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. 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. 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. 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 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. The wage base is adjusted each year by the change in the national average wage index. 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. In December 2019, Gov. 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.. 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. Its all, I suppose, a trick of assuming that there is a singular People of Illinois who, through their ratification of the constitution, promised to pay future benefits when they come due, rather than recognizing that the People of 1970 (presumably quite unknowingly) restricted future generations of Illinoisians by forcing them to make these payments without limitation. 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. Public Safety Pension Infographic. The Newsletter Bringing the Legal System to Light. Made possible by a generous grant from the Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. . . However, choosing who invests funds does not guarantee a particular outcome for benefit payments. 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. 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. They are seeking to maintain local control over pension management. | Illinoiscourts.gov. 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. But being able to vote for board members, or have a local board control investments, he added, is not of the same nature and essentiality as the ability to participate in the fund, accumulate credited time, or receive health care, disability and life insurance coverage. Once the trial court issues its ruling, the case will likely be appealed by the losing party. 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 It also represented one of the rare actions taken by the state to help local governments on the pension front. But consolidation is a small step for a tiny portion of Illinois pension problem. 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. Total downstate police and fire pension debt is only about 5% of Illinois total public pension debt. 1970, art. 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 History of Pension Enactments. 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. 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 amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. Nathan Woodside/Lewis & Clark Community College. We hope you find our website helpful! (Shutterstock) HINSDALE, IL In the last budget year, Hinsdale spent $163,000 on managing. 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. 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. Although the panel agreed the protection clause covers more than just the payment of pension money, it said past Illinois Supreme Court rulings invoking the clause involved benefits that directly impacted the participants eventual pension benefit, McLaren wrote. Villa set May 20 as the next hearing date and said he would have a written ruling ready by that date. 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. Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. The 22-page complaint alleges the consolidation violates three provisions of the Illinois Constitution: (1) the Pension Protection Clause; (2) the Contracts Clause; and (3) the Takings Clause. 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. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. Protected by Google ReCAPTCHA. Protected by Google ReCAPTCHA. Report of the Illinois Pension Laws Commission 272 (1917). The General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. "The Illinois Police Officer's Pension Investment Fund is pleased that the Illinois Appellate Court . If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. 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. In December 2019, Gov. The funded health of the public safety pension funds has tumbled over the years. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. 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 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. The Illinois Supreme Court may decide to review the case thereafter. Illinois Police Officers' Pension Investment Fund; . Kane Co. Case No. While benefits would continue to be managed by local boards, some police funds and their advocacy organizations resisted the change and a group ofpolice funds early last yearsued to block the implementation, arguing the mandated consolidation equates to a benefit cut. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. 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 Act does nothing more than require one type of government-created pension fund to transfer assets to another type of government-created pension fund. . J.B. Pritzker signed a bill to consolidate local police and firefighter pensions from across downstate Illinois, but beneficiaries are suing because the state is notorious for poor pension management. 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. 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. 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). The three changes intended to bring Tier 2 benefits in line with safe harbor restrictions are as follows: 1) Expand survivor benefits. DeGette. 802 South 2nd Street | Springfield, IL 62704 However, each of these claims revolve around the same general premise. The league stated it is confident it will beat the legal challenge. The local funds are already required to pay the costs of administration of the local funds, and plaintiffs do not cite any evidence to show that the costs of administration of the new funds, even including startup costs, would be any greater, McLaren wrote. 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. As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. 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. 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. 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. J.B. Pritzker championed to consolidate about 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. 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. The two sides last year laid out arguments seeking a summary judgment. This plan falls far short of eliminating even the $11 billion of debt held by these plans. A legal memo from the Illinois Municipal League had pointed to the pensionable salary cap as a particular area of concern for potential safe harbor violations, because the current salary cap of roughly $115,000 is less than the Social Security wage base of $132,900. 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. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers. If the legislation is upheld, the police funds are expected to move forward with the transfer process during the appeal. Suburban and Downstate Police and Fire In Illinois, the vast majority (649) of the existing 664 pension plans are for police and fire personnel employed by municipalities outside of the City of Chicago.3 These plans are commonly referred to as "suburban and downstate" police and fire pension plans. The plan has modest fiscal goals. Consolidation: Attorney Mancini . Senate Bill 616 reinstates the Tier 1 benefit for these surviving spouses. January 21, 2020. 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. t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. Patrick Andriesen, Illinois Policy Institute, Woman sues Granite City QuickTrip over parking lot slip, fall, Madison County civil docket Feb. 27-Mar. 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. Justice Robert McLaren wrote the panels opinion, issued Feb. 7; Justices Susan Hutchinson and Ann Jorgensen concurred. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. 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. Pension Crisis Overview Presentation. 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. It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. 802 South 2nd Street | Springfield, IL 62704 The decision asserts, in short, that the delegates knew full well that pensions were not properly funded, and intentionally made the choice to guarantee pensions by means of obliging future generations to pay, no matter what, rather than funding them as they are accrued. 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. Illinois Second District Appellate Justice Robert McLaren Will be used in accordance with our terms of service & privacy policy. 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. 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. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. Recent News. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. 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. In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. These estimates came from comparisons to existing Illinois pension plans that are more consolidated, but these other plans also have different benefit formulas. 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. The police funds ended 2019 at 54.98% and firefighters were at 54.35%. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. This site is protected by reCAPTCHA and the Google Privacy Policy 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. Taxpayers must not allow Springfield to pretend theyve solved the pension problem. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 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. More than $13. No Reproduction Without Prior Authorizations. 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. 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. 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 /. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. The Social Security wage base is the maximum amount of salary subject to Social Security tax. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. 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. 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