Illinois' Fraternal Order of Police is among the groups opposed to the idea. 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. 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. . Protected by Google ReCAPTCHA. Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. 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. This is a much narrower claim than some have made, including Gov. J.B. Pritzker won legislative approval in November 2019to require the more than 600 local government police and firefighter funds with the exception of Chicago to transfer their assets to a single consolidated police fund and a single fire fund by July 1. The legal limbo brought about by the case has resulted in some local Article 3 pensions plans choosing to not transfer funds as mandated by the Act until a ruling is announced, Richard White, the funds executive director, said in a statement. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. 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. The funded health of the public safety pension funds has tumbled over the years. To the extent that growth in the pensionable salary cap is an issue, it remains to be seen whether Senate Bill 616 solves the problem. 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. 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. No analysis of the benefit increases was performed by a professional actuary, the specialized financial analysts who estimate pension costs. The lawsuit said the law violated the state's pension protection clause, the contracts clause and the takings clause of the Illinois Constitution by terminating "plaintiffs' authority to. Illinois Police Officers Pension Investment Fund 1) Review and possible approval of IPOPIF Exhibit A Resolution . 994 108th Congress (2003-2004). The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. 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. Unfortunately, we know there is no political will, on the part of those currently in power. 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. Phone: 312-201-9066 | Email: [emailprotected] Ill. Const. Once the trial court issues its ruling, the case will likely be appealed by the losing party. . The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. On December 18th, 2019, Governor Pritzker officially signed Public Act 101-0610 into law, which then took effect on January 1st, 2020. The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. H.R. 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, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. The Newsletter Bringing the Legal System to Light. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. "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. lawsuit filed by a handful of . Further updates will be provided as they become available. Illinois Police Officers' Pension Investment Fund; . 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 IPOPIF team will remain diligent in our interactions with local police plans to assist them in transferring funds to the IPOPIF consolidated fund.. John D. and Catherine T. MacArthur Foundation. 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 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. 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. The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers. 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. 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 People ex rel. 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. 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 White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. Consolidation: Attorney Mancini . and Terms of Service apply. 802 South 2nd Street | Springfield, IL 62704 The courts decision rests on its interpretation of what constitutes a benefit., The case Arlington Heights Police Pension Fund et al v. Jay Robert Pritzker et al argues that benefits are damaged because the law strips plaintiffs of their autonomy and their authority.. The law creates the. A limit was also imposed on the amount of earnings used to calculate final average salary. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. Senate Bill 616 reinstates the Tier 1 benefit for these surviving spouses. . . 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; 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. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. The fund said it has $6.9 billion in assets under management. Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. The initial legislation, which affected most public pension funds in the State, was introduced on March 24, 2010 and passed the same day. Illinois Gov. J.B. Pritzker championed toconsolidateabout 650 local police and firefighter pension funds from across Illinois under state management by mid-2022. 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.. The First Responder Pension Consolidation law currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. State law restricts the securities that the existing police and fire funds are allowed to hold. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. In Illinois, there is a rich body of law concerning interference with pension rights and benefits. The plaintiffs are seeking to certify the lawsuit as a class action. The report, prepared by Chicago-based Anderson Economic. Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. 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. 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. But consolidation is a small step for a tiny portion of Illinois pension problem. 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 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. Attorneys Daniel Konicek and Amanda Hamilton, of Konicek & Dillon, of Geneva, represented the plaintiffs. . 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. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Your email address will not be published. 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. As a result, Tier 2 members paid about 1.9% of their salary to subsidize Tier 1 benefits. 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. Theres been confusion among the stakeholders over the litigations impact should the court overturn the legislation, which would also impact the firefighters fund. 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. In December 2019, Gov. 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. 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. 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. 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. The plan has modest fiscal goals. What do you think? 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. 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