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 in effect at hire, without reduction, until retirement. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. and Terms of Service apply. The law is aimed at easing shortfalls in Illinois local public safety pensions by merging more than $16 billion in assets from the 650 retirement plans into two funds, one for police and one for firefighters. On December 18th, 2019, Governor Pritzker officially signed Public Act 101-0610 into law, which then took effect on January 1st, 2020. 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. There, the plaintiff joined the pension fund in 1969. The Illinois Police Officers' Pension Fund Investment Board is now accepting resumes and RFP's for the following positions: Executive Director General Legal Counsel Administrative Services Please visit this link https://bit.ly/2vXYd8R for the full job description and details on RFP's. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. Rock Island Alderman Mark Poulos, Ward 6, has been appointed as a temporary trustee to the Illinois Police Officers' Pension Investment Fund by Gov. J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . The three main parts of the pension benefit formula are illustrated below. 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 2023 Asset International, Inc. All Rights Reserved. Youre invited to comment at JaneTheActuary.com! 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. Maybe thats because state lawmakers take a problem they arent sure exists, apply a solution they dont know will work and never determine the cost. There were several matters about the operation of the legislature and governor that have been knocked around that this court was, I believe, was wisely waiting for some guidance and was provided none.. 1970, art. Once the trial court issues its ruling, the case will likely be appealed by the losing party. In the task force report, the cost is estimated at $70 million to $95 million over five years, or $14 million to $19 million per year, but there is no supporting documentation for the estimate. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. The report, prepared by Chicago-based Anderson Economic. 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. The IPOPIF team will remain diligent in our interactions with local police plans to assist them in transferring funds to the IPOPIF consolidated fund.. H.R. We are already showing savings and increased earning ability, proving the benefit that was predicted and is needed by this consolidation, said league Executive Director Brian Cole. Three dozen current employees and retirees, along with 18 local retirement plans, filed a lawsuit in February in Illinois circuit court saying the consolidation violates the state. ; Justices Susan Hutchinson and Ann Jorgensen concurred. Since then, the Firefighters Pension Investment Fund (FPIF) and the Illinois Police Officers Pension Investment Fund (IPOPIF) have geared up to receive those investment funds and go to work. The enhancements to Tier 2 benefits for employees hired after 2011 were part of a bill to consolidate the states roughly 650 public safety pension funds into just two funds, one each for police and fire. 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. Lawsuit Challenges Pension Asset Consolidation by John E. Motylinski 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. J.B. Pritzker. The law is aimed at easing shortfalls in Illinois local public safety pensions by merging more than $16 billion in assets from the 650 retirement plans into two funds, one for police and one for firefighters. The panel explained the amendment allows the Illinois Finance Authority to lend up to $7.5 million to each of the new statewide funds, and if borrowed, it would be repaid with interest. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. The Illinois Supreme Court may decide to review the case thereafter. The difference might be accounted for by the proposed change in the calculation of final average salary, which lowers the required multiplier under IRS rules. The local boards also did not have any say in the actual method of funding; contribution requirements were set in the Pension Code.. Ill. Const. The move is intended to help improve the financial stability of the pension funds and ease pressure on local governments to raise taxes to fund those pensions. 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].) Consolidation: Attorney Mancini . The task force report said the following changes were intended to address concerns about the fairness of Tier 2 and to avoid running afoul of IRS regulations: The first change, involving benefits paid to surviving spouses, is not expected to affect many individuals and reportedly holds great significance for first responders. As Rich Miller writes in the Chicago Sun-Times, enhancing survivor benefits has been part of the political agenda for police and fire unions since long before consolidation became a topic of discussion. The statement was not read and no action was taken during the convention to include language allowing a reasonable power of legislative modification (p 21 - 22). https://ift.tt/xkdXGS1 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.The losing side will appeal, so the case will likely end up before the Illinois Supreme Court, but next month's decision will impact the course of a consolidation process Made possible by a generous grant from the That could be a boost for communities being squeezed by pension costs. When Gov. White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. However, many of the local pension leaders remain hesitant or are even refusing to merge until they learn the outcome of litigation to block Pritzkers law. B. Pritzker, who signed the bill into law. While consolidation cuts down on duplicative administrative costs and pools investment assets for larger returns, downstate police and fire pension debt is only about5%of total state obligations. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 Court Rejects Legal Challenge to Illinois Pension Consolidation, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, Pension Risk Transfers: What to Watch Out For, Kentucky Retirement System Trustees Say It Is Not Subject to State's Anti-ESG Law, Sequoia Capital, Thoma Bravo, Paradigm Sued for Touting FTX, Ohio STRS Loses 9.52% in 2022, Board Rejects Neville Vote of Confidence. The plaintiffs dropped their motion to certify class status. (The other is New York.) comeback The plan has modest fiscal goals. 802 South 2nd Street | Springfield, IL 62704 Illinois Federation of Teachers, AFT, AFL-CIO vs. Lindberg, 60 Ill.2d 266 (1975) 3 Felt vs. Board of Trustees, 107 Ill.2d 158 (1985) 5 Schroeder vs. Morton Grove Police Pension Board, 219 Ill. App.3d 697 (1991) 7 McNamee vs. State of Illinois, 173 Ill.2d 433 (1996) 9 The People ex rel. See, e.g., Report of the Illinois Public Employees Pension Laws Commission of 1949, 10 (1949) (revenues allocated to pension funds have not kept pace 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. Pritzker is certainly overselling the benefits, calling the move a huge bipartisan step, which is concerning given Illinois politicians long history of ignoring the root cause of the pension crisis. 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 /. Unfortunately, we know there is no political will, on the part of those currently in power. Worth Police Pension Fund 7112 W. 111th Street Worth, IL 60482 . In Illinois, there is a rich body of law concerning interference with pension rights and benefits. Municipalities have until July 1 to transfer all assets from their locally managed pension funds . The Illinois Police Officer's Pension Investment Fund told lawmakers during a committee hearing that some individual funds have resisted transferring their assets because of a pending lawsuit challenging the constitutionality of the 2019 consolidation law. Trustee Moehrlin made a motion to table the resolutions to appoint an authorized representative to the new Illinois Police Officers Pension investment fund and Trustee Orta seconded the motion. In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and fire pensions to consolidate their funds into two . On appeal, the plaintiffs argued Judge Villa erred by finding the amendment didnt violate the state constitutions pension protection clause. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. 2) Increase pensionable salary cap. The fund said it has $6.9 billion in assets under management. 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. The other two changes are designed, at least in part, to address the safe harbor concerns. 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. 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. 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%. In fact, the text cites multiple attempts to provide some alternate language to the constitutions blanket statement, which did not succeed: We note, moreover, that after the drafters of the 1970 Constitution initially approved the pension protection clause, a proposal was submitted to Delegate Green by the chairperson of the Illinois Public Employees Pension Laws Commission, an organization established by the General Assembly to, inter alia, offer recommendations regarding the impact of proposed pension legislation. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. 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. Illinois Supreme Court Justices all stand before, swearing in ceremonies for Justice Lloyd Karmeier as the chief justice of the Illinois Supreme Court Monday, Oct. 31, 2016, in Springfield, Ill. (AP Photo/Seth Perlman), Chicago Mayor Lori Lightfoots vaguely worded statements, Illinois 1970 constitution is one of only in two in the nation, overturned the legislation in a 2015 decision. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. In addition, the 1970 constitution, and its drafters, cared not in the least for pension funding, only that the benefits are paid out to retirees; and the legislature, in its 2013 benefits-reduction legislation, was not making the case that it could not pay benefits which were due, but that the burden placed on the state budget of prefunding those benefits was too great. Lawmakers justified the changes by pointing to potential violations of a provision of federal law known as safe harbor. The Internal Revenue Code requires state and local government employees to either receive Social Security or be part of a retirement system that is at least as generous. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. These pensions are primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities core services. They argued the consolidation would strip them of the right to elect local pension board members and for those local boards to control and invest money. An Illinois Circuit Court judge has denied a lawsuit that 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. Protected by Google ReCAPTCHA. Chicago Office | Illinois Policy One concern is that these benefit enhancements were not truly necessary, but were used as a political bargaining chip to convince police and fire unions to support the legislation. The firefighters fund is further along in the consolidation process and expects to meet the deadline. Opinions expressed by Forbes Contributors are their own. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. This includes 2,826 general purpose governments and 6,097 special purpose governments During a series of State appropriations hearings held by the Illinois General Assembly in both the House and Senate this spring, State agency leaders discussed their budget requests included in Governor Pritzkers We welcome any questions and feedback about the content of this blog. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. If funds who delayed their transfer wish to transfer after the May 20 court ruling, we will accommodate them as we are able, White said. A pension consolidation task force Thursday released a report that recommends the state combine roughly 650 suburban and Downstate police and fire pension funds to try to increase efficiency and lower costs while also increasing pension benefits. 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. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. The State of Illinois, Tier 2 workers receive annual benefit increases upon retirement of 3% or one-half of the rise in the Consumer Price Index (CPI), whichever is less, on a simple-interest basis. Yesterday, Illinois Gov. State law restricts the securities that the existing police and fire funds are allowed to hold. Terms & Conditions | Privacy Policy J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. . The Plaintiffs have 30 days to appeal the decision. 2019 consolidation legislation. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. Challenging the amendment directly, plaintiffs also argued it violates the state constitutions takings clause regarding public use of private property. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. We held in that case that the clause means precisely what it says: if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the States pension or retirement systems, it cannot be diminished or impaired (p. 14). Police Officers' Pension Investment Fund. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. Patrick Andriesen, Illinois Policy Institute, Woman sues Granite City QuickTrip over parking lot slip, fall, Madison County civil docket Feb. 27-Mar. The case of Buddell v. Board of Trustees, State University Retirement System of Illinois, 118 Ill. 2d 99, 101 (1987) is a prime example of such an improper legislative diminution of pension benefits. Police and fire pension costs for DeKalb, Illinois, use up about 20% of general fund revenue, up from 10% in 2014, city manager Bill Nicklas said in an interview. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). As the plaintiffs articulate one example, a retired-beneficiary participant previously had the benefit of a 2.1% vote (1 out of 47) for the one beneficiary selected member of his pension fund, and thus, effectively a 0.43% say regarding the Boards selection of an investment manager or advisor. 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