REPORT DIGEST
REVIEW OF INFORMATION SUBMITTED BY THE CHICAGO TRANSIT
AUTHORITY’S RETIREE HEALTH CARE TRUST
2011 ANNUAL REVIEW
Release Date: December 2011
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703
(217) 782-6046 or TTY (888) 261-2887
This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov
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SYNOPSIS
The Board of Trustees of the Chicago Transit Authority
Retiree Health Care Trust is required by the Illinois Pension Code to submit a
report to the Office of the Auditor General (OAG). The report is intended to annually assess the
funding level of the Retiree Health Care Trust.
The Illinois State Auditing Act (Section 5/3-2.3(f))
requires the OAG to examine the information on the funding level of the Retiree
Health Care Trust submitted pursuant to Section 22-101B(b)(3)(iii)
of the Illinois Pension Code.
The OAG is required to review the Retiree Health Care
Trust’s assumptions to ensure they are not unreasonable in the aggregate. Our review was limited to the specific
conclusions required by the Pension Code.
This report does not constitute an audit as that term is defined in
generally accepted government auditing standards.
● The Retiree Health Care Trust submitted its Funding
Valuation Report as of January 1, 2011 to the Office of the Auditor General on
September 30, 2011.
● The Report concluded that the actuarial present
value of projected contributions, trust income, and assets, in excess of the
statutory reserve, exceeded the actuarial present value of the projected
benefits. Consequently, no change in
benefits or contributions was required.
● We examined the assumptions
in the Retiree Health Care Trust’s Funding Valuation Report and found that they
were not unreasonable in the aggregate.
ANNUAL REVIEW RESULTS
AND CONCLUSIONS
STATUTORY REQUIREMENTS
The Illinois State Auditing Act (Section 5/3-2.3(f))
requires the Auditor General to annually examine the information on the funding
level of the Retiree Health Care Trust (RHCT)
submitted pursuant to Section 22-101B(b)(3)(iii) of
the Illinois Pension Code. The Pension
Code requires the Retiree Health Care Trust to prepare a report that meets the
requirements delineated in the Code and to submit it to the Auditor General at
least 90 days prior to the end of its fiscal year.
The Pension Code (Section 22-101B(b)(3)(iv)) provides the
OAG 90 days to review the information submitted by the RHCT. If the RHCT
projects a funding shortfall, it shall provide a plan to (1) increase
contributions by employees, retirees, dependents, or survivors, or (2) decrease
benefits, or (3) make other plan changes, or (4) any combination thereof to
cure the shortfall within 10 years. If
the RHCT projects a surplus, it may decrease
contributions, increase benefits, or make other plan changes, to the extent of
the surplus.
If the OAG review determines the RHCT’s
assumptions are not unreasonable in the aggregate, the Trust shall implement
the plan. Otherwise, the OAG shall
explain the basis for its determination to the RHCT
and may recommend an alternative.
This report does not constitute an audit as that term is
defined in generally accepted government auditing standards. The scope of OAG’s review, established by the
Pension Code, focused on whether the actuarial assumptions used in the RHCT report were not unreasonable in the aggregate.
REPORT DETERMINATION
The Board of Trustees of the Chicago Transit Authority RHCT submitted its Funding Valuation Report as of January
1, 2011 to the Office of the Auditor General on September 30, 2011, which was
subsequently revised on November 8, 2011.
The Funding Valuation Report included information required by the
Pension Code. As shown in Digest Exhibit
1, the Funding Valuation Report concluded that the actuarial present value of
projected contributions and trust income plus assets in excess of the statutory
reserve exceeded the actuarial present value of the projected benefits:
• The net actuarial present value of projected benefits was $693,547,803.
• The actuarial present value of projected active contributions, trust income, and assets was $737,920,275 (after subtracting $38,834,808 for the required statutory reserve).
• Consequently, projected income and assets exceeded
projected benefits by 6.4 percent, and as such, no reduction in benefits or
increase in contributions was necessary.
With the assistance of our consulting actuary, Aon Hewitt,
we examined the RHCT’s assumptions in the Funding
Valuation Report. Overall, these
assumptions were not unreasonable in the aggregate. Pages 4 – 7 of our 2011 Annual Review contain
observations on the specific assumptions used in the Funding Valuation Report.
WILLIAM G. HOLLAND
Auditor General
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This Annual Review was conducted by OAG staff with the assistance of our consultants, Aon Hewitt.