Annual Review Information Submitted by the Chicago Transit Authority's Employee Retirement Plan

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REVIEWOF INFORMATION SUBMITTED BY THE
RETIREMENT PLAN FOR CHICAGO TRANSIT AUTHORITY EMPLOYEES
2011 ANNUAL REVIEW
Release Date: November 2011
SYNOPSIS
The Illinois State Auditing Act requires the Retirement Plan for Chicago Transit Authority Employees
(Retirement Plan) to submit its most recent audit, annual statement, and actuarial statement to the Office of the
Auditor General (OAG) by September 30 of each year. These documents were submitted by the Retirement Plan
on September 30, 2011. The OAG reviewed these documents and concluded that the Retirement Plan had
complied with the requirements established in the Auditing Act.
The Illinois Pension Code (40 ILCS 5/22-101(e)(3)) requires the Retirement Plan determine, based on a report
prepared by an enrolled actuary, the estimated funded ratio of the total assets of the Retirement Plan to its total
actuarially determined liabilities. The Retirement Plan is also required to determine the contribution rates needed
to meet the funding requirements established by the Pension Code. The Auditor General is then required to
review the Retirement Plan’s determination and assumptions to determine whether they are “unreasonable in the
aggregate”. This report does not constitute an audit as that term is defined in generally accepted government
auditing standards.
 The OAG reviewed the Retirement Plan’s assumptions in the January 1, 2011 Actuarial Valuation and
concluded they were not unreasonable in the aggregate.
– The Retirement Plan kept most of its assumptions unchanged from the prior year’s Actuarial Valuation
except that it reduced the investment rate of return assumption from 8.75 percent to 8.5 percent.
– While this reduction improves its reasonableness, the 8.5 percent investment return assumption remains at
the upper end of returns used by other pension plans.
 The Pension Code requires the Retirement Plan to set employee and employer contribution rates at levels so
that the Plan’s projected funded ratio does not decline below 60 percent in all years through 2039.
– Based on the January 1, 2011 Actuarial Valuation, the Retirement Board increased the employee and
employer contribution rates for 2012 to keep the Plan’s funded ratio from declining below the statutorily
required 60 percent level in all years through 2039.
– The employee contribution rate will increase from 8.345 percent to 8.65 percent of pay and the employer
contribution rate will increase from 10.69 percent to 11.3 percent of pay (the employer contribution rate is
net of debt service credit of 6% of pay).
2011 ANNUAL REVIEW – INFORMATION SUBMITTED BY THE RETIREMENT PLAN FOR CTA EMPLOYEES
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2011 ANNUAL REVIEW – INFORMATION SUBMITTED BY THE RETIREMENT PLAN FOR CTA EMPLOYEES
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OAG reviewed the documents
submitted by the Retirement Plan
and concluded the Retirement Plan
had complied with the Auditing Act.
While the reduction of the
investment rate of return from
8.75% to 8.5% improves the
reasonableness of this actuarial
assumption, the 8.5% investment
return assumption remains at the
upper end of returns used by other
pension plans.
The Retirement Plan’s assumptions
were not unreasonable in the
aggregate.
ANNUAL REVIEW
RESULTS AND CONCLUSIONS
STATUTORY REQUIREMENTS
The Illinois State Auditing Act (30 ILCS 5/3-2.3(e)) requires
the Retirement Plan for Chicago Transit Authority Employees
(Retirement Plan) to submit an audit, annual statement, and
actuarial statement to the Office of the Auditor General
(OAG) by September 30 of each year.
 On September 30, 2011, the Retirement Plan submitted
these documents to the Auditor General.
 The OAG reviewed these documents and concluded that
the Retirement Plan had complied with the requirements
established in the Auditing Act.
In addition, the Illinois Pension Code (40 ILCS 5/22-
101(e)(3)) requires the Retirement Plan determine the
estimated funded ratio of the total assets of the Retirement
Plan to its total actuarially determined liabilities, based on a
report prepared by an enrolled actuary.
 The Retirement Plan is also required to determine the
contribution rates needed to meet the funding
requirements established by the Pension Code.
 The Auditor General is then required to review the
determination and the assumptions to determine whether
they are “unreasonable in the aggregate”. (pages 3-4)
REVIEWOF ACTUARIAL VALUATION
The Retirement Plan submitted the Actuarial Valuation as of
January 1, 2011 to the OAG on September 30, 2011. This
Actuarial Valuation was adopted by the Retirement Plan’s
Board of Trustees (Board) at its September 22, 2011 meeting.
Most of the Valuation’s assumptions were the same as the
prior year’s Valuation. However, the Board reduced the
investment return assumption from 8.75 percent to 8.5 percent.
While this reduction improves the reasonableness of the
investment return assumption, the 8.5 percent investment
return assumption remains at the upper end of returns used by
other pension plans.
The OAG reviewed the Retirement Plan’s assumptions in the
January 1, 2011 Actuarial Valuation and concluded they were
not unreasonable in the aggregate. This report does not
2011 ANNUAL REVIEW – INFORMATION SUBMITTED BY THE RETIREMENT PLAN FOR CTA EMPLOYEES
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January 1, 2011:
 Assets . . . . . . . . . . . $1.9 billion
 Liabilities . . . . . . . . $2.7 billion
 Funded Ratio . . . . . . . . . 70.1%
The Board increased employee
contribution rates from 8.345% to
8.65% of pay and employer
contribution rates from 10.69% to
11.3% of pay (the employer
contribution rate is net of debt
service credit of 6% of pay).
constitute an audit as that term is defined in generally accepted
government auditing standards. (pages 4-10)
As of January 1, 2011, the actuarial value of assets for pension
benefits was approximately $1.91 billion and the actuarial
liability was $2.72 billion, according to the Retirement Plan’s
Actuarial Valuation.
 The funded ratio decreased from 74.8 percent as of
January 1, 2010 to 70.1 percent as of January 1, 2011.
 The 2011 Valuation notes the decrease is due primarily to
the amortization of deferred asset losses and the decrease
in the investment return assumption from 8.75 percent to
8.5 percent. (page 10)
CONTRIBUTION RATES
The Pension Code requires the CTA to contribute 12 percent
of pay, less up to a 6 percent credit for debt service paid on the
bonds issued for contribution to the Retirement Plan;
employees are required to pay 6 percent of pay. The Pension
Code further requires that contribution rates be increased if the
funded ratio is projected to decline below 60 percent prior to
2040, with the CTA paying two-thirds and employees one-third
of the required contribution.
 Based on the January 1, 2011 Actuarial Valuation, the
Retirement Plan increased the employer and employee
contribution rates for 2012 to keep the Plan’s funded ratio
from declining below the statutorily required 60 percent
level in all years through 2039.
 The Board increased the employee contribution rate for
2012 from 8.345 percent to 8.65 percent of pay and the
employer contribution rate from 10.69 percent to 11.3
percent of pay (the employer contribution rate is net of
debt service credit of 6% of pay). (pages 4, 9-10)
___________________________________
WILLIAM G. HOLLAND
Auditor General
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This Annual Review was conducted by OAG staff with the
assistance of our consultants, Aon Hewitt.