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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. 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. The IPOPIF team will remain diligent in our interactions with local police plans to assist them in transferring funds to the IPOPIF consolidated fund.. 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. 992, H.R. . Gov. Meanwhile, the asset consolidation process is proceeding. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. (Shutterstock) HINSDALE, IL In the last budget year, Hinsdale spent $163,000 on managing. 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. FPIF recently notified local funds of their asset transfer dates which begin October 1, 2021. 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. 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. However, as pointed out by the Civic Federation, lawmakers never definitively established that a safe harbor violation existed for Tier 2 public safety workers, nor that the changes in this bill were the minimum necessary to bring the plans into compliance. 2) Increase pensionable salary cap. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. Illinois has nations worst pension debt. 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. 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. 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. However, that process may be interrupted if a court issues an order staying the transfer of assets. 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. 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 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. 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. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. Unfortunately, we know there is no political will, on the part of those currently in power. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 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.. The Newsletter Bringing the Legal System to Light. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). The plaintiffs are seeking to certify the lawsuit as a class action. 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. What do you think? Lawmakers justified the changes by pointing to potential violations of a provision of federal law known as safe harbor. The Internal Revenue Code requires state and local government employees to either receive Social Security or be part of a retirement system that is at least as generous. 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. See, e.g., Report of the Illinois Public Employees Pension Laws Commission of 1949, 10 (1949) (revenues allocated to pension funds have not kept pace 2019 consolidation legislation. Terms & Conditions | Privacy Policy JB Pritzker himself, that those future accruals are guaranteed under the contracts clause of the United States Constitution, or by applying basic principles of justice and fairness, so that an amendment could never actually accomplish its purpose. The league stated it is confident it will beat the legal challenge. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. 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. 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. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. 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. 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 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 . This site is protected by reCAPTCHA and the Google Privacy Policy Officials in more than 650 suburban and downstate Illinois towns need to be laser focused in early 2022 on the implementation of the state's massive investment overhaul of police and firefighter pensions. 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. 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 requires that contribution changes due to changes in actuarial assumptions be phased in over three years. Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. 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. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. The local boards were entrusted with investing the contributions so that payments could be made to participants. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. Since our last newsletter, on November 10, 2021 the 3) Increase final average salary. 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. Appointment of DOI Security Administrator: . Illinois There, the plaintiff joined the pension fund in 1969. With the changes in the bill just enacted, the cap would grow at full inflation instead. However, it should be noted that these increased returns are not guaranteed. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. B. Pritzker, who signed the bill into law. The firefighters fund is further along in the consolidation process and expects to meet the 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. Elected officials never sought formal guidance from the Internal Revenue Service. 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.. 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. J.B Pritzker is expected to sign the legislation. Will be used in accordance with our terms of service & privacy policy. . 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. J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. 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. 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 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. 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.. 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. 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. B. Pritzker, who signed the bill into law. 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. A group of police funds last year sued to block the implementation arguing the . "No matter the ruling, the case likely will be heard by the Illinois Supreme Court. 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. If the court sides with the plaintiffs and overturns the legislation the appeal would go directly to the Illinois Supreme Court due to the constitutional question at hand. 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. starts here. 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. Pritzker is certainly overselling the benefits, calling the move a huge bipartisan step, which is concerning given Illinois politicians long history of ignoring the root cause of the pension crisis. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 As the plaintiffs articulate one example, a retired-beneficiary participant previously had the benefit of a 2.1% vote (1 out of 47) for the one beneficiary selected member of his pension fund, and thus, effectively a 0.43% say regarding the Boards selection of an investment manager or advisor. However, [a]s a result of Public Act 101-0610, he will only have the benefit of a 1/8,830 vote (1 out of 8,830) for the one beneficiary-selected member of the nine-person Permanent Board of the Firefighters Pension Investment Fund, which equates to just a 0.0013% say regarding the Permanent Boards selection of an investment manager or advisor. The plaintiffs also claim that their vested benefits have been diminished because the consolidation law requires each downstate pension fund to ultimately bear all costs of transition, up to $15,000,000, plus interest.. On June 25, 2021, the Defendants filed motions to dismiss the Plaintiffs amended complaint, and the court has given the Plaintiffs until August 4, 2021, to respond to these motions. The enhancements to Tier 2 benefits for employees hired after 2011 were part of a bill to consolidate the states roughly 650 public safety pension funds into just two funds, one each for police and fire. The plaintiffs also argued the consolidation impaired their benefits because it required the local funds to pay up to $15 million, plus interest, to transition, operate and administer the new funds. Earlier this week, I griped that an Illinois State Senator, Heather Steans, had claimed that the state had solved its pension problem except for the pesky issue of legacy costs. ; Justices Susan Hutchinson and Ann Jorgensen concurred. . Once the trial court issues its ruling, the case will likely be appealed by the losing party. 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. Police Officers' Pension Investment Fund. A limit was also imposed on the amount of earnings used to calculate final average salary. 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 These pensions are primarily funded through the states second-highest in the nation property taxes, diverting taxpayer dollars from improving cities core services. 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. 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. 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. An Illinois Circuit Court judge refused a trial which sought to stop the consolidation of the state's 650 fire and police pension funds, rejecting the plaintiff's claims that a law enacting the decision violated the state constitution.. If the legislation is upheld, the police funds are expected to move forward with the transfer process during the appeal. . . By collecting data from the largest public pension systems in the state and centralizing it into our new Illinois Public Pensions Database, the Better Government Association aims to bring greater clarity to . Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) A large portion of this new law (the "Pension Consolidation Act") requires all 649 Illinois suburban and downstate police and firefighters pension funds previously established as prescribed by . 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].) Illinois 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. J.B. Pritzker championed to consolidate about 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. Pritzker lawsuit. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings 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.. . 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. Theres been confusion among the stakeholders over the litigations impact should the court overturn the legislation, which would also impact the firefighters fund. Illinois Police Officers Pension Investment Fund 1) Review and possible approval of IPOPIF Exhibit A Resolution . This effort also proved unsuccessful. 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. The three main parts of the pension benefit formula are illustrated below. 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. 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. One concern is that these benefit enhancements were not truly necessary, but were used as a political bargaining chip to convince police and fire unions to support the legislation. The local boards also did not have any say in the actual method of funding; contribution requirements were set in the Pension Code.. Litigation. 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. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. It is supposed to cut administrative costs and raise investment returns but rating agencies consider it a positive credit step because municipal budgets are strained by rising payment demands that have forced some to raise taxes, cut services, issue pension obligation bonds, and sell off assets. 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. Tier 2 workers receive annual benefit increases upon retirement of 3% or one-half of the rise in the Consumer Price Index (CPI), whichever is less, on a simple-interest basis. 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. Your email address will not be published. They are seeking to maintain local control over pension management. Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. A court ruling as soon as December will determine the fate of a 2019 law Gov. According to a legal analysis commissioned by the Illinois Municipal League, Tier 2 does not satisfy the safe harbor rules because the pensionable salary cap has not increased as fast as the Social Security wage base. 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. 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