REPORT DIGEST

 

REVIEW OF INFORMATION SUBMITTED BY THE CHICAGO TRANSIT AUTHORITY’S RETIREE HEALTH CARE TRUST

 

ANNUAL REVIEW

 

Release Date: December 16, 2010

 

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

­­­­­­­­­­­____________________________

 

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 State Auditing Act.  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 Actuarial Report to the Office of the Auditor General on September 30, 2010. 

 

• 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 Retiree Health Care Trust’s assumptions and found that they were not unreasonable in the aggregate.

 

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 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 Retiree Health Care Trust.  If the Retiree Health Care Trust 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 Retiree Health Care Trust 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 Retiree Health Care Trust’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 Retiree Health Care Trust and may recommend an alternative plan. 

 

This report does not constitute an audit as that term is defined in generally accepted government auditing standards.  The OAG’s review, the scope of which is established by the Pension Code, focused on whether the actuarial assumptions used in the Retiree Health Care Trust’s report were not unreasonable in the aggregate. 

 

REPORT DETERMINATION

 

The Board of Trustees of the Chicago Transit Authority Retiree Health Care Trust submitted its Report to the Office of the Auditor General on September 30, 2010.  The Actuarial Report as of January 1, 2010 included information required by the Pension Code.  As shown in Digest Exhibit 1, the 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 $772,641,049.

 

• The actuarial present value of projected active contributions, trust income, and assets was $781,001,402 (after subtracting $42,817,797 for the required statutory reserve).

 

• Consequently, projected income and assets exceeded projected benefits by 1.1 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 Retiree Health Care Trust’s assumptions as disclosed in the Actuarial Report.  Overall, we found these assumptions were not unreasonable in the aggregate.  Pages 4 – 7 of our 2010 Annual Review contain observations on the specific assumptions used in the Actuarial Report.

 

 

WILLIAM G. HOLLAND

Auditor General

 

WGH:JFS

 

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