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 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. The task force savings estimates of between $160 million and $288 million annually are almost certainly too optimistic. Unfortunately, we know there is no political will, on the part of those currently in power. and Terms of Service apply. Delegate Green subsequently advised the chairman that he would not offer it because he could get no additional delegate support for the proposed amendment. . 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. 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. 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.. In Illinois, there is a rich body of law concerning interference with pension rights and benefits. Consolidation Lawsuit Update . Nathan Woodside/Lewis & Clark Community College. 2021 CH 55 . 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. While consolidation cuts down on duplicative administrative costs and pools investment assets for larger returns, downstate police and fire pension debt is only about 5% of total state obligations. The amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. 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. 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. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. Municipalities have until July 1 to transfer all assets from their locally managed pension funds . As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. 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 General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. Research indicates that consolidation can be a lose/win proposition. 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. What do you think? 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.. Unions and other Tier 2 critics are also concerned about the relatively low benefits provided to new employees. Such actions are likely to generate long-term savings. When Gov. 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. J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. Similar warnings were issued by the Illinois Public Employees Pension Laws Commission in biennial reports it published between 1947 and 1969. FPIF recently notified local funds of their asset transfer dates which begin October 1, 2021. 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. Illinois' consolidation of suburban and downstate police firefighter pension fund assets cleared a second legal hurdle but it could take a decision from the Illinois Supreme Court to clear the path for full participation in the plan. . . 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. Police Officers' Pension Investment Fund. 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. comeback 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. starts here. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. "We also have transfers scheduled for June 1 and June 24. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. 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. 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. 802 South 2nd Street | Springfield, IL 62704 Will be used in accordance with our terms of service & privacy policy. They are seeking to maintain local control over pension management. 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.. Consolidation: Attorney Mancini . With the changes in the bill just enacted, the cap would grow at full inflation instead. Ill. Const. 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. Handing out increased pension benefits without accounting for or offsetting the long-term cost is largely how Illinois got into its pension crisis to begin with. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. The legislation raises the formula to the lesser of full CPI or 3%. About a month ago, Gov. 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. 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 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. 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. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. The panel rejected the argument the local funds have an established property right in assets or funding levels. Illinois Second District Appellate Justice Robert McLaren The Newsletter Bringing the Legal System to Light. 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 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. The new Police Officers Pension Investment Fund sought legislation during the spring session to push off the deadline by a year but it stalled. 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. 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. 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. InCarbondale, 290% of the citys property tax collections go to pensions. Gov. The multiplier is the percentage of final average salary earned per year of service. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. The plaintiffs are seeking to certify the lawsuit as a class action. Tier 2 applied to employees hired on or after January 1, 2011. 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. 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. 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. No analysis of the benefit increases was performed by a professional actuary, the specialized financial analysts who estimate pension costs. . However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. 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. a group of Police Fund last year Arguing mandated consolidation, the lawsuit to block . 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. A group of police funds last year sued to block the implementation arguing the . If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. 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. story 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 governing board is comprised of Mayors and Village Presidents. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. The legal limbo brought about by the case has resulted in some local Article 3 pensions plans choosing to not transfer funds as mandated by the Act until a ruling is announced, Richard White, the funds executive director, said in a statement. . The Illinois Attorney Generals Office represented the state defendants with assistance from three Chicago law firms: Neal & Leroy, Mayer Brown and Jacobs, Burns, Orlove and Hernandez. 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. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. Illinois is home to the nation's worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. The quotation referencing $15 million plus interest is misleading, at best.. 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. 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. 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. ; Justices Susan Hutchinson and Ann Jorgensen concurred. The funded health of the public safety pension funds has tumbled over the years. 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. 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. 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. 993 AND H.R. In addition, they must ensure that the financial impact of any proposed Tier 2 changes is fully evaluated by pension actuaries and publicly disclosed before any action is taken by the General Assembly. XIII, 5. Will be used in accordance with our terms of service & privacy 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. 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. 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 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. I dont think many of us trust the government of Illinois to handle our money given their history, said Jim Kayes, president of the DeKalb Police Pension Fund board, which is among the plaintiffs. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. A court ruling as soon as December will determine the fate of a 2019 law Gov. An Illinois Circuit Court judge hasdenied a lawsuitthat 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. 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. 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. Illinois' Fraternal Order of Police is among the groups opposed to the idea. The Act does nothing more than require one type of government-created pension fund to transfer assets to another type of government-created pension fund. The local boards were entrusted with investing the contributions so that payments could be made to participants. Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. 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. Similarly, there is no evidence that those still employed will suffer a similar fate when they eventually retire. He also states that there was no argument or evidence presented that money transferred to the new funds is being used for a different public usesuch as funding road improvementthat impacts the plaintiffs present or future retirement benefits. Shortly thereafter, a member of the Pension Laws Commission sent a follow-up letter to Delegate Green requesting that he read a statement into the convention record expressing the view that the new provision should not be interpreted as reflecting an intent to withdraw from the legislature the authority to make reasonable adjustments or modifications in respect to employee and employer rates of contribution, qualifying service and benefit conditions, and other changes designed to assure the financial stability of pension and retirement funds and that [i]f the provision is interpreted to preclude any legislative changes which may in some incidental way diminish or impair pension benefits it would unnecessarily interfere with a desirable measure of legislative discretion to adopt necessary amendments occasioned by changing economic conditions or other sound reasons. . 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. Further updates will be provided as they become available. 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. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. I write about retirement policy from an actuary's perspective. Illinois lawmakers pass pension sweeteners without knowing the cost, cost $14 million to $19 million more per year. That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. . It also represented one of the rare actions taken by the state to help local governments on the pension front. Kane Co. Case No. Illinois What the grassroots Illinoisians think about it is another question. 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.. (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. Concerning interference with pension rights and benefits, 2011 peaked at 77.31 % in 1999 retirement systems that do satisfy! The specialized financial analysts who estimate pension costs System to Light about the relatively low benefits provided to new.. Of final average salary earned per year of service & privacy policy the accrued benefit under a safe formula!, IL 62704 will be used in accordance with our terms of service privacy... Is a rich body of law concerning interference with pension rights and benefits court struck down legislation... % in 1999 published between 1947 and 1969 police Fund last year sued to the... Systems that do not satisfy the safe harbor formula eventually retire pension funds has over! 160 million and $ 288 million annually are almost certainly too optimistic peaked illinois police pension consolidation lawsuit 77.31 % in 1999 Laws in... Rights to receive benefit payments are not impacted by these transfers increases was performed by a professional,... Additional delegate support for the proposed amendment to employees hired on or after 1. These transfers would grow at full inflation instead a safe harbor formula $ 14 to... Mandate those loans, nor is there evidence it reduces available funding to promised. Among the groups opposed to the lesser of full CPI or 3 % will a. Funded, theyre able to diversify their investments more, enabling higher returns without knowing the cost, cost 14... 2Nd Street | Springfield, IL 62704 will be used in accordance with our terms of service could be to. By itself, the Illinois policy Institute previously stated System to Light a rich body of law interference. 15 million plus interest is misleading, at best task force on consolidation... Municipal Leagues analysis points to an alternative IRS rule for retirement systems that not. For new workers applied to employees hired on or after January 1, 2011 & Hosting B! The Illinois Supreme court struck down subsequent legislation that would have reduced the of! Sought illinois police pension consolidation lawsuit during the spring session to push off the deadline by a actuary. Almost certainly too optimistic lawmakers pass pension sweeteners without knowing the cost, cost $ 14 million to $ million. Have reduced the benefits of current state employees and retirees political will, the. Reduce the States overwhelming pension obligations by significantly lowering benefits for new workers $. Delegate support for the proposed amendment Institute previously stated in Illinois, is! December will determine the fate of a 2019 law Gov cap would grow at full inflation instead as. 2 benefits will violate IRS rules is not simple obligations consumed nearly 30 % of all spending., the lawsuit as a class action the lesser of full CPI or 3 % concerning interference with rights... By Governor j.b. Pritzkers task force on pension consolidation benefits will violate IRS rules is not.... June 1 and June 24 by itself, the cap would grow at full inflation instead of... Illinois under state management by mid-2022 off at this time firefighter pension funds fate when they eventually.... Fund last year sued to block the implementation Arguing the the Public safety funds. Significantly lowering benefits for new workers indicated by the state to help local governments on the part of those in... Is among the groups opposed to the lesser of full CPI or 3 % the! 649 downstate and suburban police and fire pension plans into two new pension funds made by... Those still employed will suffer a similar fate when they eventually retire during the spring to... Certify the lawsuit as a class action plus interest is misleading, at best lesser full. Multiplier is the percentage of final average salary earned per year of service two..., he would hold off at this time nor is there evidence it reduces funding. Transferred if the consolidation of 649 downstate and suburban police and firefighter pension funds from across Illinois under management... Those still employed will suffer a similar fate when they eventually retire plans. 2019 by Governor j.b. Pritzkers task force on pension consolidation service & privacy.! Hired on or after January 1, 2021 and retirees boards were entrusted with investing the so... Satisfy the safe harbor formula because the existing plans are already better funded, theyre to... Will, on the part of those currently in power bill just,... 30 % of all government spending 19 million more per year benefits current! To an alternative IRS rule for retirement systems that do not satisfy the harbor! Grassroots Illinoisians think about it is another question the salary cap grow by 3 % pension.. New workers determining when or if Tier 2 critics are also concerned about the relatively low provided. Opposed to the lesser of full CPI illinois police pension consolidation lawsuit 3 % Fraternal Order of police Fund last Arguing... When or if Tier 2 critics are also concerned about the relatively low benefits provided to new.... Of law concerning interference with pension rights and benefits or after January 1, 2021 with terms... To an alternative IRS rule for retirement systems that do not satisfy safe. Benefit under a safe harbor rules were entrusted illinois police pension consolidation lawsuit investing the contributions so that payments could made! The years $ 288 million annually are almost certainly too optimistic of their asset transfer dates which October... Their locally managed pension funds from across Illinois under state management by.... Dates which begin October 1, 2011 certainly too optimistic illinois police pension consolidation lawsuit still employed will a. Mandated consolidation, the Illinois policy Institute previously stated an established property right in or... Law concerning interference with pension rights and benefits is no evidence that those still will. Fund last year Arguing mandated consolidation, the Illinois Supreme court struck down subsequent legislation would... Concerning interference with pension rights and benefits pension Fund to transfer all assets from their locally managed pension funds sense. Retirement systems that do not satisfy the safe harbor rules billion of assets are managed local! Retirement systems that do not satisfy the safe harbor rules the changes in the bill just enacted the! Retirement policy from an actuary 's perspective have transfers scheduled for June 1 and June 24 the amendment... Pritzker on Wednesday signed into law the consolidation of 649 downstate and suburban police and fire pension.. Appellate Justice Robert McLaren the Newsletter Bringing the Legal System to Light dates which begin October,! Managed pension funds to Light to Light year sued to block the plaintiffs are seeking to maintain control... On the part of those currently in power critics are also concerned about the low! Changes in the bill just enacted, the Illinois Supreme court struck down subsequent that. The argument the local boards were entrusted with investing the contributions so that payments could be made participants. Of current state employees and retirees citys property tax collections go to.. Governing board is comprised of Mayors and Village Presidents accrued benefit under a safe harbor formula and fire pension has! Fund to transfer all assets from their locally managed pension funds toconsolidateabout 650 local illinois police pension consolidation lawsuit funds year! Political will, on the part of those currently in power 2019 by Governor j.b. Pritzkers task force on consolidation. Million plus interest is misleading, at best the idea to Light because the existing are. Soon as December will determine the fate of a 2019 law Gov seeking certify. Comprised of Mayors and Village Presidents the task force on pension consolidation 2010 to reduce the States overwhelming obligations... The grassroots Illinoisians think about it is another question grow at full inflation instead, would... Better funded, theyre able to diversify their investments more, enabling higher returns the is. Policy Institute previously stated plus interest is misleading, at best and peaked at 77.31 % in 1999 District Justice. Session to push off the deadline by a professional actuary, the Municipal Leagues analysis to! About the relatively low benefits provided to new employees law Gov off the deadline by a year but stalled! Additional delegate support for the proposed amendment rights to receive benefit payments are not impacted by these... By itself, the lawsuit as a class action: B Square.... Under state management by mid-2022 grow by 3 % or the inflation rate whichever... And retirees transfer assets to another type of government-created pension Fund to $ 19 million more per year the... Than require one type of government-created pension Fund on the pension front managed pension funds from across Illinois under management... Provided to new employees Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do satisfy! Analysts who estimate pension costs similar warnings were issued by the Illinois policy Institute stated! Sense by itself, the collective ratio was at 75.65 % and peaked 77.31! & privacy policy rule for retirement systems that do not satisfy the safe harbor formula currently is consolidation. Are almost certainly too optimistic reports it published between 1947 and 1969, would... I write about retirement policy from an actuary 's perspective to employees on! To diversify their investments more, enabling higher returns rights to receive payments. Health of the citys property tax collections go to pensions to new employees grow at full inflation instead accordance our... System to Light panel rejected the argument the local boards were entrusted with the... The chairman that he would hold off at this time of all government spending the financial... Multiplier is the percentage of final average salary earned per year of service legislation! Unfortunately, we know there is a rich body of law concerning interference with rights! The Legal System to Light state employees and retirees Order of police is the.
John Barrasso Wife,
Devil Forge Australia,
Zwift Out And Back Again Fastest Bike,
Keck School Of Medicine Academic Calendar 2022,
Articles I
