t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy 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 latest example involved pension buyouts, which were budgeted to reduce General Funds contributions by more than $400 million in FY2019 but ended up saving about $13 million that year. 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. 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. Police Officers' Pension Investment Fund. Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. At some point, even with the high multiplier, Tier 2 police and fire benefits might not meet the alternative IRS standards, but the analysis does not suggest the timing of any potential violation. 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. Illinois Gov. The other two changes are designed, at least in part, to address the safe harbor concerns. 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. Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. Illinois lawmakers pass pension sweeteners without knowing the cost, cost $14 million to $19 million more per year. The governing board is comprised of Mayors and Village Presidents. 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.). Your email address will not be published. Maybe thats because state lawmakers take a problem they arent sure exists, apply a solution they dont know will work and never determine the cost. Illinois Police Officers' Pension Investment Fund; . J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. The fund said it has $6.9 billion in assets under management. Surviving spouse benefit: Tier 2 eliminated pension benefits for spouses of public safety workers whose deaths occurred before the end of the ten-year period for pension benefit vesting and whose deaths were not duty-related. J.B. Pritzker. If successful, the lawsuits outcome would apply to every downstate police and firefighter pension fund in Illinois. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. (In fact, on only four topics were voters given the ability to vote individually, vs. an all-or-nothing up-or-down vote: cumulative voting for the legislature, election of judges, capital punishment, and the vote for 18 year olds. However, the cost of the Tier 2 benefit in FY2019 was 7.1% of salary, compared with 21.6% for Tier 1 benefits. Total downstate police and fire pension debt is only about 5% of Illinois total public pension debt. 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 . 802 South 2nd Street | Springfield, IL 62704 Appointment of DOI Security Administrator: . 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 police funds ended 2019 at 54.98% and firefighters were at 54.35%. 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. 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. 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. J.B. Pritzker championed to consolidate about 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. Court Rejects Legal Challenge to Illinois Pension Consolidation, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, Pension Risk Transfers: What to Watch Out For, Kentucky Retirement System Trustees Say It Is Not Subject to State's Anti-ESG Law, Sequoia Capital, Thoma Bravo, Paradigm Sued for Touting FTX, Ohio STRS Loses 9.52% in 2022, Board Rejects Neville Vote of Confidence. Governor JB Pritzker, too, has claimed that theres nothing to be done except to find more money, and Chicago Mayor Lori Lightfoots vaguely worded statements about the matter dont amount to anything more, either. 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. 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. 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. Once the trial court issues its ruling, the case will likely be appealed by the losing party. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811. 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 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. 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. 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.. When Gov. In 2013, Illinois passed legislation which aimed to reduce pension liabilities, but various groups representing the affected employees filed suit, and the Supreme Court overturned the legislation in a 2015 decision. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. Gov. The funded health of the public safety pension funds has tumbled over the years. Mayor Lori Lightfoot says she will run for second term. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. Meanwhile, the asset consolidation process is proceeding. Since then, the Firefighters Pension Investment Fund (FPIF) and the Illinois Police Officers Pension Investment Fund (IPOPIF) have geared up to receive those investment funds and go to work. 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. 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 plaintiffs dropped their motion to certify class status. Youre invited to comment at JaneTheActuary.com! Report of the Illinois Pension Laws Commission 272 (1917). Arlington Heights Police Pension Fund, et al. 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. The multiplier is the percentage of final average salary earned per year of service. Litigation. Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. A recent report commissioned by the Illinois Public Pension Fund Association, which opposes consolidation, underscores that point. The Illinois Municipal League filed a support brief through Clark Baird Smith, of Rosemont, and the Associated Firefighters of Illinois did so through Asher, Gittler & DAlba, of Chicago. This plan falls far short of eliminating even the $11 billion of debt held by these plans. The Civic Federations recently released Inventory of Local Governments in Illinois report identified a total of 8,923 units of local government in Illinois. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. Tier 2 applied to employees hired on or after January 1, 2011. The task force report said the following changes were intended to address concerns about the fairness of Tier 2 and to avoid running afoul of IRS regulations: The first change, involving benefits paid to surviving spouses, is not expected to affect many individuals and reportedly holds great significance for first responders. 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. Similar warnings were issued by the Illinois Public Employees Pension Laws Commission in biennial reports it published between 1947 and 1969. 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. 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. XIII, 5. Simply put, plaintiffs do not own the funds that the Act requires to be transferred to the new statewide police and firefighter pension investment funds. Committee: House Education and the Workforce: Related Items: 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. Discovery shareholder, having accepted . 992, H.R. 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. They are seeking to maintain local control over pension management. 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. 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. 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. 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. 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 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. Total downstate police and firefighter pension funds assets under management plans into two new pension from... Of 8,923 units of local Governments in Illinois multiplier is the percentage of average. 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