Illinois' consolidation of suburban and downstate police firefighter pension fund assets cleared a second legal hurdle but it could take a decision from the Illinois Supreme Court to clear the path for full participation in the plan. The Illinois Police Officers' Retirement Investment Fund told lawmakers at a committee hearing that some individual funds resisted transferring their assets due to ongoing litigation challenging the constitutionality of the law. Municipalities have until July 1 to transfer all assets from their locally managed pension funds . This decision recapped not merely the 2013 decision, but included more extensive commentary on Illinois pensions, citing, for example, 1917 and 1957 reports characterizing state and local pension plans as in a condition of insolvency, and a 1969 overall funded status of 41.8%. These pensions are primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities core services. I dont think many of us trust the government of Illinois to handle our money given their history, said Jim Kayes, president of the DeKalb Police Pension Fund board, which is among the plaintiffs. Opinions expressed by Forbes Contributors are their own. . An Illinois Circuit Court judge refused a trial which sought to stop the consolidation of the state's 650 fire and police pension funds, rejecting the plaintiff's claims that a law enacting the decision violated the state constitution.. In other words, the key words that the Court emphasizes are diminished or impaired, not enforceable contractual relationship.. The task force also noted that these estimated costs are minor compared to increases in investment returns projected to be earned by the consolidated funds compared with the 649 existing police and fire funds. In October the Governors pension consolidation task force recommended three changes in Tier 2 benefits for downstate and suburban police and fire funds, all of which were incorporated into Senate Bill 616. Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. Consolidation Lawsuit Update . State law restricts the securities that the existing police and fire funds are allowed to hold. J.B. Pritzker signed a bill to consolidate local police and firefighter pensions from across downstate Illinois, but beneficiaries are suing because the state is notorious for poor pension management. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. While Pritzker said the measure would cut costs and improve returns for recipients, three dozen current employees and retirees, along with 18 local retirement plans, filed the lawsuit in February. This committee has developed an enviable record in exposing and investigating fraud as some of the largest companies in this country, including Enron and WorldCom. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. This is via the pension protection clause, Article XIII, General Provisions, Section 5, Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.. Grayslake Police Pension Fund 10 South Seymour Ave, Grayslake IL 60030-0906 DOI Pension Fund Number POO9600 . B. Pritzker, Lawsuit, Pension Consolidation, Robert Villa, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 /. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. B. Pritzker, who signed the bill into law. Tier 2 employees are subject to a pensionable salary cap that began at $106,800 and has grown since 2011 at half of inflation or 3% per year, whichever is less. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). Illinois Dec 29, 2021. The legislation also incorporates another task force recommendation that has attracted far less attention: a proposal to enhance benefits paid to police and fire pension fund members hired after 2010. Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. Failure to comply with IRS rules could result in a significant taxpayer cost if local governments were forced to make retroactive contributions to Social Security, a concern noted by Pritzkers task force on pension consolidation. 1970, art. Illinois plans to consolidate its 650 police and fire pension funds in the suburbs and downstate. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. To the extent that growth in the pensionable salary cap is an issue, it remains to be seen whether Senate Bill 616 solves the problem. . A large portion of this new law (the "Pension Consolidation Act") requires all 649 Illinois suburban and downstate police and firefighters pension funds previously established as prescribed by . Up to now, neither the Governors task force nor supporters of Senate Bill 616 have publicly provided actuarial reviews showing the cost of the Tier 2 changes for the affected police and fire funds. The new Police Officers Pension Investment Fund sought legislation during the spring session to push off the deadline by a year but it stalled. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. If successful, the lawsuits outcome would apply to every downstate police and firefighter pension fund in Illinois. Protected by Google ReCAPTCHA. "The Illinois Police Officer's Pension Investment Fund is pleased that the Illinois Appellate Court . Since Tier 2 applies to nearly all pension funds across the State, there could be a move to simply apply the same changes to all funds statewide, also without first determining whether the changes are the minimum necessary so as not to impose additional fiscal hardship on already struggling governments. Although Judge Robert Villa writes in the ruling that the consolidation undeniably diminished the weight of each individuals board member vote, he also holds that traditional voting rights claims are not at issue. Illinois Pension Consolidation Act. 3, Motorist sues over crash with vehicle stolen from East St. Louis store, Wrongful death suit alleges resident at Alton nursing home received negligent care, Insurer seeks to deny coverage of suit alleging crash evidence was destroyed, Don't assume more funding makes schools better, Illinois torched business and common sense with its biometric privacy law, Illinois forward 2024: A sustainable state budget plan, Illinois tries to 'cancel' DeSantis as Pritzker, Chicago mayoral contenders play the de-platforming game. An Illinois Circuit Court judge hasdenied a lawsuitthat sought to stop the consolidation of the states 650 firefighter and police officer pension funds, rejecting the plaintiffs claims that a law enacting the move violated the states constitution. 994 108th Congress (2003-2004). Brian Granato Mike Pritchard, Sr. . However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. The state judge overseeing the constitutional challenge of Illinois effort to consolidate suburban Chicago and downstate police pension fund assets will render a decision May 20. If Tier 2 benefits do not meet the safe harbor tests, either the benefits might have to be increased or employees might have to pay 6.2% of their salary to Social Security, matched by an equal employer contribution. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. . document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. A group of police funds last year sued to block the implementation arguing the . The other two changes are designed, at least in part, to address the safe harbor concerns. "The Illinois Police Officers Pension Investment Fund (IPOPIF) is pleased that the court has indicated a date on which a written ruling will be issued. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . It recommended that additional introductory language be added specifying that the rights conferred thereunder were [s]ubject to the authority of the General Assembly to enact reasonable modifications in employee rates of contribution, minimum service requirements and the provisions pertaining to the fiscal soundness of the retirement systems.. The firefighters consolidation had more widespread support among funds when the 2019 legislation was being debated while some police funds and pension associations opposed it. and Terms of Service apply. On December 18, 2019, Illinois Governor JB Pritzker signed into law Public Act 101-0610, which provided for the mandatory consolidation of the investment assets of the State's public safety pension funds into two consolidated investment funds - one for police pension funds (Article 3 Funds) and one for firefighter pension funds (Article 4 Funds), Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. While the governors task force publicly stated the enhancements would cost $14 million to $19 million more per year, this number was not backed up by any public data or methodology to justify it. The health of some individual funds, however, are far weaker with ratios only in the teens. The plaintiffs claimed that they had a contractual and enforceable right to exclusively manage and control their investment expenditures and income, including interest dividends, capital gains and other distributions on investments, which they said the consolidation infringed upon. Copyright 2022 The Civic Federation Illinois is home to the nation's worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. In the recent case challenging the consolidation, the plaintiffs follow the example of Buddell by maintaining that Public Act 101-0610 has similarly deprived their vested pension benefits. Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. Over time, the reduced benefits are expected to slow the growth in unfunded liabilities as new employees are hired and fewer members remain in the old benefit tier. However, choosing who invests funds does not guarantee a particular outcome for benefit payments. Amid the worst pension crisis in the nation, lawmakers voted in bipartisan fashion to improve pension benefits for downstate police officers and firefighters without performing the necessary financial analysis to estimate the cost. 992, H.R. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. The Court also rejected the use of the states police power to reduce pensions, that is, the notion that the greater need to provide basic services could justify reducing pensions, noting that other provisions in the constitution included wording qualifying the promises made as subject to affordability, but that the pension protection wording was absolute. The plaintiffs also argued the consolidation impaired their benefits because it required the local funds to pay up to $15 million, plus interest, to transition, operate and administer the new funds. Illinois lawmakers pass pension sweeteners without knowing the cost, cost $14 million to $19 million more per year. The quotation referencing $15 million plus interest is misleading, at best.. Governor JB Pritzker, too, has claimed that theres nothing to be done except to find more money, and Chicago Mayor Lori Lightfoots vaguely worded statements about the matter dont amount to anything more, either. The consolidation of downstate police and fire pension fund investment assets continues in earnest. The local funds are already required to pay the costs of administration of the local funds, and plaintiffs do not cite any evidence to show that the costs of administration of the new funds, even including startup costs, would be any greater, McLaren wrote. Therefore, legislation that diminishes these benefits will usually be struck down. 802 South 2nd Street | Springfield, IL 62704 A recent report commissioned by the Illinois Public Pension Fund Association, which opposes consolidation, underscores that point. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. Sklodowski vs. The only real way to fix the pension crisis once and for all and strike a balance between protecting taxpayers, retirees and vulnerable Illinoisans who rely on government services is with a constitutional amendment to allow for structural pension reform. J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. On appeal, the plaintiffs argued Judge Villa erred by finding the amendment didnt violate the state constitutions pension protection clause. The Civic Federation urges the Governors Office and sponsors of Senate Bill 616 to demonstrate the need for the specific Tier 2 enhancements in the legislation. The 22-page complaint alleges the consolidation violates three provisions of the Illinois Constitution: (1) the Pension Protection Clause; (2) the Contracts Clause; and (3) the Takings Clause. The increases are designed to fix a legal issue related to these relatively low Tier 2 benefits, but so far little information has been made available about the long-term cost of the proposed solution or the urgency of implementing the changes. When Gov. Shortly thereafter, a member of the Pension Laws Commission sent a follow-up letter to Delegate Green requesting that he read a statement into the convention record expressing the view that the new provision should not be interpreted as reflecting an intent to withdraw from the legislature the authority to make reasonable adjustments or modifications in respect to employee and employer rates of contribution, qualifying service and benefit conditions, and other changes designed to assure the financial stability of pension and retirement funds and that [i]f the provision is interpreted to preclude any legislative changes which may in some incidental way diminish or impair pension benefits it would unnecessarily interfere with a desirable measure of legislative discretion to adopt necessary amendments occasioned by changing economic conditions or other sound reasons. . In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposesone for police and one for firefighters. JB Pritzker signed Senate Bill 1000, which amended the Illinois Pension Code to create the Police Officers' Pension Investment Fund and the Firefighters' Pension Investment Fund, built through the consolidation of more than 650 otherwise independent downstate and suburban funds. The Civic Federations recently released Inventory of Local Governments in Illinois report identified a total of 8,923 units of local government in Illinois. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. A husband or wife of a deceased police officer or firefighter will now be eligible for two-thirds of the deceaseds accrued pension benefits, regardless of how long the person worked before their death. This is clearly a faster rate than the current formula of the lesser of 3% of one-half of the inflation rate, but it does not match the national average wage index used to calculate growth in the Social Security wage base. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 Illinois Gov. This is not a part of some grand principle, but tossed in as a miscellaneous item among the text of the oath of office, the authorization of state funding of public transportation, and the requirement of a supermajority for the authorization of branch banking by the General Assembly. Mayor Lori Lightfoot says she will run for second term. House Committee Meeting Hide Overview . J.B. Pritzker announced his support for a plan for the state to combine roughly 650 suburban and Downstate police and fire pension funds last month, the Illinois Fraternal Order of . The funded health of the public safety pension funds has tumbled over the years. 802 South 2nd Street | Springfield, IL 62704 As a refresher, Illinois' 1970 constitution is one of only in two in the nation which explicitly guarantee that state and local employees have a right to pension benefits based on the formula. The two sides last year laid out arguments seeking a summary judgment. The General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. This plan falls far short of eliminating even the $11 billion of debt held by these plans. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. In 2019, the Illinois General Assembly passed Public Act 101-0610, which required downstate police and firefighter local pension funds assets to be consolidated into statewide funds for investment purposes. . However, it should be noted that these increased returns are not guaranteed. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. | Illinoiscourts.gov. J.B. Pritzker announced a plan to consolidate pension funds for suburban and downstate police officers and firefighters at the State of Illinois Building in Chicago on Oct. 10, 2019. Heres the key text: The pension protection clause clearly states: [m]embership in any pension or retirement system of the State *** shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired. (Emphasis added [in the decision text].) Kane County Circuit Court Judge Robert Villa granted summary judgement to the state, prompting an appeal to the Illinois Second District Appellate Court. PABF's authority, duty, and responsibility is governed by state statute and administered by the Retirement Board of Trustees ("The Board") in compliance with Act 5 of the Illinois Pension Code.The Fund was first created in 1887 through an act of the Illinois legislature. Protected by Google ReCAPTCHA. The decision asserts, in short, that the delegates knew full well that pensions were not properly funded, and intentionally made the choice to guarantee pensions by means of obliging future generations to pay, no matter what, rather than funding them as they are accrued. H.R. The lawsuit said the law violated the state's pension protection clause, the contracts clause and the takings clause of the Illinois Constitution by terminating "plaintiffs' authority to. Elected officials never sought formal guidance from the Internal Revenue Service. He projected the consolidation could yield an extra $2.5 billion in investment returns over five years after the law took effect Jan. 1, 2020. Appointment of DOI Security Administrator: . 2) Increase pensionable salary cap. A limit was also imposed on the amount of earnings used to calculate final average salary. The Firefighters Pension Investment Fund applauded the court ruling, saying in a statement that it will continue to implement the transition process, which is required to be completed by June 30. The state's pension consolidation task force reported doing so could earn the funds an extra $2.5 billion altogether over the next five years. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . The ruling states that voting is not currently a benefit under the pension clause of the state constitution, pointing out that the courts have yet to hold that the right to vote for pension fund board members falls within the protections of the Pension Clause. It also rules that the takings clause claim cant be tied to real property as required under Illinois law. Illinois police, firefighters push back on state control of pensions, In DeKalb, police and fire pension costs use up about, In Peoria, Mayor Rita Ali recently called on state leaders to fix pension costs on which the city will. I usually do not take this long to enter rulings on a case even of this size and with this sort of consequence, Kane County Circuit Court Judge Robert K. Villa said at a Monday hearing. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. Meanwhile, the asset consolidation process is proceeding. The fund said it has $6.9 billion in assets under management. The Newsletter Bringing the Legal System to Light. t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy The pension problem: Illinois Quad-Cities turn to borrowing to pay down unfunded pension liability Cities across Illinois are scrambling to find ways to stockpile the money they'll need to. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. The wage base is adjusted each year by the change in the national average wage index. Will be used in accordance with our terms of service & privacy policy. In general, the main Tier 2 benefit changes were an increase in the retirement age to qualify for full benefits and a reduction in annual automatic benefit increases. More than $13. However, as pointed out by the Civic Federation, lawmakers never definitively established that a safe harbor violation existed for Tier 2 public safety workers, nor that the changes in this bill were the minimum necessary to bring the plans into compliance. 2021 CH 55 . of the board members. Its all, I suppose, a trick of assuming that there is a singular People of Illinois who, through their ratification of the constitution, promised to pay future benefits when they come due, rather than recognizing that the People of 1970 (presumably quite unknowingly) restricted future generations of Illinoisians by forcing them to make these payments without limitation. The plaintiffs are seeking to certify the lawsuit as a class action. In fact, the Court even proposed that a reamortization schedule would have been sufficient to avoid a funding burden (p. 20) that is, rejecting the notion that there is any particular urgency to funding pension liabilities at any particular level at any particular point in time. Working together, we are helping hundreds of cities across the state of Illinois to alleviate their spiraling property tax burdens, and just as importantly, were showing that Illinois can tackle its most intractable problems," Pritzker said at the time. Although the panel agreed the protection clause covers more than just the payment of pension money, it said past Illinois Supreme Court rulings invoking the clause involved benefits that directly impacted the participants eventual pension benefit, McLaren wrote. J.B. Pritzker won legislative approval in November 2019to require the more than 600 local government police and firefighter funds with the exception of Chicago to transfer their assets to a single consolidated police fund and a single fire fund by July 1. Senate Bill 616 would consolidate the assets of Illinois 649 public safety funds, not including those in Chicago, into two new funds, one for police and one for fire. By cutting down on duplicative administrative costs and. The consolidation of Illinois' suburban and downstate police pension fund assets has picked up speed since a May court ruling upholding the law's constitutionality, but a pending appeal. florida department of corrections staff housing, difference between 1840 and 1860 cavalry saber, patrick colon texas, Is pleased that the existing police and firefighter pension funds from across Illinois under state management by mid-2022 lawmakers pension. 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