They are seeking to maintain local control over pension management. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. . Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. 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. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. Illinois Second District Appellate Justice Robert McLaren 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. 1970, art. 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. However, the cost of the Tier 2 benefit in FY2019 was 7.1% of salary, compared with 21.6% for Tier 1 benefits. A court ruling as soon as December will determine the fate of a 2019 law Gov. 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 Our website provides a portal to the web based Annual Statement Filing System and gives you easy access to a variety of information regarding your pension benefits. Ultimately, the combination of unknown costs for the benefit increases and uncertain savings from consolidation means taxpayers should be wary of any potential benefits of this bill. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. Some pension experts warned as early as 2010 that the new benefit structure was so low that it might force certain government employees to participate in the Social Security system. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. The State of Illinois, B. Pritzker, who signed the bill into law. On December 18th, 2019, Governor Pritzker officially signed Public Act 101-0610 into law, which then took effect on January 1st, 2020. The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers. 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. The task force savings estimates of between $160 million and $288 million annually are almost certainly too optimistic. Made possible by a generous grant from the 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. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811. 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. 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. In Illinois, there is a rich body of law concerning interference with pension rights and benefits. The state constitutions pension clause bars any diminishment or impairment of promised benefits. The health of some individual funds, however, are far weaker with ratios only in the teens. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. J.B Pritzker is expected to sign the legislation. Kane Co. Case No. t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy 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. Please e-mail[emailprotected]with your query. The league stated it is confident it will beat the legal challenge. 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. XIII, 5. 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. 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. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. Yesterday, Illinois Gov. The plaintiffs claim 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 the consolidation has infringed upon. 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. January 21, 2020. JB Pritzker's task force released its report proposing consolidation of the states' police and fire pension funds, which at present are managed individually by the . . Youre invited to comment at JaneTheActuary.com! Gov. 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. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. of the board members. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. Further updates will be provided as they become available. 2019 consolidation legislation. 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. Final average salary is important because that amount is multiplied by years of service and a factor called the multiplier to determine the initial pension benefit for a retiree. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. That could be a boost for communities being squeezed by pension costs. 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 lawsuit. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. 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. Illinois Police Officers' Pension Investment Fund; . Will be used in accordance with our terms of service & privacy policy. 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. 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. 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. 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 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. . 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. B. Pritzker, who signed the bill into law. The Newsletter Bringing the Legal System to Light. Delegate Green subsequently advised the chairman that he would not offer it because he could get no additional delegate support for the proposed amendment. . Police Officers' Pension Investment Fund. The league stated it is confident it will beat the legal challenge. As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. B. Pritzker, who signed the bill into law. 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. 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. 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.. The legislation impairs the exclusivity and rights of the local funds to manage their funds locally and impairs and diminishes their ability to vote and to have their vote count, Daniel Konicek, of Konicek & Dillon which is representing the police funds, said in an interview. Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) The latest example involved pension buyouts, which were budgeted to reduce General Funds contributions by more than $400 million in FY2019 but ended up saving about $13 million that year. 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 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. No Reproduction Without Prior Authorizations. 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. On February 23, 2021, eighteen police and firefighter pension funds, as well as individual active and retired members of these funds, filed a complaint against Governor Pritzker, the two new consolidated pension investment funds, and others in the Kane County Circuit Court. . (The other is New York.) 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. 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%. 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. 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. . This site is protected by reCAPTCHA and the Google Privacy Policy 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. Chicago Office | Illinois Policy 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. and Terms of Service apply. Theres been confusion among the stakeholders over the litigations impact should the court overturn the legislation, which would also impact the firefighters fund. By: Matthew J. Schueler. . 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