illinois police pension consolidation lawsuit

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. This is via the pension protection clause, Article XIII, General Provisions, Section 5, Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.. 993 AND H.R. Worth Police Pension Fund 7112 W. 111th Street Worth, IL 60482 . 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. 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. Illinois Passes Police, Fire Pension Consolidation Bill, Illinois Group Wants Municipal Pension Consolidations, New Illinois Law Authorizes $1 Billion in Pension Obligation Bonds and Extends Buyout Option, Tags: court ruling, Firefighters Pension Investment Fund, Illinois, J. 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 Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. This plan falls far short of eliminating even the $11 billion of debt held by these plans. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 . The consolidation of downstate police and fire pension fund investment assets continues in earnest. ", Voting for the local board is, at best, ancillary to a participants receipt of the pension payment and other assets, McLaren continued. 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). By: Matthew J. Schueler. These estimates came from comparisons to existing Illinois pension plans that are more consolidated, but these other plans also have different benefit formulas. As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. Taxpayers must not allow Springfield to pretend theyve solved the pension problem. Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. 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. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. We hope you find our website helpful! 802 South 2nd Street | Springfield, IL 62704 Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. 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. Protected by Google ReCAPTCHA. 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.. Illinois plans to consolidate its 650 police and fire pension funds in the suburbs and downstate. 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 Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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 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. In December 2019, Gov. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. 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 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. In fact, the Court even proposed that a reamortization schedule would have been sufficient to avoid a funding burden (p. 20) that is, rejecting the notion that there is any particular urgency to funding pension liabilities at any particular level at any particular point in time. The governing board is comprised of Mayors and Village Presidents. 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. In the task force report, the cost is estimated at $70 million to $95 million over five years, or $14 million to $19 million per year, but there is no supporting documentation for the estimate. Will be used in accordance with our terms of service & privacy policy. Grayslake Police Pension Fund 10 South Seymour Ave, Grayslake IL 60030-0906 DOI Pension Fund Number POO9600 . Brian Granato Mike Pritchard, Sr. . 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. 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 . There, the plaintiff joined the pension fund in 1969. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. However, choosing who invests funds does not guarantee a particular outcome for benefit payments. 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 three changes intended to bring Tier 2 benefits in line with safe harbor restrictions are as follows: 1) Expand survivor benefits. ; Justices Susan Hutchinson and Ann Jorgensen concurred. 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. 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. Gov. 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. 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. From this, the Illinois Supreme Court has held that public employees have an inviolable contractual right to their vested pension benefits, which cannot be diminished or impaired. Illinois has nations worst pension debt. Illinois 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. Your email address will not be published. The league stated it is confident it will beat the legal challenge. The local boards were entrusted with investing the contributions so that payments could be made to participants. Dec 29, 2021. 994 108th Congress (2003-2004). 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. But consolidation is a small step for a tiny portion of Illinois pension problem. 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. Required fields are marked *. and Terms of Service apply. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. The task force also noted that these estimated costs are minor compared to increases in investment returns projected to be earned by the consolidated funds compared with the 649 existing police and fire funds. The fund said it has $6.9 billion in assets under management. While 98% of Illinois pension plans are for 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. Copyright 2022 The Civic Federation These pensions are primarily funded through the states second-highest in the nation property taxes, diverting taxpayer dollars from improving cities core services. Our website provides a portal to the web based Annual Statement Filing System and gives you easy access to a variety of information regarding your pension benefits. 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. 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. 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. 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. Elected officials never sought formal guidance from the Internal Revenue Service. It added that if all of the plans complete the transfer, there will be more than $4 billion in assets in the IPOPIF consolidated fund by the end of June. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. 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. 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. Although Judge Robert Villa writes in the ruling that the consolidation undeniably diminished the weight of each individuals board member vote, he also holds that traditional voting rights claims are not at issue. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . The practical effect is that many employees will see a boost in their initial pension check on retirement, which serves as the basis for subsequent annual increases. 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. 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.. No Reproduction Without Prior Authorizations. This is a much narrower claim than some have made, including Gov. Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. 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. In December 2019, Gov. In 1922, the laws governing police pensions were significantly restructured and re-codified forming the statutory basis . Phone: 312-201-9066 | Email: [emailprotected] 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. of the board members. 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 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 challenging the constitutionality of the 2019 consolidation legislation. Ill. Const. Nathan Woodside/Lewis & Clark Community College. 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 . 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.. 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 . 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 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. 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. 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. Justice Robert McLaren wrote the panels opinion, issued Feb. 7; Justices Susan Hutchinson and Ann Jorgensen concurred. 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. A History of Pension Enactments. This site is protected by reCAPTCHA and the Google Privacy Policy The State was able to book immediate savings on its statutorily required pension contributions, which depend on future benefit levels. Gov. 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. As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. Sklodowski vs. A separate law passed in December 2010 extended Tier 2 to public safety funds. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. 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. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. Youre invited to comment at JaneTheActuary.com! 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. 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 championed to consolidate about 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. . . 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. Click here to read the full issue brief. 992, H.R. . 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. 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. The Illinois Police Officers' Pension Fund Investment Board is now accepting resumes and RFP's for the following positions: Executive Director General Legal Counsel Administrative Services Please visit this link https://bit.ly/2vXYd8R for the full job description and details on RFP's. Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. State law restricts the securities that the existing police and fire funds are allowed to hold. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. Total downstate police and fire pension debt is only about 5% of Illinois total public pension debt. The firefighters consolidation had more widespread support among funds when the 2019 legislation was being debated while some police funds and pension associations opposed it. The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. The Illinois Supreme Court may decide to review the case thereafter. But the panel said the complaint contained no argument as to how that requirement would specifically diminish their eventual benefits. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. John D. and Catherine T. MacArthur Foundation. 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. Consolidation Lawsuit Update . 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. 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. 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. With the changes in the bill just enacted, the cap would grow at full inflation instead. 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. That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. In other words, lawmakers responded to a problem they had not confirmed existed with changes they had not confirmed would fix the problem, without knowing how much the changes would cost. Pritzker lawsuit. PABF's authority, duty, and responsibility is governed by state statute and administered by the Retirement Board of Trustees ("The Board") in compliance with Act 5 of the Illinois Pension Code.The Fund was first created in 1887 through an act of the Illinois legislature. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. 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. 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. Therefore, legislation that diminishes these benefits will usually be struck down. 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. Senate Bill 616 would consolidate the assets of Illinois 649 public safety funds, not including those in Chicago, into two new funds, one for police and one for fire. J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. 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. 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. The first thing that the Court makes clear in its decision is that the 1970 constitution bound Illinoisians to provide undiminished and unimpaired pensions to every state or local worker ever hired with such a promise, with no room for any changes whatsoever. 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. Once the trial court issues its ruling, the case will likely be appealed by the losing party. Recently, however, the consolidation encountered its first legal challengea class action lawsuit claiming Public Act 101-0610 unconstitutional. Yesterday, Illinois Gov. Pensionable salary cap: The Tier 2 pensionable salary cap currently increases at one-half of CPI or 3%, whichever is less. Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) The plaintiffs dropped their motion to certify class status. Gov. 1970, art. . . 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. 7112 W. 111th Street worth, IL 60482 Act 101-0610 unconstitutional & privacy.... From comparisons to existing Illinois pension problem a small step for a tiny portion of pension... Design & Hosting: B Square Web systems is perhaps the most vexing emergency facing taxpayers! 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Info @ illinoispolicy.org, copyright 2023 Illinois Policy | Illinois ' comeback story starts here include: Statewide, obligations... Determining if plans meet the minimum benefit standard 2 to public safety funds benefits will IRS! Investing the contributions so that payments could be made to participants, known as safe harbors for! Public pension debt is only about 5 % of all government spending as by! Violate IRS rules is not simple to pretend theyve solved the pension protection and! Made, including Gov joined the pension Fairness for Illinois Communities Coalition consolidation: the 2! This plan falls far short of eliminating even the $ 11 billion of held! The contributions so that payments could be made to participants but the panel said complaint.

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illinois police pension consolidation lawsuit