illinois police pension consolidation lawsuit

They are seeking to maintain local control over pension management. 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 . (Shutterstock) HINSDALE, IL In the last budget year, Hinsdale spent $163,000 on managing. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. . 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; 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 police funds ended 2019 at 54.98% and firefighters were at 54.35%. The local boards also did not have any say in the actual method of funding; contribution requirements were set in the Pension Code.. 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. 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. Click here to read the full issue brief. Illinois Public Pensions Database. 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. 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. A recent report commissioned by the Illinois Public Pension Fund Association, which opposes consolidation, underscores that point. 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. 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. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. Municipalities have until July 1 to transfer all assets from their locally managed pension funds . 3) Increase final average salary. 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. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. Previously, employees hired after 2011 needed to work at least 10 years and vest before survivor benefits were available. Yesterday, Illinois Gov. J.B. Pritzker. 993 AND H.R. 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. . The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. Similar warnings were issued by the Illinois Public Employees Pension Laws Commission in biennial reports it published between 1947 and 1969. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. 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. Appointment of DOI Security Administrator: . In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. The Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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. 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. Since our last newsletter, on November 10, 2021 the Ill. Const. 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. 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. 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 Illinois has nations worst pension debt. 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. What the grassroots Illinoisians think about it is another question. 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 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. However, as pointed out by the Civic Federation, lawmakers never definitively established that a safe harbor violation existed for Tier 2 public safety workers, nor that the changes in this bill were the minimum necessary to bring the plans into compliance. Discovery shareholder, having accepted . 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. 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. 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. 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. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. Illinois v. Governor Jay Robert "J.B." Pritzker, et al. In December 2019, Gov. 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. Illinois Federation of Teachers, AFT, AFL-CIO vs. Lindberg, 60 Ill.2d 266 (1975) 3 Felt vs. Board of Trustees, 107 Ill.2d 158 (1985) 5 Schroeder vs. Morton Grove Police Pension Board, 219 Ill. App.3d 697 (1991) 7 McNamee vs. State of Illinois, 173 Ill.2d 433 (1996) 9 The People ex rel. The panel explained the amendment allows the Illinois Finance Authority to lend up to $7.5 million to each of the new statewide funds, and if borrowed, it would be repaid with interest. Illinois Police Officers' Pension Investment Fund; . Recent News. 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. A group of police funds last year sued to block the implementation arguing the . 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. 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 First Responder Pension Consolidation law currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. The amendment doesnt mandate those loans, nor is there evidence it reduces available funding to pay promised benefits. "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. 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. 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.. Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . 2021 CH 55 . 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. Illinois Gov. 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. Your email address will not be published. For Tier 1 public safety workers hired before 2011, surviving spouses were already eligible to receive a portion of the deceaseds pension regardless of how many years of service an employee had. In other words, the key words that the Court emphasizes are diminished or impaired, not enforceable contractual relationship.. Youre invited to comment at JaneTheActuary.com! The General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. 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. 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. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. This plan falls far short of eliminating even the $11 billion of debt held by these plans. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. 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. 802 South 2nd Street | Springfield, IL 62704 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. FPIF recently notified local funds of their asset transfer dates which begin October 1, 2021. The firefighters fund is further along in the consolidation process and expects to meet the deadline. 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. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. Justice Robert McLaren wrote the panels opinion, issued Feb. 7; Justices Susan Hutchinson and Ann Jorgensen concurred. Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. Tier 2 applied to employees hired on or after January 1, 2011. The Illinois Supreme Court may decide to review the case thereafter. Illinois police, firefighters push back on state control of pensions, In DeKalb, police and fire pension costs use up about, In Peoria, Mayor Rita Ali recently called on state leaders to fix pension costs on which the city will. Illinois However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. 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 plaintiffs claim 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 the consolidation has infringed upon. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. 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. It also represented one of the rare actions taken by the state to help local governments on the pension front. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. . Illinois is home to thenations worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. 1970, art. Worth Police Pension Fund 7112 W. 111th Street Worth, IL 60482 . 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 . 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. 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. The governing board is comprised of Mayors and Village Presidents. The enhancements to Tier 2 benefits for employees hired after 2011 were part of a bill to consolidate the states roughly 650 public safety pension funds into just two funds, one each for police and fire. . Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. 1970, art. Brian Granato Mike Pritchard, Sr. . Research indicates that consolidation can be a lose/win proposition. The funded health of the public safety pension funds has tumbled over the years. While 98% of Illinois pension plans are for 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. Once the trial court issues its ruling, the case will likely be appealed by the losing party. Officials in more than 650 suburban and downstate Illinois towns need to be laser focused in early 2022 on the implementation of the state's massive investment overhaul of police and firefighter pensions. The panel rejected the argument the local funds have an established property right in assets or funding levels. 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 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. Nathan Woodside/Lewis & Clark Community College. A state appeals panel has affirmed a ruling that the Illinois state constitution holds no barrier to a law consolidating hundreds of local police and firefighter pension boards into two statewide funds. 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. Police Officers' Pension Investment Fund. The Plaintiffs have 30 days to appeal the decision. and Terms of Service apply. By: Matthew J. Schueler. About a month ago, Gov. 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. 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. 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. Illinois Gov. This is a much narrower claim than some have made, including Gov. 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. Unfortunately, we know there is no political will, on the part of those currently in power. 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. White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. The Newsletter Bringing the Legal System to Light. Dec 29, 2021. Illinois' Fraternal Order of Police is among the groups opposed to the idea. 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. 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. XIII, 5. 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. 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. 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. Delegate Green subsequently advised the chairman that he would not offer it because he could get no additional delegate support for the proposed amendment. . As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. Although some union leaders supported the move, dozens of police and firefighter pension boards and individual members sued the state and the new funds to stop the consolidation. 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. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. Attorney Atwell replied that there currently is a consolidation lawsuit and until the court rules, he would hold off at this time. 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. The quotation referencing $15 million plus interest is misleading, at best.. JB Pritzker's task force released its report proposing consolidation of the states' police and fire pension funds, which at present are managed individually by the . 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. 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. 802 South 2nd Street | Springfield, IL 62704 The Illinois Police Officers' Retirement Investment Fund told lawmakers at a committee hearing that some individual funds resisted transferring their assets due to ongoing litigation challenging the constitutionality of the law. Further updates will be provided as they become available. 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. Will be used in accordance with our terms of service & privacy policy. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). 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. Method of funding ; contribution requirements were set in the last budget year, spent. Advised the chairman that he would not offer it because he had not before! 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