illinois police pension consolidation lawsuit

The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. 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.. 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. 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. In addition, the 1970 constitution, and its drafters, cared not in the least for pension funding, only that the benefits are paid out to retirees; and the legislature, in its 2013 benefits-reduction legislation, was not making the case that it could not pay benefits which were due, but that the burden placed on the state budget of prefunding those benefits was too great. 2) Increase pensionable salary cap. . 992, H.R. 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. B. Pritzker, who signed the bill into law. But consolidation is a small step for a tiny portion of Illinois pension problem. The Newsletter Bringing the Legal System to Light. To the extent that growth in the pensionable salary cap is an issue, it remains to be seen whether Senate Bill 616 solves the problem. 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. Illinois Pension Consolidation Act. These pensions are primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities core services. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. 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. manager" with respect to a pension fund or retirement system established under this Code if the person: (1) is a fiduciary appointed by the board of trustees of the pension fund or retirement system in accordance with Section 1-109.1; (2) has the power to manage, acquire, or dispose of any asset of the retirement system or pension fund; Kane Co. Case No. Yesterday, Illinois Gov. Grayslake Police Pension Fund 10 South Seymour Ave, Grayslake IL 60030-0906 DOI Pension Fund Number POO9600 . The task force estimated that the consolidated funds could generate an additional $820 million to $2.5 billion in investment returns over five years, or $164 million to $500 million per year. J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. 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].) 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. Governor's Pension Consolidation Feasibility Task Force Report. H.R. That could be a boost for communities being squeezed by pension costs. 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. They are seeking to maintain local control over pension management. candidate seeks $12M from Preckwinkle, 4th Ward Dems for alleged defamatory mailers, Judge says franchisors also liable in suits claiming biomertric scan violations; Ruling could make businesses more vulnerable to suits, UIC law prof can continue part of lawsuit regarding reaction to his allegedly racially insensitive test question, IL high court: Concerns over 'absurd,' 'annihalitive' payouts no reason to limit damage claims under IL biometrics law, Appeals panel agrees IL police and firefighter pension consolidation doesn't violate state constitution, IL Supreme Court: Chicago didn't violate state law by charging fees to owners of impounded vehicles, Appeals panel: Chicago must force telecom companies to hire union labor to upgrade their equipment on city-owned poles. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. While 98% of Illinois pension plans are for However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. 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. 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. But the panel said the complaint contained no argument as to how that requirement would specifically diminish their eventual benefits. Problems include: Nicklas and some other city leaders are relived to see their pensions consolidated, noting the underfunded plans weigh on budgets and credit ratings, contributing to a slowed economic recovery from the pandemic. 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. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. 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. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. Made possible by a generous grant from the Municipalities have until July 1 to transfer all assets from their locally managed pension funds . 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. J.B. Pritzker. The Illinois Supreme Court ordered the consolidation of lawsuits filed by cannabis dispensary license applicants in an attempt to resolve multiple claims challenging the fairness of the licensing . 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. In December 2019, Gov. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. 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. 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. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). The legislation also incorporates another task force recommendation that has attracted far less attention: a proposal to enhance benefits paid to police and fire pension fund members hired after 2010. 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 Illinois Police Officers Pension Investment Fund (IPOPIF) is pleased that the court has indicated a date on which a written ruling will be issued. In Illinois, there is a rich body of law concerning interference with pension rights and benefits. House Committee Meeting Hide Overview . The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. . 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. 3) Increase final average salary. ; Justices Susan Hutchinson and Ann Jorgensen concurred. Tier 2 employees are subject to a pensionable salary cap that began at $106,800 and has grown since 2011 at half of inflation or 3% per year, whichever is less. 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. Terms & Conditions | Privacy Policy Public Safety Pension Infographic. 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. 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. . Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. 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. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. However, it should be noted that these increased returns are not guaranteed. The new Police Officers Pension Investment Fund sought legislation during the spring session to push off the deadline by a year but it stalled. Illinois' Fraternal Order of Police is among the groups opposed to the idea. Chicago Office | Illinois Policy This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. 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. 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. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. The case of Buddell v. Board of Trustees, State University Retirement System of Illinois, 118 Ill. 2d 99, 101 (1987) is a prime example of such an improper legislative diminution of pension benefits. Even without class status, all funds would be impacted if the court overturns the legislation. January 21, 2020. 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. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. 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. More than $13. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. . 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 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 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. 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 case is expected to be resolved in the circuit court on initial motions. The constitution itself was ratified by vote of 57%, with a turnout of 37% of voters in a special election in December, which all makes it a bit insulting for the Court to proclaim that it was the People of Illinois who asserted their will in this manner.). Litigation. 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. 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. 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. 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. . 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. 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. White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. 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.. 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. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. comeback 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 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. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. 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