Youre invited to comment at JaneTheActuary.com! Pension Crisis Overview Presentation. The Social Security wage base is the maximum amount of salary subject to Social Security tax. a group of Police Fund last year Arguing mandated consolidation, the lawsuit to block . 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. 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. 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 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. 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. 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. However, choosing who invests funds does not guarantee a particular outcome for benefit payments. The case is expected to be resolved in the circuit court on initial motions. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. 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. There, the plaintiff joined the pension fund in 1969. 2) Increase pensionable salary cap. 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. Once the trial court issues its ruling, the case will likely be appealed by the losing party. 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. DeGette. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. 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. 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. Please e-mail[emailprotected]with your query. Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. Gov. (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. According to The Wrap, a lawsuit was filed in New York last week on behalf of the Collinsville Police Pension Board, which is an Illinois-based Warner Bros. See, e.g., Report of the Illinois Public Employees Pension Laws Commission of 1949, 10 (1949) (revenues allocated to pension funds have not kept pace The IPOPIF team will remain diligent in our interactions with local police plans to assist them in transferring funds to the IPOPIF consolidated fund.. If funds who delayed their transfer wish to transfer after the May 20 court ruling, we will accommodate them as we are able, White said. For more than a decade, the Civic Federation has strongly supported consolidation of hundreds of police and fire department pension funds across Illinois to improve investment returns and reduce administrative costs. 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. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 January 21, 2020. 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. Police Officers' Pension Investment Fund. The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. 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 . 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. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. 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. With the litigation pending, many police funds have held off on moving their assets and the courts decision will come just a month ahead of the deadline, although funds dont face any punitive actions for missing the deadline. 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. This site is protected by reCAPTCHA and the Google Privacy Policy Pensionable salary cap: The Tier 2 pensionable salary cap currently increases at one-half of CPI or 3%, whichever is less. 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 lawsuit contends that pension member benefits are being impaired because the transition costs are being covered by loans through the Illinois Finance Authority that the two new consolidated funds must repay. Research indicates that consolidation can be a lose/win proposition. Gov. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. Meanwhile, the asset consolidation process is proceeding. Pritzker lawsuit. 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 panel rejected the argument the local funds have an established property right in assets or funding levels. 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. It also represented one of the rare actions taken by the state to help local governments on the pension front. 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. Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. 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. 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.). 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. Terms & Conditions | Privacy Policy 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. 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 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. 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. 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. 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. 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. The state's pension consolidation task force reported doing so could earn the funds an extra $2.5 billion altogether over the next five years. Since our last newsletter, on November 10, 2021 the Kane Co. Case No. Illinois However, that process may be interrupted if a court issues an order staying the transfer of assets. Article XIII, Section 5, of the Illinois Constitution, commonly known as the Pension Protection Clause, provides that [m]embership 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. Ill. Const. starts here. "The Illinois Police Officer's Pension Investment Fund is pleased that the Illinois Appellate Court . 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. Will be used in accordance with our terms of service & privacy policy. Discovery shareholder, having accepted . 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. The quotation referencing $15 million plus interest is misleading, at best.. An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the state's 650 firefighter and police officer pension funds, rejecting the plaintiff's claims that a law enacting the move violated the state's constitution. However, it should be noted that these increased returns are not guaranteed. 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. The plaintiffs dropped their motion to certify class status. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. Plaintiffs are individual active and retiree/beneficiaries of the local funds: they have no right to the investments held by the funds; rather, they are entitled only to present or future payments from the funds, McLaren wrote. Unfortunately, we know there is no political will, on the part of those currently in power. Gov. 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. That is because the average wage index increased faster than the CPI-based formula used to calculate the Tier 2 cap. Copyright 2022 The Civic Federation Failure to comply with IRS rules could result in a significant taxpayer cost if local governments were forced to make retroactive contributions to Social Security, a concern noted by Pritzkers task force on pension consolidation. Supporters of Senate Bill 616 have not as yet shown whether the proposed changes are needed to satisfy legal requirements and, if they are needed, whether they must be implemented immediately. https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/, Daily Treasury Par Yield Curve Rates 28 Feb 2023, The Inflationary Effects of Sectoral Reallocation, Daily Treasury Par Yield Curve Rates 23 Feb 2023, On the Limitations of Dataset Balancing: The Lost Battle Against Spurious Correlations, Years of life lost to COVID-19 in 81 countries, Daily Treasury Par Yield Curve Rates 22 Feb 2023, Daily Treasury Par Yield Curve Rates 17 Feb 2023, Daily Treasury Par Yield Curve Rates 16 Feb 2023, CalPERS Refusal to Put Clearly Insolvent Long-Term Care Insurance Plan in Bankruptcy Increases Harm to Policyholders and Makes Board and Responsible Executives Liable. 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.. The amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. B. Pritzker, who signed the bill into law. 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. The law creates the. Further updates will be provided as they become available. 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 . 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. The pension problem: Illinois Quad-Cities turn to borrowing to pay down unfunded pension liability Cities across Illinois are scrambling to find ways to stockpile the money they'll need to. 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 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. Patrick Andriesen, Illinois Policy Institute, Woman sues Granite City QuickTrip over parking lot slip, fall, Madison County civil docket Feb. 27-Mar. 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. 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 Firefighters Pension Investment Fund applauded the court ruling, saying in a statement that it will continue to implement the transition process, which is required to be completed by June 30. J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. Lawsuit Challenges Pension Asset Consolidation by John E. Motylinski 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. 802 South 2nd Street | Springfield, IL 62704 "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. J.B. Pritzker announced his support for a plan for the state to combine roughly 650 suburban and Downstate police and fire pension funds last month, the Illinois Fraternal Order of . Arlington Heights Police Pension Fund, et al. Illinois Second District Appellate Justice Robert McLaren Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. 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.. Tier 2 applied to employees hired on or after January 1, 2011. 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. XIII, 5. 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.. 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. 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. The funded health of the public safety pension funds has tumbled over the years. 1970, art. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. 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. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. This site is protected by reCAPTCHA and the Google Privacy Policy 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 The Civic Federation urges the Governors Office and sponsors of Senate Bill 616 to demonstrate the need for the specific Tier 2 enhancements in the legislation. ", Voting for the local board is, at best, ancillary to a participants receipt of the pension payment and other assets, McLaren continued. The three main parts of the pension benefit formula are illustrated below. 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. Litigation. 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. Protected by Google ReCAPTCHA. 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. 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. 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. 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. 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. . Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. 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 two sides last year laid out arguments seeking a summary judgment. 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. A recent report commissioned by the Illinois Public Pension Fund Association, which opposes consolidation, underscores that point. Illinois has nations worst pension debt. 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. 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. comeback 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, however, the consolidation encountered its first legal challengea class action lawsuit claiming Public Act 101-0610 unconstitutional. A court ruling as soon as December will determine the fate of a 2019 law Gov. 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. If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. 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. 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. The First Responder Pension Consolidation law currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. . 994 108th Congress (2003-2004). . 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 Civic Federations recently released Inventory of Local Governments in Illinois report identified a total of 8,923 units of local government in Illinois. These estimates came from comparisons to existing Illinois pension plans that are more consolidated, but these other plans also have different benefit formulas. 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 . 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