History and Founding of the CTA Retiree Health Care Trust
Legislation passed by the Illinois General Assembly in January 2008 authorized the establishment of the CTA
Retiree Health Care Trust (RHCT, or the Trust). The primary responsibility of the CTA RHCT is to provide and
administer health care benefits for CTA retirees and their dependents and survivors.
This document provides background information on why and how the Trust was formed and describes how the
Trust will work. It also summarizes decisions that have been made, either by the Illinois legislature or the
Trustees of the CTA RHCT, that will affect current and future retirement health care benefits for CTA retirees,
their dependents, and survivors.
The financial challenges facing the Retirement Plan for Chicago Transit Authority Employees (the Retirement
Plan) have been well publicized. At the end of 2006, the CTA Retirement Plan was only 30% funded, which
means it could cover only 30% of future expenses, including both pension payments and health care costs.
Health care costs were also expected to increase significantly.
Historically, the retiree health care plans offered by the CTA were very generous compared to similar plans
offered by other public and private employers. The plans were free for retirees, with a fixed premium rate for
dependent coverage regardless of the number of dependents covered. This is very uncommon. When combined
with rising health care costs, these plan features meant that the Retirement Plan would have to pay a larger
portion of future health care expenses if no changes were made to either the plan design or the payment
Previous Legislative Changes
To address the financial challenges facing the CTA's retirement program, the Illinois legislature passed two laws
in 2006 and 2008. These laws are summarized below.
Public Act (PA) 94-839 (June 6, 2006): This Act required the CTA to separate the funding for retiree health care
benefits from the funding for pension payments by January 1,2009.
Public Act (PA) 95-708 (January 18,2008): This Act amended Section 22-1018 of the Illinois Pension Code and
Section 3-2.3(a)(7) of the IL State Auditing Act to include the following:
- The CTA Retiree Health Care Trust (RHCT) must be established as an independent entity to provide health
care benefits to CTA retirees, their dependents, and survivors. The Trust must be managed by a Board of
Trustees comprised of three union representatives, three representatives appointed by the CTA, and a
professional fiduciary appointed by the RTA. The RHCT was expected to assume responsibility for retiree
health care benefits some time after January 1,2009 but not later than July 1,2009.
- To be eligible for retiree health care coverage, a CIA employee must be at least 55 years old and have at
least 10 continuous years of service if he/she retires after January 18,2008 (note: the implementation of
this change has been, and continues to be, delayed by court order).
- Once the RHCT assumed financial responsibility for retiree health care (no later than July 1, 2009), the
retiree health care benefit program could not offer any plan that includes coinsurance levels higher than
90% coverage for in-network services or 70% coverage for out-of-network services (after a deductible has
- The retiree health care benefit program must be reviewed annually to determine if there are sufficient funds
to cover its future obligations. If current funds are insufficient, then contribution increases (i.e., increased
premiums) and/or benefit decreases (i.e., reduced coverage) must be implemented to eliminate the
shortfall within ten years.
- The total contributions received from participants (i.e., retirees, dependents, and survivors) taken together
cannot exceed 45% of total RHCT expenses in the prior plan year.
- Active employees will be required to contribute at least 3% of their salary to the RHCT effective January 1,
Establishing the CTA Retiree Health Care Trust
The CTA RHCT was established in May 2008. The Trust was initially funded with approximately $529 million
received from the CTA's issuance of pension obligation bonds. It also receives income from the following
- Retiree/dependent/survivor premium contributions. Historically, retirees only paid medical care premiums
for their dependents (approximately 20% of the total cost), and their survivors paid premiums if they
continued coverage after a retiree's death. Retirees also paid a portion of the premium cost for dental
coverage for themselves and their dependents. Beginning July 1, 2009, the RHCT will begin collecting
premium contributions from retirees for their coverage as well.
- Payroll deductions from active CTA employees. Beginning January 1, 2008, all active CTA employees have a
percentage (currently 3%) of their gross salary deducted from their paychecks.
- Investment returns. The Trust Fund balance will be invested, and the income from those investments (net of
losses and expenses), will be returned to the Fund.
The CTA RHCT will assume full responsibility for the funding, payment and administration of health care benefits
for CTA retirees, their dependents, and survivors no later than July 1, 2009.
The Trustees of the CTA RHCT are committed to providing the best possible benefits to CTA retirees and their
families while protecting the Fund's assets.