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. But consolidation is a small step for a tiny portion of Illinois pension problem. Click here to read the full issue brief. 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. Governor's Pension Consolidation Feasibility Task Force Report. 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. Illinois Police Officers' Pension Investment Fund; . . Police Officers' Pension Investment Fund. 2021 CH 55 . What the grassroots Illinoisians think about it is another question. 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. 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 3) Increase final average salary. 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. 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. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. 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. 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. 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. Police accounted for $7.5 billion of the total and firefighters for $5.5 billion, according to the most recent reportfrom the state legislatures Commission on Government Forecasting and Accountability. 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. 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. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. Mayor Lori Lightfoot says she will run for second term. B. Pritzker, who signed the bill into law. More than $13. 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. 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. 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. Your email address will not be published. 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. However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. Arlington Heights Police Pension Fund, et al. Protected by Google ReCAPTCHA. Pensionable salary cap: The Tier 2 pensionable salary cap currently increases at one-half of CPI or 3%, whichever is less. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. Will be used in accordance with our terms of service & privacy policy. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. starts here. 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. They are seeking to maintain local control over pension management. Research indicates that consolidation can be a lose/win proposition. 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. By cutting down on duplicative administrative costs and pooling investment assets to get better returns an important source of income for pension funds consolidated pension systems are more efficient. 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 firefighters fund is further along in the consolidation process and expects to meet the deadline. . 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. Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. Senate Bill 616 reinstates the Tier 1 benefit for these surviving spouses. 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. . 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. (In fact, on only four topics were voters given the ability to vote individually, vs. an all-or-nothing up-or-down vote: cumulative voting for the legislature, election of judges, capital punishment, and the vote for 18 year olds. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. 1970, art. 994 108th Congress (2003-2004). The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. The Illinois Police Officers Pension Investment Fund said it completed its third tranche of asset transfers on May 2, and that to date 46 plans have transferred more than $1 billion worth of assets to the IPOPIF consolidated fund. Unfortunately, we know there is no political will, on the part of those currently in power. Chicago Office | Illinois Policy 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. 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. By cutting down on duplicative administrative costs and. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. Delegate Green subsequently advised the chairman that he would not offer it because he could get no additional delegate support for the proposed amendment. . 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. Consolidation was also proposed in Pennsylvania in 2012 and 2018. 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. As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. 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. 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. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. 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. Justice Robert McLaren wrote the panels opinion, issued Feb. 7, Pritzker, Raoul: No 'fundamental right' to own, sell 'assault weapons' in IL, ask IL high court to toss TRO, Appeals court: Rockford nurse can only get $2,500 from her lawsuit win, even though county health department violated her abortion conscience rights, 4th Ward Chicago Ald. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. 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. 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. 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. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. Additionally, Tier 2 reduced the final average salary on which a pension is based from the average of the highest four of the last five years of service to the average of the highest eight of the last ten years of service. The legislation raises the formula to the lesser of full CPI or 3%. Unions and other Tier 2 critics are also concerned about the relatively low benefits provided to new employees. Please e-mail[emailprotected]with your query. v. Governor Jay Robert "J.B." Pritzker, et al. 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. 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. 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. Dec 29, 2021. The state, represented by Richard Huszagh, assistant attorney general, has countered that constitutional protections are limited to membership benefits and not fund management. The report, prepared by Chicago-based Anderson Economic. However, it should be noted that these increased returns are not guaranteed. 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. XIII, 5. The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. The fund said it has $6.9 billion in assets under management. 802 South 2nd Street | Springfield, IL 62704 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. Nathan Woodside/Lewis & Clark Community College. When Gov. comeback 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. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. 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 aconstitutionalamendment to allow for structural pension reform. 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 Courts decision emphasizes over and over again that what binds the General Assembly and the people of Illinois are the key words of Article 13, Section 5, the benefits of which shall not be diminished or impaired. Its a simple ruling: you cant do anything which has the effect of reducing existing or future benefits (and the guarantee of a future Cost of Living Adjustment is included in such promises) so long as this phrase exists in the Illinois constitution. Gov. InCarbondale, 290% of the citys property tax collections go to pensions. 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. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. These pensions are primarily funded through the states second-highest in the nation property taxes, diverting taxpayer dollars from improving cities core services. "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. The main distinction between the case at bar and the aforementioned cases, Villa writes, is that those cases involved traditional voters rights claims such as procedural due process, equal protection, constitutional vagueness, improper delegation of legislative authority, and other guarantees found in the United States and Illinois Constitutions.. J.B. Pritzker on Wednesday signed into law the consolidation of 649 downstate and suburban police and fire pension plans into two new pension funds. In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. 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. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. 1970, art. | Illinoiscourts.gov. Elected officials never sought formal guidance from the Internal Revenue Service. 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. In the end, my reading of this decision says that the Court gave Illinois voters a roadmap to pension reform: there is only one path forward, that of an amendment, but it is at the same time, it is a travelable path, achievable if there is sufficient political will or grassroots support. 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. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. starts here. Copyright 2023 Asset International, Inc. All Rights Reserved. This plan falls far short of eliminating even the $11 billion of debt held by these plans. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. The panel rejected the argument the local funds have an established property right in assets or funding levels. The Social Security wage base is the maximum amount of salary subject to Social Security tax. The Illinois Supreme Court may decide to review the case thereafter. 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 . FPIF recently notified local funds of their asset transfer dates which begin October 1, 2021. Yesterday, Illinois Gov. 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 initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. Tier 2 applied to employees hired on or after January 1, 2011. Similar warnings were issued by the Illinois Public Employees Pension Laws Commission in biennial reports it published between 1947 and 1969. 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. The other two changes are designed, at least in part, to address the safe harbor concerns. The league stated it is confident it will beat the legal challenge. A group of police funds last year sued to block the implementation arguing the . . 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. No plaintiff has any right to direct the investment of the monies held by the funds or direct that they receive any different course of payments (either in amount or frequency) beyond that established by statute and the funds. 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. 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). In December 2019, Gov. 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. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. The courts decision rests on its interpretation of what constitutes a benefit., The case Arlington Heights Police Pension Fund et al v. Jay Robert Pritzker et al argues that benefits are damaged because the law strips plaintiffs of their autonomy and their authority.. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. 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. Copyright 2022 The Civic Federation Surviving spouse benefit: Tier 2 eliminated pension benefits for spouses of public safety workers whose deaths occurred before the end of the ten-year period for pension benefit vesting and whose deaths were not duty-related. 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. The law creates the. If successful, the lawsuits outcome would apply to every downstate police and firefighter pension fund in Illinois. 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. Discovery shareholder, having accepted . 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. Even without class status, all funds would be impacted if the court overturns the legislation. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 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. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. 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. 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. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. 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. DeGette. 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. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. and Terms of Service apply. It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. The Newsletter Bringing the Legal System to Light. 2019 consolidation legislation. Public Safety Pension Infographic. 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), 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. ", Voting for the local board is, at best, ancillary to a participants receipt of the pension payment and other assets, McLaren continued. 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 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. . 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 multiplier is the percentage of final average salary earned per year of service. 992, H.R. The Newsletter Bringing the Legal System to Light. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . 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. 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. Final average salary: Senate Bill 616 restores the higher Tier 1 level based on the average of the highest four of the last five years, instead of the average of the highest eight of the last ten years. A court ruling as soon as December will determine the fate of a 2019 law Gov. Will be used in accordance with our terms of service & privacy policy. 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