The headline of the Associated Press story published on Feb. 5, "Bonuses for public sector retirees cost millions," describes a retirement benefit paid by IMRF as a "bonus." The story also implied this "bonus" money could have been used toward another purpose. Untrue on both counts.
Employees of local units of government provide various services and receive a salary, retirement program and, frequently, health insurance -- similar to the compensation package for private sector employees. IMRF's retirement program furnishes disability, retirement and death benefits. Part of this package includes post-retirement benefit increases to protect against the ruinous effects of inflation on retiree income.
Enacted in 1992, the 13th payment was enacted when Social Security recipients received a 3.7 percent increase (bonus?). It also came on the heels of a 10-year period where Social Security recipients received an average annual compounded 4 percent increase (bonus?).
The Associated Press story implied the money used was diverted from more important services the unit of government could provide, but dollars levied to fund retirement benefits can only be used for retirement benefits. A unit of government may not shift the money from one pocket to another, then pay that money for other services. Old-fashioned? Yes, but rational and clean.
So, when is a bonus not a bonus? When it is used to fight inflation as part of a comprehensive compensation package. This money also supports each retiree's community. In 2012, IMRF pension payments generated $1.7 billion in economic activity in Illinois and helped support 12,344 jobs.
Louis W. Kosiba
Executive Director, Illinois Municipal Retirement Fund