REPORT DIGEST REVIEW OF INFORMATION SUBMITTED BY THE CHICAGO TRANSIT AUTHORITY’S RETIREE HEALTH CARE TRUST 2013 ANNUAL REVIEW Release Date: December 2013 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. 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 Valuation Report as of January 1, 2013 to the Office of the Auditor General on October 2, 2013. ? 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 Actuarial Valuation Report and found that they were not unreasonable in the aggregate. ANNUAL REVIEW RESULTS AND CONCLUSIONS STATUTORY REQUIREMENTS The Illinois State Auditing Act (30 ILCS 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 which may (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 the 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 Actuarial Valuation Report as of January 1, 2013 to the Office of the Auditor General on October 2, 2013. The Actuarial Valuation Report included information required by the Pension Code. As shown in Digest Exhibit 1, the Actuarial 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 $645,710,391. • The actuarial present value of projected active contributions, trust income, and assets was $813,380,403 (after subtracting $32,599,547 for the required statutory reserve). • Consequently, projected income and assets exceeded projected benefits by 26.0 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 Actuarial Valuation Report. Overall, these assumptions were not unreasonable in the aggregate. Pages 4 – 9 of our 2013 Annual Review contain observations on the specific assumptions used in the Actuarial Valuation Report. WILLIAM G. HOLLAND Auditor General WGH:JFS This Annual Review was conducted by OAG staff with the assistance of our consultants, Aon Hewitt.