J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. The plaintiffs are seeking to certify the lawsuit as a class action. Protected by Google ReCAPTCHA. ", Voting for the local board is, at best, ancillary to a participants receipt of the pension payment and other assets, McLaren continued. 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 State was able to book immediate savings on its statutorily required pension contributions, which depend on future benefit levels. Illinois Public Pensions Database. 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. For more than a decade, the Civic Federation has strongly supported consolidation of hundreds of police and fire department pension funds across Illinois to improve investment returns and reduce administrative costs. Illinois lawmakers pass pension sweeteners without knowing the cost, cost $14 million to $19 million more per year. J.B. Pritzker released a task force report calling for the consolidation of downstate municipal fire and police pension funds and called for quick action by On December 18th, 2019, Governor Pritzker officially signed Public Act 101-0610 into law, which then took effect on January 1st, 2020. Chicago Office | Illinois Policy 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. What the grassroots Illinoisians think about it is another question. 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. 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. While 98% of Illinois pension plans are for This is a much narrower claim than some have made, including Gov. . 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 Illinois Supreme Court ordered the consolidation of lawsuits filed by cannabis dispensary license applicants in an attempt to resolve multiple claims challenging the fairness of the licensing . Tier 2 applied to employees hired on or after January 1, 2011. Worth Police Pension Fund 7112 W. 111th Street Worth, IL 60482 . 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. 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.. . However, choosing who invests funds does not guarantee a particular outcome for benefit payments. 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. In other words, the key words that the Court emphasizes are diminished or impaired, not enforceable contractual relationship.. J.B. Pritzker. 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. However, [a]s a result of Public Act 101-0610, he will only have the benefit of a 1/8,830 vote (1 out of 8,830) for the one beneficiary-selected member of the nine-person Permanent Board of the Firefighters Pension Investment Fund, which equates to just a 0.0013% say regarding the Permanent Boards selection of an investment manager or advisor. The plaintiffs also claim that their vested benefits have been diminished because the consolidation law requires each downstate pension fund to ultimately bear all costs of transition, up to $15,000,000, plus interest.. "The Illinois Police Officer's Pension Investment Fund is pleased that the Illinois Appellate Court . In other words, lawmakers responded to a problem they had not confirmed existed with changes they had not confirmed would fix the problem, without knowing how much the changes would cost. The police and fire funds satisfy this test because of the relatively high multiplier of 2.5% that is applied to final average salary to determine the pension benefit. Consolidating scores of local firefighter and police pension funds could save Illinois taxpayers between $820 million and $2.5 billion in the next five years, according to a report published Thursday by a state task force that's been studying the issue since January. 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. 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. 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. The practical effect is that many employees will see a boost in their initial pension check on retirement, which serves as the basis for subsequent annual increases. Will be used in accordance with our terms of service & privacy policy. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . Chicago Office | Illinois Policy 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. The Social Security wage base is the maximum amount of salary subject to Social Security tax. In Peoria, Mayor Rita Ali recently called on state leaders to fix pension costs on which the city willnever catch up, not in our lifetimes.. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. 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 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 amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. A Tier 2 public safety employees final average salary, which serves as the basis for calculating monthly and annual pension payments at the end of a career, will now be based on the highest four out of the last five years rather than the highest eight of the last 10. A limit was also imposed on the amount of earnings used to calculate final average salary. 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. Unfortunately, we know there is no political will, on the part of those currently in power. January 21, 2020. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. The unfunded liabilities of Illinois suburban and downstate public safety pensionsrose to $13 billion in the last yearof compiled results reported to the state, soaring over a 29-year climb that underscores the deep strains on local government budgets. This site is protected by reCAPTCHA and the Google Privacy Policy Youre invited to comment at JaneTheActuary.com! Justice Robert McLaren wrote the panels opinion, issued Feb. 7; Justices Susan Hutchinson and Ann Jorgensen concurred. comeback Plaintiffs are individual active and retiree/beneficiaries of the local funds: they have no right to the investments held by the funds; rather, they are entitled only to present or future payments from the funds, McLaren wrote. 2019 consolidation legislation. Consolidation was also proposed in Pennsylvania in 2012 and 2018. The plan has modest fiscal goals. 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. Gov. "No matter the ruling, the case likely will be heard by the Illinois Supreme Court. The league stated it is confident it will beat the legal challenge. The fund said that approximately 90% of local firefighterpension funds have successfully completed the transition process so far, and that it is working with the remaining funds to do the same. 802 South 2nd Street | Springfield, IL 62704 and Terms of Service apply. Nathan Woodside/Lewis & Clark Community College. 1970, art. The constitution itself was ratified by vote of 57%, with a turnout of 37% of voters in a special election in December, which all makes it a bit insulting for the Court to proclaim that it was the People of Illinois who asserted their will in this manner.). That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. 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. 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. Even without class status, all funds would be impacted if the court overturns the legislation. Recently, however, the consolidation encountered its first legal challengea class action lawsuit claiming Public Act 101-0610 unconstitutional. This plan falls far short of eliminating even the $11 billion of debt held by these plans. Senate Bill 616 requires that contribution changes due to changes in actuarial assumptions be phased in over three years. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. The losing side will appeal, so the case will likely end up before the Illinois Supreme Court, but next months decision will impact the course of a consolidation process that is expected to miss a July 1 deadline. "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 addition, because the assumed rate of return is used as the discount rate for pension liabilities, an increase in the expected return rate by the consolidated funds would also reduce statutorily required annual pension contributions. . The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. To qualify for exemption from Social Security coverage, government workers must receive a retirement benefit from their public pension plan that is at least equal to the benefit they would receive under Social Security. These pensions are primarily funded through the states second-highest in the nation property taxes, diverting taxpayer dollars from improving cities core services. 2) Increase pensionable salary cap. 992, H.R. In 2019, the Illinois General Assemblypassed a billthat 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. 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. Illinois is home to the nations worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. 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. 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). With the changes in the bill just enacted, the cap would grow at full inflation instead. of the board members. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. Committee: House Education and the Workforce: Related Items: Patrick Andriesen, Illinois Policy Institute, Woman sues Granite City QuickTrip over parking lot slip, fall, Madison County civil docket Feb. 27-Mar. Total downstate police and fire pension debt is only about 5% of Illinois total public pension debt. J.B Pritzker is expected to sign the legislation. Pritzker lawsuit. 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 . 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. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. XIII, 5. At some point, even with the high multiplier, Tier 2 police and fire benefits might not meet the alternative IRS standards, but the analysis does not suggest the timing of any potential violation. 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 IPOPIF team will remain diligent in our interactions with local police plans to assist them in transferring funds to the IPOPIF consolidated fund.. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. Nicklas and some other city leaders are relived to see their pensions consolidated, noting the underfunded plans weigh on budgets and credit ratings, contributing to a slowed economic recovery from the pandemic. 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. 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. B. Pritzker, who signed the bill into law. InCarbondale, 290% of the citys property tax collections go to pensions. On June 25, 2021, the Defendants filed motions to dismiss the Plaintiffs amended complaint, and the court has given the Plaintiffs until August 4, 2021, to respond to these motions. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. Phone: 312-201-9066 | Email: [emailprotected] Further updates will be provided as they become available. The Newsletter Bringing the Legal System to Light. The People ex rel. 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. ; Justices Susan Hutchinson and Ann Jorgensen concurred. 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. The local boards also did not have any say in the actual method of funding; contribution requirements were set in the Pension Code.. These estimates came from comparisons to existing Illinois pension plans that are more consolidated, but these other plans also have different benefit formulas. 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.. The multiplier is the percentage of final average salary earned per year of service. It also represented one of the rare actions taken by the state to help local governments on the pension front. https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/, Daily Treasury Par Yield Curve Rates 28 Feb 2023, The Inflationary Effects of Sectoral Reallocation, Daily Treasury Par Yield Curve Rates 23 Feb 2023, On the Limitations of Dataset Balancing: The Lost Battle Against Spurious Correlations, Years of life lost to COVID-19 in 81 countries, Daily Treasury Par Yield Curve Rates 22 Feb 2023, Daily Treasury Par Yield Curve Rates 17 Feb 2023, Daily Treasury Par Yield Curve Rates 16 Feb 2023, CalPERS Refusal to Put Clearly Insolvent Long-Term Care Insurance Plan in Bankruptcy Increases Harm to Policyholders and Makes Board and Responsible Executives Liable. 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].) Problems include: Nicklas and some other city leaders are relived to see their pensions consolidated, noting the underfunded plans weigh on budgets and credit ratings, contributing to a slowed economic recovery from the pandemic. 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. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. The Illinois Supreme Court found that the plaintiff had a substantive and vested right to apply for military service credit because there was no limit on applying for such credit when he joined the pension fund. Terms & Conditions | Privacy Policy document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. Yes, it uses the language, technically true, that it was the people of Illinois who, in voting for the constitution, restricted the General Assembly from making any such changes, rather than acknowledging that those people were rather powerless to evaluate any such individual provision agreed to by the delegates drafting the constitution once it was put up for a vote. In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. 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. 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. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . The funded health of the public safety pension funds has tumbled over the years. By cutting down on duplicative administrative costs and. Copyright 2023 Asset International, Inc. All Rights Reserved. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. When Gov. . The quotation referencing $15 million plus interest is misleading, at best.. They are seeking to maintain local control over pension management. While benefits would continue to be managed by local boards, some police funds and their advocacy organizations resisted the change and a group ofpolice funds early last yearsued to block the implementation, arguing the mandated consolidation equates to a benefit cut. The health of some individual funds, however, are far weaker with ratios only in the teens. The fund said it has $6.9 billion in assets under management. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. The plaintiffs dropped their motion to certify class status. Illinois Police Officers' Pension Investment Fund Skip to Main Content ***IPOPIF Board has Elected New Officers*** Contact Newsletter About Actuarial Reports FOIA Governing Documents Trustee Election Meetings Reports Resources RFP & Recruitments Investment Reports Blue Line Mugshots Staff Directory Investments 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. As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. House Committee Meeting Hide Overview . 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. 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). 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. Illinois Gov. The two sides last year laid out arguments seeking a summary judgment. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. 3) Increase final average salary. 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. Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) From this, the Illinois Supreme Court has held that public employees have an inviolable contractual right to their vested pension benefits, which cannot be diminished or impaired. The firefighters fund is further along in the consolidation process and expects to meet the deadline. Appointment of DOI Security Administrator: . 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