- ----- 77
c. Financing--------------------------------- 77
d. Fiduciary standards------------------------ 77
e. Legality of the plan- ----------------------- 78
Appendix A: The pension plan of the Chicago Transit Authority and
rulings thereunder------------------------------------ 79
Appendix B: The pension plan of the Village of Morton Grove, Ill ------ 106















INTRODUCTION


The State of Illinois has established statutory guidelines for most
,of its State and local governmental pension plans. See Illinois Pen-
sion Code, Chapter 1081/, Illinois Revised Statutes. The State's
pension system is comprised of mandatorily established and regulated
State and local pension plans. The employees of the State, cities and
counties are treated with reasonable similarity, though there are suffi-
cient differences to warrant separate examination of each plan.
There are five plans applicable to employees of the State of Illinois:
four specific plans (the General Assembly Retirement System,
the State Universities Retirement System, the Teachers' Retirement
System, and the Judges' Retirement System), and one general plan
(the State Employees Pension Plan). For employees of the Univer-
sities System, the General Assembly, the Judiciary, or the Public
School System, the specific plans described in the appropriate statutes
provide essential retirement benefits. For other employees of the State,
the State Employees Pension Plan provides these benefits. The funding
requirements, coverage, fiduciary standards, and financing, however,
differ from plan to plan. Each is independently discussed in this
report.
The local plans are also statutorily regulated and established with
two notable exceptions. There are thirteen such plans: one general pen-
sion plan and twelve specific pension plans. The general pension plan
is the Illinois Municipal Retirement Fund. The specific plans are
divided by employment and by population areas. Where the plan
designates its application is limited to cities over 500,000 in population,
it will currently only apply to Chicago, Illinois. Where it is to apply
to counties over 500,000 in population, it will currently only apply to
Cook County, which contains Chicago.1 The different plans applicable
to Chicago and Cook County are the Firemen's Annuity and Benefit
Fund, the Policemen's Annuity and Benefit Fund, the Municipal Em-
ployees', Officers', and Officials' Annuity and Benefit Fund, the County
Employees' and Officers' Annuity and Benefit Fund, the Laborers' and
Retirement Board Employees' Annuity and Benefit Fund, the Park
Employees' and Retirement Board Employees' Annuity and Benefit
Fund, and the Public School Teachers' Pension and Retirement Fund.
The plans applicable to other municipalities and districts are the
Policemen's Pension Fund, the Firemen's Pension Fund, the Forest
Preserve District Employees' Annuity and Benefit Fund, the Sani-
tary District Employees' and Trustees' Annuity and Benefit Fund,
and the so-called Closed Funds (for the Houses of Correction Em-
ployees and the Public Libraries Employees). Except for the general
It may be noted that these plans could, at some future date, become applicable to other
cities or counties in Illinois, if their populations grew to exceed 500,000. They currently,
however, only apply to Chicago and to Cook County.
(33).





34


fund and the so-called Closed Funds. the municipalities are required
to establish and operate these plans in pursuance to Illinois statutory
law.
There are also two nonstatutory plans for employees of local gov-
ernmental units in the State. There is the Chicago Transit Authority
Pension Plan. which is created by Statute but is not regulated by
statute, aind there is the pension plan of the Village of Morton Grove,
llii is. a v village of over 2.0)OO inhabitants in Cook County.
The overall purpose of this report is to discuss in some detail the
various pension plans covering employees of the State and local gov-
erlmental units of tlhe State of Illinois. Each statutory pension plan
will be analyzed for coverage, funding, financing, and fiduciary re-
quirements. Thereafter, the two nonstatutory pension plans will be so
analyzed.
Included are two appendices. The first app))endix contains the provi-
sioins of the pension plan of the Chicago Transit Authority, and the
second contains the provisions of the pension plan of the Village of
Morton Grove. Illinois.












STATE AND LOCAL PENSION PLANS FOR THIIE STATE (OF ILI.INOIS:
COVERAGE, FUNDING, FINANCiNG,. AND FIU IAiY S,.ANDiAi)S

The State of Illinois and its contained municipal orgaiizatiols
provide their employees with a nliuiber of different pension and ro-
tiriineiit plans. These plans are, in largest part, regulated by thle Illi-
nois Pension ('ode and the Constitution of the State of Illinois. TiPs
report will examine these plans; both those applicable to the St ate's
employees and those applicable to employees of local governmental
units. The plans will be studied with regard to their feature- resp)ect-
ing coverage, funding, financing, and fiduciary standards.
Coverage, for the purpose of this report, means the class of State
and local employees who may receive benefits under a certain plan.
The fact that employees may elect not to participate will not be
discussed, nor will requirements as to years of employment nece.sary
to participate. The coverage factor is intended to separate the ecu-
ployees of the State and local government who are covered by each
plan.
Funding, for the purpose of this report, means tlhe required contri-
butions of both the employees and the government. The definitional
scope of such contributions, i.e. the percentage of employee salaries
or the factors which determine the government's contributions, will
be discussed.
Financing, for the purpose of this report, will mean the re-ources
behind the promised governmental contributions. Included in this
determination will be whether or not the general taxing power of the
State or local government will be behind the contributions and
whether a specific directive to the appropriate officer of the State or
local unit exists, which could be enforced by writ of mandamuS.-2
The Constitution of the State of Illinois, furthermore, provides
that:
Meminhership in any pension or retirement system of the State, any unit of
local government or school district, or any agency or instrumentality thereof,
shall be an enforceable contractual relationship, the benefits of which sliall not
be diminished or impaired. Article XIII, Section 5.
The applicability of this provision to financing pension benefits,
however, is not totally clear. One commentary has asserted that the,
provision does not require "the funding of pension programs." The
2The writ of mandamus is an extraordinary jinli.ini reiPdy by which a court of com-
petent jurisdiction may command "an officer to whom it is addressed to perform some
specific duty which the relator is entitled of riEht to have iperfoirmnied and which the party
owing the duty has failed to perform." 26 Illinois Law and Practice Mandamus. Sec. 2
(1956. supp. 1974). The writ is available in the State of Illinois. 87 Ill. Rev. Stat.. Sec. 1.
Mandamus has been held available to compel the levy of a statutorily required tax, such
as is also found for the majority of local pension plans under the Illinois Pension Code.
People ex rel. ('Cahokia Unit School District No. 187 v. Ea.'t St. Louis School District No.
189, 6 I!l. App. 3d 511 (1972). It has also been found appllicablhe in the pensini li.!d. to
compel the Director of Finance of the State of Illinois to prp,'erly determine hpn.lfirt, and
contributions for a statutory pension plan. Illinois State Lmployr '. Association v. Mc-
Carter, 9 Ill. App. 3d 764 (1973). In this decision, the court noted that the statute "creat-
ing the retirement system expressly provides the manner by which the amount of State
contributions to the System are to be determined," therefore permitting a writ of
mandamus to be issued.
3 Smith-Hurd Illinois Annotated Statute.: Constitutional Commentary, State Constitu-
tion, Art. 13, Sec. 5 (1975-1976).





36


provision does, however, afford some basis for contesting the acts of
the Stato inhibiting payment of accrued benefits and rights.4
FihliciaTry standards, for the purpose of this report, are the duties
and responsibilities of the trustees of the pension plans. The general
dduties of all trustees would appear to apply to these trustees in the
;i1.-ence of special provisions.5 Such duties include the duty to exer-
cise diligence and care of a reasonable, prudent person under like cir-
(illmsta:nzes in dealing with his or her own affairs.0 Furthermore, like
,tiior trustees, the trustee of the pension plans must observe a high
-Aiidard of ethical conduct and good faith in the administration of
the trust.7 Tihe trustee, is not. however, an insurer of the corpus and
he or slhe is not liable for losses to the trust so long as good faith rea-
son ;ible prudence, care, and diligence are exercised.8 The trustee
may be liable for losses or depreciation in value of trust assets where
there is failure to act with such care or diligence, determined by the
farts and circumstances known at the time of the investmentn9
In addition to these general fiduciary requirements of trustees in
Illinois. the pension laws provide special fiduciary standards and
limitations in many cases. These will be the subject of examination in
this report: the special oaths, limitations on investment, civil sanc-
tions and criminal sanctions against retirement fund (trust) trustees.
I. Tie P(,sion Plans Applicable to Employees of the State of Illinois
There are five different pension plans applicable to employees of
the State government of Illinois. Four of the plans cover employees
of specific employers: the General Assembly Retirement System, the
State Universities Retirement System, the Teachers' Retirement Sys-
temn of tlhe State, and the Judges Retirement System of the State.
Tlhe fifth plan applies to those employees of the State of Illinois who
are not covered by the other four plans. It is the State Employees'
Pension Plan.
In consideration of the five plans certain similar features become
evident. First. both the State and the participating employees con-
tribute toward funding of each plan. The amounts contributed by
the government and employees in each plan differ, but they are all
"contributory" plans.
Second. in each pension plan the Comptroller of the State of Illinois
is ordered to issue the requisite warrants for State obligations to the
plan (benefits and contributions). The Treasurer of the State is com-
pelled by statute to pay on those warrants from the general treasury
of tlhe State. Each of these duties would appear within the scope of
a writ of mandamus.10
Tlhe pension laws of the State of Illinois are found in Chapter
101 2 of the Illinois Revised Statutes, enacted in 1963 as the Illinois
Pension Code (hereinafter, "IPC").
4 rSep. however. People ex rel. I.F.T. v. Lindberg, 60 111. 2d 266 (1975), holding that this
provision does not require a specific level of appropriations during the fiscal period for
jwnsions, and affords no hasis for attacking the Governor's veto of pension appropriations.
5 See. e.g., Wilson v. Board of Trustees of the State Universities Retirement System,
108 111. App. 2d 210 (1969), which, in dealing with the question of a wife who killed her
husband, was convicted of voluntary manslaughter, and sought survivor's benefits under
thI. State Universities Pension System, discussed the deceased and his wife In terms of
beneficiarieses" and the trustees as if trustees of an ordinary trust. (Note: she did not get
hbnofits).
S:;5 lliniois Law and Practice Trusts, Sec. 122 (1956, supp. 1974).
7Jd.
S:'.5 fimnois Law and Practice Trusts, Sec. 153 (1956, supp. 1974).
6 Id.
10, See fn. 2, supra, p. 35.





37


A. THE (;IEN'FIL\L ASSI:MBLY RI:TIIIMIINT SYSTEM
1. Coverage
The General Assembly Retirement System covers members of the
General Assembly, the President of the Senate and members of the
General Assembly temporarily in the military. IPC, Sec. 2-105.
2. Fundlig
Both the State and the covered employees contribute to fiindinc of
the General Assembly Retirement System. The covered employees are
required to contribute 7% of each "payment of salary" received after
January 10, 1973. Payments for a widows annuity are an additional
2% as are payments for widower's annuity. The officers of thie Gene ;I I
Assembly, who are given additional payments for their service. as
officers, must contribute on those additional payments as well as ordi-
nary salaries. IPC, Sec. 2-126.
The State of Illinois is required to contribute to the General As.-em-
bly Retirement System annually in am-ounts which, togetlier with tbe
contributions made and required to be made by the employees cove:.-cl
by the System, as well as interest earned on investments, will meet the
costs of maintaining the System. These costs include at lei-t the
amount to meet:
(a) actuarial requirements for such year for annuities in ex(ce,,s of the amounts
provided for by accumulated contributions of the individual retired members
and the expense of administration, (b) an amount eqii;l to the contributions
made by the members towards the automatic increase in retirement annuity, ...
and (c) to create and maiiihiin a reserve at the end of the yeir of an amount
equal to the estimated amount required to pay annuities, refunds and expeii-..s
during the succeeding year. IPC, Sec. 2-124.
3. Financing
As noted supra, p. 36, the State Treasury is the source of funds for
the General Assembly Retirement System, and use of these funds
would appear compellable by writ of mandamus.
4. Fiduciary standards
The Board of Trustees of the General Assembly Retirement System
trust are required to take an oath vowing to:
diligently and honestly administer the affairs of the system and ... not knowin-ly
violate or wilfully permit the violation of any of the provisions of this Arti-le.
IPO, Sec. 2-127.
The investments of trust funds are not conducted by the Board of
Trustees. IPC, Sec. 2-135. Rather, they are conducted by the Illinois
State Board of Investment under Article 22A of the Illinois Pension
Code.
Trustees and employees of the System are prohibited from having
any:
direct interest in the income, gains or profits of any investments made by the
board, nor shall any such person receive any pay or emolument for services in
connection with any investment. No trustee or employee of the board simll become
an endorser or surety, or in any manner an obligor for money loaned or bor-
rowed from the system. EPC, Sec. 2-152.
Violations of these prohibitions constitute "petty offijiss's". IPC, S1c.
2-152. A similar penalty attaches to a person who:
knowingly makes any false statement, or falsifies or permits to be falsified iny
record of this system, in any attempt to defraud the sy.:telm * IPC, Sec. 2-155.






38


B. STATE UNIVEW'I-TIES RETIREMENT SYSTEM
1. 6o',i 'age
'Thlie Sziato Universities Retireinent System covers presently or for-
merly employ yed members of educationala, administrative, secretarial,
cleri",..l. 'c.lhaji i(a 1. labor or otiier stall'" of certain organizations
within the State of Illinois. 1PC. Sec. 15-106. The employee must be
employed at least one-half time. IPC, Sec. 15-106. Included in the list
of orz an izat ions are:
The University of Illinois, Southlern Illinois University, the State Board of
Higher Education. the State Geological Survey, the State Natural History Sur-
vey, the State Water Survey, the University Civil Service Merit Board, the Board
of Tnristees of the State Universities Retirement System, the Illinois Junior
(0', tlt' Toi)rd, Class I junior college boards, any association of Class I junior
collh'e I,,iars org;allizet(l under Section 3-55 of the "Public Junior College Act",
tlhel Board of Governors of State Colleges and Universities, Colleges and Uni-
versif it-s governed by the Board of Gov-ernors of State Colleges and Universities,
the Board of Regents of the Regency Universities System, regency universities
governe'(ld by tlhe Board of Regents, and, for and only during the period for which
eminiloyer contributions required by this Article are paid, the following organiza-
tiois : the alumni 'si-sociations, the foundation and the athletic associations which
are attiliaited with the universities and colleges included in this Section as
EziIploy'-. IPC, Ser. 15-106.
2?. FiiH,^uq
Bothl the State and the covered employees contribute to funding of
the State Universities Retirement System. The covered employees are
requireId to contribute { 'o of each payment of earnings after Sep-
temb)er 1, 19G9, as well as an additional /2'/o to finance increased bene-
fits s required by the act. IPC, Sec. 15-175. Survivors' insurance pay-
me1lit are another 1% of earnings payments. IPC, Sec. 15-158.
The State of Illinois is required to contribute to the State Universi-
ti..s Retirement System in an amount which, in combination with
ea n i' is on the System's investments and employee contributions, will
IMIeet the estimated cost of current annuities, survivors' insurance'bene-
fits. .ostt of administration, and to accumulate assets sufficient to equal
the liability for all benefits expected to be paid to then annuitants, their
survivors, accumulated additional normal and survivors insurance con-
tributions of current participants and reasonable reserves. IPC, Sec.
15-155. Also included in the costs which must be funded by the State
are thle cost of acquisition of land and construction of an office build-
ing, ;ivortized over a period of 30 years, less annual rentals which
ofay he expected. I PC, Sec. 15-155. In no event will the contributions
of the State for a fiscal year be less than an amount required to fully
fund the current service costs with actuarial reserves as required, plus
interest on unfunded accrued liabilities. IPC, Sec. 15-155.
3. F;,,atvin.
A\< noted supra. p. 36, the State Treasury is the source of funds for
the State Universities Retirement System, and use of these funds
Aold 1 appear compellable by a vrit of mandamus. Furthermore, the
r(bqlli]'r( Stat( contributions, benefits and administrative expenses are
iimde obligationss of the State of Illinois," and may be enforced as
other olligat ions, in court. IPC,Sec. 15-156.






39


4. Fiduciary standards
The Board of Trustees of the State Universities Retirement Sys-
tem trust are required to take an oath that:
the person will diligently and honestly administer the affairs of this retire-
ment system, and will not knowingly violate or willfully permit to be violated
any of the provisions of this Article. IPC, Sec. 15-1;9.
Furthermore, while thle Board of Trustees has tlhe power to invest.
the assets and corpus of the trust, it may only invest these assets in
twelve stated types of investment:
(1) Bonds, notes and other direct obligations of the United States govern-
mentit; bonds, notes and other obligations of any United States government
instrumentality, whether or not guairanteed; and obligations the principal and
interest of which are guaranteed unconditionally by the United States
Government;
(2) Joint and several obligations of the twelve Federal Land Banks organized
pursuant to the Federal Farm Loan Act of 1916 and operating under the super-
vision of the Farm Credit Administration; and obligations of the Inter-American
Development Bank;
(3) Obligations of any state, or of any political subdivision in Illinois, or of
any county or city in any other state having a population as shown by the last
federal census of not less than 30,000 inhabitants provided that such political
subdivision is not permitted by law to become indebted in excess of 10% of the
assessed valuation of property therein and has not defaulted for a period longer
than 30 days in the payment of interest or principal on any of its general obliga-
tions or indebt( diies, during a period of 10 calendar years immediately preceding
sul'. investment;
(4) Bonds, delbentures, and other corporate obligations of any corporation
created or existing under the laws of the United States or any state, district or
territory thereof, provided there has been no default on the obl)ligations of the
corporation during the 5 years immediately preceding the purchase;
(5) Obligations guaranteed by the Government of Canada, or by any Province
of Canada, or by any Canadian city with a population of not less than 150,000
inhabitants, provided (a) they are payable in United States currency and are
exempt from any Canadian withholding tax, (b) the investment in any one
issue of bonds shall not exceed 10% and (c) the total investments at book
value in Canadian securities shall be limited to 5% of the total investment
account of the system at book value:;
(5.1) Direct obligations of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the payment
of principal and interest by the State of Israel, on the following conditions:
(a) The total investineiitts in such obligations shall not exceed 5% of the book
value of the aggregate investments owned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the date of such invt1tdnet;
(c) The bonds and interest thereon shall be payable in currency of the United
States;
(d) The bonds shall contain an option for the redemption thereof after 90
days from date of piurlIase;
(e) The investment in these obligations has been approved in writing by in-
vestment counsel employed by the board, which counsel shall be a national
or state bank or trust company authorized to do a trust business in the State of
Illinois, or an investment advisor qualified under the Federal Investment Ad-
visors Act of 1940 and registered under the Illinois Securities Act of 1953;
(f) The system making the investment shall have at least S.'5,000.000 of net
presenllt assets.
(6) Nott-s secured by mortga-igcs under Sections 203 and 207 of the National
Housizn Act which are insured by the Federal Housilng Commissioner, or his
successor or assigns, or debentures issued by such Commissioner, which are gn1ir-
m ntefd as to principal and interest by the Federal Housing Ailt i iii agencyv of the United States Government;
(7) Lonns to veterans guaranteed in whole or in part by the United States
Government pursunint. to Title III of the Act of Cirs. kniow\\ ii as the "Scrvick-
men's Readjustnentit Act of 1944," 58 Stat. 284. 38 U.S.C. 119:, ;s amended or
supplemented from time to time. provided such guaranteed loans are liens upon
real estate;






40


(S) Comnimon and preferred sti k of a bank, organized under the laws of the
United Status tir any state, which lihas capital funds, represented by capital,
siurllus and undivided profits of at least 20 million dollars;
(9) Czmtion and preferred stock of a life insurance company, organized
uhder tilt, la:.s of til United States or any state, which has capital funds, repre-
srinted by capital, special surplus funds and unassigned surplus of at least 50
million dollars;
(1(I) ('omiminon a-nd preferred stock of a fire or casualty insurance company, or
a .oinlainatiotmn thereof, organizdcl under the laws of the T'nited States or any
.-tate. wh\vlichl lias capital funds represented by capital, net surplus and voluntary
r'.-servvs. if at last 50 million dollars ;
(11) Other common and preferred stocks which are legal investments for trust
funds under the laws of thie State of Illinois. provided that (a) the stocks are
listed (on a national securities exchangeane as defined in thle Federal securities Ex-
change Act, (b) the stocks are issued or guaranteed by a corporation created
,r ,exiinig under tie laws of the U'nited States or any state, district or territory
t hereof. (c) tlhe corporal ion which issued or guaranteed the stock is not in ar-
rears on pamineent of dividends o(n its preferred stock. (d) the corporation which
i.,ued or guaranteed the stock has paid a cash dividend on its common stock
in ewlh of the 14) years ,next preceding tie date on which the stock is to be pur-
.li;l-d. and its net. earnings a available for dividends on common stock during
1i.ii pe)'id was at least equal to thle amount of the dividends paid on such
stock. (e) the total book value of all stocks owned by the system shall not ex-
.ceed 4'f' 4)1" the total book value of all investments of tlie system, (f) the book
value of stock investments in any one corporation shall not exceed 5% of the
a:nxiuniu in amount which may be invested in stock, determined as of the date of
the invest .nirrt, anid the investments in the stock of any one corporation shall
]!ut exc,.d 1"; of the total outstanding stock of such corporation, (g) the in-
-i ,1cli(,,tf in stock is approved by at least a majority of the members of the board
after having been recommended by a national or state bank or trust company
wNhich is ftntliorized to do a trust business in the State of Illinois, or an invest-
mii,.nt aldvisor who is qualified under the Federal Investment Advisors Act of
1940 and is registered under the Illinois Securities Law of 1953, (h) the preferred
stocks must be issued or guaranteed by a corporation which, for a period
5,t 5 fiscal years next preceding the d(late of investment for which the necessary
-.atistival data are available in pul)blished fiscal year statements, had average
annual net income plus average annual fixed charges at least equal to 2 times the
-nt. of its average anuimal fixed charges, and which, for the last 2 fiscal years
of such period, had annual net income plus annual fixed charges of at least 11/
lines tlw. sum of its dividend requirements for preferred stock and its fixed
charges, and (i) if tlhe corporation has acquired a substantial part of its property
\Within 10 years immediately prior to the date of the investment, by consolida-
Tinl. me(rger, purchase of all or a substantial portion of the assets of any other
co)rlporation or corporations or purchase of the assets of any unincorporated
1-isiness enterprise, the net income, fixed charges and dividends of the acquired,
1,r.Ceeceor or constituent corporation or enterprises shall be consolidated and
a(ljuisted in applying the test. set. forth in this paragraph (11) ; and
(12) Real estate acquired by purchase, gift, condemnation or otherwise, and
an office building to be constructed thereon for the use of the system at a total
c.st not to exceed $575,000. The board may lease surplus space in the building
ani is authorized to use proceeds from rental of space for operation, mainte-
iafnce and furnishing of the building. IPO, Sec. 15-167.
Furthermore, it is a Class A misdemeanor" to falsify or permit
to be falsified ainyv record or document to the pension fund in order
to defraud. IPC, Sec. 15-187.

C. TEACHERS' RETIREMENT SYSTEM OF THE STATE

1. Coverage
The mebel)ersh]ip in tlie Teachers' Retirement System of the State
of Illinois is restricted to full-time or permanently employed teach-
11 A ('lhi-..s A mli1pmrn.iannr Ik tlh most serious of misdompanors under Illinois Criminal
L:aw. ::', Ill. 10'v. Slit., S.r,7 16ii .1- 1(c)(1). Thi pe'nalty is generally between one year
amid six months, impri.sonment. 3, 111. Rev. Stnat., Sec. 1005-5-2(b) (1).








ers, teacher-secretaries, substitute teachers, supervisors, principals,
supervising principals, business manager., school nu-rss, or librarians
teaching in the public common schools, as well as:
(b) Any teacher, teacher-clerk, principal, supervisor, Sliervi-iing printiIilw,
superintendent or assistant superintendent. and any certified libr;irian or i::--
taut librarian employed in the Illinois Braille and Sight Saving Schlol, te
Illinois School for the Deaf, the Illinois State Traiiing Sc.lol for Boys, the
Illinois State Training School for Girls, the Lincoln State School, tt,,
Dixon State School, the Illinois Soldiers' and Sailors, Chil'lren's School,
the Illinois Visually Handicapped Institute, the Illin,,is ChildreIn's H,:-
pital-School, or in any other facility of the Department of Mental Health
or the Department of Children and Family Services, the Illinois Indus-
trial School for Boys, or in any other facility of the Diliartment of Correction<,
the State Reformatory for Women, or the Illinois State Penitenti:iryv. or in
any facility of the Department of COrrections-Adult Division aind tle I).1,irt-
mient of Corrections-Juvenile Division on a full-timie basis, or if not full-time
(in a permanent and continuous basis in a p,,.i4tioni in which -ervices are ex-
lected to be rendered for at least one school year, and who is either certificat'-l
under the law governing the certification of teachers or a contributor to or ,pw-
ticipant in the "State Institution Teichers' Pension and Retirement Fund" at
some time during the year immediately preceding September 1, 1941;
(c) Any superintendent of an educational service region, assistant superin-
tendent. of an educational service region, Superintendent of Public IJ-t41rlction :
any person employed in the office of the Superintendent of Public Instruction as
an executive; any executive of the boards engaged in the service of public com-
mon school education in school districts within this system of which the Superin-
tendent of Public Instruction is an ex-officio officer;
(d) Any qualified psychological examiner who holds a valid permit under
Section 14-1.09 of The School Code and who works with children in public school
programs authorized by Sections 14-1.01 through 14-1.10 of The School Code;
(e) Any employee of a school board association operating in compliance with
Article 23 of the School Code who is certified under the law governing the
certification of teachers;
(f) Any school nurse described in paragraph (d) of Section 7-137 of Article
7 of this Code, electing in accordance with that section to become a member of
this system;
(g) Any teacher, dean or president, of a Class II junior cole and any
professional associates and advisors employed in the office of such dean or presi-
dent, any testing officer, counselor, librarian, or person performing the duties of a
testing officer, counselor or librarian in Class II junior colleges who is certified
under the law governing the certification of teachers;
(h) Any person employed by the Retirement System as an executive who is
certified under the law governing the certification of teachers; and
(i) Any director, supervisor, instructor, counselor, project writer or other
professional personnel employed on a full-time basis or if not full-time on a per-
manent and continuous basis in a position in which services are expected to be
rendered for at least one school year, by and under the supervision and control of
a superintendent of an educational service region, provided such employment
requires the employee to be certified under the law governing the certification
of teachers and is in an educational program serving 2 or more districts in ac-
cordance with a joint agreement authorized by the Illinois School Code or an
educational program conducted by the superintendent of an educational service
region in conformity with Federal legislation authorizing such programs. IPC,
Sec. 16-106
2. Funding
The State and the covered employees both contribute to funding the
Teachers' Retirement System of the State of Illinois. The covered em-
ployees are required to contribute 61/21% of their salary payments for
each year after June 30, 1971. An additional 1%c contribution is re-
quired where survivors' benefits are desired. IPC, Sees. 16-152,
16-153.


g5-101-76-4





42


Thle State contributes. out of the common school funds and other
fuind-,. enough to meet the obligations for the next. fiscal year. IPC,
Sec. 1W-15s. The a mount estimated is actuarially determined to meet:
tih State costs for retirement allowances and benefits earned by the members
dtirinig the fiscal year, including regular interest on any State obligation at the
lIzintiniig 4f thle year for the cost of benefits, retirement allowances and benefits
earned in prior years and not previously provided by State contributions. IPC,
Sec.. 16-15.")
This amount contributed by the State may not be less than 1.2. multi-
plieId by tlhe contributions of the members of the plan. IPC, Sec.
1 ;-1.I)S.
3. F!),,o )ig(
As noted ..npra., p. 4, the State Treasury is the source of funds for
the Teachers' Retirenient System, and use of these funds would appear
coml elIal ble by writ of mandamus. Furthermore, the required State
contributions are male "obligations of the State of Illinois." IPC,
Sc.,. 1G162.
4. Fi/c;,; I/r standards
Members of the Board of Trustees of the State Teachers' Retirement
SvstUmii are required to take, an oath to "diligently and honestly admin-
ister the affairs of this" plan. Furthermore, they must swear that they
wvill not "knowingly violate or wilfully permit to be violated any of
the provisions of law applicable to the retireiiient systeil." IPC, Sec.
16-166.
The investment power of the Board of Trustees is furthermore
limit ed by stat ute. They may invest assets of the trust only in the listed
typi's of invest mient:
Laiis upiiion real estate shall be secured by first mortgage and shall not exceed
401" if tlhe value of the realty as fixed by expert appraisal. The board may hold,
assign, or sll any of the securities and investments of the system, as well as the
proceed(ls of investments and any moneys belonging to the system. When the board
determiniies upon the investment of any moneys or upon the conversion or sale of
any securities, it shall, by resolution duly adopted by a majority vote of the board
nwiii ei-rs. direct the custodian to so invest the moneys or convert or sell the
seci. nit ihs,.
The Ba;ird mlay also invest and reinvest the reserves as follows:
1. lRndls. or other obligations which are payable from revenue or earnings
silecitically pledged therefore of a public utility in Illinois which is municipally
i, ried fitlh.r directly or indirectly through any civil division, authority or public
itr-u,-ninthility of the municipality, provided:
(a) the muniicipality has at least 2,500 inhabitants;
(b) the utility laas been in operation in its present form for at least 7 years prior
to i lie date of inve.stinents;
(c) ,onds or obligations of such utility have not been in default for any period
l(onI.er than .30 days;
(d) the rates for service are fixed and maintained and collected at all times so
as to Iprdluee sufficient re-venue or earnings to pay all operating and maintenance
c.ia- re- anid both the principal and interest on such bonds or obligations;
(e) the invest nent in any one issue of such bonds does not exceed 25% of such
is -I I( ;
(f) the total investment, in these types of security does not exceed 15% of the
total invest i.ents owned by the system.
2. Bonds or other obligations which are payable from revenue or earnings
splecitically pledged therefore of a public utility outside of the State of Illinois
wlici is federally or municipally owned either directly or indirectly through any
civil division, authority or public instrumentality, provided:
(a) the inunicipaility has at least 30,000 inhabitants;






43


(b) the utility has been in operation for at least 10 years prior to the date of
investment;
(c) bonds or other obligations of such utility have not been in default for any
period longer than 30 days;
(d) the rates for service are fixed and maintained and collected at all times so
as to produce sufficient revenue or earnings to pay all operating and maintenance
chare.s and both the principal and interest on such bonds or obligations;
(e) the investment in any one issue of such bonds does not exceed 15% of such
issue, and that the total investment in this type of security dues not exceed 10%
of the total investments of the system.
3. Revenue bonds issued by the University of Illinois, or any school, department
or division thereof, Southern Illinois University, Illinois State Normal Univer-
sity, Eastern Illinois Unive.rsity, Northern Illinois University, and Western Illi-
nois University, provided that the investment in any single issue of such bonds
shall not exceed 15% of such issue, nor shall the total amount of bonds of this
type exceed 5% of the total investments of the system.
4. Obligations guaranteed by the Government of the Dominion of Canada, or
by any pr,,vinice of Canada. or by any Canadian city with population of not less
tlm ln 150,000 inhabitants, provided:
(a) they are payable in United States currency;
(b) that the investment in any one issue of bonds does not exceed 10% of an
issue; and
(c) the total investments in Canadiazn securities shall be limited to 5% of the
total investment account of the system.
5. Bonds or other obligations of the Commonwealth of Puerto Rico, provided
that the investment in any one issue of bonds thereof does not exceed 10%, and
that the total investment in all securities of the said Commonwealth of Puerto
Rico shall be limited to 2% of the total investment account of the system.
(5.1) Direct obligations of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the payment of
principal and interest by the State of Israel, on the following conditions:
(a) The total investments in such obligations shall not exceed 5% of the book
value of the aggregate investments owned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the date of such investment;
(c) The bonds and interest thereon shall be payable in currency of the United
States;:
(d) The bonds liall contain an option for the redemption thereof after 90 days
from date of purchase;
(e) The investment in these obligations has been approved in writing by invest-
ment counsel employed by the board, which counsel shall be a national or state
ilank or trust company authorized to do a trust business in the State of Illinois,
or an investment advisor qualified under the Federal Investment Advisors Act of
1940 and registered under the Illinois Seci cities Act of 1953;
(f) The system making the investment shall have at least $5,000,000 of net
assets.
6. Bonds, debentures or other evidences of indebtedness (including railroad
equipment trust certificates) of any corporation created or existing under the laws
of the United States or any state, district or territory thereof.
7. Common and preferred stocks which are legal investments for trust funds
under the laws of this state, provided:
(a) the stocks are listed on a national securities exchange as defined in the
Federal Securities Exchange Act;
(b) the stocks are issued or guaranteed by a corporation credited or existing
under the laws of the United States pr any state, district or territory thereof;
(c) the corporation which issued or guaranteed the stock is not in arrears on
p:iyment of dividends on its preferred stock;
(d) the corporation which issued or guaranteed the stock has paid a cash
dividend on its common stock in each of the 10 years next preceding the late on
which the stock is to be purchased, and its net earnings available for dividends on
common stock during this period were at least equal to the amount of the
dividends paid( on such stock ;
(e) the total book value of all stocks owned by the System shall not exceed 40
percent of the total book value of all investments of the System ;
(f) the book value of stock investments in any one corporation shall not exceed
5 percent of the maximum amount which may be invested in stocks, dletermnined
as of the date of the investment, and the investments in the stock of any one





44


corporation shall not exceed 1 percent of the total outstanding stock of such
corporation ;
(g) the investment in stock is approved by at least 3 of the members of the
board after having been recommended in writing by a national or state bank or
trust company which is authorized to do a trust business in the State of Illinois
and is emrployed by the board as agent or corporate trustee; and
(h) the preferred stocks must be issued or guaranteed by a corporation which,
for a period of 5 fiscal years next preceding the date of investment for which the
necessary statistical data are available in published fiscal year statements, had
aivrage annual net .'.ome plus average annual fixed charges at least equal to 2
times thesum of its ; ,-erage annual fixed charges, and which, for the last 2 fiscal
years of such period, had annual net income plus annual fixed charges of at least
1.2 times the sum of its dividend requirements for preferred stock and its fixed
('ha rges.
S. 4Uliiations of the International Bank for Reconstruction and Development.
9. Obligations of the Inter-Amierican Development Bank.
10. Unlisted Common Stocks (other than mutual funds) or the following types
of institutions whose securities are not listed on any such securities exchange:
(a) any hank which is a member of the Federal Deposit Insurance Corporation
having capital funds represented by capital stock, surplus and undivided profits
o(if at least ,$20.NJ0,O)0; (b) any life insurance company having capital funds
represented by capital stock, special surplus funds and unassigned surplus
totalling at least $50.000.(000; and (c) any fire or casualty insurance company, or
a combination thereof, having capital funds represented by capital stock, net
surplus and voluntary reserves of at least $50,000.000.
For the purpose of this section, fixed charges shall mean interest on funded or
unfunded debt and contingent interest charges. IPC, Sec. 16-179.
Thei limitations on investment of the assets of the Trust bv the Board
of Trustees are only to apply at the time of purchase of the particular
asset and 'shall not require liquidation of any investment at that
time." IPC, Sec. 16-179. This would appear to preclude purchase of
the prohibited types of assets, but once purchased, there can be no
forced liquidation of assets.
The Board of Trustees of the plan may invest the funds of the plan
in andl comminigde with. the investment funds under the Illinois Board
of Investment, organized under IPC, Article 22A. IPC, Sec. 16-179.1.
The book value of all commingled funds may not exceed the equity
value of funds permitted invested under IPC, Sece. 16-179, i.e. 40%
of the book value of all investments of the system.
It is a Class A misdemeanor for any trustee, member, employee or
person on the Board of Trustees to:
knowingly make * any fnilse statement or falsifies or permits to be falsified
any record of this retirement system in any attempt to defraud such system as a
result of such act, or intentionally or knowingly defraud * this retirement sys-
tem inany manner * IPC, Sec. 16-19S.

D. JUDGES RETIREMENT SYSTEM OF ILLINOTS
1. (Coreraqe
The Judges Retirement System of the State of Illinois extends its
coverage to judges of tlhe various State courts, police magistrates,
masters in chancery and civil referees of the Municipal Courts of Chi-
cago. IPC, Sec. 18-112. It also covers any person who is paid for per-
sonal services as the administrative director appointed by the Supreme
Court and who had previously been a participant in the plan. IPC,
Sec. 18-108. The State courts covered by the plan are the Supreme
Court. Appellate Court and Circuit Court, and the Court of Claims (to
the extent that the judges of the latter are not covered by the general
employees' pension plan). IPC, Sec. 18-107.






45


2. Funding
The judges covered by the plan and the St aite of Illinois both con-
tribute to funding the Judges Retirement System. The covered em-
ployees are required to contribute, after 1967, 71/% of their pay-
ments of salary for the basic pension annuity. IPC, Sec. 18-133.
Widows' annuities are another 21/2% of each salary payment, after
July 12,1953. IPC, Sec. 19-34.
The State of Illinois is required to contribute an annual appropria-
tion which, when combined with the employee contributions, will pro-
vide sufficient funds to:
meet the costs of maintaining this system in accordance with the following method
of funding:
The State's contribution applicable to any fiscal year shall be the sum of (1)
the amounts estimated to be required, on the hasis of the actuarial tables adopted
by the Board ... for annuities during the year in excess of the accumulated con-
tributions of the judges retired during the year; plus (2) the estimated expenses
(if administration for the year; or (3) an amount equal to the ret ireimeiit annuity
and widow's annuity contributions of the participants during the year and the
estimated amount required to pay all annuities and expenses for the succeeding
year. IPC, Sec. 18-131.
3. Financing
As noted supra, p. 36, the State Treasury is the source of funds for
the Judges Retirement System of the State of Illinois, and use of these
funds to pay benefits would appear compellable by writ of mandamus.
Furthermore, the State's required payments for benefits and admin-
istrative expenses of the plan are made "obligations of the State". IPC,
Sees. 18-153, 18-132.
4. Fiduci.ary standards
The Board of Trustees of the Judges Retirement System of the
State of Illinois are required to swear an oath that they will "diligently
and honestly administer the affairs of the retirement system, and will
not knowingly violate or wilfully permit to be violated any of the pro-
visions of this Article." IPC, Sec. 18-135.
The trustees do not invest the assets of the Judges Retirement Sys-
tem of the State of Illinois. Rather, this function is transferred to the
Illinois State Board of Investment, organized under IPC, Article 22A.
IPC, Sec. 18-141.
No trustee or employee of the Board of Trustees may have any di-
rect interest in:
income, gains or profits, of any investments made by the board, nor shall he re-
ceive any pay or emolument for services in connection with any investment. No
such trustee or employee shall become an endorser or surety, or in any manner
an obligor for money loaned or borrowed from the system. IPC, Sec. 18-159.
Violation of this prohibition against direct conflict of interest con-
stitutes a "petty offense." 12
It is a Class A misdemeanor for an individual to knowingly make
any "false statement, or falsify or permit,... to be falsified any record
of this system, in any attempt to defraud." IPC, Sec. 18-162.
12 "Petty Offense" is defined by the Illinois criminal laws as the least serious of criminal
offenses, usually punished by a "period of conditional discharge" and/or a fine. 38 ll. Rev.
Star., Sees. 1005-5-1; 1005-3-3(f).





46


E. S AI'.VI' i-':M 'lI, Y l'v 'I1 :NSh1N PL.\N
1. ( < i,,1
Te Slt:ite Emplloyees' Retirelment System of the State of Illinois
extdill- coveragie to i1yv "legllar la. iassifIed or ,nilt-1l:.S.itied ofli4cer or
tep(lAove" of tii, Statt'. 1paid to ,furilisli pr'sonlal services. "I'lie statute
dlefi i-es ipI)lOI)Y 1i'ilt inl ternis of the ele'llients of receipt of a salary, in
returi for p1el-s11')al m'er\ iceS. re' idered to tlo e State, paid4 on a warrant
of ti l Delpalrtmieinlt or tfro in elected or duly aippointedl officer of the
State. drawn by tlie State Comptroller upiI the State Treasurer, in a
l,,).-itioln noarlly reqiiirig ;it least. 900 work liotiurs per year. IPC,
S'c,. 14-110'. This plin includes "a person elected to a State office or as
:a cl,'k of the Appellate Conit . ." as long as tfiat individual so elects
,i.,ilWr-hriiI) in l!,ie plain. 1PC, Sec. 14-143.
Tli.' term I"D)epartnc t" t .sed al ove is defined to include
Any deplrtiii'iit. institution, board, canmnission, officer, court (ir any agency
of the Strate r'ceivinig State apipruopriations a. d halingi ixiwver to certify piay-
rxnolk to tl.e Sr.ate Cminitr',ller authorizing payments 4if salary or wages against
such aplpi State .1iiilV(.yees not f Ir irutit. association or organization herein referred to as a
State enipliyces asso4.iati,1n which laas as its niemilrshil limited to State em-
p1lhyees and n1iniliers of a Siate retirement system so long as such State employees
association maki,.es ,-,ntrilbutions ,,in leli]lf of its employees the amounts required
by this Article to be made by emniployees. and by the State as determined by the
board of trustees, except those departments included under the term "Employer"
in the State L'niversities Retireenit System. IPC, Sec. 14-107.
Spt,'cifiaallyv excluded from the term "employee" for purposes of the
State Elmployees.' Retiremient System are members of the State Legris-
lature. inci nilenl ts of offices elected by vote of less thaii thle entire
State (and including clerks of the Appellate Court within the plans),
: )pointees of the Governor under the Civil Admninistrative Code.
unless tifie individual elects coverage. Judges of a court of record or
leer,,ins revceiving1 pensions under the Judges Retirement System, per-
sons covered by or eli-ril)le for coverage under the Teachers' Retire-
meit Sv:ten, the State iniversities' Systemn. or the Judges Retire-
nient System of Illinois, or employees of municipalities or subdivisions
of the State. IPC, See. 14-108.
2. Fnrldr,9
poth the State and the covered employees contribute to the funding
of tlhe Eniplovees' Retirement System. The employees covered con-
trilobite 11 i. of earnable co ,pe ).sation after 1971. Policepersons and
firepersons contril)te at a rate of 7r. An additional contribution is
reNiiiredi for survivors' benefits (1 Y) and for service retirement
allow ,.nces (( (; ).' IPC. Sec. 14-171.
Tlhe State ,",nt'ibutes an i mount annually which, together with
mel(.m.iers contributionss interest i necolie fronii investiiielits and otlier
incoiie of tl-e system, is sufficient to meet the costs of "maintaining
and,1 adlmIinisteri'nir the systeiii on a funded basis in accordance with
actuarial re.-erve requirements." IPC. Sec. 14-169. Tlhe State contri-
bitionls mnist e(qlal at !,.-as; te anmi u; l averagre of the projected ex-
pe1iditiures over the next 10 years for purposes of:
(1) State annuity; (2) prior pricee annuity; (3) the part of reversionary
annuity (derived frilin other than accumulated contributions; (4) death benefit
except ac'inumula ted contributions or any part thereof: (5) survivors annuity;
(6) ordinary disability benefit; (7) accidental disability benefit; (8) acci-





47


dental death benefit except that part consisting of accimiulated contributions;
(9) widow's annuity except that part c oisisting of employee contributions there-
for, and (10) administration expense * *. IPC, See. 14-169.
The computation of annual expenditure shall also consider factors
of probable future retirements, death, interest earnings, and eiiiplo-
ment turnover. Furthermore, excess contributions will be credited to
a contingent reserve for accrued and accruing liabilities of the .-t lim.
IPC, Sec. 14-169.
The annual contributions from both the trust funds and Fed(eral
moneys are the aforementioned amounts, less expenditures for ad-
ministration, computed in ratio of the total members to be paid bene-
fits to the total covered for forthcoming years. Tl.hese figures may not
be varied from the statutory computations.13
With regard to the Illinois State Toll Highway Conmmission. aind
its employees, contributions by the State are made by the C(oiiniiss iol
in an amount to provide actuarial reserves and full funded require-
ments. IPC, Sec. 14-169.
3. Financing
As noted supra, page 36, the State Treasury is the source of funds for
the Employees' Retirement System and use of these funds to pay
benefits would appeal r compellable by writ of mandamus.
Furthermore, thlie State's required payments for annuities, bene-
fits, allowances and expenses of administration are "obligltioiis of tlhe
State." IPC, Sec. 14-170.
4. Fiduciary standards
The Trustees of the system must take an oath not to "knowingly
violate or wilfully p)ermnit the violation of any of the provisions of
law applicable to the system," and that they will "diligently and
honestly administer the affairs of the system." IPC, Sec. 14-172.
The investment function with regard to funds of the Employees'
Retirement System is conducted by the Illinois State Board of In-
vestment, not the Board of Trustees of the System. IPC, Sec. 14-179.
Furthermore, no trustee or employee of the Boarid is permitted to
have any direct interest in:
the income, gains or profits of any investments made by the board, nor shl:ill any
such person receive any pay or emolument for services in connection with any
investment. No trustee or employee of the board shall become an endorser or
surety or in any manner an obligor for money loaned by or borrowed from the
system. IPC, Sec. 14-194.
Violations of these prohibitions constitute petty offenses.
It is a Class A misdemeanor for any person to knowingly make a
false statement or falsify a record of the Employees' Retirement Sys-
tem with intent to defraud the System. IPC, Sec. 14-198.
II. The Plans Applicable to Employees of Local Goveenments
The State of Illinois has established a number of pension plans for
employees of the local governmental units as well as plans for State
employees. Furthermore, it would appear that there is one legal non-
statutory pension plan for local government units: the plan of tihe
Chicago Transit Authority. This second part of the report will discuss
these plans and their requirements with regard to coverage, funding,
financing, and fiduciary standards. Again, where there is no abroga t -
13 Illinois State Employiees' A..v 'iation v. 1ALcCarter, 9 111. App. 3d 764 (1973).





48


ing or amendlatory statute, the general State law on fiduciary stand-
ards and criminal sanctions enforcing such laws would appear
applicable.14

A. STATUTORY PLANS FOR LOCAL EMPLOYEES
Under thle Illinois Pension Code there are thirteen major pension
progr'azni for local employees: the Policemen's Pension Fund (Munici-
p)alities ,j()0.000 and Under); the Firemen's Annuity and Benefit Fund
(Cities over 500.000); the Firemen's Pension Fund (Municipalities
.1(0H1)() and Under); the Policemen's Annuity and Benefit Fund
((C'ities 50.000 and Over) ; the Illinois Municipal Retirement Fund;
the Municipal Employees', Officers', and Officials' Annuity and Benefit
Fund (Cities over 500,000 Inhabitants) ; the County Employees' and
Officiers' Annuity and Benefit Fund (Counties over 500,000 Inhabi-
tants) ; tlhe Forest Preserve District Employees' Annuity and Benefit
Fund; the Laborers' and Retirement Board Employees' Annuity and
Benefit Fund (Cities over 500,00 Inhabitants); the Park Employees'
; Rd Retirement Board Employees' Annuity and Benefit. Fund (Cities
over 500,000); tlhe Sanitary District Employees' and Trustees" An-
nuitv and Benefit Fund; the Public School Teachers' Pension and
Reti'ren.iint Fund (Cities over 500.000 Inhabitants); and the Closed
Funds (for House of Correction Employees and Public Library
Employees).
1. Policemen's Pension Fund (municipalities 500,000 and under)
a. Co'rerage
The Policemen's Pension Fund covers all "policemen" employed by
municipalities, including "any city, village, or incorporated town of
not. less than 5,000 nor more than 500,000 inhabitants," as determined
fromni the latest United States census survey. Towns of less than 5,000
inLhabitants may bring their policemen under this fund by referendum.
The definition of "policeman" for the purposes of the Policemen's
Pension Fund is any person who:
(a) is heretofore or hereafter appointed to the police force of a police depart-
ment andl sworn and commissioned to perform police duties; and (b) is found upon
examinationn of a duly licensed physician or physicians selected by the Board to
-e physically and mentally fit to perform the duties of a policeman; and (c)
within :3 months after receiving his first appointment, and if reappointed, within
:8 months the-reafter, makes written application to the board to come.under the
provisions of this Article. IPC, Sec. 3-106.
The definition of policeman notwithstanding, certain individuals may
not become members of the Policemen's Pension Fund or be covered
thereunder. Included therein are certain policemen who, as of July 1,
1963, are at least 36 years of age and have served as policemen for at
least. 25 years. as well as:
Part-time policemen. special policemen, night watchmen, temporary employees,
traffic guards or so-called auxiliary policemen specially appointed to aid or di-
rect traffic at or near schools or public functions, or to aid in civil defense, mu-
nicipal parking lot attendants, clerks or other civilian employees of a police
department who perform clerical duties exclusively * IPC, Sec. 3-109.
b. Funding
Policemen contributing to the Policemen's Pension Fund must con-
tribute 7 c% of their salary after 1971. "Salary" for purposes of plan
16 See supra, fns. 4 and 5, at 36.





49


contributions, includes only the annual salaries, and excludes overtime
pay, holiday pay, bonus or merit pay. IPC, Sec. 3-125 (2).
The local governments whose policemen are covered by the Police-
men's Pension Fund are required by the State to contribute to funding
of the fund. Their contributions are in an amount which, when added
to the members contributions and all other receipts of the fund, will
meet the "annual requirements of the police pension fund." IPC, Sec.
3-125. A reserve is also required to be established by the Board of
Trustees of the Policemen's Pension Fund in an amount not less than
$10,000 for each policeman and beneficiary in each municipality.
This is to be from municipality contributions as well as employee
contributions.
C. Financing
The city council or board of trustees of the municipality whose em-
ployees are covered by the Policemen's Pension Fund must finance
their contributions by an annual property tax. IPC, Sec. 3-125. The
tax must be sufficient to fund the plan's annual requirements and to
provide the required reserve fund. IPC, Sec. 3-125. The tax shall be
levied and collected in the same manner, and additional to, any other
general taxes of the municipality. IPC, Sec. 3-125.
d. Fiduciary standards
The Trustees of the Board of Trustees of the Policemen's Pension
Fund are limited in their ability to invest the assets of the fund. They
may invest such assets only in:
Interest bearing bonds or tax anticipation warrants of the United States, of
the State of Illinois, or of any county, township or municipal corporation of the
State of Illinois; insured withdrawable capital accounts of State chartered sav-
ings and loan associations; insured withdrawable capital accounts of federal
chartered federal savings aand loan associations if the withdrawable capital ac-
counts 'are insured by the Federal Savings and Loan Insurance Corporation; and
in savings accounts or certificates of deposit of a national or State bank. All sec-
urities shall be deposited with the treasurer of the municipality, and be subject
to the order of the Board. Interest on such investments shall be credited to the
account of the pension fund. IPC, Sec. 3-135.
No other specific provisions of the applicable section of the Illinois
Pension Code regulate the fiduciary standards of the Board of Trustees
of the Policemen's Pension Fund.
2. Firemen's Pension Fund municipalitiess 500,000 and under)
a. Coverage
The employees of the full-time, paid fire department of any city,
township, village, or incorporated town of not less than 5,000 nor more
than 500,000 inhabitants, by the latest United States census, may be
covered by the Firemen's Pension Fund. Electing towns of less than
5,000 inhabitants but with a paid full-time fire department may also
be covered, as may be firemen of any fire protection district with a
full-time fire department.
The term "firemen" for the purposes of the Firemen's Pension Fund,
is defined to include:
(a) Any person who on July 11, 1919, was entitled to benefits of "An Act to
create a Board of Trustees of the firemen's pension fund; to provide and dis-
tribute such fund for the pensioning of disabled firemen, and the widows and
minor children of deceased firemen ....





50


(b) In cities which have adopted "An Act to regulate the civil service of cities",
approved March 20. 18115. as amended, any person who has been or may be ap-
iinted to any position classified by the civil service commission of such city, in
the tire service of such city ; and
(c) In municipalities which have not adopted the Civil Service Act . any
plirson whoq has lbeen or may lie appointed to any fulltime position in the fire de-
lpartnut-nt or service of such municipality ; and
(d ) Any pversoli whoi would have been included as a fireman under sub-para-
grlphls. (b) or (c) above except that he served as a de facto and not as a de jure
lirminan. IPC, Sec. 4-106.
b. Funding
Both the miunicipality and the covered firemen contribute to the
finding of tlhe Firvemnen's Pension Fund. The covered employees are re-
q iirvd to contribute 5% of their salary for years after 1947. IPC. Sec.
4-124.
The applicable municipality is required to contribute an amount
whicli, in conjunction with other receipts of the fund (including fines
for violations of the fire ordinances of the municipality), will suffice
to:
(1) nimeet the annual requirements of the pension fund; and
(2) pIrovide actuarial reserves for the annuities and benefits to be earned by
the lirvmen during the year, and said actuarial reserve requirements shall be
coiminited at a rate of not less than 17.5% of the salaries and wages to be paid
to the firemen for the ensuing year; and
(3) Provide for the amortization of the unfunded accrued liabilities, including
li;bllitie-. on account of pensions and benefits in force at such d(late, as determined
:1s of De,.emner 31. 1966. by the Pension Division of the Department of Insur-
ance over a period of 40 years from such d(late using an interest rate assumnp-
tion of 4" per annum. IPC, Sec. 4-118.
c. Fianichig
The municipal contributions to the plan's fund are financed by a
compulsory property tax on all taxable property within the jurisdic-
tion. The tax must be levied and collected in addition to other general
taxes and in the same manner as other general taxes. IPC, Sec. 4-118.
d. Fiduciary standards
The monies collected by the special tax levied by the city are to be
kept in a segregated fund. IPC, Sec. 4-118. Furthermore, the Board of
Trustees of the Firemen's Pension Fund are restricted in their ability
to invest the fund's assets (reserves), to:
interest bearing bonds of the United States, or of the State of Illinois, or of any
county, city, township, village, incorporated town, municipal corporation or school
district in this State; or in tax anticipation warrants issued by any city, town-
ship. village, incorporated town, or fire protection district included within this
Article; insured withdrawable capital accounts of State chartered savings and
lo.an associations; insured withdrawable capital accounts of federal chartered
federal savings and loan associations if the withdrawable capital accounts are
insured by the Federal Savings and Loan Insurance Corporation; and in savings
accounts or certificates of deposit of a national or State bank. Bonds purchased
hpreunler shall be registered in the name of the Board. IPO, Sec. 4-128.
J. Pol;, e:m n,'s Annuity and Brnefit Fudl (cities over 500,00)
n7. Coverage
The Policemen's Annuity and Benefit Fund (PABF) covers police-
men employed by cities of 500,000 or more inhabitants. IPC, Sec.
5-101. The Code also defines "policemen," for the purposes of the
PABF, to include:







(a) An employee in the regularly constituted police d-partmeiit of a city
appointed and sworn or designated by law as a peace officer with the title of
policeman, policewoman, chief surgeon, police surgeon, police dog ca teller, police
kennelman, police matron, and members of the police force of the police depaIrt-
ment; and
(b) An employee as defined in sub-paragralph (a) immediately above who is
serving in the regularly constituted police department of a city in a rank or posi-
tion which is exempt from civil service and who, immediately prior to the time
he began such service, was a participant in the Policemen's Ainuity and Bene-
fit Fund Act; and
(c) Any policeman of a park district transferred to the employment of a city
under the "Exchange of Functions Act of 1957." IPC, Sec. 5-10).
b. Funding
Both the cities involved and the employees covered under tlhe PABF
must contribute to its funding. The covered employees are required to
contribute 7% of their annual salaries to the fund for age and -alary
annuities. IPC, Sec. 5-169. They must, furthermore, contribute an
additional 1% of their salaries if they desire widow's or widower's an-
nuities. IPC, Sec. 5-170. After 1962, to defray the cost of ordinary
death benefits each policeman must, in addition, contribute $2.50 per
month of active duty to the fund. IPC, Sec. 5-171.
The cities must contribute 9 5/7% of the salaries of the employees
covered by the plan. IPC, Sec. 5-169. Furthermore, the cities must
contribute 2% of the employees' salaries to cover elected employees'
choices for survivors' benefits. IPC, Sec. 5-170. The city, in addition,
shall contribute an annual sum of $224,000 to defray the costs of ordi-
nary death benefits. IPC, Sec. 5-170. When a policeman receives duty
disability benefits the city must contribute, in lieu of salary deductions,
the equivalent amount. IPC, Sec. 5-172. Similar contributions are re-
quired for ordinary contributions of policemen receiving ordinary dis-
ability benefits. IPC, Sec. 5-173. The maximum a city under the fund
may be required to contribute is $9,700,000 times the proper factor for
that year (the factor for 1974 was 1.90, and for 1975 it is 1.97). IPC,
Sec. 5-168.
c. Finanicing
The cities covered by the PABF must levy an annual general prop-
erty tax to pay the amounts required by the Illinois Pension Code.
IPC, Sec. 5-168. The tax must be general, and must be additional and
levied and collected as other general taxes. IPC, Sec. 5-168.
d. Fiduciary Standards
The Board of Trustees of the Policeman's Annuity and Benefit Fund
are restricted in their investment of funds of the pension. They may
only invest in certain statutorily delineated funds, to wit:
(a) Interest bearing bonds, notes or bills of the United States or obligations
fully guaranteed as to the payment of bth 1)ricipal and interest by the United
States. or interest bearing bonds of the State of Illinois, or of any county, city,
village, incorporated town, municipal corporation or school district in this state.
(b) Tax anticipation warrants issued by the State of Illinois, or the city
in which such annuity and benefit fund is operating, or of the county in which
such city is located, or of any school district within such city, or of any annuity
and benefit fund, annuity and retirement fund, or any pension fund now or
hereafter in operation in such city.
(c) Revenue bonds issued by the University of Illinois, or any school, depart-
ment or division thereof, or in any university owned by the State of Illinois, or
any school department or division thereof, provided that the investment in any
single issue of such bonds shall not exceed 13.% of such issue, nor shall the total
amount of bonds of this type exceed, ajt any time, 5% of the total investments of
the fund.





52

(d) Boids or other evidence, of indebtedness of any public utility corporation,
and bonds or other evidences of indebtedness of any industrial or financial corpo-
ration including certificates of deposit issued by a national or State bank or
trust conil ilny authorized to do business in the State of Illinois, provided interest
has been paid by the corporation on its indebtedness for at least 5 years last
Mpast. Not more than 1%C of total investments shall consist of any one issue of
these bnmids or certificates of deposit. Such securities other than certificates of
deposit shall be of corporations in one of the states of the United States of
America.
(e) Interest bearing general obligations, payable from unlimited ad valorem
taxes, of any other state in the United States, or the political subdivisions of any
.uic state having a population over 30,000 as shown by the latest official census
of the United States Census Bureau, which has not defaulted in the payment of
iprinc('ilpal or interest on any of such general obligations for more than 30 days in
the 10) years next preceding date of such investment.
(f) Obligations of the twelve Federal Land Banks and the Inter-American
Development Bank.
(g) Bonds of the International Bank for Reconstruction and Development
which are direct and unsecured obligations of the Bank, provided that the invest-
ment in any one iscue of these bonds shall not exceed 1% thereof, and that the
total investments in such luinds shall be limited to 5% of the total amount of in-
vestments owned by the fund.
(h) Direct obligations of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the payment of
principal and interest by the State of Israel. on the following conditions:
1. The total investments in such obligations shall not exceed 5% of the book
value of the aggregate investments owned by the fund;
2. The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the date of such investment;
3. The bonds and interest thereon shall be payable in currency of the United
States;
4. The bonds shall contain an option for the redemption thereof after 90 days
from date of purchase ;
5. The investment in these obligations has been approved in writing by invest-
ment, counsel employed by the board, which counsel shall be a national or state
bank or trust company authorized to do a trust business in the State of Illinois. or
an investment advisor qualified under the Federal Investment Advisors Act of
1940 and registered under the Illinois Securities Act of 1953;
6. The fund makiI" the investment shall have at least $5,000,000 of net present
assets.
(i) Common or preferred stocks, which are legal investments for trust funds
under laws of the State of Illinois, subject to the following conditions and limita-
tions:
(a) The stocks are listed on a national securities exchange as defined in the
Federal Securities Exchange Act;
(b) The stocks are issued or guaranteed by a corporation created or existing
under thle laws of the United States. or any State. district or territory thereof;
(c) The corporation which issued or guaranteed the stock has paid a cash
dividend on its common stock in each of the 10 years next preceding the date on
which thle stock is to be purchased, and its net earnings available for dividends on
common stock during this period was at least equal to the amount of the dividends
paid on such stock;
(d) The corporation which issued or guaranteed the stock is not in arrears on
payment of dividends on its preferred stock ;
(e) The total book value of all stocks owned by the Retirement Board shall
not exceed 10% of the total book value of all investments, determined as of the
date of any proposed invest nment in common stock ;
(f) The book value of stock investments in any one corporation shall not
exceed 5%, of the maximum amount which may be invested in common stocks.
determined as of the date of the investment, and tihe investment in the stock
of any one (rJoK)ration shall not exceed 1.c of the total outstanding stock of such
corporation ;
(g) The investment in common stock is approved by at least 4 of the 7 members
of the board after having been recommended in writing by investment counsel
employed by the board, which counsel shall be a national or State hank or trust
company authorized to do trust business in the State of Illinois, or an investment
advisor qualified under the Federal Investment Advisors Act of 1940 and reg-
istered under the Illinois Securities Act of 1953-or licensed and recognized as
investment counsel under other appropriate laws of the United States or the State







of Illinois. if such Act of 1940 or the Illinois Securities Law should be repe;iled
or be no longer applicable. IPC, Sec. 5-187.
Furthermore, no Trustee of the Board of Trustees may, nor may
any other employee or person officially connected with the Board, re-
ceive "any commission on account of any inve-tn4ient made by the
board." IPC, Sec. 5-221.
4. Fib'emien's Annuity arid Benefit Fund (Cities over J00,000)
a. Coverage
The Firemen's Annuity and Benefit Fund (FABF) extends its cov-
erage to the firemen employed by cities of more than 500,000 inhabi-
tants. The Illinois Pension Code also defines "firemen," for purposes
of the FABF, as any person who:
(a) was, is, or shall be employed by a city in its fire service as a fireman, fire
engineer, marine engineer, or fire pilot, and whose duty is to participate in the
work of controlling and extinguishing fire at the location of any such fire,
whether or not he is assigned to fire service other than the actual extinguishing
of fire ; or
(b) is employed in the fire service of a city on the effective date, whose duty
shall not be as hereinbefore stated, but who shall then be a contributor to,
participant in, or beneficiary of any firemen's pension fund in operation by
authority of law in such city on said date, unless he applies to the retirement
hioard. within 90 days from the effective date, for exemption from the provisions
of this Article. Any person who would have been entitled on July 1, 1931 to
membership in this fund by reason of the definition of the word "fireman"
contained in "An Act to provide for a firemen's pension fund and to create a
board of trustees to administer said fund in cities having a population exceeding
two hundred thousand (200,000) inhabitants", filed July 14, 1917, as amended,
who has not filed with the board prior to July 1, 1941, a written application to
be a member shall not be a fireman within the meaning of this Article.
b. Funding
Both the cities and the covered participants contribute to the fund-
ing of the FABF. The covered participants contribute 71/ % of each
salary payment for the ordinary retirement and life benefits. IPC, Sec.
6-166. For widow's annuities an additional 1% must be contributed.
IPC, Sec. 6-167. An additional $2.50 per month must be contributed
for ordinary death benefits. IPC, Sec. 6-168.
The municipality must contribute 81/2 % of each salary payment to
covered employees to pay for the basic annuities. IPC, Sec. 6-166.
In addition, another 2% of each salary payment must be contributed
to pay for widow's annuities. IPC. Sec. 6-167. The city is required
to contribute an additional $142.000 for each tax year for death
benefits. IPC, Sec. 6-168. Additional contributions in lieu of salary
deductions are also required where the employee is receiving duty
disability benefits. IPC, Sec. 6-169. Where the firemen are receiving dis-
ability benefits, the city will still make its usual contributions. IPC,
Sec. 6-170. The city also contributes for administrative costs and
other required sums. IPC, Sec. 6-172. The amount which the city
must provide shall not exceed .0863 of the value of the assessable
property of the city, and may not be required to exceed the contribu-
tions of the employees to the fund for the calendar year two years
prior, multiplied by 2.23. IPC, Sec. 6-165.
c. Financing
The city must raise its required contributions by a general property
tax on all taxable property within its jurisdiction. The tax must be
collected as other general property taxes, but must be levied sepa-
rately. IPC, Sec. 6-165.






54


11. ] ;,/?/,-.1*/y .,fx/f,,,arJ
Tlhe 1 T'rustees of the Board of Trustees of tlhe FABF are restricted
in their investments toI certain listed types of investments, to wit:
(a) Interest liearinr fulll faith and credit bonds of the United States, the
State of Illinois or of a2y county, corporation (n or school district in this state.
(li,) Interest clearing water (lelientinres of the city in which the fund is
oipt'ratting.
(c) Tax aunticil itiiii warrants (if the city in which the fund is operating.
(d) ('oinnmercial bIank time certificates of deposit.
(e) Bonds(l or other evidence of indebtedness issued or guaranteed by any
railroad Ior in its equilupmenut trust certificates, public utility, financial or indus-
trial corpl(,ratiin organized under the laws of the United States, any State or
States of the United States or tlhe District of Columblia, provided they are rated
AA or better by any two nationally recognized security concerns, the total of
which investments shall not exceed 505c of the total book value of the invest-
ments held by tne Fund at tihe time of purchase and provided, further, that
not lo re than 2"' of the total book value of the investments of the Fund shall
be invested in any one issue of tlhe investments described in this paragraph, at
tlie time of purchase.
(f) Bond, of the International Bank for Reconstruction and Development
which are direct and unsecured obligations of the Bank, provided that the in-
vestmieit in any one issue of these bonds shall not exceed 1% thereof, and that
the total investments in such bonds shall be limited to 5% of the total amount of
investments owned by the fund.
(g) Obli-ations of the twelve Federal Land Banks and the Inter-American
Deve client Bn k.
(h) Direct obligations of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the payment
of principal and interest by the State of Israel, on the following condition,::
1. Tlie total investments in such obligations shliall not exceed 5%r of book value
o(if the aggregate investments owned by the fund;
2. The State of Israel shall not be in default, in the payment of principal or
intiere-t on any of its direct general obligations on the date of such investment;
3. The bonds and interest thereon shall be payable in currency of the United
Sta tes;
4. Thie bonds, shall contain an option for the redemption thereof after 90 days
from the date of purchase;
5. Tlhe investment in these obligations has been approved in writing by invest-
ment counsel employed by the Board, when counsel shall he a national or state
bank or trust company authorized to do a trust business in the State of Illinois,
or an investment advisor qualified under the Federal Investment Advisors Act
of 1940 and registered under the Illinois Securities Act of 1953;
6. ThIe fund making the investment shall have at least $5,000.000 of net
present a. sets.
Any bond or rezi,,terable evidence of indebtedness purchased by the Board
shall be rei and nin-reCistersile evidence of indebtedness purchased by the Board shall be
clearly mnrked to evidence its ownership by the Board. The Board may sell
any of the 4eenritie- ;elongins to the Fund and borrow money upon such
.eiirities as collateral whenever, in its judziment. such action is necessary to
meet thle ca,1 retq1iiriemefit, of the Fund. IPC, Sec. 6-183.
IFurtheir)more. no member of the Board of Trustees or person of-
ficifllv connected with the Board may accept a commission on account
of any invest meant of FADF funds. IPC, Sec. 6-215.
15. 111'/!,o;.,..lli, ,'o;pW! Pi,.i,., ,,,tf Fiund
,'. C(m'f rnqe
Tie Illinois \Iuniciplal Retirement Fund (IMRF) extends tle(, cov-
erage of a State-regrilated pension system to any employee of any
municipality within the State of Illinois. Tihe st,.Atiites define "munici-
pality"to include:
A city, village, incorporated town, county, township: and any school. park,
sanitary, road, forest preserve, water, fire protection, public health, river con-






55

servanicy, mosquito abatement, tuberculosis saiiitarium, ('Class II junior college
district or other local district with general continuous power to levy taxe- on
the property within such district; now existing or hereafter created within the
State * *. IPC, Sec. 7-105.
It also defines "employee", for the purposes of the IMRF, to mean:
(1) Any person who:
(a) 1. Receives earnings as payment for the performance of personal -,'rvices
or official duties out of the general fund of a municipality, or out of any slori;il
fund or funds controlled by a municipality, or by an instrumentality thereof, or
particilpatinig instrumentality, including, in counties, the fees or earnliil.g of any
county fee office; and
2. Under the u4iial common law rules app)licable in deternliiiiiin the employer-
empIloyee relationship, lhas the status of an employee within a muunicil,:,lity. or
of any instrumnientality thereof, or a participating instrumentality, including
aldermen, county supervisors and other persons (excepting ths-e, employed as
independent contractors) who are paid compeni-sation, fees, allowances or other
emolument for official duties, and, in counties, the several county fee offices.
(b) Serves as a township treasurer appointed under "the School Code",
approved March 18, 1951, as heretofore or hereafter amended, and who receives
for such services regular compensation as distinguished from per diem com-
pensation, and any regular employee in the office of any township treasurer
whether or not his earnings are paid from the income of the permanent township
fund or from funds subject to distribution to the several school districts and
parts of school districts as provided in "The School Code", or from both such
Soliu IceS.
(c) Holds an elective office in a municipality, instrumentality thereof or par-
ticipating instrumentality.
(2) "Employee" does not include persons who:
(a) Are eligible for inclusion under any of the following laws:
1. "An Act in relation to an Illinois State Teachers' Pension and Retirement
Fund", approved May 27,1915, as amended;
2. Articles 15 and 16 of this Code.
However, such persons shall be included as employees to the extent of earnings.
that are not eligible for inclusion under the foregoing laws for service- not of
an instructional nature of any kind.
(b) Are designed by the governing body of a municipality in which a pension
fund is required by law to be established for policemen or firemen respectively,
as performing police or fire protection duties, except, that when such persons are
the heads of the police or fire department and are not eligible to be included
within any such pension fund. they shall be included within this Article: pro-
vided, that such persons shall not be excluded to the extent of concurrent
service and earnings not designated as being for police or fire protection duties.
(3) All persons, including, witliout limitation, public defenders and probla-
tion officers, who receive earnings from general or special funds of a county
for performance of personal services or official duties within the territorial
limits of the county, are employees of the county (unless excluded by paragraph
(2) of this section) notwithstanding that they may be appointed by and are
subject to direction of a person or persons other than a county board or a county
officer. It is hereby established that an employer-employee relationship under the
usual common law rules exists between such employees and the county paying
their salaries by reason of the fact that the county boards fix their rates of com-
pensation, appropriate funds for payment of their earnings and otherwise exer-
cise control over them. This finding and this amendatory Act shall apply to all
such employees from the date of appointment whether sueh date is prior to or
after the effective date of this amendatory Act and is intended to clarify existing.
law pertaining to their status as participating employees in the Fund. IPC. Se,.
7-109.
The IMRF extends to many municipal organizations with popula-
tion of under 1,000,000, specifically:
1. Except as to the municipalities and inst riumentalities thereof specitir.lly
excluded under this Article: (a) Every county, and (b) all cities, villa-es and
incorporated towns having a population in excess of 5.000 inhabitants as deter-
mined by the last preceding decennial or subsequent federal census, shliall be
subject to this Article following publication of the census by the Bureau of the
Census, provided that if any city, village or incorporated town attains a plal-
tion over 5,000 inhabitants, after previously having provided social security






56

coverage for it s employees under the Social Security Enabling Act, participating
under this Article by any such municipality shall not be mandatory but shall
lie governed by the method prescribed in the following provisions of this Section.
2. School districts other than those specifically excluded under this Article,
shall lie subject to this Article, without election, with respect to all employees
thereof.
3. Towns and all other bodies politic and corporate which are formed by
vote of. or are subject to control by, the electors in towns and are located in
twnsTI which are tinot participating municipalities on the effective date of this Act,
by elect ion pursuant to Section 132.1 of this Article.
4. Any other municipality (together with its instrumentalities), other than
those specifically excluded from participation, and those described in para-
graph 3 above, which elects to be included either by referendum in the manner
hereinafter provided or by the adoption of a resolution or ordinance by its
governing body. A copy of such resolution or ordinance duly authenticated and
"-rtified by the clerk of the municipality or other appropriate official of its
.governing body shall constitute the required notice to the board of such action.
5. Each municipality shall begin participation as follows:
A. Municipalities required to participate under subparagraph 1 of this para-
graph (a) shall begin on the January 1st following publication of the census
provided the publication date is on or before October 1st. If after October 1st
participation shall begin on the second January 1st after publication. IPC, Sec.
7-182.
I f they apply for coverage, certain other municipal organizations may
be covered bv the IMRF:
1. Township School District Trustees.
ii. Multiple County and Consolidated Health Departments created under "An
Act in relation to the establishment and maintenance of county and multiple-
county public health departments", approved July 9, 1943.
iii. Public Building Commissions created under the Public Building Com-
mission Act", approved July 5, 1955. and located in counties of less than
1.000.000 inhabitants.
iv. A consolidated or cooperative Public Library System created under "An
Act to provide a program of state grants to aid in the establishment and develop-
ment of a network of public library systems and making appropriations therefore ,
approved August 17, 1965.
v. Regional Planning Commissions created under "An Act to provide for
regional planning and for the creation, organization and powers of regional
planning commissions", approved June 25, 1929, and serving counties, all of
which have less than 1,000,000 inhabitants.
vi. Local Public Housing Authorities created under the "Housing Authorities
Act", approved March 19, 1934, located in counties of less than 1,000,000
inhabitants.
vii. Illinois Municipal League.
viii. Northeastern Illinois Metropolitan Area Planning Commission.
ix. Southwestern Illinois Metropolitan Area Planning Commission.
x. Illinois Association of Park Districts.
xi. Illinois Supervisors, County Commissioners and Superintendents of High-
ways Ass.ociation.
xii. Tri-City Regional Port District.
xiii. An association, or not-for-profit corporation, membership in which is au-
thorized under Section 17 of Article XIII of "An Act to revise the law in relation
to township organization", approved March 4,1874, as amended.
nv. Drainage Districts operating utinder the "Illinois Drainage Code", ap-
proved June 29, 1955.
xiv. Local mass transit districts created under the "Local Mass Transit Dis-
trict Act" approved July 21, 1959.
6. Fudinog
Both tlie participating employees and the municipal governments
covered by tfe Illinois Municipal Retirement Fund contribute to the
sllpport of tlhe Fund. The covered employees contribute a base amount
of 33.iC of earnings for retirement annuity purposes. Additional
contributions may be made of up to 10% of earnings. Survivor con-
tributions for such benefits are at a rate of IPC, Sec. 7-173. Each








sheriffs' law enforcemIent employee must imiake an additional 1% con-
tribution. II1, Sec. 7-173.1.
The contributions of the imiunici)al1 o'gall izatliols vary, (lel)pl(l-
ing upon certain circumstances. Thle lmuniicip"iVty must contribute anl
amount equal to the basic and additioiial co(ltribulltios of tIhe ellm-
ployees. IPC, Sec. 7-172(a). Thee municipalities mnust contribute
for covered employees who are not particiIpatinig iII almloults req5uilile
by the Social Security Enabling Act anld l(ec(- ,try ad(li ist nat ie ex-
p)elses-. IPC, Sec. 7-172(a). If thie 1muicip)ality lhas no pa, rt icipat ing
employees with current e;rnigS1111 it must contribute an atount sutf-
ficient to amortize over 20 years any negative balance in its 1muici(pal-
ity reserve resulting from a year's award of benefits. IC, Sec. 7-172
(a). The municipalities must also contribute at a "municipality con-
tribution rate" determined annually as the sum of:
1. The percentage of earnin-i of all the p. participating employees of all pa;rtici-
pat6ng municipalities and participating instrumentalitiie, which, if paid over
the entir-e period of their service, will be sufficient when cllcomlloiined witi all emII-
ployee contributions available for the payment of benefits, to 1)provide all an-
rnities and thlie colnt1'i'ntions required Iby the provisions of the Social Se "ritty
1i.iahling Act for participating employees, such percentage to be known as the
nornilal cost rate
2. The percentage of earnings of the lpa rticiiiting employees of each partici-
liting municiipallity and 1 participating instrumentalities nece.:--i ry to adjust for
the difference between tPe p' --nt value (of all benefits, excluding temporary and
total and perilmnent disability and death benefits, to be provided for its pa r-
ti-ipati iIg" employees and the sumn of its accumulated municipality contribute ions
and the accumulated( employee contributions and the present value of expected
future employee and municiliality contributions pursuant to subla:r;'gr:iph 1
of this paragraph (b). This adjustment shall be spread over the remainder of the
Period of 40 yea rs from the first of the year following the date of determination
3. The percentage of earnings of the partici,.,iting employees of all munici-
pii,!ities and participating instrumentalities necess:iry to provide the pre.-,'-iit
value of ali temporary and total and permanent disability benefits granted during
the most recent year for which information is available;
4. The percentage of earnings of the j articilati g employees of all pa irticipat-
ing municipal Iities and p:,rticipiating instrumentalities nec(.-.atry to provide Ihe
preseent value of the net single sum death benefits expected to become payable
from the reserve established under Section 7-206 during the year for which
this rate is fixed;
5. The percentage of earnings necessary to provide the amount required to
provide that proportion of the adnIliniktrative expenses of the fund, excluding
tli at. attributable to covered employees who are not pa rticipating emphlo yees, and
the pro rata share of thie total exln)tsves of the State Agency, as determined by
the State .\k-ency, appli<;lile to such participatingg employees, for the year, ad-
justed for any surplus or defi,!ency existing as of the end of the previous year,
which the number of employees in the p:,rticip;iting municipAlity or the par-
ticipating instrumentality as of the beginning of the year is of the total number
of employees then in all participating mnunicipilities and parl i.iplaiing
i nst ri,,mentalities;
6. The percentage of earnings neigce(-s;iry to meet any deficiency arisi'ng in the
Termniinted Municipality Reserve. IPC, Sec. 7-172.
The municipalities which employ persons making control I)ut ions as
sheriffs' employees must make an additional contribution of 8%O of
their ordinary municipal rate. IPC, Sec. 7-172(c).
c. Financing
Municipalities covered by IMRF must "appropriate an amount suf-
ficient to provide the current municipality contributions. IP C, se'.
7-171.15 These amounts may be raised by a property tax. IPC, S. .
15 "This has been held to be a matter of ii-crotin. not disturbed by the courts unless a
clear abuse of discretion is shown. People ex rel. Sweet v. Central Illinois Public Service
Co., 21;.s N.E. 2d 404 (111. Sup. Ct., 1971).
65-101-76- 5





58

7-171 (1,). A participating county which is also part of a multi-county
health department under "An Act in relation to the establishment
and ilaintenlance of county alnd(l multiple-county public health
departnlents" shall also a appropriate, sufficient funds for health
department contributions. IP(C, Sec. 7-171(c). All taxes here-
undler are levied and collected addlitionally to and in the same manner
as general property taxes. IPC, Sec. 7-171(d).
d. F;,l uciir?/ sfdards
The Board of Trustees of the IMRF is restricted in its ability to
invest plan assets. They may only invest in statutorily permitted
assets:
1. Bonds. nmtes or other general ,ihligations of the United States Government,
n1d 11lig-atimins of which bothi the principal and interest are guaranteed uncon-
dii izailly by t lie United States Government;
2. Bonds or notes of the State of Illinois;
3. Bonds o(r other evidences of indebtedness which are general obligations
of any county, city, towni, village. school district, sanitary district, park district,
omard of education. or of any political subdivision or municipal corporation of
the St:ite of Illilnois;
4. B-,ids or notes which are general obligations of any other state in the
Unitt-d Stl;te<. or of any political sub4ddivisio thereof, provided each subdivision
li.a1d a ppiil.tii, as shown by the last Federal Census preceding such invest-
ment if not less th;ian 30.000J inhabitants, and provided that such state or political
snuldivision thereof has not defaulted for a period longer than 30 days in the
payiymneit of interest or principal on any such general obligations during the pe-
rit.] of 10 yen rs next preceding suc-h investment;
Tax anticip)ition warrants issued by the State of Illinois. or any county,
city, tiiwn. villatge. sa;iiitary district, park district, board of education, school
di- ri-t. or any political subdivision or municipal corporation of this state;
6. Bonds or other obligations which are payable from revenues or earnings
sp.ifi,.i.ly pledged therefore of a p)uldic utility in any state of the United States,
mniii.iliwlity oviwed, either directly or indirectly through any civil division, au-
tliril y or p iili" ii'4trunientality of the mutinicipality, provided :
a. The mun iieiplity operating such utility has at least 2.500 inhabitants if
sZm h iim1iiipility is in thle State of Illinois, or 30.000 inhabitants if outside the
State of llinik. as shown by the last Federal Census preceding such investment;
i,. The utility liis ,een in operation in its present form for a period of at
least 7 yaers prior to the date of the investment;
c. Any b,,onds or oli,,ig:itins of such utility have not been in default within a
period of 3 ye.-ars in the payment of interest or principal on any of its indebted-

d. The rates for service shall be fixed according to engineering estimates so
as to pr:oduck- a s,,ffi.ient revenue or earnings to pay all operating and mainte-
na;i,'e ,hljir,,. ;111nd both principal and interest on such bonds or obligations;
e. The investment in any one issue of such securities shall not exceed 25% of
such issue.
7. IBonds, or oilither evidences of indebtedness issued or guaranteed by and rail-
road corporation nrgani.ed under the laws of any state or states of the United
States. or in equipment trust certificates, provided interest has been paid by the
('irpirati,'n on its indebtedness for at least 5 years last past. Not more than 1%
of "I,,: in vestnients shall consist of any one issue of these securities;
8. Bonds, or oithor evidences of indebtedness of any public utility corporation.
organized under the laws of any state of the United States, provided interest has
boon paid by the corporation on its indebtedness for at least the 5 years last
p:i4 these securities;
9. Bonds or other evidences of indebtedness of any industrial or financial cor-
p,,ration. organized under the laws of any state of the United States, provided
interest has been paid by the corporation on its indebtedness for at least the 5
years last past. Not more than 1% of total investments shall consist of any one
issue of these securities;






59

10. Bonds which are payable from revenues or earnings specifically ple.dged
therefore of the University of Illinois, the Southern Illinois University, the B',i rd
of Governors of State Colleges and Universities, or the Board of Regent.-, of the
Regency Universities System;
11. Bonds or other obligations guaranteed by the Governmnent of the Domini zni
of Canada, or by any province of Canada, or by any C;anadian city with a popu-
lation of not less than 150,000 inlia;bitants, provided they are rated "A" or bet-
ter by any 2 nationally known security concerns, and are lii:yable in United
States funds. Not more than lt c of total investments .:!hall consist of any one
issue of these securities;
12. Bonds or other obligations of the Commonwealth of Puerto Rico. Not more
than 1c, of total investments shall consist of any one issue of these securities;
12.1 Direct obliga lions of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the pliyment
of principal and interest by the State of Israel, on the following conditions:
a. The total investments in such obligations shall not exceed 5% of the book
value of the aggregate investments owned by the fund;
b. The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the date of such inves uient;
c. The bonds and interest thereon shall be payable in currency of the United
States;
d. The bonds shall contain an option for the redemption thereof after 90 d:iys
from date of purchase;
e. The investment in these obligations has been approved in writing by in-
vestment counsel employed by the board, which counsel shall be a national or
state bank or trust company authorized to do a trust business in the State of
Illinois, or an investment advisor qualified under the Federal Investment Ad-
visors Act of 1940 and registered under the Illinois Securities Act of 195:3;
f. The fund making the investment shall have at least $5,000,000 of net present
assets.
13. Common stock, preferred stock, and convertible bonds and debentures
of any railroad, public utility, financial or industrial corporation organized under
the law-, of the United States, any state or states of the United States or the
District of Columbia, provided that;
a. The corporation shall have no arrears in dividends on its preferred sti.-k.
if any;
b. The corporation shall have paid a cash dividend on its common stock in
each year of the 10-year period next preceding the date of investment and the
aggregate net earnings available for dividends on th common stock of such
corporation for the whole of such period shall have been at least equal to the
amount of such dividends paid ;
c. If the corporation shall have acquired its assets, or more than 25% thereof
at book value, within a 5-year period immediately prior to the date of the invest-
ment therein by consolidation, merger, purchase of all or a substantial portion
of the assets of any other corporation or corporations or purchase of thie assets
of any incorporated bisii:ess enterprise by purchase or otherwi-e, the net income,
fixed charges and preferred dividends of the acquired. predecessor or constituent
corporations or enterprises shall be consolidated and adjusted in applying the
test set forth in this paragraph 13 ;
d. The word "year" as used in this paragraph 13 shall mean the fiscal year
of any corporation involved;
e. Such securities are listed on a national securities exchange as defined in the
Federal Securities Exchange Act of 1934 ;.
14. Common stock of a bank, organized under the laws of the United Stat.-4
or any state, which has capital funds, represented by capital, surpTus and
undivided profits of at least 20 million dollars :
15. Common stock of a life insurance comliany, organizedil under the laws of
the United States or any state, which has capital funds, reli-resentedil by capital,
special surplus funds and unassigned( surplus of at least 50 million dollars:
16. Common stock of a fire or casualty insurance company, or a combination
thereof, organized under the laws of the United States or any state, which ht:a
capital funds represented by capital, net surplus and voluntary revc'ves, of
at least 50 million dollars;
17. Savings accounts or certificates of deposit of a -tate or national b:ink to
the extent that the deposits are insured by an instrumentality of the Unit en.
States Government; ;





60


1q. il(ir.,W .nl ,, ; ir t.,t' ,r '..irc.s of ;I -t.'to or rrd rr,,- sfv','r lnd lminll
.s.-,Ir1:i10tiiM to flit e\!?,III i.it -Ilc'i nI',,'1111s ,!r .41li; ".1 ;ir.1 illIll'1.( 1 l i l an in'tI'1-
11 it n .-I lii :I :lI* t 'l 'it ',l S 1,l s < ,I k\ 'r I I i ,II --II ;
19. s. I I;1 "I'- t f lll;l-ll-'l 'I'lll IT I',I-4 mIrlit ("', ,'i.-10i -4i Act of 1010). whi,.h Ire ri',Li,(Ird inder that Act and
wiN ,- I .- nr ,'-. ;i' rI, Ji'.ll''dr Illllol t I lliuoiwk Sfi.n' it .\v'e Act I1" 19.53:
I. l.;Irtii .:t 1i,, -4 ill < .,'iiii,. nt 1'111<4 1'l1114, 1',i eulder i]1e ( <.Illln lln T rust
Funiil A.,l. ;a]p]riv' l -July 2"9 1913. ;.is ;in ,ii(le(1.
(1) Ix ,-' :'.,iuts ill 4i.ihii1i:1.i st:, 1k li; rticilu: il.' s il 1 ci',, inn4n truIist fuil .ds aind
s.h:l ,rr- in ll.1'1i.1 'lli,'t in vi' -I In w, f i ,l i *iii. -4 1 :nll I. n :
1. limnitiL. in lIik v.-ilthi.. to :).)I/ r ofi the ,,t.il IIok v 'ilie of ;all investments
of the t'i ( d
2. niii l. only up,,i -'.., vote ,f 2he 1,.,a r',1 :
3l. ml.-,h, ,,i y lpnlim written rii ii l'i1; ri'iill of cim-1' i olnt eo nolllz W] lhn ll
be a n:itioin;il or state hank or trust company aunthlirized to do trust business in
tlh State of IllilniN or an 1 invetm uivt dvk r ql Iie i dr tlie Fr-ledral In-
v'".,tii t Advi:,,r.s Act of 19-!0 a. d l',regi- terd under the Ill finis Securitie.; Lnaw
of 195..
(e) Iiv(,4tl-,nlits in common and prefi'rred tr-(l k s-lmll 1, liimitod to (1) 1%
of the common or preferred stowk of ,nme (.orl.iraiion :(nd (2) -,r of the tital
lo(ik value fivt.:;, nts of the fI"1mi1 in Ciilllllon !(ldl prefr(ed stock of one
corl',-,rati',h. IPC, Se 7-201.
The Illinois Pen-ion Code al,;o requires tlat all invest ,e.nts shall
1be clearly ::iarlked to indicate the fiend's ownershlip and that the Board
of Triustee-, iiav register S(,ecUIritits inii the niimie of the flnd or the
name of a nominee created of thel Fund for that prpw,-e by ain ap-
propriate fm;,nci;'.l institution. IPC, See. 7-201(e). Furthermore ade-
pquate amounts are required to show all such aset-. IPC, See. 7-2202.
6. 3/,Uf;cO/)-l Emnployer.' Offirr.m. ind OffialW A r mty and Benefit
Fund (Cit;. over 500,000 Inhabtoan t.)
a. Coro,-rqe
Thei Municipal Employees', Officers', and Officials' Annuity and
Benefit Fund (MEOOABF) extends its coverage to certain individ-
uals employed by cities of over 500,000 inhabitants, as of the most re-
cent United States Census. The term "municipal employee, employee,
contributor or participant" extends to any of a number of posi-
tion-. Included in the category of such employees are employees of
the cla-sified civil service on a nontemporary basis, employees who
were so employed(l priopto enactment of the Civil Service Act, individ-
uals employed by the Board of Trustees of the MEOOABF, tem-
porary employees n(ler Section 10 of the Civil Service Act who has
rendered( not l,-.s tlitan 12 months. of service. at. least 4 of which were
consecutive full normal working months rendered inmmedliatelv prior
to aplplyinr for inclh.-ion in the Fund, who files a written application
for -iitli inclusion, andl who was employed after 19-19, aldermen or
otliher officials of thle employer filing written application with the Board
of Trlstee.-. pWrsons employed in the law department of the local
court or Board of Election Commissioner- who w-as a contributor
and pairticipt i-t ;a of Decemhler 31, 1959. in the fund of the Court
and L:Nw Dep;irtlnient Employvees,' Annuity Act or the Boardl of Elec-
tion Coi ii In i--:ioTer- Employee' Annuity Act. employees of the public
liihrary who were included under the Public Library Employees' Pen-
sion Act as of Decemlber 31, 10.65. 1:(l( employees of thle house of cor-
rection and pa"itticipmts as of December 31, 19M in the House of Cor-
rection Employees' Pension Plan. IPC, Sec. 8-113.








b. Fer,,,liny
3Bo01 Olie covered participantls a1n(d fie cov(e-led mlullnicJIplilies (on-
triblte to, th f din.: o' tle MEOOA.BF. hloe covered participanl.ts
triblifie to H ie f11iiiil( i-g0 the 1\1LOOA l' PI (2'IS
contribllte '>. of t lieii .Laies aSlter Jan caryv 1 1972, fo their
b11ic a_, alnd :Tvice annuillities. IPC. S- 1-17. "idowms ammiti''.-.
are. an adlitionalll cont rilmt ion of It of salary. IPC. Sec. S-182.
w I 1 I--t I I( Ie) 't oI I *iii .:
The. muicip~{'lality co}vered'( 1by tlie, ftniid( musl, t contrli!,ute, (; oi' 1iheir
elliplovees, ";;a'ies, ,,,"linp:,1 July 1, l)81. IP(, Sec. S-171-. They
linlSt also coltl ritite 0y/ for eiiplove : electi n) w(Io's eefits 0 I P( ,
Seec. 8-18. Illie muniicipallity also contrilbties lin1 le of lth i leploeees
contributionsl whlen tilhe eliplovee is receiving dittV lisa.)iIity b)lleneits.
1(", Sec. 8- Tihe. (citvy also cont(ibut- its (orlinaly collt riulltons
wilen til poye liiploe i- reI-ceivi'. o)ina 1 l;Y dis8ailitv bielefits. I c(', Sec.
8-1S8. Trle city alo co't ril)ites for a(!iii Istaiti\ve co(stls f tlc plan.
IP(, S'c. 8-190.
The. mui4nicipalitv's contlriblmtilons a1e 1]im0ited bI eit e(r1 thile alolnt
obtained by a ax le'v of .10939c oiln thlie value o all property taxai)le
within thle citv or S12o00)0(. The c1itv a1so Ced olt! excc(,(l a .r-
- '" 1 i'
( -t8a2 Of emp)io ee's coitl'il)bltiois If it litas beenll cove'.'. fIor years
... JL V iI
(thle percelni-ae. for ex'amiple, for l)75 is 1.49)., i or tihe. year I 7TO is
1.,o)()( r o! tie vear 19T7 is 1.6025. e;.i] times tlie coni iilntious two) years
ez:rlier). IPC, Sec. 8-173.
C.
c. F~i,,ancig~f
Tlhe lmicipality will finance its contribu)ltionsl by a special pdIoperty
tax on all property taxable witiin the jurisdictions of th lie cit 1 a(
collected in addition to anld ii a malneir similar to tlie general )property
tax. I(,SC,.. 8-17,.
d. Fidu cm') t'y sfiffd-nc11. J
The Trustees of the Board of Trustees of the MEOOABF are re-
stricted in their investment of Fund :vs.ts. They may invest only in:
(1) Intei-.st bearing bonds, notes or bills of United States, or obligations fully
guaranteed as to the pa.nyeent of both principal and interest by the United Static,;
or dirt'ct obligations guaranteed as to the piaymelnt of p)rincilpal and interest by
an aa- (2) Interest bearing bonds of tie State of Illinois, or of anly county, city. vil-
lage, incorporated town, municip;i] corporationl, i-.lool district in the State or
any other political subdivision authorized by law to levy taxes in Illinois or in
revenue bonds of the Sta te of Illinois ;
(3) Revenue bonds issued(l by anly county, city, village, incorporated town or
political subdivision in this State, having a population of not less than 2.5.50j
inhabitants accord i:, to the latest official census of the United States Census
Bureau, but limited to the extent that no such investmni.it slia1ll exceed an amount
of 25%, of any one issue and limited to-a total investment in this type of 4-.,.urity
of 15%5 of inv(--ted assets as suclh i- <,ts may be at the tile any such investments
are mlde:
(4) Tax anticipation warrants of thie State of Illinois,, or of any city in which
this Article is in effect, or of the county in which the city is 1lo Ated, ()r of any
s'lool di,-1 rit within the city:
(5) Inte''i-.t bearing" general obl igatious, lpayavile, frmn n milimiited ad valornill
ta xw, of0 any other State in the Uinite(l States. or time pollicial sunldivisions of
any such St.ite having a population of over 30,0(y0) as shown by tile lalt 4 oii,-i.il
censtls of thie United ShtItes censusus Burea lu which lias not defl;[ilted ill the ); iy-
lnenlt of 1,ri1lic;1l: or iimteI-f onil ally of suchl ','i:"ilal olnifiti 'Us for I,',e tfhal
30 days in the 10 years next prec(diii-, the date of such imv. ii.cet:
(61 B,,lds m'r ot'..,. ob,.;;I tions gluar;ilteed by thie Goveornmli lt o lil P',minion
of Ciiaiada, or by any Province of (Caliitla, or by ally (aml mdi.l Icily wil!, a popiu-






62


latiin of nIit 1ess tOin 15."1.000 ilnhalitants; provided that thle principal and in-
tev'-t in suclil se-curities is lpayable in I'nited States currency, and such invest-
iltleit i. rteommelliIII(-ded in writing by investment counsel employed by the board
- }iereiif't'er splecified ii pazragralh (9) (g) of this Section, relating to common

(;.1 ) Direct fil i.1ati ills of the State of Israel for the payment of money, or
olif:.fitivl- fr tlit' lpayllnlit oif Imoley which are guaranteed ias to the payment of
prii'i'acil. a nd interest by the State of Israel onil tihe following conditions:
(a) The toal investmnt nis in suhl oldigations shall not exceed 5% of tlhe
1,1)k \ liet 10, Thlt State if Isr-ael shall not lie in default in the payment of principal or
iitn.r. *-t ll iay nv )f its direct "ge-eral oblligattions on tile date of slch investment;
(c) Tih' 1-oid.s an:d interest tlhtre-n shall lie payalile in currency of the United
Sit:,.- :
id 11 Tlite oinds sliall 'ciitain an option for he redemption thereof after 90 days
fr 'ini, i;i t of pilrclia e ;
o-) T'Li iuvestiiit'lli in tlit-e oli igations has been approved in writing by in-
vt.-tII'Init c ',ll 'l *l eimpil,'y d by the l', ard, wliich c:liinsel shall lie a national or
state 1,1-aiik Ill tru-t coniipany autlhrizpd to do a trust business in thle State of
Illini-. ilr an in\ ,t i.niit advior qniilifie'd under the Federal Investment Ad-
vi,,irs Act of 101i ;indl registered under the Illinois Securities Act of 1953;
if) The tuni d iakiiu, tile investment shall have at least S5.000,000 of net pres-
VJi1 ;i --ct '| .
17) Bondml or other evidences of indebtedness issued or guaranteed by any
railroi;! coror ari'timi or in its elquipmlent trust certificates; bonds or other evi-
d.ciL,'.-4 if iliIdt'litedness of any public utility corporation ; blonds or other evidences
4if iit'llel'tedi-c.'s of Illy industrial or finance corporation ; provided (a) such bonds
,r -.i., othlier evidncee- of indelitf.dness sliall lie issued or guaranteed by cor-
l",r.-iio'' which are incorporated in one of the States or the United States or
oi],r:ite under a n;ition;il charter; (b) no default in the payment of interest or
priii'pal has occurred in respect to the corporate indebtedness within the past
5 years: an'd (c) not more than ll' of the then total invested assets of the fund
sli:ll lie ill any ,ine issue nf any one of such securities; not more than 10% of
tl,. total of ;liy 'oine separate issue of corporate bonds, trust certificates, or evi-
dicii..-s rf itd,.ltednes., shall 1,e purchased ;
') O)linti ins tof' the International Bank for Reconstruction and Develop-
ment. and obliiations of thlie Inter-Anierican Development Bank.
) Coninimon or preferred stocks, which are legal investments for trust funds
iindt.r laws of tlhe State of Illinois, subject to the following conditions and
limitations, :
(:i) The stocks ,re listed on a national securities exchange as defined in the
Federal Securities, Exchange Act;
(b) Thie stocks are issued or guaranteed lby a corporation created or existing
uinde-r the laws of the United States, or any State, district or territory thereof;
(c) Thle corporation wliitr-h issued or guaranteed the stock has paid a cash
dividend on its common stock in each of the 10 years next preceding the date on
which the stock is to lie purchased, and its net earnings available for dividends
on common stock during this period was at least equal to the amount of the divid-
end- paid on s,'li stock ;
(d) The corporation which ij;ued or guaranteed the stock is not in arrears
on pI vent of dividlends on its preferred stock ;
(e) T'le total ,bonk value of all stocks owned by the Retirement Board shall
not .xceed 25'l of the total ,ook value of all investments, determined as of the
date of a ny proposed investment in common stock ;
(f) The hook value of stock investments in any one corporation shall not
excee-d :"' of the maximum amount which may lie invested in common stocks.
d(etermined as (if the date of the investment, and the investment in the stock of
anv ,one corporation shall not exceed 1%o of the total outstanding stock of such
corporation ; IPC, Sec. A-201.
No memboLer of t1he Board of Trustees or other person officially con-
nected with thle Board may receive any commission on account of in-.
vetynents made by tlie Fund or trust. IPC, Sec. 8-246.





63


7. County Employees' and Officer.s' Annuy and Benefit Fund (coun-
ties over 500,000 inhabitants)
a. Covci'age
The County Employees' and Officers' Annuity and Benefit Fund
(CEOABF) covers the employees of counties with populations over
500,000 inhabitants. The term employee is defline(l. for the purlp -c-s
of the CEOABF, to include: employees of the county in the (clIsi ified
civil service or under the County Police Merit Bo;rd as a- deputy
sheriff in the County Police I)epartmnient, an employee of thle county
not in the classified civil service of the county but whose salary or
wag es is paid by the county, if employed for 12 months prior to elect-
ing to contribute, county officers elected by a vote of the people, per-
sons employed by the Board of Trustees of the CEOABF, employees
of the Public Aid in counties of 3,000,000() or more population, where
transferred to the State employ by operation of law and where they do
not elect coverage under a State pension plan, and employees of gov-
ernmental units whose functions are transferred in whole or part to
counties. IPC, Sec. 9-108.
b. Funding
Both the participating employees and the covered counties con-
tribute to funding the CEOABF. The participating employees con-
tribute 61/2% of each salary payment after September 1, 1971, for age
and service annuities. Deputy sheriffs participating as employees
of the County Police Department contribute 7% of salary for a'"e and
service annuities. IPC. Sec. 9-170. Widow's benefits are an additional
1 r of salary above $3.000 per year. IPC, Sec. 9-177.
The counties which contribute to the CEOAFB must contribute 7%
of each employee's salary to the fund. IPC, Sec. 9-170. In addition,
where the employee elects widow's coverage, an additional 13/4 % must
be contributed. IPC, Sec. 9-177. The county also contributes for the
costs of administration. IPC, Sec. 9-183. Where the employee is under
duty d(lisability benefits, the county shall contribute both its normal
contribution and his (or hers) to the fund. IPC, Sec. 9-180. Where the
employee is on ordinary disability benefits, the county's contributions
are its normal level. IPC, Sec. 9-181. The county need not contribute
more than 80% of the employees' contributions for the year two years
prior. IPC, Sec. 9-169.
c. Financing
The county contributions are financed by a general property tax
levy which will produce the required contributions. The levy is to be
additional to, but collected in the same manner as the general county
property taxes. IPC, Sec. 9-169.
d. Fiduciary standards
The Board of Trustees of the fund has the power of investment of
the trust's assets but, it is limited as to the nature of the permissible
invest i ients. The Board may only invest trust assets in:
(1) Interest bearing bonds of the United States ;
(2) Interest bearing bonds of the State of Illinois, or of any county, city,
village, incorporated town, municipal corporation or school district of the state;








(',') t ., i'1 ; 1' I, 1,,,d i- -ll(d ill a,-o',rdal,( '; within the Feltderal Farm Loan
Al.-t;
14I) 1..,1 ,!< or ot her e\ iil,.'i.Ii -. (f i dll'lt'diII''"s iii-,iiud or t.ri1 1 rauintIh'fd 1w any rail-
rI",.iil ,*' "op l ;iti lm { ill '"plql] ii,'rtl trust f'rrl'itic';in"-. 1prcvidled t], co rpor~lition has1
Il,,t ,l,'f.,i cd (H1 ;11y ,,f i!r i ,,- i-::tions, eith r 11 .i t,'I lplil, i1,l1 fir interest, w ithlin
i d f 5 yr ;s pri-i; tiJ tir' it.ote If if i -t iieit. No ii11,iir (li7ii %, of total
investmen;I sil v-iss (i'an Iir issn ()fts c r-v i Il 11c'.
I.1 l1: iius T, il 0 i' t drin (.1 of i Ii,1. of :ill p !l!ilii Illility corpflrn tiifin.
provid{1d rhe co1,rp ..ti m ]i.is 11.d 4 ,ifi.i iltd ,,n a y ,f' its ,,l1 i a lion! s. ,it hter a s to
priI4i[.:2l or ilt,..i -I. \\ fl in a ,,i.hd of 5i y,'n s ll' | ir to lw daite of iiitvestimeit.
N o iinii I< I of t t a il tesIII{ ii -lill t ,1 1 t 1of aly wivl' is.',.slute < snIt
- ,lll'ir l ;' "
i('i I d..,'(!I. or otl:r ,\ id.Wii (- of il''^trdnc-, of any imd .isi ri.l mr li!ir lve cofr-
I .,r "lio)I. provid,' tlie co{' ; 't1in1 luis not ilt.alI.d rii any of j it- ollip ', ii,,1O.
eitlhr as to pIrin('i:,;il ,,r in1i'",-1, N it bin a plri''d of 5 yeari-L prior to thle (dIate of
iIV i i X,,' t l. No I1 t l' llIl 1'" ofi total in '-i 1-.1 iilit -li;'1l c)ii-i.-t (of aly one is-slp
,, suIcIh H' i1l M'% :
t7 i B :,1- 7f t1:.' Int.'r .i..i1 -,,1: of i.i 1 lB f.:i t strii'l. ion a ,l Develolm iinwit w\hi,'h
ar1 dire( t a I l id I'.-iI,'red tlu i.'i. i. in (of Ill, Bt .i lik. il, vidv' i tlit hat tHi, invest-!iilnt in
aIJy Ole i-s1e of t!iL".' I ii,.ls sl.;i1 ll .it e'xi 'i'd 11 theCreof, aIL(l tli:lt tlhie total
il''. .t .;'its in such ho'l. < shall il, limited to 1 57, of Itlil total atimilit ,t of invest-
li,.; ts 1-.1,..' .y t],. ]' ,id :
)( wi .:ti s f tl 12 F. ill 1 1 Tt.;i B; i :- aid(1 the I tIIfr-t A i. rio 4an Dovelo)p-
ll,.'l~t I ;:;1llk.
ls.) Dirit oldi-;itions of thle S(:te of T-.:ael for the payment of money, or
ohli~2ih,'1 for tile pi:lyment of money which ;i r! IzlNa ranted ars to the Ipaymnient of
1ri 'ci l: i and iiite .t'-1 by tile .'-te of Israel. (Ii the followi, eo i ll ionls:
(a) 'I'li, total ilniv,.tmnents in 'whli ol)ligatioi- sliall nut n '4wved 5rc of the book
I'il1.. (,f tlhe L1 rf a te ilvi'-fiments ,,\neid by the fund :
1)) Thie S.i;te o(f T-riel sliall not !e, in default in the payment of principal or
i)t .-.t o)n any of its direct CrOnc ll hli rti, ituis oil the d; te of such investment ;
(e Tlie bonds ;!iid int.tre- tlihereon .I;Lll lbe pIy;.i1b illn currlT'-iny o. tie I'lnit{ed
Star -:
(d1) Thi, bonds lhnall contain n i option for the redemption thereof after 90 days
frI, ;i d:1te of pi ''jIri -a '
(e) ''.e inv,-tInent in thlliS- olhli-L-ations hlas been alliro,',-vedl in writing by in-
vestmient c, n-,1 El eImployed by the boi'rLd which eloi nsl sliall lie a national or
state bm1l; or Ii.-t c,.iiJa ty anthoriz'ed to do a trust busine-s in the State of
llijiisO. or and iM-0vrtmrn.t advisor qni:lified under the Federal Investment
.\dvi-,,r\ Act of 1940 and regristre d under the llHiiii,, Se.r4ties Act of 1953:
lfI The fmund nakii, the invetii- ients shall have at least $.k.(K)0O00 of net

(9) (omurion stir-k,-;. wvicih are legal invo-tiiients for trust funds under laws
of tlhe Swite of Illinois -iii.jeet to the following eodillioio-s aild limiitationq:
(;i ) The t,,'".l: anre listed on a imtit,11il sc.(ilrities ex'-le a ge as defined in tlhe
.Feler:l S ,.iritics T.\I|.,:IIL:r. Act :
(1h) 1"'7 sti ;Iks a r, is-Im'd or ,u-naranteed by a corporation erea.ted or existing
n !er the l::ws of tO w Tlnited Stati-. or any State, district or territory thereof;
Tlhe (corjI'rtion wli issued or gma' -iteed the -thik lias paid a cash
diviili,'id on its eomnimn sto,.k in eacli of the 10 y( ars next pre'i-idinm, the date on
wlliich he :tock is to 1,w 1,Iii ,:-,,l. n1il it int ,:rii innos available for dividendIs on
c' 'i-mii'iI stock duriij tlii iilpriod \wIS at least equal to the amount of the
divi'llor ds lp:id on sill-] st) l 4 1
(d) The c-, rrpilontion which i<-loil., or gim.i'.niteed the stock is not in arrears
on 011 11 ',\ t of dividl.ill- oni its l,'r f.rr d stoul. ;
(e) Tle t11.,l liik value of al! sto-r1!s owned by tlihe Retirevment Pga rd shall not
exc'e'd 15C"; of tl,' tol;'1 li k x :lue(- of all invi.-tigliIlt in e',inimon stiic(k ;
(f) "1"i. 1111,k v-il-w of sto,-1 in\, ,- (meats in any on(e corporation shall not
ex\', r c,1 1', ,,f tle lm:xi i l\ ii l amonllllt \hii(cih ma;iy be in\ve-t<'d in coimnion stocks,
dftiiiild :; of tel, d;0(e of the iu\,'-l fii'lit. illd the invwttment in the stock of
any one colirai-i,', .b.;ll not exceed 1NI of flit total outstaiidi(i, stock of such
',r';.r.itioii : [1'r, 9-1 V .
,'. Fo,, .V,/ Pi,, ,' Dit, ,, I jt <} ,,,lu .1 Snuir ,y Ifl B, Iyfif Fund
(I, ('Or .,,',r
(i,. r o,)'}' o**/*
W ien a fon t prcr'. (1 -ri(t 1i,,;i o 1>id;ios co-extonsive with
thlsic of I council v which is ,,,,mfitted to 1lie coe\ reI, 1 the County Eln-





65


ployees' and Officers' Annuity and Benefit Fund. the separate fund of
the Fotest Preserve Di)strict Employees' Annuity and Benelit Fund
shall be established, IPC, Sec. 10-101.
b. Fi undinq
The saiiie funding requirements as apply to the CEOABF apply to
the FPDI )EABF, except the limit on the District's required contribu-
tions. The District may not be required to levy a tax of moire than 1.3
times the employee contributions for the year two years prior. 1PC,
Sec. 10-107.
c. Financiniq
The District may levy an annual tax to finance its contributions. The
tax would be general and additional to the other property tax(-e, and
collected and levied in the same fashion as the other taxes. IPC, See.
10-107.
d. Fiduh Piary stan dard.
No provisions for fiduciary standards are made in the Illinois Pen-
sion Code for the Forest P-swerve I)istrict Employees' Annuity and
Benefit Fund.
9. Laborers' and Retiremen,,?t Boalrd Employees' Aimuify anjid Be-nefit
Fund (Cit(X.is over ')00,000 Inhabitaut.s')
a. Coverage
For cities of over 500.000 inhabitants, the Laborers' and Retirement
Board Employees' Annuity and Benefit Fund (LRBEAB) permits
participation and coverage of any employee in a position classified by
the Civil Service Act as labor service, and appointed in a nontemporary
capacity, any employee in a labor service position for an appropriate
city prior to enactment of the Civil Service Act, any person employed
by the Board of Trustees of the LRBEAB, any person employed by a
retirement board of any other annuity and benefit fund in such city,
other than a fund under the LRBEAB, persons employed as labor
service under Se(tion 10 of the Civil Service Act (After July 31 .1961),
and employees of a junior college board. IPC, Sec. 11-110.
b. Fumnding
The covered city and participating employees both contribute
towards funding of the Laborers' and Retirement Board Employees'
Annuity and Benefit Fund. The participating employs are required
to contribute 61/; of their salaries (after January 1, 1972) for age and
service annuity payments. IPC, Sec. 11-170. Furthermore, any ein-
p)loyee in service oil July 1, 1947 mav elect to make additional contri-
butions up to 7/13 of the accumulated age and service annuity sums
up to that (late. IPC, Sec. 11-171. Emplov,,ee1- may contribute n ad(li-
tional 11 1% for widow's annuities (after January 1, 1966). IPC. IT .
11-174.
The city covered b)y the Fund must contribute (6% of each e,)ploV-
eesl 1pVIN'1it of -.lr.yv (after July 1. 19)")). IPC. ST,. 11-1 7(0. An eDI-
ployees contribItion of the elective contrilt ion under IPC. 11-
171. '.requires tihe city to also contril)utle 14/1 times the :l 1(ldiiioil1 e('I-
ployee contribution to the Fund. IPC. See. 11-171. The city nii-t al-o
contribute 2f'- of the salaries of employees who elect wi(tdow's beefits.





66

IPC, Sec. 11-174. It must also contribute the amount usually contrib-
uted by thie employee and itself where the employee is receiving duty
disability leniefits. IPC, Sec. 11-176. Where thie employee receives
ordinary disability benefits, the city must contribute its own ordinary
contributions. IP(, Sec. 11-177. The city also contributes for adminis-
tration costs. IPC, Sec. 11-1 719. If necessary, the city must make addi-
tional e-ontril)butions to credit to its contribution reserve such amounts
as needed to meet age and service, prior service, and widow's annuities,
to miet any part of the minimum annuity as is in excess of the age and
service and 1)prior service annuities and widow's annuities, to provide
a sufficient, balance in the investment and interest reserves of the. fund
to permit transfer of funds from that fund to other funds. IPC, Sec.
11-178. However, the city need not contribute over an amount raised
by a general property tax levy to produce an equivalent to the em-
ployees' contributions in the year two years prior times a given factor
(for 1975, the factor is 1.235; for 1976, the factor is 1.280; for 1977,
the factor is 1.325; for 1978, the factor is 1.370). IPC, Sec. 11-169.
c. Financbzg
The cities' contributions are financed by a compulsory general prop-
erty tax levied and collected in addition to but in a manner similar
to other general property taxes. IPC, Sec. 11-169.
d. Fiduciary standards
The Trustees of the Board of Trustees of the Laborers' and Retire-
ment Board Employees' Annuity and Benefit Fund are authorized to
invest the reserves (receipts) of the Fund, to the extent not required
for payment of benefits. They may, however, make only certain de-
lineated investments, to wit:
(1) Interest bearing bonds, notes or bills of the United States, or obligations
fully guaranteed as to the payment of both principal and interest by the United
States;
(2) Interest bearing bonds of the State of Illinois, or of any county, city,
village, incorporated town. municipal corporation, school district in the State or
any other political subdivision authorized by law to levy taxes in Illinois or in
revenue lionds of the State of Illinois;
(3) Revenue bonds issued by any county, city, village, incorporated town or
political subdivision in this State. having a population of not less than 2,500 in-
habitants, according to the lhitest official census of the United States Census Bu-
reau. but limited to the extent that no such investment shall exceed an amount
of 25." of any one issue and limited to a total investment in this type of security
of 15C. of invested assets as such assets may be at the time any such investments
are made;
(4) Tax anticipation warrants of the State of Illinois. or of any city in which
this Article is in effect, or the county in which the city is located, or of any school
district within the city;
(5) Interest bearing general obligations, payable from unlimited ad valorem
taxes, of any other State in the United States, or the political subdivisions of any
such State having a population of over 30.000 as shown by the latest official cen-
sus of the United States Census Bureau which hlas not defaulted in the payment
of principal or interest on any of quch general obligations for more than 30 days
in the 10 years next preceding the date of such investment;
(6) Bonds or other evidences of indebtedness issued or guaranteed by any rail-
road corporation or in its equipment trust certificates: bonds or other evidences
of indebtedness of any public utility corporation; bonds or other evidences of in-
debtedness of any industrial or finance corporation ; provided (a) such bonds or
such other evidences of indebtedness shall be issued or guaranteed by corpora-
tions which are incorporated in one of the States of the United States; (b) no
default in the payment of interest or principal has occurred in respect to the







corporate indebtedness within the past 5 years; and (c) not more ihan 1% of
the then total invested assets of the fund slall be in any one issue of any one of
such securities; not more than 10% of the total, of any one seia rate issu l of cor-
porate bonds, trust certificates, or evid(lences of indebtedne,.s., shall be purelia:, d ;
(7) Obligations of the International Bank for Reconstruction and Dev'lopment,
and obligations of the Inter-American Development Bank;
(7.1) Direct obligations of the State of Israel for the payment of money, or
oligatimons for the payment of money which are guaranteed as to tlie payment
of principal and interest by the State of Israel, on the following conditions:
(a) The total investments in such obligations shall not exceed 5% of the book
value of the aggregate invest inents (,wlned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the (late of such investment;
(c) The bonds and interest thereon shall be payable in currency of the United
States;
(d) The bonds shli;ll contain an option for the redemption thereof after 90 days
from (late of purchase;
(e) The investment in these obligations has been approved in writing b)y in-
vestiment counsel employed by the board, which counsel slall be a national or
slate 1,ank or trust company authorized to do a trust business in thlie State of
Illinois, or an investnent.t advisor qualified under the Federal Investment Ad-
visors Act of 1940 and registered under the Illinois Securities Act of 1953;
(f) The fund making the investment shall liave at least $5,000,000 of net
present assets.
(8) Common stocks, which are legal investnments for trust funds under laws
of the State of Illinois, subject to the following conditions and limitations;
(a) The stocks are listed on a national securities exchange as defined in the
Federal Securities Exchange Act;
(b) The stocks are issued or guaranteed by a corporation created or existing
under the laws of the United States, or any State, district or territory thereof;:
(c) The corporation which issued or guaranteed the stock has pai);d a cash
dividend on its common stock in each of the 10 years next preceding the d(late on
which the stock is to be purchased, and its net earnings available for dividends
on common stock during this period was at least, equal to the amount of the div-
idends paid on such stock;
(d) The corporation which issued or guaranteed the stock is not in arrears on
payment of dividends on its preferred stock;
(e) The total book value of all stocks owned by the Retirement Board shall
not exceed 10% of the total book value of all investments, determined as of the
date of any proposed investment in common stock;
(f) The book value of stock investments in any one corporation shall not exceed
5% of the maximum amount which may be invested in common stocks, determined
as of the date of the investment, and the investment in the stock of any one cor-
poration shall not exceed 1% of the total outstanding stock of such corporation;
IPO, Sec. 11-190.
No member of the Board of Trustees or individual officially con-
nected with the Board may receive any remuneration or commission in
connection with any investment by the Board. IPC, Sec. 11-225.
10. Park Employees' and Retircment Board Employees' Annuity and
Benefit Fund (cities over 500,000)
a. Coverage
In cities of over 500,000 population and having a Boarid of Park
Commissioners, the employees of the Board of Park Commissioners
and the employees of the Retirement Board or Board of Trustees of the
Park Employees' and Retirement Board Employees' Annuity and
Benefit Fund (PERBEABF) are covered under this Article of the
Illinois Pension Code. IPC, Sec. 12-101.
b. Funding
Both the applicable city and the participating employees contribute
towards funding the PERBEABF. The contributing employees pay





68


into the FII 1d (I l ,r of their salaries (after Septlember 1, 1971) for the
a'e adI rcti i'reiiieiit ser'i,'e anliit '. IP(, Sec. 12-15.0. Additional COll-
th'illlti li- ;Ire pI'rm,,itted of elmpl eloees epl d as of June 30, 1947, to
brlin the .onmtriiltiolls ils Iiis or hl' aciomint to the level as if contribu-
tio6 0 t A rate of 4r of salarv had bIeell made. 11 Sec. -12 0(d).
Fliu'therI' 'Q. ii a~11dditional(l contribution for wvidowl s benefits is in the
iOiimout of a 1. salary. IPC. Se'. 12-151. InI a(ldition. to defray the
c.,st of death 1ieflt provided,'l. an additional eIIployee mcontri 1tion1
111:1 v 1Ne made. not exteedelilg S';00 per month or thle amount sufficient to
provid(I' te C.dded lene(fitS. IP'C, Sec. 12-153.
Tiro cities, covered by the plan i must contribute 1.50 times tlhe con-
ti-iitnions for a're and service annuities: of their employees, anOd 2.7.5
ti mwe- the ekmplovce-' citriultions for widow's benefits (after A.'ugust
4. 1;>(1). IPC. S,. 12-1 ."2 Thle city will alsdi contribute the eil oyees'
andI enplolyers share of funding where the employv'e is on ordinaryn
or l tv disability benefits. 11 'C. Sec. 12-1.'5. The city nTeed not (con-
tr ilute (more than would Ie obl)tamned by a tax levy at a rate of .0275%
of, all taxalde property within its jurisdiction. IPC, Sec. 12-149.
c. J;hI/C'icnf'?
Thlie Bo:ird of Park Commissioner' shall levy an annual property
tax om all taxable property within the jurisdi(tion. The tax is to 1e
lvvi d :imd collected additionally to a'd1 in the s.imc manner as other
general proper:v taxes. IPC. Sec. 12-119.
d. l'"udfie',,,7! standardd+
d./
Tlie retirement board (Board of Trustees of the fund) may either
invest tfie as,,sets itself or invest in tlie commingled funds of tlie Illinois
Stite Bo.ird of Tinvet, ment. IPC. Sec. 12-166.1. If it invests the assets
it elf, it mnay only inve-t in:
(1) ,hiii,, noti,, nind other direct obli..tions of the UTnited States Covern-
1i'ilt: b,,nd., notes a-nd other obligations of any unitedd States Government
air.i.cv or inistruniiiitality, whether or not g-alranteed; and obligations the prin-
cilp;l ai1d inlrn.:t of wNIiiei. are gii.ranteed mi-.,iditiinnlly by thle United States
G-ovri-riiint or by an ai '-",iy or iniistrimentitality tiwieref;
(2) b..nd, and ni,,tes of the St;ite of Illinois :
() hilinds, or evidtioi' -; of indinoedlns, which are general obligations of any
county, city, t \in. villaie. scl4ool district, sanitairy di.strri-t. park district, Board
of Ednllention. or of any pb1itic.l subdivision of nnunicijml corporation of the
Stnte of Illinois:
(4) bimlk or notes which are giwirnl olli nations of any state in the T'nited
Statee. ,ir of ;Iny i"'litieal subdlivision thereof, provided sucl, political sulhdivision
l:1l ;1 a),piiifintil as shown by the list Fed(eral (ellzls pr4..4 din.ri such invest-
ment of not 1l-. thl:i 30.010 inhabitants, and -meh state or political sulidivision
h1:i- no1t d<(f;illtdl fr a pen'riod ltnr-r tl.nn 30 Ld;iys in tlhe pinyelint of interest or
pIriucipal ,n any of .i(h 'vienr;il obligations during the period of 10 years next
lwr.rili iir such invc-l imn it:
(5) vl id t;\ fa iticiiaifion warrant, of the Si ite of Illinoi,:, or of any con.nfy.
city. ti\wn, vill;il ., ;in,:i ry di irit, ,.irk district, Boa,,rd of Euhriatiil. school
(istrit. or Yiy ],i iiir'-il sibldivi-ilm Cor mnunirili;!:l corporaition of lhis Stnte:
(6) lind- or o( iirr ,,',1i,;iti'i ki which are i[':1M;ihl from r'virni'-s, or earnin-s
si,,.';'i,.:lly ]ih,(dhI.El liernart'tr of a i'1.11c utility in Illinois., ninnicilially owned.
eitli i',r lii' I ,ii, inilirf, .ly thronr'l anI civil division, awitlhiority or llie illn-
stl-iK iitality of tIi m lni.ir ality. pr ,vi~~~d : (.1) hlle mInllnlifil:ity oper;Itillng
lir. itiliyv hl:i' :'t h..'-t "'..*5 iiiI,;,'bitnnl- n s S!,,i',i by th"' l;.-t Ferlderal Cerus
lprrc','.diriL; .sii'1i i ,-t l i ,i (b) t1,, ntility li s b ,,,n in ,ili,'ritimi in its pres4 nt
,,rirnt :\t 1,:i.|" 7 y,,ir; ~ri,,n 1,, lthp d( lh- of tlhe ih ,-fnvi,! : (c) any boT ds (o l ohli-
f,;i ,,1 ,," fliut utility live Iot bi'''rI in paylvii'.-it if iwit rr.t ir plriiii.i:.il 'in ; oiy of ifs iniellio.dnel-s; (d) the rates for






69

ser-vice are fixed a '.-ording to eiii ,eerin" esiianttes so, as to prod'l,' ii',-ient
reveLme or eariniigs to pay all operating and maintenance chain; ,.- w(l both
principal and interest oni such bonds or obli.-';tio is; Ie the investment in any
Moe issue of such bonds does not exceed 25, of such i--'ie; (f) lhe aimri iz.d
book value of the inve-tment in this type of security does not exceed 101; of
the amortizi.d hook value of the total investments owned bIy tloe fund:
(7) bonds or other evidences of iideitedne'-- issued or ;;ii :rI:nteed by mny
railr,,ad corporation of any state of thle United States of America. or in 'I.iiip,-
m ,*It triist certificates there'of, provided int.res.t has Ibeen paid I y the c r(pjo)ra-
tion <11 its indebtedness for at least the 5 years last past. Nut mIore thall V, of
tlhe tital investmeiits shall consist of any one issue ;if thei-. bonds;
(8) bonds or other evidences of indebteldness of any public utiliy corpolr:ition
of any state of the United States of America, provided inte;--I 1as beenll paid by
the corporation on its indebtedness for at least the 5 years last past. Not more
than 1-4 of total inve:-tients shall consist of any one issue of th,-., bomnds;
(9) bonds or other evideices of indebtedness of any inidustriAl corporationn of
any state of the United States of America, provided interest has been laid(1 by
tlhe corporation on its indebtedness for at least the 5 years last 1ia;t. Not more
than 1C of total investments shall consist of any one issue o)f these bonds;
(10) bonds which are payable from revenue- or earnings sli..i fic(ally pledged
therefore of the University of Illinois, the Southern Illinois University of the
Teachers College Board.
(11) bonds of the International Bank for Reconstruction and Development
which are direct and unsecured obligations of thle Bank provided that the invest-
nment in any one issue of these bonds shall not exceed 1';- thereof, and that tithe
total investments in such bonds shall be limited to 5%c of the total amount of
investments owned by the fund.
(12) bonds of the Inter-American Development Bank which are direct and
unsecured obligations of the Bank provided that the investment in any one issue
of these bonds shall not exceed 1-i thereof, and that the total investments in
suchl bonds shall be limited to 53' of the total amount of investments owned by
the fund.
(13) direct obligations of the State of Israel for the payment of money, or
obligations for the 1,ayment of money which are guaranteed as to thle payment
of principal and interest by the State of Israel, on the following conditions:
(a) The total investments in such obligations shall not exceed 5". of the
book value of the aggregate investment owned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the d(late of such investment;
(c) The bonds and interest thereon shall be payable in currency of the United
States;
(d) The bonds shall contain an option for the redemption thereof after 90
days from date of purchase; IPC, Sec. 12-166.
Furthermore, no member of the Board of Trustees nor any indi-
vidual connected directly with the Board may have any interest "di-
rect or indirect, in the (rains or profits of any investment made by siuchl
board * IPC, See. 12-186. Nor may anyv such person have any
direct or indirect interest or receive any pay or emolument for such
inve-tmeiients. Board members and related individuals may not act as
agents or partners for others to borrow or i1-e funds of t]ie Trust. nor
may any such person "become an endorser or surety or become in any
manner an obligor for monies loaned by or borrowed of anyv :-ch
board." IPC, Sec. 12-1,6.
11. Si,/;fiiry D;str;ict Employ, ,.s' and Twrustees' Ality, '71u0 Benefit

a. Cor,' rage
The Saniitary District Emip)loyees' and Trustee-" Annuityv and( Bene-
fit Fund extends its coverage to all ::iititary di-t nicts located to include
within them at least two towns or villa r,- or cities with a total polpu-
lation of at least 1,000,000 inhabitants. IPC, Sec. 13-101. An indi-






70


Vldulal may participate as an employee of such sanitary district if he
or -It i js an emlhovee of the district appointed by civil service certifi-
,a;tion and aI)pointWment under tlhe "Chicaio Sanitary D)istrict Act,"
or ;n eiplio)yee exempt from tlhe classified civil service, a temporary
cml,,ovee of tlhe sanitary (, district, an appointed officer or acting officer
of ti, sanitiary district. an employee of tlhe Board of Trustees, or a
Trii-tee of the sanitary districtt who elected to become a participating
employee. IPC, Sec. 13-108.
b. Fuldinq
Thie, pirtici paticng employees and covered district, both contribute
towards the funding of the plan. The contributions required of the
participating employees for age and service annuities are at a rate
of (I.' of salary (after January 1, 1973). IIPC, Sec. 13-170. Any
employee wlho has service prior to August 1. 1947, may make an addi-
tional elective contribution. IPC, Sec. 13-172. To aid in defraying the
cost of the increased service retirement allowance, each employee must
contribute an additional 1% of salary after January, 1960. IPC, Sec.
13-172. Widow's annuities are an additional 11/21% of salary. IPC, Sec.
13-173.
The district contributes at a rate of 6% of each employee's salary
(after August, 1, 1953). IPC, Sec. 13-170(b). The district also con-
tributes 2( ; of salaries of employees for widow's benefits. IPC, Sec.
13-173. The district is also required to contribute 534 salary of em-
ployees for prior service annuity on the effective date of the employee's
service, subject to the salary limitation of $3,000 per year, plus interest.
IPC, See. 13-177. The district also contributes for administration
costs. IPC, Sec,. 13-179. The district's contributions need not exceed the
amount contributed by employees. two years prior thereto, times a
factor statutorily determined (for 1975 the factor is 1.80; for 1976 the
factor is 1.85; for 1977 the factor is 1.90; for all years thereafter the
factor is 1.95). IPC, Sec. 13-169.
c. F1inamnog
The district's contributions are financed through a property tax on
all property within the.district, levied and collected separately, but in
the same manner as otlier general property taxes. IPC, Sec. 13-169.
d. F;ife(aryt sftandvtrds
While the Board of Trustees of the plan may invest the assets and
receipts of the trust, it may only invest in delineated assets, to wit:
(1) Interest bearing bond,, notes or bills of the United States, or obligations
fully guaranteed as to the payment of both principal and interest by the United
Sta -s ;
(2) Interest bearing bonds of lthe State of Illinois. or of any county, city,
vHillae, incor Orl;ited tow\vn. municipal corporation, school district in the State
or any other politi-.al subdivision authorized by law to levy taxes in Illinois or in
revenue b nd of tlie St;ite ,if Illinois.
(3) Rovenue bonds issued by any county, city, village, incorporated town
or ieolitieil subjidivision in this State, havin,.- a p iplatiomi of not less than 2.500
inhabitants cording to the latest oi.ial venuss of the United States Census
Bure;iu. lbut limited to the extent that no suchl investment shall exceed an amount
of 25%,- of any one issue and limited to a total investment in this type of security
"f 15% ,f invested assets as such assets may b)e at the time any such investments
are made ;
(4) Tax anticipation warrants of the State of Illinois. or of any city in which
this Article is in effect, or of the county in which the city is located, or of any
school district within the city;








(5) Interest bearing general obligations, payable from unlimited ad Valorem
taxes, of any other State in the United States, or the political sub(livisions of
any such State having a population of over 30,000 as shown by the latest official
census of the United States Cens.us Bureau which has not defaulted in the
payment of principal or interest on any of such general obligations for more
than 30 days in the 10 years next preceding the date of sil-h investment;
(6) Bonds or other evidences of indebtedness. issued or guaranteed by any
railroad corporation or in its equipment trust certificates ; bonds or other evide(Ije
of indebtedness of any public utility corporation; bonds or other evidences of
indebtedness of any industrial or finance corporation; provided (a) such bonds
or such other evidences of indebtedness shall be issued or guaranteed by cor-
porations which are incorporated in one of the States of the United States; (b)
no default in the payment of interest or principal has occurred in respect to the
corporate indebtedness within the past 5 years; and (c) not more than 1%' of
the then total invested assets of the fund shall be in any one issue of any one of
such securities; not more than 10% of the total, of any one separate issue of
corporate bonds, trust certificates, or evid(lencts- of indebtedmnss, shall be pur-
chased; and not more than 50% of total investments shall be in the combined
category in this paragraph described.
(6.1) Direct obligations of the State of Israel for the payment of money, or
obligations for the payment of money which are guaranteed as to the payment
of principal and interest by the State of Israel, on the following conditions:
(a) The total investments in such obligations shall not exceed 5% of the
book value of the aggregate investments owned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct general obligations on the date of such investment;
(c) The bonds and interest thereon shall be payable in currency of the United
States;
(d) The bonds shall contain an option for the redemption thereof after 90
days from date of purchase;
(e) The investment in these obligations has been approved in writing by
investment counsel employed by the board, which counsvA shall be a national
or state bank or trust company authorized to do a trust business in the State
of Illinois, or an investment advisor qualified under the Feder.'l Investment
Advisors Act of 1940 and registered under the Illinois Securities Act of 1953.
(f) The fund making the investment shall have at least $5,000,OCO of net
present assets.
(7) Common and preferred stocks which are legal investments for trust funds
under the laws of the State of Illinois, provided (1) the stocks are listed on a
national securities exchange as defined in the Federal Securities Exchange Act,
(2) the investment is approved by at least % of the membership of the members
of thb board after having been recommended in writing by a national or state
bank or trust company authorized to do business in the State of Illinois, or by
an investment counsel licensed as such under the laws of the United States, and
employed by the board as investmnwnt counsel, (3) the stocks are issued by a
corporation created or existing under the laws of the United States, or of any
state, district or territory thereof, (4) the corporation shall have no arrears
of dividends on its preferred stock, (5) the corporation has paid a cash dividend
on its common stock in each of the 10 year period next preceding date of invest-
ment and the aggregate net earnings available for dividends on the common stock
of such corporation during such period was at least equal to the amount of such
dividend paid, (6) the preferred stock had average annual net income plus average
annual fixed charges at least equal to 2"times the sum of its average annual fixed
charges and which for the last 2 fiscal years of such period, had annual net income
plus annual fixed charges of at least 11/2 times the sum of its dividend require-
ments for preferred stock and it fixed charges, for a period of 5 fiscal years next
preceding the date of investment for which the necessary statistical data are avail-
able in published fiscal year statements, (7) the total book value of all stocks
owned by the fund shall not exceed 331/3% of the total book value of all invest-
ments of the fund and (8) the book value of stock investments in any one corpora-
tion shall not exceed 5% of the maximum amount which may be invested in stocks,
determined as of date of investment, and the investment in the stock of any one
corporation shall not exceed 1% of the total outstanding stock of such corporation.
(8) Bonds of the International Bank for ReTonstruction and Development
which are direct and unsecured obligations of the Bank. provided that the in-
vestment in any one issue of these bonds shall not exceed 1,( thereof, and that





72

the tmtal inve1tments in such lboinds shall be Iimnited to 5'" of the total amount
of ilvest'mleltlts I,\\'Wiied ly the fund :
(9) )lli.irltins of the 12 Federal InLnd P.inks and tilt Initer-Amnierican De-
velipiJmnt Bank.
F111, tilt 1in1 prpse of this Section,. fixed eliarges shall mean interest on funded
or itfliifiled delit and colitiligent interest cliarges.
Liliiititiiis h'reinlifore set f -orth shnll lie applicalde only at date investment
wa-- llurclh.l se(- No sale ir liqui(lation o f any inlvestmiient shall lie required solely
lw'ri-u< o(f (cllanL'S in the relative market value of investments at any time. IPC,
St.t'. I:"-IS!).
The Board may also invest the funds of the Trust in the comingled
invt'stment fund of the Illinois Board of Inve4istment. IPC, Sec. 189.1.
Furthermore, no Board member may receive any commlllllission or pay-
meitt from the fund as pay or salary, nor may they (or any person
related to thie Board) receive any commission with respect to in-
vestments of the Board. IPC, See. 13-214; 13-215.
12. Piblw School Teaceer'" P< nsion and Retirenwret Fund (cities of
or i(, :0.000 ilOQ/) ttdal fts)
a. Coverage
In each city with a population over 500.000 there will be a Public
School Teai'ers Pension and Retirement Fund (PSTPRF). It covers
all "mnonmlis, of the tcac1iiiin force of the city, including principals,
a-sistlant principles. the general superintendent of schools. the deputy
siperintenlelit of schools, as-oci ate superintendents of schools, mem-
1ber' of the Board of Examiners, all other persons whose employment
'Peijlii'(.s a teaching certificate issued by the Board of Examiners and
employees of thle Board of Tru'tees but excluding persons contribut-
ing concurirently to any other public employee pension system in Ilii-
nois. ." IPC' Sec. i7-106. The. cove," a",e also exclu(les individuals
ictired and re,-civing benefits under another pension system of the
State. per-ons employed on an hourly basis, and persons receiving
pesiols from) the fund who are employed temporarily by the Board
of Edication (for less than 75 days in a school year). IPC, Sec. 17-106.
b. F~ininrhg
Botlh the cities and the covered employees contribute toward the
fiimiigr of the Public School Teachers' Pension and Retirement Fund.
The 1 airticipa tin gr employees contribute 61 % of their salaries forserv-
ic'0 or disability retirement pen-ion, and additional contributions of
I.-' ; for annual increase in base pension and 11,, for survivors' and
clihld rens pensions. IPC, Sec. 17-130.
Thle mi.ilicipal government contributes an amount raised by a. spe-
chil tax for this purpose. The tax will be at a rate of .202 on the dollar
value of property located within the city. IPC, Sec. 17-128.
c. F ; i-ir-i;i.
The city"s contribllt ions are financed throii-h a mandatory property
iax levied on all property in the city. additional to and( levied in the
same mi manner a- otlier general pro ty taxes. IPC, Sec. 17-128.
d. l";ff;,,,c .itid ffiJird.,
Thle BoaPrdi of Tristees of the Public School Tea'ihers' Pension and
Rtiremen lit Fund is ve'tedI with the authority to invest, the funds of
l]ie FInd. but only in certa in delineated investments, to wit:






73


1. Bonds, notes and other direct obligations of tlie united State, Government,
and also obligations of instrument alities and agencies (oft the t'nited States Gov-
ernmlent, whether or not guaranteed by that (Government;
2. General obligation bonds and notes of the State of Illinois ;
3. Bonds or other evidences of indebteiiLdness which are general oblig;itions of
any political subdivision or municipal corporation of the Stale of Illinois ;
4. General obligation bonds of any other state of the United Slates or of any
political subdivision thereof or municipal corporation, if the political subdivision
or municipal corporation had a population as shown by the last federal census
preceding the inv e.stiieiit of not less than 30,000 inhabitants, and the state, politi-
cal subdivision or municipal corporations lias not defaulted for a period longer
thal 90 days in the payment of interest or princip.Il on any of its general obliga-
tions during the period of 10 years next preceding the investment;
5. Tax anticipation warrants issued by the State of Illinois, or by any political
subdivision or municipal corporation of the State;
6. Bonds or other obli-ations which are payable from revenues or earnings,
specifically pledged therefore, of a public utility in the State of Illinois, imunicip;ally
owned, either directly or indirectly through any civil division, authority or public
instrumentality of the municipality, if (a) the municipality operating such utility
has at least 2,500 inhabitants as shown by the last federal census preceding such
investment.; (b) the utility has been in operation for a period of at least 7 years
prior to the date of the investment; (c) bonds or obliga t ions of the utility have not
been in default for a period longer than 90 days in the payment of interest or
principal; and (d) the rates for service are fixed so as to produce sufficient reve-
nue or earnings to pay all operating and ma ilitetiance charge.- and both prinicilial
and interest on the bonds or obligations.
The investment in any one issue of these bonds may not exceed 25% of that
issue, and the total investment may not exceed 10% of the total Uamount of invst-
ments owned by the fund;
7. Revenue bonds issued by the Board of Trustees of the University of Illinois,
the Board of Trustees of Southern Illinois University, the Board of Regents
of the Regency Universities System, and thie Board of Governors of State Col-
leges and Universities, and any public building commission organized under the
laws of this State;
8. Bonds or other obligations which are payable from revenues or earnings,
specifically pledged therefore, of a public utility outside the State of Illinois,
municipally owned, either directly or indirectly through any civil division, au-
thority or public instrumentality of the municipality, if (a) the nmunicipIllity
operating the utility has at least 30,000 inhabitants as shown by the last federal
census preceding the investment; (b) the utility has been in operation for a
period of at least 7 years prior to the date of the investment; (c) bonds or obli-
gations of the utility have not been in default for a period longer. than 90 days
in the payment of interest or principal ; and (d) the rates for service are fixed
so as to produce sufficient revenue or earnings to pay all operating and minainte-
nanee charges and both printcilpal and interest on the bonds or obligations,
The investment in any one issue of these bonds may not exceed 251, of such
issue, and the total investment may not exceed 10% of the total amount of
in ves.tments owned by the fund.
9. Obligations of Canada, or any province thereof, or of any city having a
population of at least 150,000 inhabitants, if thle principal and interest are 1pa;y-
able in United States currency. The total investments in these securities may not
exceed 5% of the total amniount of investments owned by the fund :
10. Bonds of the Commonwealth of Puerto Rico. The investment in any one
issue of bonds of that government may not exceed 10 '; thereof and the total
investments in securities thereof may not exceed 2% of the total amount of in-
vestments owned by the fund;
10.1. Direct obligations of the State of Israel for the payment of money, or
oblig.ations for the pavement of money which are guaranteed as to the Ilymenlt of
principal and interest by the State of Israel, on the following conditions:
(a) The total invest iiwiits in such obligations slhill not exceed 5' ; of the book
value of the aggregate investments owned by the fund;
(b) The State of Israel shall not be in default in the payment of principal or
interest on any of its direct .eleral obligations on the d(late of such investment:
(c) The bonds and interest thereon sliall be payable in currency of thie Uuiied
States: -
65-101-76--6






74


(d) Ti'Ple indls shall contain an option for the redemption thereof after 90
days fri btl d:te of purciase;
(e) Tih' investment in these i)bligations has been approved in writing by in-
ve.stiinlit counsel emijdoyved by the lhard, which counsel shall be a national or
..:iitt. :iink )r trust company authorized to do a trust business in the State of
Illiniois. o)r an investment advisor qualified under the Federal Investment Ad-
visors Act of 1940 and registered under the Illinois Securities Act of 1953.
(f) Tihe fiund mi:king the investment shall have at least $5,000,000 of net
11resenwlt assets.
11. lidis or other evidences of indebtedness issued or guaranteed by any rail-
1T'ad cirpoiration. or in equipment trust certificates, if the corporation has not
,ief'.ilteil on any of its obligaltions, either as to principal or interest, within a
period of 5 years prior to the date of investment. No more than 1% of total in-
vest r eiits m;iay consist of any one issue of these securities;
12. B'ntids o)r other evidences of indebtedness of any public utility corporation,
if the crii)raition l.has not defaulted on any of its obligations, either as to prin-
cipal or interest, within a period of 5 years prior to the date of investment.
No more than 1%r of total investments may consist of any one issue of these
securities ;
13. Bond-s or other evidences of indebtedness of any industrial or finance cor-
piratimn, if the corporations has not defaulted on any of its obligations, either as
t, principal or interest, within a period of 5 years prior to the date of invest-
mient. No m,)re than 1r of total investments may consist of any one issue of
these securities:;
14. Bank capital notes which are direct, unsecured obligations of a banking
institution which is a member of a Federal Deposit Insurance Corporation having
capital funds represented by capital stock, surplus and undivided profits of at
least ..20.0(X).000, if the institution has not defaulted on any of its obligations,
either as to principal or interest, within a period of 5 years prior to the date
of investment. No more than 1% of total investments may consist of any one
issue of these obligations.
1.5. The securities mentioned above in paragraphs 11, 12, 13 and 14 must be
securities of corporations which are incorporated in one of the states of the
United Stiates of America.
16(1). Common and preferred stocks of any corporation chartered under the
lnws of tlhe United States or of any state, district or territory thereof, if listed
on a national securities exchange as defined in the Federal Securities Exchange
Act and are legal for trust funds in Illinois. Common stocks are eligible if (a)
the corporation has paid cash dividends on its common stocks in each of the
last 5 years next preceding the date of investment and (b) the corporation's
aggregate net earnings available for dividends for the whole of that period have
been ait least. equal to the amount of the dividends paid. The investment in the
st(uck of any single corporation (including shares previously purchased) may not
exceed 1' of the book v;iwe of the total investments of the fund on the date of
plirhi.se or be greater than 1"r of the total outstanding stock of the corporation.
Preferred stocks are eligible if the company's common stock meets the above
criteria.
16(2). Common stocks of the following types of institutions whose securities
are unlisted: any li;nk which is a member of the Federal Deposit Insurance Cor-
porationi living capital funds represented by capital stock, surplus and undivided
profits of at least $20.000,000); any life insurance company having capital funds
represenetd by capital stock, special surpuls funds and unassigned surplus to-
tallini at least $50().OOO.000O; and any fire or casualty insurance company, or com-
bination thereof, having capital funds represented by capital stock, net surplus
and voluntary reserves of at least $.0n,0O0O,f00. Common stocks are eligible if (a)
the institution hns paid ca.sh l dividend- on its common stock in each of the last
10 years next precepdin the (late of investnwnt nnd (b) the institution's aggregate
net earnings available for dividends for tlhe whole of that period have been at
least equal to the amount of the dividends paid. Tihe investment in the stock of
any single institution (incldin! shares previously purchased) may not exceed
1 4) of the ),ook value of tlhe ttial investment, o-f the fund on the date of pur-
chase nor le greater than 1i'. of the total outsatnndini stock of the institution.
16(3). Thie :ngregate amonint to be invested in comrnon and preferred stocks
shall be limited to .'A'l, of the book value if tlip t,,al investments of the fund
on tlhe datp tlhe investment i madile andl the ilv-'tinent in any such stocks must
be approved by at least 2'., of tle mIemi ersliip) of the bi)a rd.






75


17. Notes secured by mortga'.zs under Sections 20.3 and 207 of the National
Honuing Act which are insured by the federal housing commissioner, or lhis
slV-cessor or assigns, or in delentures issued by such comin iiS owner, which are
guaranteed as to principal and intre-st- by the Federatl HoI-I-iii Administration,
or agency of the United States Government. No more than 20% of total invest-
meUts of the fund may consist of tlhese securities.
18. Bonds of the International Bank for RTc.onstruction and Development and
the Inter-American Development Bank which are direct and unsecured obliga-
tiols of these Banlks. The investment in any one issue of these bonds may not
exceed 1% thereof, and the total investments in these bonds muiit be limited to
5% of the total amount of investnet-nts owned by the fund.
19. Loans to veter;ins glarante-ed in whole or Ia rt by the United States Gov-
f.rnment pursuant to Title III of the Act of Congress known as the "Servicemen's
Readjustment Act of 1944", as amended or supplemented from time to time,
provided such guaranteed loans are liens uIpon real estate. IPC, Sec. 17-146.
The Trustees may also invest funds in the comingled investment
funds of the Illinois State Board of Investment. IPC, Sec. 17-146.1.
13. The Closed Funds (for the hov.-e of correction employees and for
the public library employees)
a. Coverage
At the election of the Board of Inspectors of the Houses of Correc-
tion for a city with a population over 150,000, such Board may adopt
a House of Correction Employees' Pension Fund, with coverage of
all employees of the applicable houses of correction. IPC, Sec. 19-101.
For these purposes, employees of the houses of correction are those so
employed under the appropriate civil service law, and those in the em-
ploy prior to enactment of the civil service law. IPC, Sec. 19-105. The
Fund does not cover employees whose employment commenced after
January 1, 1954. IPC, Sec. 19-105.
The Board of Directors of the Public Libraries in a city with over
500,000 inhabitants may elect to have a Public Libraries Employees'
Pension Fund, with coverage extended to:
all persons in the employ of the public library board prior to July 8, 1955 re-
ceiving a stipulated salary per annum; all persons in the employ of the board of
trustee of such Public Library Employes' Pension Fund prior to July 8, 19755,
receiving a stipulated salary; all persons who are contributors to this fund and
have contributed to this fund for a period of at least 1 year ** IPC, Sec. 19-
204.
b. Funding
The House of Correction Employees' Pension Fimd is funded by
employee contributions of 6% of salary and an additional 2- of sal-
ary contribution from male employees. IPC, Sec. 19-101. Along with
these contributions the municipal authority is authorized to levy a fax
on all taxable property, up to .0009 per cent of the value of such prop-
ertv. IPC. Sec. 19-104.
The Public Library Employees' Pension Fund is funded by contri-
butions from the employees of 6% of salary, or more, as determined by
the Board of Trustees of the plan. IPC. See. 19-208(1). No provision
appears to be made for contributions bythe governing municipality.
c. Financing
The city which establishes a House of Correction Employee.;' Pen-
sion Fund is permitted, though not compelled, to levy a property tax
in addition to other property taxes, on the propeily within its juris-
diction, in addition to and in the'same manner as other taxes. IPC,
Sec. 19-104. It may be noted, however, that the statutory language





76


lwi-Il'it!, tile ]cvy of the taIx 1)b y tle .ity, but notes tlilat tile city council
sall1 levv tie t a ;i at ithe aF mi1nienttioned rate. I PC, Sec. 19-104.
No pr6\ ision appeast' n to I)e '.t1 up fin ancc 1the Pltblic Library Enm-
ployet. IPei-ioli Fiiid. otlihr t lhani tI o,' ,ilt ribut ions of the eimployees.
,l. Fidi ,,c,11 l .q x/e,,w 1 ,.;
Itl' 1 thoair, ls of 1rl'iste('s are penrmitted to invest the funds of the
]>t,-i0 iis in tt-ir 1 iscret ion, with IIo resi rictif Is oI I tIlIe type of ilnvest-
,.nt. ot her thil;ii ihe g,'ineral law of fidliuciary responsibility. IPC. Sees.
19-109: 19-20S.
Furthtermnore. it is a Clas:- B misdeilIeallor fo,, an:y person to directly
or, indir-itlyv "avoid or -eek to avoid any or all of lie provisions of this
Division. * or obstilct the enforcement of any of the provisions of
thli. Division." IMC, Sec-. 19-118; 19-219.
B. NONSTATUTOR I;Y PLANS FOR LOCAL EMPLOYEES
There appear to be two significant pension plans for local employees
within the State of Illinois: the pension plan of the Chicago Transit
Authority and the pension pIlani of the Village of Morton Grove. The
fonrer is authorized by statute. 1113/4 111. Rev. Stat., Sec. 307. The
latter doe-, not appear to lbe statutorily authorized.
1. 7i` Ch, ,,lgo Irai.4t Authority Pevs;o P1t a. Colr rage
Tlie pension plan of the Chiciago Transit Authority (CTA) covers
all emnI)ployvees of the Authority. The plan's terns defilne "eiipl)loyee"
to include those individuals who, on June 1, 1948, and thereafter, are
receiving a ",regular and stated compensation" from the Authority, who.
on June 1, 194., were al)siient due to "leave of absence, or authorized
furlough" and those individuals who, on June 1, 1948, or thereafter,
were on leave of absence because of office-holding in the Association
(Division 241 and Division 308 of the Amalgamiiated Transit Union),.
or its International Office or the International Office or another office,
of any authorized bargaining agent. Plan, Sec. 3.3. Temporary em-
plovee-. defined as an employee emniployed by the CTA for not more
than six months and who do not accumulate seniority during em-
ployieiit, are not included in the plan. Plan, Sec. 3.3.
b. Fund;lig
Bottli the pa rticilpmts and the C.T.A. contribute towards fundingthe
pension plan. After 1973, the employees of the CTA miust contribute
7% of :aI riy. En Ip)loyts who wo, ere en iployed between January 1, 1965,
and June 1, 1949., a:id whose compeiisatiion was over $10,000 (the
am1oun1t above `10.000 not having not been covered by the plan) must
rI'miit to thle Fund "thle amount of contributions he should have made
if anniuaI l comipl)cisailion exceedi(ii(rig 10,000, had been covered by the
Pla*n toirelier with ai amiiount equal to the interest that would
have bevi cre'(litevd to tlie eiimployee." Plan, Sec. 7.1.
Tlie CTA 1ii1.st cointribute, after 1973, 13% of the employee's sal-
a'rie, to thle fun1 of tlie phlii. It miiust also remnit its contributions for
salaIries of eipl loyvees between June 1, 1049 and January 1, 1965,.
whlo (",arv(ed over s.10,000, which amoiiiot was not covered by thie plan.
PlaInI, SeI,. 7.1.







c. Finanng;a
No provisions are made for financing tlie count ribut ions of t!e (CTA
to the pension plan.
dI. Fiduciary standards
TruLstees of the CTA Pension Plan must be a "bank or trust com-
pany incorporated under the laws of the Inited States or of the Siate
of Illinois" with a combined Capital and surplus of at least S7.00().(00.
The trustee must be authorized by law to accept a(nd exe(c'lte trusts
of at least 10 years in duratiomi. Plan. Sec. 18.1. The trustee has no
liability for any amounts paid under the plan, to the extent of their
correctness, when the amounts are determined aand certified to tlie
trustee by the (Committee oin Retirement Allowance of the P1ension
Plan. Plan, Sec. 18.3. Powers of the trvistee, with rer'ardl to invest-
1 ments and management of the trust assets are determinedll( b cnItract
between the trustee and the (Comlmittee, )bult thle trustee 1u11st ,'' *that
"the fund shall at all times be prudently invested." Plan. Sec. 18.4.
The Committee may authorize:
the Trustee in its sole discretion, to) invest and reinvest the IFund in any 1)prop-
erty, real or pl.rsonal, or 1)art interest therein, wherever situate. ilne'uliigi Ilit
without being limited to common and preferred si(ocks. lorpa';te and m ,lvewi-
m,-ntal obligations, trust and participation certificates, leaseholds, 1(ort'algg('es
and other interests in realty. Plan. Sec. 18.4.
For a copy of the plan and appended agreements and interpretations
of the Chica,2o Transit Authority, please see Alppendix A.
2. The pension pan, of the Vihlage of iforton GrYove
a. Cover'aqe
The pension plan of the Village of Morton Grove, Illinois, covers
all "present and future full-time Employee(s)" of the Village. Tlhe
plan's definitional provision (Part I, 1.) defines "full-time Employee"
as one who is employed for at least 400 hours p)er year, and makes one
year's -ervice a prerequisite to participation. Part 1 2.
b. Funding
The participating employees of the Village of Mortmon Grove are
required to contribute "2% of Montlhly Earnings toward funding the
pension plan. Plan. Part 1, 1.
The Village must contribute annually the amount required to keep
the plan actuarially solvent, in a aiianiount equal to that required for
current service cost plus interest on any unfunded past service liability.
Plan. Part II, 11.
c. Fin'ircing
There is no provisions reqiiri-ing tlhe Village of AMorton Grove lo
make the payments for the pension plan.
d. Filduc/any sta(dards
There are no special provisions in the pension plan provid.iin for
the m;i s- by which tlhe assets of tlhe p1l1 are to 1e i ,-el. ex,'el)t
that interest in an amount not exceediing( 31/ -,+ annual Iv slall 1 1 pa i
1bv the writer of the plan. Continental Assural-iice (I Compay. ('liiia.- .
Illinois, on the plan assets.





78


e. T.c, a7ty of the plan.
The Village of Morton Grove appears to be one of a very few vil-
larzes in the State of Illinois with its own municipal pension plan.
Section 7 of thle Illinois Pension Code establishes the Illinois Munici-
pal Retireiment Fund. The question may be raised as to violation of
tills statute by the establishment of the Morton Grove plan.
Section 7-182 states that the described municipalities of that pro-vi-
sion of the Illinois Pension Code "shall be included within and be
subject to tils Article beginning upon the effective dates hereinafter
specified." Included in the description are "all cities, villages and
incorporated towns having a population in excess of 5,UO( inlabi-
tants * *." IPC, S.ec(. 7-132(1). Subparagraph 5 of that same sec-
tion refers to these covered municipalities as "municipalities reqliVred
to pairticil)pate under sub)paigraph 1 * *." IPC, Sece. 7-132(.) (A).
However, provision is al so made for towns which "elect to be included
either by referendum * or by adoption of a resolution." IPC.
See. 7-132(4). This latter provision, however, is preceded by tlhe
phrase "Any other municipality, * other than those specifically
excluded from participation and those described in paragraphs 3
above * *" IPC, Sec. 7-13-2(4).
Section 7-132 would appear to require that in villages of 5.000 pop-
ulation or more, the Municipal Retirement System of the State of
Illinois provided for in Article 7 of the Illinois Pension Code -would
appear to be the only permissible general municipal pension plan.
Other plans would be in violation of the law, unless they were
supplementary to a general incorporation into the Municipal Retire-
ntct System. In other words, if the Village. of Morton Grove lias a
population over 5,000 in the last census, then it should become a mem-
ber of the Illinois Municipal Retirement System. Its own pension plan.
if it should become a member of the IMRS, could be. valid but only
supplementary to the plan of the IMRS.
The 1970 population of Morton Grove, Illinois, was set at over
26,000 by the Bureau of the Census. Therefore. its refusal to adopt t]le
Municipal Retirement Systemni of the State of Illinois and its adoption
of its own municipal pension plan may be in violation of the Illinois
Pension Code.











APPENDIX A-THE PENSION PLAN OF THE CIIICAGO TRANSIT
AUTHORITY AND RULINGS TI1EREUNDER
This Agreement, made in triplicate as of June 1, 1949, by and be-
tween Chicago Transit Authority, a municipal corporation created
by the Metropolitan Transit Authority Act of Illinois, party of the
first part, and Divisions 241 and 308 of the Amalgamated Trainsit
Union, formerly known as the Amalgamated Association of Street,
Electric Railway and Motor Coach Employees of America, party of
the second part, as amended, Witnesseth:

SECTION 1-TITLE
1.1. The retirement and disability allowance plan which is the sub-
ject of this agreement shall be known as "Retirement Plan for Chicago
Transit Authority Employes" and is sometimes referred to in this
agreement as "this Plan" or "the Plan."

SECTION 2-PURPOSE
2.1. The object of the Plan is to provide retirement allowances in
case of old age or disability for the eligible employes of the Chicago
Transit Authority who are represented by said pa ity of the second
part, subject to the conditions hereinafter set forth, and for other
employes to whom the Plan may be later extended as herein provided,
subject to the conditions herein set forth.

SECTION 3-DEFINITIONS
3.1. "Authority" shall mean Chicago Transit Authority.
3.2. "Association" or "Amalgamated" shall mean both Division 241
and Division 308 of the Amalgamated Transit Union.
3.3. "Employe" shall mean any employee of the Authority who:
(1) was, on June 1, 1918, or after such date in case of new
employes, receiving a regular and stated compensation from the
Authority, other than a retirement allowance or retainer; or
(2) was, on June 1, 1948, absent due to leave of absence, or
authorized furlough (other than retirement or disability retire-
ment) or sickness, or accident, which started subsequent to Sep-
tember 30,1947; or
(3) was, on June 1, 1948, or is thereafter, on leave of absence
because of holding office in the Association or its International
Office or in the office of International Office of any other bargain-
ing agent representing employes of the Authority. (Amended
1-1-68)
Any person other than one described in the last above subpara-
graph (3) not at work on June 1, 1948 due to leave of absence or
authorized furlough (other than retirement or disability retirement)
(79)





so


11or mi'lklns. ,t accident, whirli :llseci.e 1iran p'ior to (Octolber 1. 1947
;inil %Nh wII -; a parl-ticiplant under any of tle former Ietireniment and
I)i. Kihilitv IPl:l-s in ell'ect on O,.tobler 1, 19-47, shall have a retirement
or 'i-.11 iii ly aIllowa'e whe\ln eliaiblje uidler tbe provisioliS set forth
in -l,'h Plan equal to llte liviefits 1now beilii' paid or that lmay in the
future i. paid t ttlhose retired uIdiler sutli lPeT-M i return *in g to rieviula r elmpl)Vymlent with the Au\thoritv after
Jiim 1.19 !, for i periodmof Tot less than thirty (:10) days will ijualify
:IS :il etIllplo ye under tis P1:an.
It is ilo)t intendedl to iil(ude temporary employes as defined by
ithe Retireineiit Allowan'e Conmiittee provided for hereinafter. Re-
tired iTl ploes ;are ,ot iilumled,. except ai provided in Section 20.
Any emiiplove retired on di-aMility previous to June 1. 1948. who
rti irs to a,.t ive dtutv f,,' the Autloritov, after thle effective late of this
Ili n. -1ill not 1, entitled to aiy of the beenefits under this Plan (ex-
re'pt tlh, provided in Section -2o) unless hii- period of active duty
is m,,r, tht1i three consecutive months, provided, that if he is dis-
:,lled. as d.s'-ril,,d in Section 12. lv cause ari-inir after his retu'n
to work. hle shall be tlntitledl to) a di5sabilitv allm'wan'e under this Plan,
'.,, rdl,, of 1his 1period1 of service a after his return to work.
:'.. "4Etitive ,ate of the Plan" s-iall i meai June, 11 9-I09.
3 ... "Past Servie- s haall mea:ii the continuous service with the
Authilority, or any of its, predleceT'-soIr public utilities, rendered prior to
the elective ,late of thi- Plan.
,.',. "Future Service" shall mean continuous service witli tlhe Au-
t hloritv fro',m :t ilt a after the effet i \e date of this Plan.
8.1. "C 1otjin4os Setrvice" shall mlean service with the Authlorit y,
or ;li'v of its pred,.esor public utilities, from the, date since which
eillplovment l]as remained unbroken. provided, however, that the
f ollw in, slhall not hIe considered a break in continumous service:
(1) Authoriz.ed lea ves of aLsemnce anl authorized absence be-
'aii-' of -ic,'ne]-s or injury.
(2) Time spent in the s-ervice of the armed forces or the Mer-
chant -Marine of the United States or her allies during a period of
emier ,cIiy, or on a-ccount of compulsory military service provided
the vIploye lias returned or returns to the service of the Author-
ity after his honorable discharge within the period described by
law, if any. (S+ee Rule 16, paIe G,)
(;) Terlination of emIplo,,,ment, if followed by reinstatement
withiin (3) ),:,rs ;ftier d(ite of termination of employment,. with
-e.iii,,itYV ri2tl. in tle joi e l:Io-sification occupied at tlhe time of
terilinIation, or teiminationm of emnplovillient if followed by rein-
:,t:.liient v.iIin (I) years in motheCIr job (lassil!ciation, with
,rvice f ),,w ..1to of lire (Ipriorl to tel'ntii 10atio1.
(4) P eriod- ,1uritL, vhlich no servxies were rendered because
of -trike- or m .loit .
5)) L;,v-,,r due to re'l,-iion in fo,.- if t!i lay-off ocfuIr red after
1i'.. ;ndl tIlh e, ploye v-.- I.:le ,] Iack to wor. anil p lirsualant to
-,iwl re,:,ll ,ti r dn,,, to \. Irk iriolr to 1I.:87. 'l"i, -~ibp:ira&raph (5)
al,'pl',-. ir,1 t, e'IIplvy '< Ito ivl ire fi1, or virer Jaim'irv 1. 11 .
(;) ()th,.r I" "-,,off e ior 1!,',1u h r,,i e," ., -. i i.n.' thr'o, (.) years,
,i1ion.~. exenel v ;'eeiit f t(e Aliorit" and tlie Asso-
)i a 0-io1.





81


Provided, however, that in calcillatin" p,- service and in determ) in-
ing eli, ibility (whether )ase onil past or fliti'e -,rvire) to a mini-
mum retirenieiit or (lisabilitv allowance uimler this folrn, abs c(e for
one or more of thle foreoin"- g"TotIunds exce; dillng three (o!nsectie
years shall, to the extent it excecis sliu three es.,e ded e in
colniputing the length of s;iid past ,'rvice. or in dete'iliiig eligibilitv
to such minimuni retirenlnt or 1disbi lity allowance. (Amie ded
10-26-55)
3.8. "Annual Rate of Past Service Compeni:tion" -hall 11 :!n
As to each hourlyv .;.ted eitploye, the average earnings for the year
ended May 31, 19-148 of the occupational group to wich sclt em-
ploye belonged on May 31, 1948, or in which sitch employee was
classified if hired sub-,',l) ent to May 31, 19-1S, which have beel (tel'-
mined and are hereby agreed to be as follows:
(1) Motormen, conductors, one-man and bius operators, aflnd(
members of D)ivision 3')S c';rtried on tlhe "Other Train Service'
payroll of tlhe Rapid Tranisit Division. 7;700.00:
(2) Members of Division U41 carried on the "Carhouse" pa -
rolls of the Surface Sy: eni $34-80.)0;
(3) Members of Division 38( ci-sified as regular and extra
guards, lampnlpmen, platfoiil men, shopmeni. roa 'len or E lectrical
Department employee : $3240.00:
(4) Members of Division 241 carried on the "Miscellaneous
Transportation" payroll of the Surface Divisioi. 290.:
(5) Other members of Division 241 not included in the three
preceding paragraphs (1), (2), and (4) and Menib)ers of Divi-
sion 308 classiti'" 'i as porters, crossing watchime., agents A and B,
station watchmen and Stores Department employees. S2820.0).
Provided, however, that, oni the Rapid Trantit D)ivision, as to any
part-time hourly rated employe or student eniploye who worked les
th :n the normal scheduled hours for his occupational group during
tlhe year ended May ,31, 19D-,] his "annual rate of past service com-n-
pensat ion" shall be his actual total earnings for the year ended May 31,
1948, but not exceeding the applical: e rate specified in the above
schedule.
As to each salaried employe, the total earnings paid by the Author-
ity to such employee for the year June 1, 1947 to May 31, 1948. If the
services of such emplove did not cover the entire year June 1, 1947 to
May 31, 1948, thle "annual rate of past service compensation" shall be
determined by multiplying by twelve the average monthly earnings
of said employe paid by the Authority in the period 1.. ween June 1,
1947 and May 31, 1948, but not le:-s than twelve time t tie monthly job
clas-;ification rate on May 31, 1948 of such employe. If such eimploye
did not work during the year June 1,1947 to May 1, 1948. the annuall
rate of past service competitionn' shall be the -Ioithly rate on
May 31, 1948 of the job siich enmploye held when his ab-'nlce began,
multiplied by twelve. As to each varieded emiploye hired after May 81,
19-18, the "annual rate of past service con p(i.-,:;tion" shall be the
monthly job declassification rate on Mar 31, 1948 of tihe job for which
thle employee was hired, multiplied by twelve.
NOTE- -For Annual Rite of Past Servie C'.,in pensntion as to each *,'.i'ibi o hnurly-rit -f
emnipltoye not in luded in the above classificatinru. see Appendices A and B, ''- *-'.'.







As to nn emiiiplove absent on account of a position with the Associa-
tion or its International Office, or with the office or International Office
of any other bargaining agent representing employves of the Authority
annuall rate of past service compensation" shall be determined in
accorl.liiee( with this paragraph on the basis of the job classification
last. held with the Authority or any of its predecessor public utilities
)by suiich Iiiploye. (Amended 1-1-68)
"3.. "Coilpensation" shliall mean as to future service and as to the
conitributios10 to tle Fund provided for hereinafter, thle total earnings
paiid by tlhe Authority to a participating employe onl or after the
effective date of the Plan. (Amended 1-1-6.5)
As to those occupying full-time positions with the Association or
its International Office. or with tlhe Office or International Office of
1i1yv oilier bit) i-'giiiinig agent representing eniployes of the Authority,
compensationo" shall mean the current average pay hours for em-
ploycs working in the job classification last, held, multiplied by the
rate currently in effect for that job classification. As to tlihose who are
in p rt-time positions with the Association or its International Office,
or with the office or International Office of such other bargaining
agent "compensation" as defined above, shall also include, the earnings
which he would have received from the Authority if hlie had not been
absent on account of such part-time position. (Amended 1-1-68)
"Average annual compensation in the highest. five (5) completed
Plan Years" shall mean that amount determined bv dividing bv five
(5) tlie total Compensation, as defined herein, of the employee in those
five (5) Plan Years within the ten (10) Plan Years immediately
prior to his normal retirement date (or, if earlier, the effective date
of retirement) in which his Compensation was greatest. (Amended
1-1-71)
3.10. "Committee" shall mean the Retirement Allowance Commit-
tee (described hereafter.
3.11. "Fund" shall mean the moneys and property due to or in
the, l ands of the Trustee including payments by the employes and
the Authority plus thle income or other proceeds from investments,
less disbursements for benefits and expense.
3.12. "Trustee" shall mean the bank or trust corporation selected
to administer the Fund.
3.13. Beginning January 1, 1953, "Plan Year" shall be the calendar
year. (Amended 12-1-52)
3.14. The mnascufline pronoun wherever used shall include the
fe iini iie pronoun, and the singular, the plural.
SE( TION 4-PARTICIPATION IN THE PLAN
4.1. Subject to paragraph 4.2, all employes, as defined above, shall
come und(ler this Plan and continue as contributing employes so long
-is they are in the employ of the Authority in an occupation or position
to which this agreement applies or may hereafter be made to apply.
4.2. This agreement shall apply, in the first instance, only to the
employes represented by said party of the second part; it may be
made applicable to other employes or groups of employes of the
Authority by agreement between the Authority and such other em-
ployes, either individually or when represented by a bargaining agent,
then with such bargaining agent.*
See Appendices A, B and C.





83


SECTION 5--RETIRHEM ENT ALLOWANCE COMMITTEE
5.1. A committee shall be established to be known as the "Retire-
ment Allowance Committee." Said committee shall consist of ten (10)
members. Five (5) members shall be appointed by the Chicago Transit
Board and said Board shall have the right at any time and for any
period to replace any member appointed by it. Three (3) members
shall be appointed by Division 241 of the Amalgamated Transit Union,
one (1) member shall be appointed by Division 308 of the Amalga-
mated Transit Union, and each Division shall have the right at any
time and for any period to replace any member appointed by it, and
one (1) member shall be appointed to represent the employes who
are not represeiited by the Association for the purpose of collective
bargaining with the Authority, and be appointed by them or their
representatives.
5.2. All members of the Committee shall have alternates who shall
be appointed in the same manner provided in paragraph 5.1. A major-
ity of the members of each unit as defined in paragraph 5.4 shall
constitute a quorum.
5.3. The Committee shall select from its membership a Chairman
and a Secretary. All members of the Committee shall serve without
compensation.
5.4. The members appointed by the Chicago Transit Board shall
vote as a unit. The members appointed by the Association and the
other employes, respectively, shall also vote as a unit. Unit vote shall
be determined by a majority of the members of each unit. A con-
currence of the two units shall be final and binding upon all interested
parties. In the event of a tie vote, the question or questions in issue
shall be submitted to arbitration upon demand of either party.
The Board of Arbitration shall consist of tI ree (,8) persons, one (1)
to be selected by the Chicago Transit Board, and the other by the
Association, and these two (2) persons shall select a third disinter-
ested person. The Board of Arbitrat ion shall have the power to render
a final and binding award by a majority vote on matters submitted to
it for arbitration. The expense of the neutral person, as well as the
joint expenses incidental to his activities shall be borne by the Fund.
5.5. The Secretary of the Pension Committee shall act upon all
routine matters in connection with the administration of the Plan
and shall keep a record of the proceedings of the Committee.
5.6. The Committee shall have power:
(1) To make and enforce such rules and regulations consistent
with the provisions of this agreement as in its opinion may be
necessary, or desirable, for carrying out of its duties, and for the
efficient administration of the Plan;
(2) to decide any question arising in the administration, inter-
pretat ion and application of this Plan;
(3) to determine, according to the provisions herein set forth
the eligibility of an employee for old-age retirement and disability
allowance under this Plan and, if eligible, his rights hereunder;
(4) to certify to the Trustee the name of each employee eligible
for a refund or old-age retirement or disability allowance and
the amount payable to him and to rescind such certification in
accordance with the provisions of this Plan;





84


() to :i)rove or dleny a.ny a pp1liatioB,, for a1n optional forn of
pIVIIenlet or 01 :.tir01e liit a11llOn'Iles. an d to formulate riles with
r.-pcI to tI IeI elct ion of, anid payeI Ie Its rlIder, an" su11.1lC optional
fol', i f lp:vli'nit. whiclh rlies. however', )sall not wbe inconsistent
witlh tle' pro% i-ions of tlli.- I'lan. (An dlte t'l 1-1-71)
' ".7. Te (Comnmit tee alllty emljploy trrioli time to tille s 1(' ]eral and
0 ,.-Iex ,,.rts -(,,-it I ;" ,(,eII n1,.,. I \.

T.S. Ti'( 'oTitlt.e sadwll hold meivetiit: delernniir,. but i,,t 1( -s than one (1) Ilptinlr a:l, '1 month. It shall nmake
an :iiimal report to tlhe Autliority ;11(d tlhe A-soei.tiol. and slinll maike
i I i (i her 1re)orts of the 1.)w.ration of the P1; ii as it sluill dleeil neces-
-:Irv. At lest oi.e A veai.r the Commlittee sliiall have an ad(lit nImade of
t ., f1[- fo A( .Iid1ll to, disbu(h1 l,(d a:l held by the T-istee by a ree-
(ii1 i/, firmii of (-.erti i' public acwointalts. A st:ite',ent of the results
of -ii'1.! audit 1-li11 be fo'\, r(lded1 to tili Authority and t1l1 A.soeiation
amd t!1w duly ampp inled rep'em-entatives of a'vi other eIIplo)yees.
5.'. All nec.-siIy expe.nses incurtre(l by the Conmmittee shall be
certitlied by the Colnmmit 0e to, and paid by, tlhe Trustee out of thel funds
lit.ld 1y it.
5.10. Member'-N of the Committee shall not be personally liable for
a y act done b)y then in Ierformance of their duties as members of
thie (Committ'ce aind shall be iindldemlified by the Fund against any and
all liability and ,l'Xil ('S reasonably incurred in coneltionl with a1y
a't iol to which they may be a party by reason of their membership in
the Commlittee, provided, however, that the fore'oinig' shall not apply
ti a.1vy limember who sliall be adjudled guilty of misconduct.

SECTION (-RE1CORDS( )S
6.1. The Authority siall keep all records, compile all data, accept all
written commune nations from participating, employees and tlheir 1)elle-
ficiaries addr-csedi to the Coiunittee and submit such communications
to tlwe Coiimitee for pl,.'essing in accordance with the provisions of
this l]an, .so far ::. its empi)loy-s are concerned. The actual cost and
ex)pe!-c to the Authority inll performing such duties shall be certified by
1 (.e A.\ iithorit v to the Committee and upon approval by the Commit-
tee -liall l N, i a id by the Trustee out of the Fund.
(;.2. Twe Commititee sliall liave tihe riglit at all times to call for addi-
i onal inforl'mation concerning g any or all applications forwar l ed to
he l('omiiii1iiee and to .exal-iine all records or data pertaining to the
Plan.
SUCTION 7--C-T'I"lU'TIONS TO TIlE FUND
7.1. Except -s limited by Para.i_,raph 9.3 hereof, the conltrilbutions
of tlhe Autiority : iild o4 ttie e employee -hall ,be, the st:ited percentage of
copnl'a1tion eff..e-ctiv te tle fisl paVyroll re.spe(.ctively for tlhe periods
ii,.ucate'd )below :
P, /.;,(/
J. ;1:u ,ry 1. V1'71 to .any 31, 1T71: Perc'n t
mpijloyee -------------------------------------------------------- 5.S
Airity -------------------------------------------------- 10.2
Jl1 ne1 1. 1971 to 'I'A,,!ilir 81, 19T7:,
Ewpi il oye ------------------------------------------------------- 7. 0
A i i ,,riIy --------------------------------------------------------- 13. 0





85-


After 1973. contributions will continue at 7.019 for ilt employe, anIt
13.0' for the Authority uiL-.-s amnwide( in a(ccor(lance wit6 thi i pr)o-
visions of Section 23. (Amended 1-1-71)
An employee on Januari 1, 1`0(1.5, wvho-t co) .ensa' ion ] ipor IIeai -
1leginining on or after June 1, 1949. has excc ',e ( all annual rate of
,(l0,000 which excess aiiount was not covered by) thie Plan prior to
January 1. 1965, shall remit to the Fund the aollluinti of contributions
lie should have made if annual comipenm-ition exceedilL S)10,000)(, hliad
been covered by tlhe Phlan, begiiinig J mne 1, 19449. together witlh an
amount equal to tlhe inter...-t that would have been credited to the em-
ploye under the Plan on the cointributiojls based ol1 s1uch excess coim-
pensation if such contributions had been required beginning with tlhe
effective date of the Plan.
!The Authority shall likewise remit to the Fund. an amount equal to
the otiutioniyshl -I _1il- Nvi:
the contributions which would have been nlade be-rinnin, with the
effective date of the Plan, if there had been no limitation on the
amount of annual compensation covered by the Plan. (Am ended
1-1-65)
7.2. The contributions by all participating employees receiving com-
pensation from the Authority shall be made by means of deductions
on Vach pay-day.
7.3. Officers and representatives of the Association or its Interna-
tional Office. whether in full-time or part-time positions, who are
employes of the Authority on leave of absence, shall transmit their
contributions each month to the Authority, except insofar as any part
thereof has been deducted under paragraph 7.2.
7.4. The total contributions of the employees and the Authority shall
be forwarded by the Authority to the Trustee not later than the end
of each month for all contributions made as to pay periods ending in
the preceding month.
7.5. All payments and benefits provided for in this Plan (includ-
ing the Supplemental Benefits provided in Section 22 hereof) shall
be made from the Fund and there shall be no obligation on the part
of the Authority or the employes to provide for payment of benefits
from any other source; and there shall be no liability on the Authority
or employes to make any contributions other than those specified in
paragraph 7.1 and paragraph 21.1 (1) and paragraph 22.2 hereof.

SECTION 8--SETIRTEMENT ALLOWANCE
8.1. An employee retiring at the normal retirement date as set out
in paragraph 9.1 shall receive an annual retirement allowance paid in
equal monthly installments for life which shall be computed accord-
ing to the following formula:
(1) As to an employee who first became entitled to a retirement
allowance commencing after the month of January 1968:
(a) One (1) per cent of his annual rate of past service
compensation as defined in paragraph 3.8 for each full year
of continuous service from the date of original employment
to the effective date of the Plan, plus
(b) One and two-thirds (12/%) percent of the employee's
compensation for continuous service from and after the effec-
tive date of the Plan;





86


Provided. however that :
(2) As to an empIloye who first becomes entitled to a retirement
allowance -ommencing with or after the month of January. 1971,
the retirement allowance shall be the amount determined in ac-
cordance with lparagraphl one (1) above or the amount deter-
mined in acr'ordance with the following formula whichever is
greater:
(a) Three-quarters (,l) of one. per cent of his "average
annual compensation in the highest five completed Plan
Years" for each full year of continuous sen-rvice from the date
of original employment to the effective date of the Plan; plus
(b) One and one-lialf (1'2) per cent of his "average an-
nual compensation in the highest five completed Plan Years"
for each year (including fractions thereof to completed cal-
endar months) of continuous service from and after the effec-
tive date of the Plan and prior to his normal retirement date.
(Amended 1-1-71)
8.2. If the employe has had twenty (20) years of continuous serv-
ice and has attained the age of of sixty-five (65) years or more such
allowance shall be not less than
(a) One-Hundred Seventy-Five Dollars ($175.00) per
month if he shall first become entitled to a retirement allow-
ance commencing after the month of December, 1970; or
(b) One-Hundred Eighty Dollars ($180.00) per month if
lie shall first become entitled to a retirement allowance com-
mencing after the month of December, 1971; or
(c) One-Hundred Eighty-Five Dollars ($185.00) per
monthly if hlie shall first become entitled to a retirement allow-
ance commencing after the month of December, 1972.
(Amended 1-1-71)
8.3. The old-age retirement provided for in this section shall in no
event, be in excess of sixty (60) per cent of the employee's average
annual compensation in the highest five (5) completed Plan Years
as defined in Paragraph 3.9. No employee shall be eligible to receive a
roti'rement allowance unless he shall have been employed for at least.
three (3) years of continuous service, as above defined. (Amended
1-1-71)
SECTION 9-NORMAL RETIREMENT DATE
9.1. The normal retirement date shall be the first day of the month
following tlhe employee's sixty-fifth (65th) birthday.
9.2. Anyi ewiploye who has attained the normal retirement date
maiy retire voluntarily or mnay be retired at the option of the Authority
at or at any time after such normal retirement date. Upon such re-
tireimient he shall be entitled to such old-age retirement allowance
for life as provided in the Plan. (See Rule 15, Page 36)
9.3. If any emnploye continues in the service of the Authority after
attahinmllient of tile normal retirement. date, the old-age retirement al-
lowance payable to suchli employee shall not commence until after his
actual retirement. After his normal retirement date no employee shall
n,,1ke the contrilbut ions prescribed in Section 7 nor shall the Authority
ma;ke, any contributions with respect to the compensation of such em-
ploye. If the employee reaches age sixty-five (65) after the effective





87


date of the Plan. he shall receive no credit under paragraph 8.1 (1) (b)
and 8.1(2)(b) for any service after age sixty-five (65). (See Rule
3, Page 34) (Amended 1-1-71)

SECTION 10-EAlLY RETIlREMIJ:ENT
10.1 Any employee in good standing may retire voluntarily on or
after January 1, 1971, and after he
(a) Has attained the age of fifty-eight (58) years, or
(b) Has attained an age and completed a period of continuous
service such that the sum of his age and years of service shall
equal ninety-six (96) or more (Amended 1-1-71)
and shall receive an old-age retirement allowance for life reduced in
accordance with Paragraph 10.2.
After December 31, 1960, any employee who is l-',.arged by the
Authority for causi detrimental to the service or any employee who is
charged with an offense or breach of duty which ultimately results in
such discharire shall not be eligible for early retirement under Sec-
tion 10 unless the employee is reinstated and complies with the other
applicable provisions of the Plan. (Amended 5-1-69)
10.2 In the event of such early retirement after the month of
December, 1970, the employee shall receive his earned retirement al-
lowance. computed at and up to such early retirement date. reduced by
five (5%) per cent for each full year or fraction thereof below age
sixty-five (65), provided, however, that:
(a) The employee's earned retirement allowance computed at
and up to such early retirement date shall not be reduced:
(i) If he shall retire on or after the first day of the month
following his sixtieth (60th) birthday provided the sum of
his age and years of continuous service shall equal ninety
(90) or more; or
(ii) If the sum of his a e and years of continuous service
shall equal ninety-six (96) or more; and
(b) If, after the month of December, 1970. the employee retired
at or after age fifty-eight (58) and his age and years of continuous
service shall equal ninety (90) or more, his retirement allowance
shall be reduced as follows:
Aze last birthday at Percent of
early retirement date: Amcndf'd January 1, 1971 reduction
59 ----------------------------------------------------------- 3.0
58 --------------------------------------------------------------- 7.0
10.3. Any employee who, under the provisions of paragraph 3.3, is
limited as to eligibility and amount of benefits to the provisions of
any former Retirement and Disability Plan in effect on October 1.
1947, may retire after he has attained the age of fifty-five (55) if
then otherwise qualified under any such Plan, and shall receive the
benefits now being paid or that may in the future by payable to those
retired under any such former Plan. reduced by five (5%) per cent
for each full year or fraction thereof below age sixty-five (65). (See
Rule 4, Page 34)

SECTION 11-TEMPORARY CONTAIN, ANCJE OF OLD COMMITTEES
Not currently applicable. Text of'original section available in the
Committees Files.





NS


.,-' 'i'll\I 12 I)I- II1Y ALI.O'WAN(CE
12.1. \nv em1piloye '%%i 1. after ti le effective date of thle Plan, shall
(I ',:.1 I 1:i ed (is d'e fie IineI I 'low) fio(iI I)Iprormin1." his diti es alnd
foli lf llo.,',. ini 11'is re,21-i;l eipl) oymiIlent \\ itl tl e Authority (11e to an
(.It uII:itfloi:i1 or ml ii-,r1-(14- :1 1i1nal i1r'id(I'lit or -iknellss before biecom-
in,, eli-_ille fc'r .it oild-:i.-e ret i een ,llt e :i tio\a ii.'e in accordance with
.'ction l' Iicotf. shiall ,be entitled to a m!ontlilv uli-abilitv allowance
frui, ii 1h IeLili)Il1L of -ich disability.v, provided llhowever flthalt:
(;i) A-. to .I' en1l)Ove \\1(o [i-t l4,e'ii ie (1 isllable(dl I'ior' to the
iontith of 1;Ji7liry, 1 '1. liIt hal] lieil at. tli ttnie of I)ecominl SO
di-.d)!led1. hi coni liiI lS .,,i'V\ice for tn'l (10) ea irs or iiore ; or
(b) As to in! eniiploye wio li0'It 1)ei!ae lisa'lled on or after
Jlitiaarv 1, 1971. lie his li).n, at tlie time of heco inui i so disal)1ed :
i) for l1iil-,ecull pitio]nal iiu ill'iu- or illilesses, in continuous
serv ice for ten (10) ve'a rs or more; or
(ii) for oc,. iiational injuries or illnesses covered under
the WVork men's (Compenwmtion Act, in continuous service for
five (5) years or miore. (Amendined 1-1-71)
An emlploye is disasled1 fr i performiing his duties and from fol-
lowving i.- i ,rllar employment with the Autliorityv :
(1) WhI en, he is totally and permanently disabled for any type of
work : or
(2) Whenl. a after receiving benefits for a particular disability for
twentv-sx- (.2t) weeks under the AuthoritV's Group Accident
:1i1d Sickness Insurance or from the Authority under the Work-
men's Compensation Act, he is liial)le to return to his regular
dutie-. (See Rule No. 1, Page 31).
Hle s]iaill not Ibe entitled to receive any dlisaibility allowance for any
perioil f;,r which hlie. althouihi unable to return to his regular duties.
ref ii-- to a* cept other work offered by the Authority which, in the
judlient of a physician duly selected by the Committee, lie is ca-
pilble of oerformil2ir and which pays not less than two-thirds (%) of
the i 'arniun s wiih would have accrued to him if hlie had been cur-
rently vemilloyed in the job classification last held by him with the
Authority.
Xo employee sha:ill receive a disability benefit under this Section 12
at thle s:aein time. he receives a retirement allowance under Section 8
or 10 ie'.-of. (See Rule 15, pa-,e 36)
12.2. 'i monthly disability allowance shall be computed in the
ni.1litr provided in Section 8 above, provided that thlie monthly dis-
ability allowance shall be no more than the maximum specified in
ParaniL';Iph ,.3 above and s;-111l in no event be less than
(a) O.e-Iiundred Seventy-Five Dollars ($175.00) per month
if he shall first liecolne entitledl to a retirement allowance conm-
inencing after thi( month of December. 1970* or
(b) One-Hundred Eighty Dollars (S180.00) per month if he
shall first becomell entitled to a retiremiient allowance commencing
after the 111o1nth of Decemll lr, 1971: of
(c) One-IundIired Eightv-Five D)ollars (.185.00) per month if
e(. sill fist )e'*come entitled to a retireieient allowance commenc-
in.' ft(er the nionth of Decemiii)er, 1972. (Amended 1-1-71)





89


12.3 No employee shall be entitled to receive a (lislability allow-
ance under this Plan if and when the disability is a isult of:
(1) habitual and excessive use of intoxicaiits, drills, or nar-
cotics
(2) injurieseor diases sustained wile udr thel ilufluence of
intoxica, its, druiis or narcotics hal)itually used to exc,-s;
(3) injuries or di,-eases sustained while wilfully and illegally
pa rticipating in fights, riots, civil iiisurrections or comliittiing a
crime;
(4) injuries or dtise;ases sustained while serving( in tlihe armed
forces or the Merchant Marine of the 1United States or her allies;
(5) injuries or diseases incurred while working" for anotIl1er ellm-
ployer and arising out of such other employment while also ellm-
ployed by the Authority;
(6) injuries or diseases sustained while riding in aircraft, ex-
cept as a fare-paying passenger on regular licensed and scheduled
air lines;
(7) injuries or disea-es sustained while the employee is on leave
of absence for any reason, other than (a) holding office in t0e
Association or its International Office, or in the office or Inter-
national Office of any other bargaining agent representing em-
ployes of the Authority; or (b) sickness or accident; provided,
however, that an employe while on leave on absence for the reasons
listed under (a) and (b) shall not be eligible to benefits if the
injuries or diseases so sustained fall within subparagiraphs (1) and
(6) above. (Amended 1-1-68)
12.4 No enmploye shall be entitled to receive a disability allow-
ance under thlie Plan when he declines to permit a physician selected
by the Committee to examine or re-examine him or materially hinders
an investigation ordered by the Committee.
12.5 If, at any time, the Committee finds that any employe re-
ceiving a disability allowance is no longer disabled as defined above,
it shall order the dliscontinuance of the payments provided for in this
section. In that event, the employee shall be restored to his former
position with accumulated seniority.
12.6 If an employee entitled to disability allowance is entitled to
benefits under the group accident and sickness policy provided by the
Authority, he shall receive as a disability allowance under this Plan
only the excess, if any, of the disability allowance over the monothlyv
benefits under the group accident and sickness policy. An employee
shall not receive a disability allowance for any period for which he
receives his regular wages or salary. (See Rule 4, Page 34)

SECTION 13-PAYMIENT OF OLD-AGE RETIIMI:M3.NT AND DISAB.\IILITY
ALLOWANCES
13.1 Retirement and disability allowances, as specified herein.
shall be paid on the last d(lay of each month for which such allowance
is due.
13.2. The normal form of payment of old age retirement allow-
I ances, as specified in Paragraph 8.1, Paragraph 10.1 and Paragraph
13.1, hereof is a monthly benefit payable for the remainder of the em-
ploye's lifetime. Subject to the provisions of this Section 13, and in
lieu of the amount and form of monthly retirement allowance other-
65-101-76-7





90


wise 1yali' leherClllderCI p'ursuiant to Section 8 or Section 10 hereof, in
tll1, eveiit of normal or v:rl y retirellment, all evlpl(Iyee Imay, subject to
tlhe 'coclt of the Commiinittee. elect to have a retirement allowance of
Cequi\ -ilelnt act na rial value payable ill accordance with the following
optionlial forln of payllenlt:
A reducevd nonth hly retirement allowance payable to the retired
elliployve during his or her remaining lifetime and. if such retired
cilplocye shall predecease tlhe. spouse. designated by such retired
employve in accordance with the provisions hereof, all or a. specified
fractional part-1_ or %2 thereof, as specified by the employee in
lhis election-of such reduced monthly amount payable to the
spouse for tlhe then remainder of his or her lifetime.
Each request for an optional form of payment must. be in writing,
on a properly executed form provided for that purpose and filed with
tlie Committee. Each such form must specify the scheduled com-
mencement date of retirement allowance 1)ayments under the optional
form elected, which date. however, may not be later than the last day
of the month next following the month in which the employee's nor-
mal retirement date occurs. If the scheduled commencement date is
within the six-month period next following the date on which such
request is filled with the Committee, such evidence of the employee's
good health as may be deemed satisfactory by the Committee may be
req1iiired by the Committee; provided, however, that such evidence of
,rood health shall not be required if the request is filed with the Com-
mittee prior to December 31, 1971. An employee may, at any time
prior to his normal retirement date or, if applicable, his early retire-
ment hereunder, elect to cancel or change the optional form of pay-
ment previously approved by the Comnittee in respect of him, but
,eaV1 such change shall be deemed a new election and shall be treated
as such in accordance with the provisions of this section.
The election of, and payment under, the optional form pursuant to
tle, provisions of this section shall be subject to the following condi-
tions:
(1) Retirement allowance payments under the optional form
of payment will be payable as of the last day of each month.
Tie first such payment to the retired employee will be paid on the
last d(ly of the month next following his retirement date and tihe
List, sucli payment will be the payment due as of the last day of
thle month coincident with or next preceding the date of the re-
tired employee's death. If the retired employee shall predecease
his or her spouie, and such spouse shall have been designated in
accordance with the provisions hereof, such reduced benefit or tlhe
applicable fractional part thereof, as specified by tlhe retired em-
I)love. shall be payalfle to such spouse commencing on the last., day
of the month in which the retired employee's death occurs and
ending with the last (lay of the month coincident with or next
p)receding, the date of tlie surviving spouse's death.
(2) If the continuous service of an employee shall terminate, or
if the e, iploye sh-i:ill die prior to his normal or, if applicable, his
early retiremeiit d(ite hereunder, tlhe optional form elected by such
employ ye s1:01ll 1o (,'ancelled automatically.
(3) If the spouse designated by the employee shall die prior to
tlie emplovyes normal rettire n (nt diate or, if applicable, his early







retirement hereiunder, the optional forin of )payi ent elected shall
be calncelled automatically and a monthly retirement allowance
of the normal form and amount shall be applicable to such eim-
ploye upon his retirement hereunder, imless, prior to his normal
retirement date, a new election shall have been effected in accorid-
ance with the provisions of this section.
(4) If an optional form of payment shall have been made
effective in respect of an employee whose actual retirement has
been deferred beyond his normal retirement date pursuant to the
Provisions of Paragraph 9.3 hereof, retirement income payments
shall commence under the option, notwithstanding the scheduled
commencement date thereof, as of the last day of the month it
which the employee (i) dies, or (ii) retires, whichever first oc(cirs
in an amount determined as if the employee had in fact retired on
his normal retirement date.
(5) If an employee shall have a living spouse to whom hlie or she
is legally married on the date the election of the optional form
of payment is filed with the Committee, such spouse shall be des-
ignated the contingent annuitant under such election. If any
other person shall be designated, the election shall be invalid for
all purposes hereof.
(6) Notwithstanding the provisions of Paragraphs 15.2 and
15.3, if upon the death of an employee after his normal retirement
date, or, if applicable, his early retirement, a retirement allowance
shall be payable to the spouse pursuant to the optional form of
payment effected hereunder, no refund of the employee's contri-
butions and interest shall be payable until the death of such
spouse-at which time the amount of Refund payable shall be tlhe
excess, if any, of (i) the amount otherwise determined in respect
of him pursuant to the provisions of paragraph 15.3 at the date
of the employee's or retired employee's death over (ii) the aggre-
gate of payments made to such spouse.

SECTION 14--PIAYM[ENT OF ALLOWANCES IN CASE OF INCOMPIETENCY
14.1 In case of incompetency, either mental or physical, of any per-
son eligible to receive payments under the provisions of the Plan, pay-
ments shall be made to such person or institution that has satisfied the
Committee as to his or its right to receive the payments for said eligible
person.

SECTION 1 5-REFUNDS FROM EMPLOYES' CONTRIBUTIONS AND PAYMENT OF
DEATH BENEFIT
15.1 No employee shall be entitled to borrow against or withdraw
any part of the contributions to the Plan so long as hlie remains eligible
to pa rticipate in the Plan.
15.2 Contributions made from and after the effective date of the
Plan by any employee who becomes separated from the service of the
Authority or dies prior to retirement or disability shall be refunded
with interest at the rate hereinafter specified, less benefits received
under the Plan; however:
(a) An employee who has completed less than ninety (90) days
of service with the Authority shall be entitled to no Refund. (Ste
Rules 10 and 11, Page 35-36)





92

(b) Aln t.ploe 1v, wo lias comlpleteld ninety (90) or more clays
of :.r vice 1it I-s tlhanll onle year of s.-ervice with the Authority shall
!) n ciitit-t.( to( a Refllid of Rt letiremenet Contributions without
itetL'-t. (Sce lIilde 17. i'age 37,)
( A) An emIIpoy'e wlo, liias completed one year or more of service
%itI t! e AuttoI I ty sl:iall be elititledl to a Refund with interest, as
pro'vi led in Parag. raph 1.5.. (Amended 1-1-71)
A 11y emlploye who:e contributions under this or any prior Plan have
Ii.etn trefmiue(ld to himi in wliolh or in part slhall he entitled to no fur-
thelcr rights. bclie'fit: or allmaownces under tilis Plan or any prior Plan,
ex .ypt :,s prvidedl inl the following subparagraphs:
(1) If a;v emIploye whlo received a refund returns to work after
- cvice within the terms of paragraph 3.7(2) or is reinstated
within the terin of paragraph 3.7(3) and remits to tle Authority
for lpvaymnent into the Fundl the amount previously refunded to
linim. he shc:ll have tinm same rights under the Plan that. he would
liave hadl if he had not received the refund; (See Rule No. 9,
Pa ce 35)
(2) if an emnploye who received a refund is not reinstated within
the terms of paragraph 3.7 (3) but returns to work as a new em-
ploye hlie shall have only the rights of a new employee under this
Plan and no service prior to the date of the new employment
shall be credited as continuous Service.
(3) Refund of excess contributions under paragraph 19.3 shall
not affect any rights under the Plan.
15.3. On the death of an employee after his old-age retirement
allowance has become effective, there shall be paid from the Fund a
sIImI equal to the amount by which the agcrregate of the employee's
contribute ions since the effective date of the Plan plus interest as here-
inaifter defined have exceeded the aggregate of all benefits received
by himi.
15.4. Contributions made prior to the effectiv-e date of this Plan
shliall he -iibiect to refund in accordance with the terms, limitations
and provisions of the several Plans under which such contributions
were nuade.
Money deducted from the employes* compensate ion by the Authority
sinrc Octol,,r 1. 1947. for the account of Pension Fund No. 1 of
Cliiiri-,ro Rapid Tranisit Coinlpa y employes, shall be treated, for the
purpo.,' of this Section, as if they had been paid into said Pension
Fudl No. 1.
15... All ,iyments provided for in paragraphs 15.2, 15.3 and 15.4
slall 1,. mllade, under such rules and reulat ions as the Committee may
est.- ih:l-.
15.6. Interest on contributions, as provided for in this Section, shall
be computed:
(a) With '-pq)'ct to Plan Years ending on or before. Decem-
,w" 1. 1 D7.0. at tle mite of iiitervst. earned by the Fund but not
oll'iter than two pe it (2-) per annum. beginning with the
endl of th,, Plan Year in which the contributions were made and
end1141in. with I eciiib.rl, 1970, andl
(b1)) A\Vith re:-ptrt to Plan Years beginning on or after Janu-
aixy 1, 1971, ait one-hlalf (V ) of the rate of interest earned by the
Fund lbut not greater than three percent (3%) per annum,
beigining with: