REPORT HIGHLIGHTS

INFORMATION SUBMITTED BY THE
RETIREMENT PLAN FOR CHICAGO TRANSIT
AUTHORITY EMPLOYEES

ANNUAL REVIEW

Release Date:  November 23, 2021

State of Illinois, Office of the
Auditor General
FRANK J. MAUTINO, 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

REPORT HIGHLIGHTS

Background:

Signed into law in 2008, Public Act
95-708 made sweeping changes to the
Retirement Plan for CTA Employees.  It
required that the contributions from
the CTA and employees must be at a
level so that the funded ratio of the
Retirement Plan does not decline below
60 percent in any year before 2040,
and achieves 90 percent funding by the
end of 2059.

The Retirement Plan is required to
submit to the Auditor General an
audit, an annual statement, and an
actuarial statement by September 30 of
each year.  The Retirement Plan must
determine the estimated funded ratio
and must determine the employee and
employer contribution rates needed to
meet the requirements established by
the Pension Code.

The Auditor General is required to
review the documents and review the
actuarial determination and
assumptions to determine whether they
are unreasonable in the aggregate.

Key Findings:

• The Retirement Plan submitted the
required documents by the September 30
deadline.
• The OAG and our consultant, Aon,
reviewed the Retirement Plan’s
assumptions contained in the January
1, 2021 Actuarial Valuation and
concluded that they were not
unreasonable in the aggregate.
However, we believe that two of the
assumptions, investment return and
inflation, should continue to be
monitored and justified on an annual
basis.
• The 8.25 percent investment return
assumption used by the Plan is at the
upper edge of reasonable based on the
Plan’s asset allocation and remains at
the upper end of investment return
assumptions used by other plans. The
underlying inflation assumption is on
the upper end of the reasonable range
based on current and recent historical
capital market assumptions.  The
Plan’s investment consultant conducted
projections that found an expected 10-
year return of 8.40 percent.
• The funded ratio of the Retirement
Plan increased slightly from 52.55
percent in the January 1, 2020
Valuation to 53.27 percent in the
January 1, 2021 Valuation. When the
funded ratio declines below 60
percent, the Pension Code requires
that contribution rates be increased
so that the funded ratio is projected
to reach 60 percent within 10 years.
The contribution rates certified by
the Retirement Plan Board for 2022
were unchanged from the 2021
contribution rates.  For both 2021 and
2022, the employer contribution rate
is 20.647 percent (which is net of the
employer debt service credit of 6% of
pay) and the employee contribution
rate is 13.324 percent. The January 1,
2021 Actuarial Valuation concluded
that the contribution rates applicable
for Plan year 2022 would result in the
Plan’s funded ratio reaching the
statutorily required 60 percent level
within 10 years (i.e., by 2031) and
therefore, there was no need to
increase the contribution rates.

Key Recommendations:

• We recommend that the investment
return and inflation assumptions
continue to be monitored and justified
on an annual basis.

This Annual Review was conducted by
OAG staff with the assistance of our
consultant, Aon.