IMRF – the stealth pension tax no one talks about.

The Illinois Municipal Retirement Fund is the pension fund that provides pensions for virtually all city, township, non-certified school employees and county workers in IL outside of Cook County. With 394,000 members it has more members and more retirees than TRS (Teachers Retirement System) and is thus the largest pension fund, in terms of membership, in Illinois. That’s why I call it a stealth tax – no one talks about it.

Most muni employees pay 4% into IMRF as well as being members of Social Security. The employer pays into Social Security and another amount into IMRF. Generally speaking muni employees make less than teachers, university employees or state employees. Employer (taxpayer) contributions for both SS and IMRF are well over $1 billion/yr. so this is not chump change we are talking about.

The taxes for IMRF and SS come mostly out of property taxes. Check your tax bill – on my tax bill (Lake County) there are 7 IMRF pension taxes:

1. County of Lake
2. Village of Mundelein
3. Mundelein Park District
4. Mundelein School District 75
5. Mundelein School District 120
6. Forest preserve
7. Fremont Public Library

So you pay for the five state pensions with sales tax and income tax but you also pay for local IMRF pensions via property taxes. There are about 3,000 employers in the IMRF system.

Local police and fire pensions are also paid at the local level but are not broken out on your tax bill because they are paid out of general fund budget. There are over 600 P&F pensions statewide.

Under IMRF rules each muni government is its own little pension fund i.e. contribution rates vary depending upon the number of employees, salaries and retirees each muni government has. It is not a standard rate for all units.

IMRF officials brag about their relatively good funding position – the unfunded level is only about 15% using a 7.5% interest rate assumption. But using Moodys interest rate assumption of 4% IMRF has an unfunded liability of 54% or $33 billion.

See my article “Pension math: why the Interest Rate assumption is soooooo important.”

One of the reasons IMRF is looking better on paper is the “stealth tax” keeps going up. What I mean by that is the employer contribution rate in many cases has doubled over the last 10 years. Check out some numbers from Lake County governments:

So if you thought your only concern was state pensions think again. There are billions and billions due at the local level for IMRF and Police and Fire Pensions that no one is talking about. That is one of the reasons why your property tax bills keep going up.

Happy taxpaying!