===== PDF PAGE 6 ===== CITY OF WEST CHICAGO FINANCE COMMITTEE AGENDA ITEM SUMMARY ITEM TITLE: Police Pension Fund – Annual Tax Levy Certification/Municipal Compliance Report AGENDA ITEM NUMBER: 5B COMMITTEE DATE: November 2, 2026 COUNCIL AGENDA DATE: November 2, 2026 PREPARED BY: Katrina Hanna, Finance Director APPROVED BY: SIGNATURE__________________________ SIGNATURE__________________________ The attached municipal compliance report is required to be provided to a municipality on an annual basis, prior to the tax levy being filed. The City does not levy for pensions separately in its annual property tax levy, rather makes a contribution to the Pension Fund using available General Fund revenues. Section 3-143 of the Pension Code requires the Pension Board to annually certify the amount necessary for the City to meet its required contribution to the Pension Fund pursuant to sections 3-125 and 3-127 of the Pension Code. The Police Pension’s actuarial report identified a request for municipal contribution to the Pension Fund of $3,804,137. This contribution amount is based on the transition plan the Pension Board and City had previously agreed upon. ACTIONS PROPOSED: Recommend City Council approval of the proposed $3,804,137 contribution to the Police Pension Fund in 2027, and receive and place on file the Annual Tax Levy Certification and Municipal Compliance Report. COMMITTEE RECOMMENDATION: ===== PDF PAGE 7 ===== By Electronic Mail Only - dbovey@westchicago.org October 8, 2026 Daniel Bovey, Mayor West Chicago City Hall 475 Main Street West Chicago, IL 60185 Re: West Chicago Police Pension Fund – Annual Tax Levy Certification Dear Mayor Bovey- The undersigned is legal counsel for the Board of Trustees of the City of West Chicago Police Pension Fund (“Pension Board”). Section 3-143 of the Pension Code requires the Pension Board to annually certify the amount necessary for the City to meet its required contribution to the Pension Fund pursuant to sections 3-125 and 3-127 of the Pension Code. Pursuant to the actuarial report issued by Lauterbach & Amen on behalf of the Pension Board, the municipality’s tax levy/contribution for the West Chicago Police Pension Fund for the upcoming tax year should be $3,804,137. This recommended contribution amount is based upon the transition plan the Pension Board and City had previously agreed upon. Please notify the undersigned if the City will not be contributing the certified amount. Also enclosed for your review is a copy of the Pension Board’s Municipal Compliance Report for the fiscal year ending December 31, 2025. This report is being provided to you in accordance with Section 3-143 of the Pension Code. The Pension Board thanks the City for its commitment to fund the West Chicago Police Pension Fund. Please contact me if you have any questions regarding this matter. Sincerely, Laura J. Goodloe, Esq. cc: Jodi Rucks, Board Clerk West Chicago Police Pension Fund Katrina Hanna, Finance Director City of West Chicago ===== PDF PAGE 8 ===== THE CITY OF WEST CHICAGO, ILLINOIS POLICE PENSION FUND PUBLIC ACT 95-0950 MUNICIPAL COMPLIANCE REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025 PO Box 165 West Chicago, IL 60186 Phone: 630.293.2222 www.westchicago.org ===== PDF PAGE 9 ===== Lauterbach & Amen, _L_L_P_/ I CERTIFIED PUBLIC ACCOUNTANTS August 20, 2026 Members of the Pension Board of Trustees West Chicago Police Pension Fund West Chicago, [llinois 668 NORTH RIVER RD. • NAPERVILLE. ILLINOIS 60563 PHONE 630.393. 1483 • FAX 630.393.2516 www.lauterbachamen.com Enclosed please find a copy of your Municipal Compliance Report for the West Chicago Police Pension Fund for the fiscal year ended December 31, 2025. We have prepared the report with the most recent information available at our office. Should you have more current information, or notice any inaccuracies, we are prepared to make any necessary revisions and return them to you. The President and Secretary of the Pension Fund are required to sign the report on page 3. If not already included with the enclosed report, please also include a copy of the Pension Fund's most recent investment policy. The signed Public Act 95-0950 - Municipal Compliance Report must be provided to the Municipality before the tax levy is filed on the last Tuesday in December. We are sending the report via email to promote an environmentally-friendly work atmosphere. If you have any questions regarding this report, please contact your Client Manager or PSA. Respectfully submitted, LAUTERBACH & AMEN, LLP ===== PDF PAGE 10 ===== THE CITY OF WEST CHICAGO, ILLINOIS POLICE PENSION FUND Public Act 95-950 - Municipal Compliance Report For the Fiscal Year Ending December 31, 2025 The Pension Board certifies to the Board of Trustees of the City of West Chicago, Illinois on the condition of the Pension Fund at the end of its most recently completed fiscal year the following information: 9) 2) 3) The total cash and investments, including accrued interest, of the fund at market value and the total net position of the Pension Fund: Current Preceding Fiscal Year Fiscal Year Total Cash and Investments (including accrued interest) $60,839,049 $51,191,979 Total Net Position $60,841,603 $51,194,879 The estimated receipts during the next succeeding fiscal year from deductions from the salaries of police officers and from other sources: Estimated Receipts - Employee Contributions $535,800 Estimated Receipts - All Other Sources Investment Earnings $3,954,500 Municipal Contribution $3,804,137 The estimated amount required during the next succeeding fiscal year to (a) pay all pensions and other obligations provided in Article 3 of the Illinois Pension Code, and (b) to meet the annual requirements of the fund as provided in Sections 3-125 and 3-127: (a) Pay all Pensions and Other Obligations $4,384,400 (b) Annual Requirement of the Fund as Determined by: Illinois Police Officers' Pension Investment Fund $2,109,005 Private Actuary - Lauterbach & Amen, LLP Recommended Municipal Contribution $3,804,137 Alternative Municipal Contribution $2,331,254 Page | ===== PDF PAGE 11 ===== THE CITY OF WEST CHICAGO, ILLINOIS POLICE PENSION FUND Public Act 95-950 - Municipal Compliance Report For the Fiscal Year Ending December 31, 2025 4) The total net income received from investment of assets along with the assumed investment return and actual investment return received by the fund during its most recently completed fiscal year compared to the total net income, assumed investment return, and actual investment return received during the preceding fiscal year: Net Income Received from Investment of Assets Assumed Investment Return Illinois Police Officers' Pension Investment Fund Private Actuary - Lauterbach & Amen, LLP Actual Investment Return 5) The total number of active employees who are financially contributing to the fund: Number of Active Members Current Preceding Fiscal Year Fiscal Year $9,066,782 $4,363,582 6.800% 6.800% 6.500% 6.500% 16.186% 8.994% 44 6) The total amount that was disbursed in benefits during the fiscal year, including the number of and total amount disbursed to (i) annuitants in receipt of a regular retirement pension, (ii) recipients being paid a disability pension, and (iii) survivors and children in receipt of benefits: (i) Regular Retirement Pension (ii) Disability Pension (iii) Survivors and Child Benefits Totals Total Amount Number of Disbursed 30 $2,829,887 6 $234,137 7 $353,318 43 $3,417,342 Page 2 ===== PDF PAGE 12 ===== THE CITY OF WEST CHICAGO, ILLINOIS POLICE PENSION FUND Public Act 95-950 - Municipal Compliance Report For the Fiscal Year Ending December 31, 2025 7) The funded ratio of the fund: Current Preceding Fiscal Year Fiscal Year Illinois Police Officers' Pension Investment Fund 73.23% 70.61% Private Actuary - Lauterbach & Amen, LLP 69.80% 67.50% 8) The unfunded liability carried by the fund, along with an actuarial explanation of the unfunded liability: Unfunded Liability: Illinois Police Officers’ Pension Investment Fund $20,663,324 Private Actuary - Lauterbach & Amen, LLP $24,276,768 The accrued liability is the actuarial present value of the portion of the projected benefits that has been accrued as of the valuation date based upon the actuarial valuation method and the actuarial assumptions employed in the valuation. The unfunded accrued liability is the excess of the accrued liability over the actuarial value of assets. 9) Please see attached Investment/Cash Management policy if applicable Please see Notes Page attached. CERTIFICATION OF MUNICIPAL POLICE PENSION FUND COMPLIANCE REPORT The Board of Trustees of the Pension Fund, based upon information and belief, and to the best of our knowledge, hereby certify pursuant to §3-143 of the Illinois Pension Code 40 ILCS 5/3-143, that the preceding report is true and accurate. Adopted this Cea day of C4. , 2026 President SGA Date loleofdote Secretary Date _/o 06, L, ak Page 3 ===== PDF PAGE 13 ===== WEST CHICAGO POLICE PENSION FUND FUNDING ACTUARIAL VALUATION AS OF JANUARY 1, 2026 FOR THE CONTRIBUTION YEAR JANUARY 1, 2026 TO DECEMBER 31, 2026 668 N. River Road Naperville, IL 60563 Phone: 630.393.1483 Fax: 630.393.2516 lauterbachamen.com ===== PDF PAGE 14 ===== Actuarial Funding Report Lauterbach & Amen WEST CHICAGO POLICE PENSION FUND Contribution Year Ending: December 31, 2026 Actuarial Valuation Date: January 1, 2026 Data Date: December 31, 2025 Contact: Todd A. Schroeder Partner March 31, 2026 LAUTERBACH & AMEN, LLP ===== PDF PAGE 15 ===== m TABLE OF CONTENTS ACTUARIAL CERTIFICATION .............................................................................................................. 5 MANAGEMENT SUMMARY .................................................................................................................. 7 Recommended Contribution ................................................................................................................................................ 8 Funded Status ...................................................................................................................................................................... 8 Management Summary -Comments and Analysis ............................................................................................................. 9 Actuarial Recommended Contribution -Reconciliation ................................................................................................... I 5 VALUATION OF FUND ASSETS .......................................................................................................... 16 Fair Value of Assets ........................................................................................................................................................... 17 Fair Value of Assets (Gain)/Loss ....................................................................................................................................... 18 Development of the Actuarial Value of Assets .................................................................................................................. 19 Actuarial Value of Assets (Gain)/Loss .............................................................................................................................. 19 Historical Asset Performance ............................................................................................................................................ 20 RECOMMENDED CONTRIBUTION DETAIL ..................................................................................... 24 Actuarial Accrued Liability ............................................................................................................................................... 25 Funded Status .................................................................................................................................................................... 25 Development of the Employer Normal Cost.. .................................................................................................................... 26 Normal Cost as a Percentage of Expected Payroll ............................................................................................................. 26 Recommended Contribution Breakdown ........................................................................................................................... 26 Schedule of Amortization -New Unfunded Actuarial Accrued Liability ......................................................................... 27 Schedule of Amortization -Total Unfunded Actuarial Accrued Liability ........................................................................ 28 Actuarial Methods -Recommended Contribution ............................................................................................................ 29 ALTERNATIVE CONTRIBUTION ........................................................................................................ 30 Alternative Contribution .................................................................................................................................................... 31 Funded Status -Alternative Contribution ......................................................................................................................... 31 Actuarial Methods -Alternative Contribution .................................................................................................................. 33 ACTUARIAL VALUATION DATA ....................................................................................................... 34 Active Members ................................................................................................................................................................. 35 Inactive Members .............................................................................................................................................................. 35 Summary Of Monthly Benefit Payments ........................................................................................................................... 35 Age and Service Distribution ............................................................................................................................................. 36 ACTUARIAL FUNDING POLICIES ...................................................................................................... 37 Actuarial Cost Method ....................................................................................................................................................... 38 Financing Unfunded Actuarial Accrued Liability .............................................................................................................. 38 Transition Plan ................................................................................................................................................................... 40 Actuarial Value of Assets .................................................................................................................................................. 41 West Chicago Police Pension Fund Table of Contents ===== PDF PAGE 16 ===== TA. TABLE OF CONTENTS ACTUARIAL ASSUMPTIONS Nature of Actuarial Calculations Selection of Actuarial Assumptions.. Actuarial Assumptions in the Valuation Process... Assessment of Risk Exposures .. Limitations of Risk Analysis ..... Assessment and Use of Actuarial Models. Actuarial Assumptions Utilized..... LOW-DEFAULT-RISK OBLIGATION MEASURE Low-Default-Risk Obligation Measure - Purpose . Low-Default-Risk Obligation Measure Low Default Risk Obligation Measure vs Actuarial Liability ..........c...cccssesssesseesseesseesseessesssessuesseessecsatesucssucssuessucsneceneeanees 54 SUMMARY OF PRINCIPAL PLAN PROVISIONS .....ccccccsssssscsssescscscscsescarscscscscarscacscaacatacacscscacacacaseces 55 Establishment of the Fund .. Administration.............. Member Contributions... Regular Retirement Pension Benefit. Regular Retirement Pension Benefit - Continued Early Retirement Pension Benefit.. Surviving Spouse Benefit .............. Surviving Spouse Benefit - Continued . Termination Benefit — Vested..............0++ Disability Benefit GLOSSARY OF TERMS «.ssssessszcussecexceszsvassassassszswsunsusussseanin aan eh caves sata ease pase gcse bass vtaneenstkeesseneexeaseecss 61 GOSS ay OP TCHS cas xs sscssssecwsses ncsszswssseesecetuststewecta ee ec ue USGA BUU TUNECORE SGiR ts Bodin cc OCT as alice sagt 62 West Chicago Police Pension Fund Table of Contents ===== PDF PAGE 17 ===== IA Lauterbach & Amen 668 N. River Road Naperville, IL 60563 630.393.1483 : . . . : . ACTUARIAL CERTIFICATION This report documents the results of the Actuarial Valuation for the West Chicago Police Pension Fund. The information was prepared for use by the West Chicago Police Pension Fund and the City of West Chicago, Illinois for determining the Recommended Contribution, under the selected Funding Policy, and the Alternative Contribution for the Contribution Year January 1, 2026 to December 31, 2026. It is not intended or suitable for other purposes. Determinations for purposes other than the Employer's Actuarial Recommended Contribution may be significantly different from the results herein. The results in this report are based on the demographic data and financial information submitted by the West Chicago Police Pension Fund, and may include results from the prior Actuary. We did not prepare the Actuarial Valuations for the years prior to January 1, 2016. Those valuations were prepared by the prior Actuary whose reports have been furnished to us, and our disclosures are based on those reports. An audit of the prior Actuary's results was not performed, but high-level reviews were completed for general reasonableness, as appropriate, based on the purpose of this valuation. The accuracy of the results is dependent on the precision and completeness of the underlying information. In addition, the results of the Actuarial Valuation involve certain risks and uncertainty as they are based on future assumptions, market conditions, and events that may never materialize as assumed. For this reason, certain assumptions and future results may be materially different than those presented in this report. See the Management Summary section of this report for a more detailed discussion of the Defined Benefit Plan Risks, as well as the limitations of this Actuarial Valuation on assessing those risks. We are not aware of any known events subsequent to the Actuarial Valuation Date, which are not reflected in this report but should be valued, that may materially impact the results. The valuation results summarized in this report involve actuarial calculations that require assumptions about future events. The West Chicago Police Pension Fund selected certain assumptions, while others were the result of guidance and/or judgment from the Plan's Actuary or Advisors. We believe that the assumptions used in this valuation are reasonable and appropriate for the purposes for which they have been used. The selected assumptions represent our best estimate of the anticipated long-term experience of the Plan, and meet the guidelines set forth in the Actuarial Standards of Practice. In preparing the results, our Actuaries used commercially available software (ProVal) developed by Winklevoss Technologies, LLC. This software is widely used for the purpose of performing Actuarial Valuations. Our Actuaries coded the plan provisions, assumptions, methods, and demographic data summarized in this report, and reviewed the liability and cost outputs for reasonableness. We are not aware of any material weaknesses or limitations in the software, and have determined it is appropriate for performing this valuation. m West Chicago Police Pension Fund Page 5 ===== PDF PAGE 18 ===== 668 N. River Road Lauterbach & Amen Naperville, IL 60563 630.393.1483 44 lauterbachamen.com To the best of our knowledge, all calculations are in accordance with the applicable funding requirements, and the procedures followed and presentation of results conform to generally accepted actuarial principles and practices as prescribed by the Actuarial Standards Board. The undersigned consultants of Lauterbach & Amen, LLP, with actuarial credentials, meet the Qualification Standards of the American Academy of Actuaries to render this Actuarial Certification. There is no relationship between the West Chicago Police Pension Fund and Lauterbach & Amen, LLP that impairs our objectivity. Respectfully Submitted, LAUTERBACH & AMEN, LLP Tedel A. Selec Todd A. Schroeder, ASA, FCA, EA, MAAA West Chicago Police Pension Fund TA “ ===== PDF PAGE 19 ===== IA MANAGEMENT SUMMARY Recommended Contribution Funded Status Management Summary - Comments and Analysis Actuarial Recommended Contribution - Reconciliation ===== PDF PAGE 20 ===== MANAGEMENT SUMMARY RECOMMENDED CONTRIBUTION Prior Current Valuation Valuation sed — The Recommended Recommended Contribution $3,677,257 $3,804,137 Contribution has Expected Payroll $5,341,216 $5,347,747 Increased by $126,880 from the ; Prior Valuation. Recommended Contribution as a 68.85% 71.14% Percent of Expected Payroll “There is a Transition Plan between the Pension Board and the City, as noted in the Actuarial Funding Policies section of this report. The Transition Contribution for the current valuation is $3,804,137. FUNDED STATUS Prior Current Valuation Valuation Normal Cost $1,390,965 $1,381,251 Fair Value of Assets $51,194,879 $60,841,603 The Percent ; Funded has Actuarial Value of Assets $51,496,367 $56,106,205 Increased by 2.30% Actuarial Accrued Liability $76,289,218 $80,382,973 onan Actuarial Value of Assets Unfunded Actuarial Basis. Accrued Liability/(Surplus) $24,792,851 $24,276,768 Percent Funded Actuarial Value of Assets 67.50% 69.80% Fair Value of Assets 67.11% 75.69% West Chicago Police Pension Fund \ Page 8 ===== PDF PAGE 21 ===== MANAGEMENT SUMMARY SS RE SS MANAGEMENT SUMMARY — COMMENTS AND ANALYSIS Contribution Results The Recommended Contribution is based on the selected Funding Policy and methods that are outlined in the Actuarial Funding Policies section of this report. “Contribution Risk” is defined by the Actuarial Standards of Practice as the potential for actual future contributions to deviate from expected future contributions. For example, when actual contributions are not made in accordance to the Plan’s Funding Policy, or when future experience deviates materially from assumed. While it is essential for the Actuary and Plan Sponsor to collaborate on implementing a sound and financially feasible Funding Policy, it is important to note that the Actuary is not required, and is not in the position to, evaluate the ability or willingness of the Plan Sponsor to make the Recommended Contribution under the selected Funding Policy. As a result, while Contribution Risk may be a significant source of risk for the Plan, this Actuarial Valuation makes no attempt to assess the impact of future contributions falling short of those recommended under the selected Funding Policy. Notwithstanding the above, see the Actuarial Recommended Contribution — Reconciliation section of this report for the impact on the current Recommended Contribution of any contribution shortfalls or excesses from the prior year. Defined Benefit Plan Risks Asset Growth: Pension funding involves preparing Fund assets to pay for benefits when Members retire. During their working careers, assets grow with contributions and investment earnings; and then, the Pension Fund distributes assets in retirement. Based on the Plan’s current mix of Members and Funded Status, the Plan should experience positive asset growth, on average, if the Recommended Contributions are made and expected investment earnings come in. In the current year, the Fund asset growth was positive by approximately $9,646,700. Asset growth is important in the long-term. Long-term cash flow out of the Pension Fund is primarily benefit payments, and expenses are a smaller portion. The Plan should monitor the impact of expected benefit payments on future asset growth. We assess and project all future benefit payments as part of the determination of liability. The assessment is made on all current Members of the Fund, both active and inactive. For active Members, the assessment includes the probability that Members terminate or retire and begin receiving benefits. In the next 5 years, benefit payments are anticipated to increase 30-35%, or approximately $1,174,100. In the next 10 years, the expected increase in benefit payments is 65-70%, or approximately $2,230,500. The estimated increase in benefit payments is being compared against the benefits paid to inactive Members during the fiscal year, excluding any refunds of Member Contributions. Furthermore, plans with a large number of inactive Members have an increased “Longevity Risk”. Longevity Risk is the possibility that inactive Members may live longer than projected by the Plan’s mortality assumption. As shown in the previous paragraph, benefit payments are expected to increase over West Chicago Police Pension Fund | A Page 9 ===== PDF PAGE 22 ===== MANAGEMENT SUMMARY the next 5-year and 10-year horizons. The projected increases assume that current inactive Members pass away according to the Plan’s mortality assumption. To the extent that current inactive Members live longer than expected, the future 5-year and 10-year benefit projections may be larger than the amounts disclosed in the previous paragraph. Higher levels of benefit payments, payable for a longer period of time, may cause a significant strain on the Plan’s cash flow, future Recommended Contributions, and may lead to Plan insolvency. Unfunded Liability: Unfunded Liability represents the financial shortfall of the Actuarial Value of Assets compared to the Actuarial Accrued Liability. To the extent that Unfunded Liability exists, the Plan is losing potential investment earnings due to the financial shortfall. Contributions towards Unfunded Liability pay for the lost investment earnings, as well as the outstanding unfunded amount. If payments towards Unfunded Liability are not made, the Unfunded Liability will grow. In the early 1990s, many Pension Funds in Illinois adopted an increasing payment towards Unfunded Liability due to a change in legislation. The initial payment decreased, and future payments are anticipated to increase annually after that. In many situations, payments early on were less than the interest on Unfunded Liability, which means that Unfunded Liability increased even though contributions were made at the recommended level. The current Recommended Contribution includes a payment towards Unfunded Liability that is approximately $1,311,200 greater than the interest on Unfunded Liability. All else being equal, and contributions being made, Unfunded Liability is expected to decrease. The Employer and Fund should anticipate improvement in the current Percent Funded in the short-term. The Employer and Fund should understand this impact as we progress forward to manage expectations. Actuarial Value of Assets: The Pension Fund smooths investment returns that vary from expectations over a 5-year period. The intention over time is that investment returns for purposes of funding recommendations are a combination of several years. The impact is intended to smooth out the volatility of Recommended Contributions over time, but not necessarily increase or decrease the level of contributions over the long-term. When investment returns are smoothed, there are always gains or losses on the Fair Value of Assets that are going to be deferred for current funding purposes, and recognized in future years. Currently, the Pension Fund is deferring approximately $4,735,400 in gains on the Fair Value of Assets. These are asset gains that will be recognized in upcoming periods, independent of the future performance of the Fair Value of Assets. West Chicago Police Pension Fund TA “ " ===== PDF PAGE 23 ===== MANAGEMENT SUMMARY (Cr Se SS Cash Flow Risk: Assets, liabilities, and Funded Status are good metrics to monitor over time to assess the progress of the Funding Policy. However, these metrics may provide limited forward-looking insights. Specifically, the maturity of a Pension Fund can pose certain risks that often cannot be assessed with a point-in-time metric such as Percent Funded. For example, two different Pension Funds could have the same Percent Funded, but have completely different risk profiles. One Fund might mostly cover active Members with little to no Members in pay status, whereas a second Fund might mostly cover inactive Members with a significant level of annual benefit payments. The latter Fund has a greater “Cash Flow Risk”, i.e. a more significant chance that negative cash flows could lead to a deteriorating, rather than improving, Percent Funded over time. It is important to note that, in general, positive net cash flows are good, but also need to be sufficient to cover the growth in the liabilities (i.e. the Normal Cost as well as interest on the Actuarial Accrued Liability). Typically, when cash flows are assumed to be insufficient to cover the growth in liabilities, the Percent Funded will decline, while future Recommended Contributions will increase. Benefit Payment Risk: Ideally, plans in a sound financial position will have the ratio of annual benefits payments to the Fair Value of Assets to be less than the Expected Rate of Return on Investments assumption (i.e. 6.50%). Theoretically, in this case it can be considered that investment returns will fully cover the annual benefit payments, and therefore, all Employer and Member Contributions made to the Fund will be used to pay for future benefit accruals and pay down the existing Unfunded Liability. To the extent that the ratio of the annual benefit payments to the Fair Value of Assets increases to above the Expected Rate of Return on Investments assumption, the Plan may experience some additional risks, such as the need to keep assets in more liquid investments, inability to pay down Unfunded Liability, and may lead to Plan insolvency. As of the Valuation Date, the West Chicago Police Pension Fund has a ratio of benefit payments to the Fair Value of Assets of 5.62%. In this case, the Plan is currently in a sound financial position and has a reduced amount of Benefit Payment Risk and Cash Flow Risk. It would be expected that adherence to the current Funding Policy would lead to an increasing Percent Funded. West Chicago Police Pension Fund A Page 11 ===== PDF PAGE 24 ===== MANAGEMENT SUMMARY Fund Assets The results in this report are based on the assets held in the Pension Fund. Assets consist of funds held for investment and for benefit payments as of the Actuarial Valuation Date. In addition, assets may be adjusted for other events representing dollars that are reasonably expected to be paid out from the Pension Fund or deposited into the Pension Fund after the Actuarial Valuation Date as well. The current Fund assets are audited. The Fund The Actuarial Value of Assets under the Funding Policy is equal to the Fair Value | Assets Used in of Assets, with unexpected gains and losses smoothed over 5 years. More detail on the Actuarial Value of Assets can be found in the Actuarial Funding Policies section of this report. this Report are Audited. West Chicago Police Pension Fund TA Page 12 ===== PDF PAGE 25 ===== MANAGEMENT SUMMARY a a ES SS Demographic Data Demographic factors can change from year to year within the Pension Fund. Changes in this category include hiring new Members, Members retiring or becoming disabled, inactive Members passing away, and other changes. Demographic changes can cause an actuarial gain (contribution that is less than expected compared to the prior year) or an actuarial loss (contribution that is greater than expected compared to the prior year). Demographic gains and losses occur when the assumptions over the one-year period for Member changes do not meet our long-term expectation. For example, if no Members become disabled during the year, we would expect a liability gain. If more Members become disabled than anticipated during the year, we would expect a liability loss. Generally, we expect short-term fluctuations in demographic experience to create gains or losses of 1%-3% of the Actuarial Accrued Liability in any given year, but to balance out in the long-term. “Demographic Risk” occurs when Plan demographic experience differs significantly from expected. Similar to Longevity Risk discussed previously, additional risk is created when demographic experience differs from the assumed rates of disability, retirement, or termination. Under the chosen assumptions, actuarial gains and/or losses will always occur, as the assumptions will never be exactly realized. However, the magnitude of the gain and/or loss and its influence on the Recommended Contribution largely depends on the size of the Plan. A key Demographic Risk is mortality improvement differing from expected. While the actuarial assumptions reflect small, continuous improvements in mortality experience and these assumptions are refined upon the completion of each actuarial experience study, the risk arises because there is a possibility of a sudden shift in mortality experience. The Plan’s size helps temper contribution fluctuations, but demographic events such as disabilities or unexpected turnover can still influence funding outcomes. Even a 1—-2% increase in the Actuarial Accrued Liability can lead to a $72,000—-$143,000 increase in the Recommended Contribution. Recognizing this level of sensitivity, stakeholders are advised to factor in this potential variability when budgeting for future contributions. In the current report, the key demographic changes were as follows: New Hires: There was | Member of the Fund who was hired during the year. When a Member is admitted to the Pension Fund, the Employer Contribution will increase to reflect the new Member. The increase in the Recommended Contribution in the current year due to the new Member experience is approximately $14,900. Retirement: There was | Member of the Fund who retired during the year. When a Member retires, the Normal Cost will decrease. Any change in the Actuarial Accrued Liability will be considered when West Chicago Police Pension Fund \ Page 13 ===== PDF PAGE 26 ===== MANAGEMENT SUMMARY determining the amount to pay towards Unfunded Liability each year. The increase in the Recommended Contribution in the current year due to the retirement experience is approximately $21,800. Disability: There was 1 Member of the Fund who became disabled during the year. When a Member becomes disabled, the Fund will often experience a decrease in Normal Cost, but an increase in Unfunded Liability. The increase in the Recommended Contribution in the current year due to the disability experience is approximately $15,600. Termination: There was 1 Member of the Fund who terminated employment during the year. The Fund may be obligated to pay a benefit or a refund of Member Contributions to the Members in the future. The decrease in the Recommended Contribution in the current year due to the termination experience is approximately $11,100. Mortality: As inactive Members age and continue receiving benefits, the Fund's liability tends to increase. This year, 41 inactive Members remained in payment status. Certain events, such as divorce or the death of a spouse, can reduce liabilities by eliminating future benefit payments. The increase in the Recommended Contribution in the current year due to the mortality experience is approximately $29,000. Salary Increases: Salary increases were less than anticipated in the current year. This caused a decrease in the Recommended Contribution in the current year of approximately $16,600. Assumption Changes The assumptions were not changed from the prior valuation Funding Policy Changes The Funding Policy was not changed from the prior valuation. Output Smoothing Contributions are determined annually by allocating dollars over a specified period of time. Procedures that are used to allocate contributions over a period of time may include asset smoothing, amortization period, and output smoothing. Each procedure becomes part of the Actuarial Methodology. Output smoothing involves measuring the impact of a specific result on a contribution and recognizing the result. The final contribution should maintain a reasonable relationship to the full Actuarially Determined Contribution. The current results shown throughout the report reflect the full Actuarially Determined Contribution. m West Chicago Police Pension Fund Page 14 ===== PDF PAGE 27 ===== MANAGEMENT SUMMARY ACTUARIAL RECOMMENDED CONTRIBUTION - RECONCILIATION Actuarial Accrued Liability is expected to increase each year for both interest for the year and as active Members earn additional service years towards retirement. Similarly, Actuarial Accrued Liability is expected to decrease when the Fund pays benefits to inactive Members. Contributions are expected to increase as expected pay increases under the Funding Policy for the Fund. Actuarial Recommended Liabilit• Contribution Prior Valuation $ 76,289,218 $ 3,677,257 Expected Changes 2,884,015 110,315 Initial Expected Current Valuation $ 79,173,233 $ 3,787,572 Other increases or decreases in Actuarial Accrued Liability (key changes noted below) will increase or decrease the amount of Unfunded Liability in the Plan. To the extent that Unfunded Liability increases or decreases unexpectedly, the contribution towards Unfunded Liability will also change unexpectedly. Actuarial Recommended Liability Contribution Salary Increases Less than Expected $ (58,806) $ (16,596) Actuarial Experience 1,268,546 74,295 Investment Return Greater than Expected* (51,01 I) Contributions Less than Expected 9,877 Total Increase/(Decrease) $ 1,209,740 $ 16,565 Current Valuation" $ 80,382,973 $ 3,804,137 *Impact on the Recommended Contribution due to investment return is on an Actuarial Value of Assets basis. The Actuarial Experience can be attributable to several factors including, but not limited to, demographic changes and benefit payment experience compared to expectation. Key demographic changes were discussed in the Demographic Data section of this report. "There is a Transition Plan between the Pension Board and the City, as noted in the Actuarial Funding Policies section of this report. The Transition Contribution for the current valuation is $3,804,137. m West Chicago Police Pension Fund Page 15 ===== PDF PAGE 28 ===== VALUATION OF FUND ASSETS Fair Value of Assets Fair Value of Assets (Gain)/Loss Development of the Actuarial Value of Assets Actuarial Value of Assets (Gain)/Loss Historical Asset Performance ===== PDF PAGE 29 ===== VALUATION OF FUND ASSETS FAIR VALUE OF ASSETS Statement of Assets Cash and Cash Equivalents Money Market Pooled Investment Accounts Receivables (Net of Payables) Total Fair Value of Assets Statement of Changes in Assets Total Fair Value of Assets - Prior Valuation Plus - Employer Contributions Plus - Member Contributions Plus - Return on Investments Less - Benefit Payments Less - Refunds & Transfers Less - Other Expenses Prior Valuation $ 13,213 1,400,084 49,778,682 2,900 $ 51, 194,879 Total Fair Value of Assets - Current Valuation Current Valuation $ 10,071 1,258,182 59,570,796 2,554 $ 60,841,603 $51,194,879 3,567,300 520,197 9,066,782 (3,417,343) (16,039) (74,173) $ 60,841,603 The Total Fair Value of Assets has Increased by Approximately $9,646, 700fi0om the Prior Valuation. The Rate of Return on Investments on a Fair Value of Assets Basis for the Fund was Approximately 17.45% Net of Administrative Expense. The Rate of Return on Investments shown above has been determined as a percent of the average of the prior and current Fair Value of Assets on the Statement of Changes in Assets. The Return on Investments is net of Other Expenses, and has been excluded from the Total Fair Value of Assets at the end of the Fiscal Year for this calculation. m West Chicago Police Pension Fund Page 17 ===== PDF PAGE 30 ===== VALUATION OF FUND ASSETS FAIR VALUE OF ASSETS (GAIN)/LOSS Current Year (Gain)/Loss on Fair Value of Assets Total Fair Value of Assets - Prior Valuation $ 51,194,879 Employer and Member Contributions 4,087,497 Benefit Payments and Refunds (3,433,382) The Actual Return Expected Return on Investments 3,348,926 on Investments on a Expected Total Fair Value of Assets - Current Valuation 55,197,920 Fair Value of Actual Total Fair Value of Assets - Current Valuation 60,841,603 Assets Basis was _— Greater than Current Fair Value of Assets (Gain)/Loss $ (5,643,683) Expected for the Current Year. Expected Return on Investments $ 3,348,926 Actual Return on Investments (Net of Expenses) 8,992,609 Current Fair Value of Assets (Gain)/Loss $ (5,643,683 The (Gain)/Loss on the current Fair Value of Assets has been determined based on the Expected Rate of Return on Investments as shown in the Actuarial Assumptions section of this report. West Chicago Police Pension Fund | A Page 18 ===== PDF PAGE 31 ===== VALUATION OF FUND ASSETS DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS Total Fair Value of Assets - Current Valuation $ 60,841,603 Adjustment for Prior (Gains)/Losses Full Amount Deferral FYE 12/31/2025 $ (5,643,683) (4,514,946) FYE 12/31/2024 (1,287,266) (772,360) FYE 12/31/2023 (2,711,290) (1,084,516) FYE 12/31/2022 9,726,608 1,636,424 Total Deferred (Gain)/Loss (4,735,398) Initial Actuarial Value of Assets - Current Valuation $ 56,106,205 Less Contributions for the Current Year and Interest - Adjustment for the Corridor - Total Actuarial Value of Assets - Current Valuation $56,106,205 The Actuarial Value of Assets is Equal to the Fair Value of Assets with Unanticipated (Gains)/Losses Recognized Over 5 Years. The Actuarial Value of Assets is 92.22% of the Fair Value of Assets. ACTUARIAL VALUE OF ASSETS (GAIN)/LOSS Total Actuarial Value of Assets - Prior Valuation $ 51,496,367 Plus - Employer Contributions 3,567,300 Plus - Member Contributions 520,197 Plus - Return on Investments 4,013,857 Less - Benefit Payments (3,417,343) Less - Refunds & Transfers (16,039) Less - Other Expenses (74,173) Total Actuarial Value of Assets - Current Valuation $ 56,106,205 The Rate of Returnon Investments on an i Actuarial Valueof | Assets Basis for the Fund was ! Approximately 7.60% Net of Administrative Expense. fae Mery eee es ee The Actuarial Value of Assets incorporates portions of gains and losses over multiple years. West Chicago Police Pension Fund Page 19 ===== PDF PAGE 32 ===== VALUATION OF FUND ASSETS SSS SS a a ee HISTORICAL ASSET PERFORMANCE The chart below shows the historical Rates of Return on Investments for both Fair Value of Assets and Actuarial Value of Assets. Fair Value Actuarial Value of Assets of Assets FYE 12/31/2025 17.45% 7.60% FYE 12/31/2024 9.28% 6.24% FYE 12/31/2023 13.28% 6.77% FYE 12/31/2022 (14.75%) 1.47% FYE 12/31/2021 10.36% 9.90% FYE 12/31/2020 13.68% 9.16% FYE 12/31/2019 17.44% 6.87% FYE 12/31/2018 (4.04%) 4.47% FYE 12/31/2017 11.57% 5.82% FYE 12/31/2016 7.35% 3.92% FYE 12/31/2015 4.50% 1.90% 11-Year Arithmetic Average 7.83% 5.83% 11-Year Geometric Average 7.40% 5.80% The historical Rates of Return on Investments shown above were calculated based on the annual Return on Investments, as a percentage of the average value of the assets for the year. The historical Rates of Return on Investments shown above may not reflect the current investment allocation of the Pension Fund. For purposes of determining the average value of assets for the year, the ending Fair Value of Assets has been adjusted to net out to the portion related to the Return on Investments themselves. All other cash flows are included. For purposes of determining the annual Return on Investments we have adjusted the figures shown on the preceding pages. The figures shown on the preceding pages are net of Investment Expenses. We have made an additional adjustment to net out Administrative Expenses. Netting out Administrative Expenses allows us to capture returns for the year that can be used to make benefit payments as part of the ongoing actuarial process. ; West Chicago Police Pension Fund LA ™ ° ===== PDF PAGE 33 ===== VALUATION OF FUND ASSETS The adjustments we made are for actuarial reporting purposes only. By netting out Administrative Expenses and capturing Return on Investments that are available to pay benefits, it provides us a comparison to the Expected Rate of Return on Investments, but does not provide a figure that would be consistent with the rates of return that are determined by other parties. Therefore, this calculated Return on Investments should not be used to analyze investment performance of the Fund or the performance of the investment professionals. m West Chicago Police Pension Fund Page 21 ===== PDF PAGE 34 ===== VALUATION OF FUND ASSETS Expected Rate of Return on Investments Assumption The Expected Rate of Return on Investments for this valuation is 6.50%. Lauterbach & Amen, LLP does not provide investment advice. We look at a variety of factors when reviewing the Expected Rate of Return on Investments assumption selected by the client. These factors include: historical Rates of Return on Investments, capital market projections performed by the Consolidated Board’s investment advisors, the Consolidated Board’s investment policy, capital market forward-looking benchmark expected returns by independent investment companies, rates used by comparable pension systems, and other factors identified in the Actuarial Standards of Practice. Generally speaking, the ideal assumption for Expected Rate of Return on Investments is one that has a 50% chance of being met over the long-term. Recently, we have observed the following factors that impact Expected Rate of Return on Investments: e Volatility in the market has been high which drags down long-term geometric returns. e Similar pension systems are looking to reduce future expectations. We generally see about 95% of similar pension systems using an Expected Rate of Return on Investments that is between 6.25% and 7.50%. e We have reviewed studies conducted by Firms who gather information from multiple investment advisors who provide models and opinions on capital market returns. Those studies help guide us to see if the assumption is expected to have a 50% chance of being met over the long-term. Plans are generally aiming towards 40" to 60" percentile returns, which can help define a range of reasonableness. Specific information regarding the 40" to 60" percentile returns was not available, so we reviewed the 25" to 75" percentile returns. e When developing the assumption for the Expected Rate of Return on Investments, consideration should be given to the composition of the Plan’s assets. In particular, the proportion of assets held in invested vehicles versus balances maintained as locally held cash can materially influence the overall return expectation. For plans that maintain a substantial level of locally held cash - typically earning minimal or short-term interest rates - a lower Expected Rate of Return on Investments may be warranted to appropriately reflect the reduced earnings potential of those assets. West Chicago Police Pension Fund ===== PDF PAGE 35 ===== VALUATION OF FUND ASSETS If actual returns going forward come in less than expected, the pension system risks deferring contributions to the future that should be made today and creating additional contribution volatility. Below is a chart detailing the impact on the Recommended Contribution by decreasing or increasing the Expected Rate of Return on Investments by 25 basis points: 0.25% Decrease (6.25%) Recommended Contribution $4,096,344 Current Expected Rate of Return on Investments (6.50%) $3,804,137 0.25% Increase (6.75%) $3,522,614 Currently, the client has selected an Expected Rate of Return assumption that falls within a reasonable range. We recommend the client review the Expected Rate of Return on Investments annually to ensure the selected rate remains within a reasonable range as market conditions change year-to-year. "Investment Risk" is the potential that the actual Return on Investments will be different from what is expected. The selected Expected Rate of Return on Investments assumption is chosen to be a long-term assumption, producing a return that, on average, would produce a stable rate of return over a long-term horizon. Actual investment returns in the short-term may deviate from this long-term assumption due to current market conditions. Furthermore, establishing the Expected Rate of Return on Investments assumption may be dependent on the Illinois State Statutes pertaining to the limitations on types of investments Plan Sponsors may use. If the actual annual rates ofreturn are less than the Expected Rate of Return on Investments, actuarial losses will be produced, thus increasing the Plan's Unfunded Liability and, subsequently, future Recommended Contributions. "Asset/Liability Mismatch" risk is a similar concept as Investment Risk, as it relates to setting the Expected Rate of Return on Investments assumption compared to the actual Return on Investments achieved. The Interest Rate used to discount future Plan liabilities is set equal to the Expected Rate of Return on Investments. It is expected that the selected Interest Rate be a rate that is reasonably expected to be achieved over the long-term. To the extent that the selected Interest Rate to value Plan liabilities is unreasonable, or significantly different than the actual Return on Investments earned over an extended period of time, additional Interest Rate risk is created. For example, determining Plan liabilities at an Interest Rate higher than what is expected to be achieved through investment returns results in Unfunded Liability that is not a true representation of the Plan's condition and Percent Funded. As a result, the Actuarial Accrued Liability determined is an amount smaller than the liability that would be produced with an Interest Rate more indicative of future Expected Rate of Return on Investments. Therefore, the Recommended Contributions under the established Funding Policy may not be sufficient to appropriately meet the true pension obligations. [fl West Chicago Police Pension Fund Page 23 ===== PDF PAGE 36 ===== RECOMMENDED CONTRIBUTION DETAIL Actuarial Accrued Liability Funded Status Development of the Employer Normal Cost Normal Cost as a Percentage of Expected Payroll Recommended Contribution Breakdown Schedule of Amortization — New Unfunded Actuarial Accrued Liability Schedule of Amortization — Total Unfunded Actuarial Accrued Liability Actuarial Methods — Recommended Contribution ===== PDF PAGE 37 ===== RECOMMENDED CONTRIBUTION DETAIL ACTUARIAL ACCRUED LIABILITY Prior Current Valuation Valuation Active Members $24,197,511 24,579,772 The Total Actuarial , Accrued Liability Inactive Members has Increased hb Terminated Members 1,550,520 1,646,256 j y Retired Members 44,150,230 46,612,976 Approximately Disabled Members 3,673,657 4,929,352 $4,093,800 from the Other Beneficiaries 2,717,300 2,614,617 Prior Valuation. Total Inactive Members 52.091,707 $5,803,201 = Total Actuarial Accrued Liability $ 76,289,218 80,382,973 FUNDED STATUS Prior Current Valuation Valuation Total Actuarial Accrued Liability $ 76,289,218 80,382,973 The Percent Funded |! Total Actuarial Value of Assets 51,496,367 56,106,205 as of the Actuarial | eT —_ Valuation Dateis | Actuari iabili é af nfunded Actuarial Accrued Liability $ 24,792,851 24,276,768 Subject to Volatility H Total Fair Value of Assets $ 51,194,879 60,841,603 on Assets and | ; Sif Liability in the } ercent unde — Short-Term. H Actuarial Value of Assets 67.50% 69.80% SSS Fair Value of Assets 67.11% 75.69% West Chicago Police Pension Fund Page 25 ===== PDF PAGE 38 ===== RECOMMENDED CONTRIBUTION DETAIL = SSS SS SE EE eS eS Se DEVELOPMENT OF THE EMPLOYER NORMAL COST Prior Current Valuation Valuation Ata l00% Total Normal Cost $ 1,390,965 $1,381,251 Funding Level, the Normal Cost Estimated Member Contributions (521,493) (522,130) Co ntri b ution is Employer Normal Cost $ 869,472 $ 859,121 Still Required. NORMAL COST AS A PERCENTAGE OF EXPECTED PAYROLL Prior Current Valuation Valuation Expected Payroll $ 5,341,216 $5,347,747 Ideally, the Employer Member Normal Cost Rate 9.910% 9.910% Normal Cost Employer Normal Cost Rate 16.13% 15.92% Rate will Remain Stable. Total Normal Cost Rate 26.04% 25.83% RECOMMENDED CONTRIBUTION BREAKDOWN Prior Current Valuation Valuation The Employer Normal Cost* $ 925,988 $ 914,964 R econ ended Contribution has Amortization of Unfunded Accrued Incr eased by Liability/(Surplus) 2,751,269 2,889,173 z. 4 5% from t he Prior Valuation. Recommended Contribution’ $ 3,677,257 $ 3,804,137 *Employer Normal Cost Contribution includes interest through the end of the Fiscal Year. “There is a Transition Plan between the Pension Board and the City, as noted in the Actuarial Funding Policies section of this report. The Transition Contribution for the current valuation is $3,804,137 West Chicago Police Pension Fund LA “ ° ===== PDF PAGE 39 ===== RECOMMENDED CONTRIBUTION DETAIL SCHEDULE OF AMORTIZATION — NEW UNFUNDED ACTUARIAL ACCRUED LIABILITY Below is the schedule of remaining amortization balances for the new Unfunded Liability incurred in the current year. Initial Date Current Years Unfunded Liability Base Balance Established Balance Remaining Payment Investment (Gain)/Loss $ (574,562) 12/31/2025 $ (574,562) 15 $ (51,011) Actuarial (Gain)/Loss 1,326,292 12/31/2025 1,326,292 15 117,751 Contribution Experience $ (128,077) 12/31/2025 $ (128,077) 15 $ (11,371) Total g 623,653 § 623,653 55,369 The Actuarial (Gain)/Loss can be attributable to several factors including, but not limited to, demographic changes, Employer Contribution timing, Member Contribution experience, benefit payment experience, and salary increase experience compared to expectation. West Chicago Police Pension Fund A Page 27 ===== PDF PAGE 40 ===== RECOMMENDED CONTRIBUTION DETAIL SCHEDULE OF AMORTIZATION — TOTAL UNFUNDED ACTUARIAL ACCRUED LIABILITY Below is the schedule of remaining amortization balances for the Unfunded Liability incurred in the current and prior years. Initial Date Current Years Unfunded Liability Base Balance Established Balance Remaining Payment FYE 12/31/2025 $ 623,653 12/31/2025 $ 623,653 15 $ 55,369 FYE 12/31/2024 884,326 12/31/2024 863,293 14 80,868 FYE 12/31/2023 1,314,142 12/31/2023 1,246,103 13 123,777 FYE 12/31/2022 3,607,119 12/31/2022 3,302,930 12 349,944 FYE 12/31/2021 (3,831,319) 12/31/2021 (3,364,562) 11 (382,846) FYE 12/31/2020 (115,359) — 12/31/2020 (96,358) 10 (11,873) FYE 12/31/2019 2,054,496 12/31/2019 1,682,686 10 207,329 FYE 12/31/2018 622,428 12/31/2018 503,172 10 61,997 FYE 12/31/2017 $24,375,431 12/31/2017 _$ 19,515,851 10 $ 2,404,608 Total $29,534,917 4,276.7 g 2,889,173 For additional details regarding the Unfunded Liability Base established each year, please refer to the Actuarial Funding Report for the corresponding year. The equivalent single amortization period based on the layered amortization of Unfunded Liability is 10.42 years for the current valuation. West Chicago Police Pension Fund ===== PDF PAGE 41 ===== RECOMMENDED CONTRIBUTION DETAIL ACTUARIAL METHODS - RECOMMENDED CONTRIBUTION Actuarial Valuation Date January 1, 2026 Data Collection Date December 31, 2025 Actuarial Cost Method Entry Age Normal (Level% Pay) Amo1tization Method Level% Pay (Closed) Amortization Target Layered Targeting 100% Funded - See Previous Page Asset Valuation Method 5-Year Smoothed Fair Value The above methods constitute a sound Actuarially Determined Contribution under the parameters of Actuarial Standards of Practice. The contributions and benefit values of the Pension Fund are calculated by applying actuarial assumptions to the benefit provisions and demographic data furnished, using the Actuarial Cost Method described. The Actuarial Cost and Amortization Methods allocate the projected obligations of the Plan over the working lifetimes of the Plan Members. The Recommended Contribution amount shown in this report is based on the methods summarized above. The Actuarial Funding Policies section of this report includes a more detailed description of the Actuarial Funding Methods being used. The Actuarial Funding Methods are meant to provide a systematic process for determining contributions on an annual basis. The methods do not impact the expectation of future benefit payments. The methods only impact the way contributions are made towards future benefit payments. Different Actuarial Funding Methods may achieve funding goals with differing levels of success. Certain methods are more efficient and more stable on an annual basis. In the current valuation, the Plan Sponsor has elected to use a 10% corridor in the determination of the Actuarial Value of Assets for both the Recommended and Alternative Contributions. In the event that the Actuarial Value of Assets exceeds 110% of the Fair Value of Assets or falls below 90% of the Fair Value of Assets, the excess gains or losses will be recognized immediately. m West Chicago Police Pension Fund Page 29 ===== PDF PAGE 42 ===== ALTERNATIVE CONTRIBUTION Alternative Contribution Funded Status — Alternative Contribution Actuarial Methods — Alternative Contribution ===== PDF PAGE 43 ===== ALTERNATIVE CONTRIBUTION ALTERNATIVE CONTRIBUTION Prior Valuation Alternative Contribution $2,326,811 Expected Payroll $5,341,216 Alternative Contribution as a 43.56% Percent of Expected Payroll FUNDED STATUS -ALTERNATIVE CONTRIBUTION Prior Valuation Norrnal Cost $1,242,645 Fair Value of Assets $51,194,879 Actuarial Value of Assets $51,496,367 Actuarial Accrued Liability $77,711,403 Unfunded Actuarial Accrued Liability/(Surplus) $26,215,036 Percent Funded Actuarial Value of Assets 66.27% Fair Value of Assets 65.88% m Current Valuation $2,331,254 $5,347,747 43.59% Current Valuation $1,253,534 $60,841,603 $56, I 06,205 $81,767,243 $25,661,038 68.62% 74.41% West Chicago Police Pension Fund Page 31 ===== PDF PAGE 44 ===== ALTERNATIVE CONTRIBUTION The Alternative Contribution is based on Actuarial Funding Methods and funding parameters outlined in the Illinois State Statutes for pension funding. The resulting contribution is lower than the Recommended Contribution for the current year. The Alternative Contribution amount is not recommended because it represents only a deferral of contributions when compared to the Recommended Contribution method. Actuarial Funding Methods for pensions are best applied to provide a balance between the long-term goals of a variety of stakeholders: 1. Members — the Members are interested in benefit security and having the funds available to pay benefits when retired 2. Employers — cost control and cost stability over the long-term 3. Taxpayers — paying for the services they are receiving from active Members The Alternative Contribution methods are not intended to provide a better system in any of the above categories long-term. The parameters are not recommended for a long-term funding strategy. The funding methods and parameters put into place in the Illinois State Statutes in 2011 were intended to provide short-term budget relief for Employer Contributions. An Employer using the parameters outlined in the Illinois State Statutes for current funding should view the contributions as short-term relief. Our recommendation in this situation is for a Pension Fund and an Employer to work towards a long-term funding strategy that better achieves the long-term funding goals, over a period that does not exceed 3-5 years. The Securities and Exchange Commission in 2013 used the phrase “Statutory Underfunding” to describe situations where contributions appear to be more manageable in the short-term, but set up future Recommended Contributions that are less likely to be manageable. West Chicago Police Pension Fund LA “ * ===== PDF PAGE 45 ===== ALTERNATIVE CONTRIBUTION ACTUARIAL METHODS — ALTERNATIVE CONTRIBUTION Actuarial Valuation Date January 1, 2026 Data Collection Date December 31, 2025 Actuarial Cost Method Projected Unit Credit Amortization Method Level % Pay (Closed) Amortization Target 90% Funded Over 15 Years Asset Valuation Method 5-Year Smoothed Fair Value The contribution and benefit values of the Pension Fund are calculated by applying actuarial assumptions to the benefit provisions and demographic data furnished, using the Actuarial Cost Method described. The Actuarial Cost and Amortization methods allocate the projected obligations of the Plan over the working lifetimes of the Plan Members. The Actuarial Funding Methods are meant to provide a systematic process for determining contributions on an annual basis. The methods do not impact the expectation of future benefit payments. The methods only impact the way contributions are made towards future benefit payments. Different Actuarial Funding Methods may achieve funding goals with differing levels of success. Certain methods are more efficient and more stable on an annual basis. The guidelines in the Illinois State Statutes for pension funding are silent on the use of a corridor on the Fair Value of Assets in determination of the Actuarial Value of Assets. In the current valuation, the Plan Sponsor has elected to use a 10% corridor in the determination of the Actuarial Value of Assets for both the Alternative Contribution and the Recommended Contribution. In the event that the Actuarial Value of Assets exceeds 110% of the Fair Value of Assets or falls below 90% of the Fair Value of Assets, the excess gains or losses will be recognized immediately. West Chicago Police Pension Fund | A Page 33 ===== PDF PAGE 46 ===== ACTUARIAL VALUATION DATA Active Members Inactive Members Summary of Monthly Benefit Payments Age and Service Distribution ===== PDF PAGE 47 ===== ACTUARIAL VALUATION DATA ACTIVE MEMBERS Prior Valuation Tier I 20 Tier II 26 Total Active Members 46 Total Payroll $ 5,262,282 INACTIVE MEMBERS Prior Valuation Terminated Members 16 Retired Members 29 Disabled Members 5 Other Beneficiaries 7 Total Inactive Members 57 SUMMARY OF MONTHLY BENEFIT PAYMENTS Prior Valuation Retired Members $ 222,154 Disabled Members 15,513 Other Beneficiaries 29,443 Total Inactive Members $ 267,110 m Current Valuation 18 26 44 $ 5,268,716 $ $ Current Valuation 16 30 7 59 Current Valuation 237,884 20,656 29,443 287,983 West Chicago Police Pension Fund Page 35 ===== PDF PAGE 48 ===== ACTUARIAL VALUATION DATA = Se a a ee AGE AND SERVICE DISTRIBUTION 1/1/2026 Age and Service Distribution - Tier 1[Tier 2 Active Members Service Under 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & up Total Age Under 25 25 to 29 03 0/3 30 to 34 Ol 08 06 — Oji O|11 35 to 39 03 02 Of 016 40 to 44 02 «14 310 416 45 to 49 ee ee a ee a a i? 50 to 54 20 | 310 510 55 to 59 i} 0 10 | 2/0 60 to 64 | 65 to 69 70 & up ee ee ee eee Total Ol 09» -Ol0s‘16 8|0 510 4\0 18|26 West Chicago Police Pension Fund TA _ ° ===== PDF PAGE 49 ===== ACTUARIAL FUNDING POLICIES Actuarial Cost Method Financing Unfunded Actuarial Accrued Liability Transition Plan Actuarial Value of Assets ===== PDF PAGE 50 ===== ACTUARIAL FUNDING POLICIES ACTUARIAL COST METHOD The Actuarial Cost Method allocates the projected obligations of the Plan over the working lifetimes of the Plan Members. In accordance with the Pension Fund’s Funding Policy, the Actuarial Cost Method for the Recommended Contribution basis is Entry Age Normal (Level Percent of Pay). The Entry Age Normal Cost Method is a method under which the Actuarial Present Value of the projected benefits of each individual included in an Actuarial Valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age. The portion of this Actuarial Present Value allocated to a valuation year is called Normal Cost. The portion of the Actuarial Present Value not provided at an Actuarial Valuation Date by the Actuarial Present Value of future Normal Costs is called the Actuarial Accrued Liability. The Entry Age Normal method attempts to create a level cost pattern. In contrast to other Actuarial Cost Methods which inherently lead to uneven or less predictable cost patterns, the Entry Age Normal method is generally understood to be less risky in terms of contribution stability from year to year. The Conference of Consulting Actuaries Public Plans Community produced a “white paper” detailing Funding Policy model practices for public sector pension plans. Under the Level Cost Actuarial Methodology (“LCAM”), one of the principal elements to a Funding Policy is the Actuarial Cost Method. When deciding which Actuarial Cost Method to use, several objectives may be considered, such as the following: e Each Member’s benefit should be funded under a reasonable allocation method by the expected retirement date e Pay-related benefit costs should reflect anticipated pay at retirement e The expected cost of each year of service (i.e. Normal Cost) for each active Member should be reasonably related to the expected cost of that Member’s benefit e The Member’s Normal Cost should emerge as a level percent of Member compensation e No gains or losses should occur if all assumptions are met. Following these criteria, the use of the Entry Age Normal Cost Method (Level Percent of Pay) is a model practice. FINANCING UNFUNDED ACTUARIAL ACCRUED LIABILITY The Unfunded Actuarial Accrued Liability may be amortized over a period either in level dollar amounts or as a level percentage of payroll. When amortizing the Unfunded Actuarial Accrued Liability as a level percentage of payroll, additional risk is incurred since the amortization payments in the early years of the payment period may not be large enough to cover the interest accrued on the existing Unfunded Liability. As a result, the Unfunded Liability West Chicago Police Pension Fund TA ms . ===== PDF PAGE 51 ===== ACTUARIAL FUNDING POLICIES may increase initially, before the amortization payments grow large enough to cover all interest accruals. Generally speaking, the Plan Sponsor will be required to contribute a larger total contribution amount over the course of the funding period under a level percentage of payroll basis as compared to a level dollar payroll schedule. The Government Finance Officers Association notes that best practices in public pension finance include utilizing amortization periods that do not exceed 20 years. Longer amortization periods elevate the risk of failing to reduce any Unfunded Liability. For example, when the amortization payment in full only covers interest on the Unfunded Liability, but does not reduce the existing Unfunded Liability, the required contribution will increase in future years. A second principal element under the Level Cost Actuarial Methodology described above is to establish an Amortization Policy that determines the length of time and the structure of the increase or decrease in contributions required to systematically fund the Unfunded Actuarial Accrued Liability. When deciding on the Amortization Policy, several objectives may be considered, such as the following: e Variations in the source of liability changes (i.e. gains or losses, Plan changes, assumption changes) should be funded over periods consistent with an appropriate balance between the policy objectives of demographic matching and volatility management e The cost changes in Unfunded Actuarial Accrued Liability should emerge as a level percentage of Member compensation The LCAM model practices for the Amortization Policy include the following: Layered fixed period amortization by source Level percent of pay amortization An amortization period ranging from 15-20 years for experience gains or losses An amortization period of 15-25 years for assumption changes In accordance with the Pension Fund’s Funding Policy for the Recommended Contribution, the Unfunded Actuarial Accrued Liability is amortized by level percent of payroll contributions to a 100% funding target over a layered amortization period of 15 years. See the Actuarial Methods — Recommended Contribution section of this report for more detail. The equivalent single amortization period based on the layered amortization of Unfunded Liability is 10.42 years for the current valuation. We believe that the amortization period is appropriate for the purpose of this valuation. West Chicago Police Pension Fund ===== PDF PAGE 52 ===== ACTUARIAL FUNDING POLICIES TRANSITION PLAN Starting with the January 1, 2022 Actuarial Valuation, the Pension Board and the City have agreed to a five-year transitional funding period. During the transition period, the payment towards the new Unfunded Liability related to assumption changes as of the January 1, 2022 Actuarial Valuation is being transitioned in over five years. The first four years of payments will be a phase-in (i.e. 1/5, 2/5) of the full payment that will be paid starting in year five. The current results shown throughout the report reflect the output smoothing parameters described in the Output Smoothing section of this report. The client has elected to make this change to the Funding Policy to smooth out volatility of the contribution. We believe the contribution maintains a reasonable relationship to the Actuarially Determined Contribution. All future volatility will be included in future contributions. West Chicago Police Pension Fund LA “ . ===== PDF PAGE 53 ===== ACTUARIAL FUNDING POLICIES ACTUARIAL VALUE OF ASSETS The Pension Fund is an ongoing plan. The Employer wishes to smooth the effect of volatility in the Fair Value of Assets on the annual contribution. Therefore, the Actuarial Value of Assets is equal to the Fair Value of Assets with unanticipated gains/losses recognized over a five-year period. The Asset Valuation Method is intended to create an Actuarial Value of Assets that remains reasonable in relation to the Fair Value of Assets over time. The method produces results that can fall either above or below the Fair Value of Assets. The period of recognition is short. It is intended that the period of recognition is short enough to keep the Actuarial Value of Assets within a decent range of the Fair Value of Assets. In the event that the Actuarial Value of Assets exceeds or falls below a I 0% corridor of the Fair Value of Assets, the additional gain or loss will be recognized immediately. m West Chicago Police Pension Fund Page 41 ===== PDF PAGE 54 ===== ACTUARIAL ASSUMPTIONS Nature of Actuarial Calculations Selection of Actuarial Assumptions Actuarial Assumptions in the Valuation Process Assessment of Risk Exposures Limitations of Risk Analysis Assessment and Use of Actuarial Models Actuarial Assumptions Utilized ===== PDF PAGE 55 ===== ACTUARIAL ASSUMPTIONS NATURE OF ACTUARIAL CALCULATIONS The results documented in this report are estimates based on data that may be imperfect and on assumptions about future events. Certain Plan Provisions may be approximated or deemed immaterial, and, therefore, are not valued. Assumptions may be made about demographic data or other factors. Reasonable efforts were made in this valuation to ensure that significant items in the context of the Actuarial Accrued Liability or costs are treated appropriately, and not excluded or included inappropriately. Actual future experience will differ from the assumptions used in the calculations. As these differences arise, the expense for accounting purposes will be adjusted in future valuations to reflect such actual experience. A range of results different from those presented in this report could be considered reasonable. The numbers are not rounded, but this is for convenience only and should not imply precision which is not inherent in actuarial calculations. SELECTION OF ACTUARIAL ASSUMPTIONS Actuaries and other service providers provide guidance to their clients in the selection of assumptions used in the Actuarial Valuation based on their industry-specific training and experience. The Actuaries' expertise is used in the determination of demographic assumptions as it relates to future expectations of Plan demographic activity, such as mortality, termination, and retirement rates. The selection of economic assumptions, such as Expected Rate of Return on Investments or the assumed inflation rate, is more subjective. Investment advisors and other services providers utilize their expertise and knowledge of capital markets to model future expectations. Some assumptions may have an influence on other assumptions. The role of the Actuary in the selection of the economic assumptions is to review available market information including historical economic information and forward-looking capital market projections from investment professionals and to assess whether or not sufficient backup exists to deem the assumption reasonable. The selection of economic assumptions is the responsibility of the client. For example, the inflation rate (an economic assumption) may directly correlate to the active member salary increase assumption (a demographic assumption). Once all demographic and economic assumptions have been determined, the Actuary will create various sets of assumptions which take into account the proposed assumptions individually and in the aggregate. The client will then make the final decision of which assumption set to use. m West Chicago Police Pension Fund Page 43 ===== PDF PAGE 56 ===== ACTUARIAL ASSUMPTIONS ACTUARIAL ASSUMPTIONS IN THE VALUATION PROCESS The contributions and benefit values of the Pension Fund are calculated by applying actuarial assumptions to the benefit provisions and demographic data furnished, using the Actuarial Cost Method described in the Actuarial Funding Policies section of this report. The principal areas of financial risk which require assumptions about future experience are: = Expected Rate of Return on Investments = Patterns of Pay Increases for Members = Rates of Mortality Among Active and Inactive Members = Rates of Termination Among Active Members = Rates of Disability Among Active Members = Age Patterns of Actual Retirements Actual experience of the Pension Fund will not coincide exactly with assumed experience. Each valuation provides a complete recalculation of assumed future experience and takes into account all past differences between assumed and actual experience. The result is a continual series of adjustments to the computed Recommended Contribution. Details behind the selection of the actuarial assumptions can be found in the Actuarial Assumption Summary document provided to the client upon request. The client has reviewed and approved the assumptions as a reasonable expectation of the future anticipated experience under the Plan. West Chicago Police Pension Fund TA “ . ===== PDF PAGE 57 ===== ACTUARIAL ASSUMPTIONS ASSESSMENT OF RISK EXPOSURES From time to time it becomes appropriate to modify one or more of the assumptions, to reflect experience trends (but not random year-to-year fluctuations). In addition, Actuarial Standards of Practice require that the Actuary minimally perform a qualitative assessment of key financial and demographic risks as part of the risk assessment process with each annual Actuarial Valuation. The risk assessments we perform include, but are not limited to, the following: • Periodic demographic experience studies every 3 to 5 years to confirm the ongoing appropriateness of actuarial assumptions • Highlight the impact of demographic experience over the past year, as well as other sources of change and volatility in the Actuarial Recommended Contribution -Reconciliation section of this report • Detail year-over-year changes in contribution levels, assets, liabilities, and Funded Status in the Recommended Contribution and Funded Status sections in the Management Summary section of this report • Review any material changes in the demographic data as summarized in the Actuarial Valuation Data section of this report • Provide and discuss the Actuarial Assumption Summary document highlighting the rationale for each key assumption chosen by the client • Identify potential Cash Flow Risk by highlighting expected benefit payments over the next 5-year and 10-year periods in the Asset Growth section in the Management Summary section of this report • Describe the impact of any assumption, method, or policy change in the Management Summary section of this report • Utilize supplemental information, such as the GASB Discount Rate sensitivity disclosures to understand, for example, what impact an alternative Expected Rate of Return on Investments assumption might have on the estimation of Actuarial Accrued Liability and Funded Status • Utilize supplemental information, such as the GASB solvency test, to better understand the Cash Flow Risk and long-term sustainability of the Plan LIMIT A TIO NS OF RISK ANALYSIS Since future experience may never be precisely as assumed, the process of selecting funding methods and actuarial assumptions may inherently create risk and volatility of results. A more detailed evaluation of the above risk exposures is beyond the scope and nature of the annual Actuarial Valuation process. For example, scenario tests, sensitivity tests, stress tests, and/or stochastic modeling for multi-year projections to assess the impact of alternative assumptions and methods, or modeling future experience different from the assumptions in these results, are not included in this Actuarial Valuation. The West Chicago Police Pension Fund and/or the City of West Chicago, Illinois should contact the Actuary if they desire a more detailed assessment of any of these forward-looking risk exposures. m West Chicago Police Pension Fund Page 45