REPORT HIGHLIGHTS INFORMATION SUBMITTED BY THE RETIREMENT PLAN FOR CHICAGO TRANSIT AUTHORITY EMPLOYEES ANNUAL REVIEW Release Date: November 29, 2023 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 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, 2023 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 continues to be higher than most public plans but is supported by an investment return analysis conducted by the Plan’s Investment Consultant and a high underlying inflation assumption. The underlying inflation assumption is on the upper end of the reasonable range based on current and recent historical capital market assumptions. • The funded ratio of the Retirement Plan decreased from 54.99 percent in the January 1, 2022 Valuation to 54.20 percent in the January 1, 2023 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 of Trustees for 2024 were increased from the 2023 contribution rates. For 2024, the employer contribution rate was increased from 20.647 percent to 21.590 percent (which is net of the employer debt service credit of 6% of pay) and the employee contribution rate was increased from 13.324 percent to 13.795 percent. The January 1, 2023 Actuarial Valuation concluded that the contribution rates applicable for Plan year 2024 would result in the Plan’s funded ratio reaching the statutorily required 60 percent level within 10 years (i.e., by 2033). 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.