REPORT DIGEST

JUDGES’ RETIREMENT SYSTEM

OF ILLINOIS

FINANCIAL AUDIT

For the Year Ended:

June 30, 2005

Release Date:

March 1, 2006 

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 the Full Report are also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

¨       The unfunded liability of the Judges’ Retirement System of the State of Illinois (System) was $671.5 million at June 30, 2005.  The System’s funded ratio at that date was 45.7%.

¨       Public Act 94-0004 (Act) became law on June 1, 2005 and established specific dollar amounts to be contributed to the System by the State for fiscal years 2006 and 2007.  In addition, the Act requires all new benefit increases to be fully funded by an identified funding source. The Act went on to set expiration periods for all new benefits if not reauthorized by law.

Unfunded liability at June 30, 2005 totals $671.5 million

State contributions will be reduced for fiscal year 2006 and 2007

INTRODUCTION

      This digest covers our financial audit of the System for the year ended June 30, 2005.  A report on the results of our compliance attestation examination for the year ending June 30, 2005 is being issued separately. 

UNDERFUNDING OF THE SYSTEM

      The actuarial accrued liability was valued at $1,236.5 million at June 30, 2005.  The actuarial value of assets (at fair value) totaled approximately $565.0 million at June 30, 2005.  The difference between the liability and the assets of $671.5 million reflects the unfunded liability of the System at June 30, 2005.  The System had a funded ratio of 45.7% at June 30, 2005.

NEW LEGISLATION AFFECTING THE SYSTEM

     Public Act 94-0004 (Act) became law June 1, 2005 and established specific dollar amounts to be contributed to the System by the State for fiscal years 2006 and 2007 as opposed to the State contribution being calculated based on the existing funding formula.  In addition, the Act requires all new benefit increases to be fully funded by an identified funding source. The Act went on to set expiration periods for all new benefits if not reauthorized by law.

    The System has calculated that State contributions will be reduced approximately $8.8 million and $9.3 million for fiscal year 2006 and 2007, respectively, which the System noted is a two-year funding reduction of 22%.  State required contributions will be higher in future years to make up for the two-year funding reduction, as the overall goal of 90% funding in fiscal year 2045 was unchanged by the Act.           

AUDITORS' OPINION

      Our auditors state the June 30, 2005 financial statements of the System are fairly presented.

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WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

      McGladrey & Pullen LLP were our special assistant auditors for this audit.