Recently, the Firefighter Pension Investment Fund of Illinois ("FPIF") started the first wave of transfers from firefighters' pension funds on October 1, 2021, despite pending litigation. 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%. The consolidation of downstate police and fire pension fund investment assets continues in earnest. The State of Illinois, This is a much narrower claim than some have made, including Gov. 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. J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. 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. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. Chicago Office | Illinois Policy 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. With the changes in the bill just enacted, the cap would grow at full inflation instead. Nathan Woodside/Lewis & Clark Community College. A group of police funds last year sued to block the implementation arguing the . The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. That could be a boost for communities being squeezed by pension costs. 2021 CH 55 . 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. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. A court ruling as soon as December will determine the fate of a 2019 law Gov. manager" with respect to a pension fund or retirement system established under this Code if the person: (1) is a fiduciary appointed by the board of trustees of the pension fund or retirement system in accordance with Section 1-109.1; (2) has the power to manage, acquire, or dispose of any asset of the retirement system or pension fund; There are no allegations or evidence presented that plaintiffs currently drawing their pension benefit have suffered a present or will suffer a future loss in benefit payment, Villa writes in his decision. The Civic Federations recently released Inventory of Local Governments in Illinois report identified a total of 8,923 units of local government in Illinois. 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. But it seems about time for a deep dive into a narrow question: what did the Illinois Supreme Court have to say about pensions? The legislation raises the formula to the lesser of full CPI or 3%. The multiplier is the percentage of final average salary earned per year of service. Senate Bill 616 reinstates the Tier 1 benefit for these surviving spouses. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. 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 802 South 2nd Street | Springfield, IL 62704 Appointment of DOI Security Administrator: . Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. Discovery shareholder, having accepted . 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. When Gov. If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. Illinois Second District Appellate Justice Robert McLaren About a month ago, Gov. 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. Ill. Const. Illinois is home to thenations worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. This site is protected by reCAPTCHA and the Google Privacy Policy 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. State law restricts the securities that the existing police and fire funds are allowed to hold. 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. 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. . With the litigation pending, many police funds have held off on moving their assets and the courts decision will come just a month ahead of the deadline, although funds dont face any punitive actions for missing the deadline. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. 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. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. . Public Safety Pension Infographic. The firefighters fund is further along in the consolidation process and expects to meet the deadline. The police funds ended 2019 at 54.98% and firefighters were at 54.35%. B. Pritzker, who signed the bill into law. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. Dec 29, 2021. In Illinois most public employees, including teachers and public safety workers (but excluding most members of the State Employees Retirement System), do not have to pay into Social Security. . starts here. . Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. Copyright 2022 The Civic Federation 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. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. The case is expected to be resolved in the circuit court on initial motions. Litigation. Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. A History of Pension Enactments. comeback 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. 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. 3) Increase final average salary. story Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. 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. 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. The Newsletter Bringing the Legal System to Light. "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. 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. 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. 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. 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. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 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. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. The Social Security wage base is the maximum amount of salary subject to Social Security tax. The People ex rel. The plaintiffs are seeking to certify the lawsuit as a class action. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. Tier 2 members of the Teachers Retirement System, which covers public school teachers outside of Chicago, pay9% of their salary for pension benefits, the same as Tier 1 members. 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. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. 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. The quotation referencing $15 million plus interest is misleading, at best.. If the legislation is upheld, the police funds are expected to move forward with the transfer process during the appeal. 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. DeGette. As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. But being able to vote for board members, or have a local board control investments, he added, is not of the same nature and essentiality as the ability to participate in the fund, accumulate credited time, or receive health care, disability and life insurance coverage. There, the plaintiff joined the pension fund in 1969. 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. 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. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. Illinois Police Officers' Pension Investment Fund; . The step is now being considered by the General Assembly following recommendations in October 2019 by Governor J.B. Pritzkers task force on pension consolidation. These pensions are primarily funded through the states second-highest in the nation property taxes, diverting taxpayer dollars from improving cities core services. However, each of these claims revolve around the same general premise. Illinois Pension Consolidation Act. The Illinois Supreme Court may decide to review the case thereafter. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 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. 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. Gov. This plan falls far short of eliminating even the $11 billion of debt held by these plans. The new Police Officers Pension Investment Fund sought legislation during the spring session to push off the deadline by a year but it stalled. Simply put, plaintiffs do not own the funds that the Act requires to be transferred to the new statewide police and firefighter pension investment funds. The local boards were entrusted with investing the contributions so that payments could be made to participants. Rather, the Illinois Supreme Court says that the constitution-writers intentionally gave pensions an elevated level of protection beyond what the U.S. Constitution requires via this clause. Made possible by a generous grant from the 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. Gov. 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. 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. Consolidation Lawsuit Update . comeback 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. 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 /. 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. The report, prepared by Chicago-based Anderson Economic. The Illinois Police Officers' Pension Investment Fund told lawmakers during a committee hearing that some individual funds have resisted moving their assets because of pending litigation. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. 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].) To date, 32 plans have transferred assets totaling more than $660 million to the IPOPIF with an additional 16funds scheduled to transfer funds May 2 which would bring the total to more than $1 billion. The league stated it is confident it will beat the legal challenge. 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 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. Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. Suburban and Downstate Police and Fire In Illinois, the vast majority (649) of the existing 664 pension plans are for police and fire personnel employed by municipalities outside of the City of Chicago.3 These plans are commonly referred to as "suburban and downstate" police and fire pension plans. Illinois plans to consolidate its 650 police and fire pension funds in the suburbs and downstate. Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. . The salary cap under Tier 2 and the Social Security wage base were the same in 2011$106,800but the Tier 2 cap for 2019 is $114,952, while the Social Security wage base is $132,900. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . v. Governor Jay Robert "J.B." Pritzker, et al. Illinois' Fraternal Order of Police is among the groups opposed to the idea. Brian Granato Mike Pritchard, Sr. . According to The Wrap, a lawsuit was filed in New York last week on behalf of the Collinsville Police Pension Board, which is an Illinois-based Warner Bros. 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. The creation of two new consolidated pension funds in Illinois is providing plan executives with a rare opportunity to build defined benefit plan investment programs from scratch. 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. 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. XIII, 5. Protected by Google ReCAPTCHA. 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. Required fields are marked *. Benefits for new workers were not protected by a provision of the Illinois Constitution that bans impairment of pension benefits for existing Tier 1 retirement system members. 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. No analysis of the benefit increases was performed by a professional actuary, the specialized financial analysts who estimate pension costs. For Tier 1 public safety workers hired before 2011, surviving spouses were already eligible to receive a portion of the deceaseds pension regardless of how many years of service an employee had. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. Although some union leaders supported the move, dozens of police and firefighter pension boards and individual members sued the state and the new funds to stop the consolidation. 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. 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. In December 2019, Gov. The health of some individual funds, however, are far weaker with ratios only in the teens. 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. The wage base is adjusted each year by the change in the national average wage index. When Tier 2 was created, public attention was focused on rectifying Illinois worst-in-the-nation pension crisis and assisting local pension funds in distress. 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. J.B. 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