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].) 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. 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. In December 2019, Gov. Illinois Gov. This effort also proved unsuccessful. 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 plaintiffs are seeking to certify the lawsuit as a class action. 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. 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. 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 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. Sklodowski vs. Police Officers' Pension Investment Fund. 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 . 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. Senate Bill 616 reinstates the Tier 1 benefit for these surviving spouses. Recently, however, the consolidation encountered its first legal challengea class action lawsuit claiming Public Act 101-0610 unconstitutional. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. 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. 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. In December 2019, Gov. About a month ago, Gov. Salaries can grow beyond the cap, but the portion that is used to calculate pension benefits cannot. Grayslake Police Pension Fund 10 South Seymour Ave, Grayslake IL 60030-0906 DOI Pension Fund Number POO9600 . Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. A court ruling as soon as December will determine the fate of a 2019 law Gov. 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. Elected officials never sought formal guidance from the Internal Revenue Service. Dec 29, 2021. The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. 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.). 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. Trustee Moehrlin made a motion to table the resolutions to appoint an authorized representative to the new Illinois Police Officers Pension investment fund and Trustee Orta seconded the motion. 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. In 2015 the Illinois Supreme Court struck down subsequent legislation that would have reduced the benefits of current State employees and retirees. However, choosing who invests funds does not guarantee a particular outcome for benefit payments. 2019 consolidation legislation. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. That could be a boost for communities being squeezed by pension costs. House Committee Meeting Hide Overview . Opinions expressed by Forbes Contributors are their own. 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. By cutting down on duplicative administrative costs and. 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. 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. 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. A separate law passed in December 2010 extended Tier 2 to public safety funds. 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. 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. 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 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. In addition, they must ensure that the financial impact of any proposed Tier 2 changes is fully evaluated by pension actuaries and publicly disclosed before any action is taken by the General Assembly. 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. 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. The league stated it is confident it will beat the legal challenge. Nathan Woodside/Lewis & Clark Community College. 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. Chicago Office | Illinois Policy t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy candidate seeks $12M from Preckwinkle, 4th Ward Dems for alleged defamatory mailers, Judge says franchisors also liable in suits claiming biomertric scan violations; Ruling could make businesses more vulnerable to suits, UIC law prof can continue part of lawsuit regarding reaction to his allegedly racially insensitive test question, IL high court: Concerns over 'absurd,' 'annihalitive' payouts no reason to limit damage claims under IL biometrics law, Appeals panel agrees IL police and firefighter pension consolidation doesn't violate state constitution, IL Supreme Court: Chicago didn't violate state law by charging fees to owners of impounded vehicles, Appeals panel: Chicago must force telecom companies to hire union labor to upgrade their equipment on city-owned poles. Pritzker lawsuit. January 21, 2020. t 217.528.8800 f 312.212.5277 e info@illinoispolicy.org, Copyright 2023 Illinois Policy | Illinois' comeback story starts here. 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. With the changes in the bill just enacted, the cap would grow at full inflation instead. 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. The Plaintiffs have 30 days to appeal the decision. They are seeking to maintain local control over pension management. That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. comeback Will be used in accordance with our terms of service & privacy policy. The Social Security wage base is the maximum amount of salary subject to Social Security tax. Consolidation Lawsuit Update . Illinois Public Pensions Database. 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. Report of the Illinois Pension Laws Commission 272 (1917). 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. There, the plaintiff joined the pension fund in 1969. 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. 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. 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.. It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. 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 aconstitutionalamendment to allow for structural pension reform. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. In Illinois, there is a rich body of law concerning interference with pension rights and benefits. 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. But it seems about time for a deep dive into a narrow question: what did the Illinois Supreme Court have to say about pensions? Illinois Police Officers' Pension Investment Fund; . 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. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. 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. On appeal, the plaintiffs argued Judge Villa erred by finding the amendment didnt violate the state constitutions pension protection clause. Plaintiffs rights to receive benefit payments are not impacted by these transfers.. B. Pritzker, who signed the bill into law. While 98% of Illinois pension plans are for Copyright 2023 Asset International, Inc. All Rights Reserved. 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. 1970, art. Illinois Police Officers Pension Investment Fund 1) Review and possible approval of IPOPIF Exhibit A Resolution . 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. Youre invited to comment at JaneTheActuary.com! Further updates will be provided as they become available. of the board members. Illinois 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. Shortly thereafter, a member of the Pension Laws Commission sent a follow-up letter to Delegate Green requesting that he read a statement into the convention record expressing the view that the new provision should not be interpreted as reflecting an intent to withdraw from the legislature the authority to make reasonable adjustments or modifications in respect to employee and employer rates of contribution, qualifying service and benefit conditions, and other changes designed to assure the financial stability of pension and retirement funds and that [i]f the provision is interpreted to preclude any legislative changes which may in some incidental way diminish or impair pension benefits it would unnecessarily interfere with a desirable measure of legislative discretion to adopt necessary amendments occasioned by changing economic conditions or other sound reasons. . The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. 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. This decision recapped not merely the 2013 decision, but included more extensive commentary on Illinois pensions, citing, for example, 1917 and 1957 reports characterizing state and local pension plans as in a condition of insolvency, and a 1969 overall funded status of 41.8%. On December 18, 2019, Illinois Governor JB Pritzker signed into law Public Act 101-0610, which provided for the mandatory consolidation of the investment assets of the State's public safety pension funds into two consolidated investment funds - one for police pension funds (Article 3 Funds) and one for firefighter pension funds (Article 4 Funds), White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. The three changes intended to bring Tier 2 benefits in line with safe harbor restrictions are as follows: 1) Expand survivor benefits. The General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). 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. 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. 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. 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. 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. . Updates on Pension Consolidation Lawsuit 2) Update on Sean Madden Disability Application . 992, H.R. State law restricts the securities that the existing police and fire funds are allowed to hold. 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