They are seeking to maintain local control over pension management. 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 in effect at hire, without reduction, until retirement. t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy That could be a boost for communities being squeezed by pension costs. 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 . While consolidation cuts down on duplicative administrative costs and pools investment assets for larger returns, downstate police and fire pension debt is only about5%of total state obligations. It also represented one of the rare actions taken by the state to help local governments on the pension front. In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and fire pensions to consolidate their funds into two . Since our last newsletter, on November 10, 2021 the The health of some individual funds, however, are far weaker with ratios only in the teens. Opinions expressed by Forbes Contributors are their own. 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. Recently, however, the consolidation encountered its first legal challengea class action lawsuit claiming Public Act 101-0610 unconstitutional. A group of police funds last year sued to block the implementation arguing the . By: Matthew J. Schueler. Governor's Pension Consolidation Feasibility Task Force Report. 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. Appointment of DOI Security Administrator: . 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. 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. 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; 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 But it seems about time for a deep dive into a narrow question: what did the Illinois Supreme Court have to say about pensions? This is clearly a faster rate than the current formula of the lesser of 3% of one-half of the inflation rate, but it does not match the national average wage index used to calculate growth in the Social Security wage base. 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. 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. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. The amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. 1970, art. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. 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. DeGette. 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. This effort also proved unsuccessful. In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. Challenging the amendment directly, plaintiffs also argued it violates the state constitutions takings clause regarding public use of private property. What do you think? 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. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). 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. 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. cost of the Tier 2 benefit in FY2019 was 7.1%, holds great significance for first responders, An Inventory of Local Governments in Illinois: Municipalities, Inventory of Local Governments in Illinois, Illinois Criminal Justice System Agency Budget Requests for Fiscal Year 2022, An Inventory of Local Governments in Illinois: Townships, An Inventory of Local Governments in Illinois, The Graduated Income Tax Proposal: An Issue Brief, John D. and Catherine T. MacArthur Foundation. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. The case is expected to be resolved in the circuit court on initial motions. 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. ", Voting for the local board is, at best, ancillary to a participants receipt of the pension payment and other assets, McLaren continued. 1970, art. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. Required fields are marked *. 802 South 2nd Street | Springfield, IL 62704 When Tier 2 was created, public attention was focused on rectifying Illinois worst-in-the-nation pension crisis and assisting local pension funds in distress. 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. The State was able to book immediate savings on its statutorily required pension contributions, which depend on future benefit levels. 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. Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. 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. Nathan Woodside/Lewis & Clark Community College. About a month ago, Gov. 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. J.B. Pritzker announced a plan to consolidate pension funds for suburban and downstate police officers and firefighters at the State of Illinois Building in Chicago on Oct. 10, 2019. 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. 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. 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. 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. 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. 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. 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. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. 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