LEGISLATIVE ALERT - PENSION CONSOLIDATION - LEGISLATIVE ALERT
As many of you have heard, the Governor is proposing the mandatory consolidation of all downstate and suburban police pension funds into one plan which will initially be controlled by the State. The local pension fund boards who currently serve officers would continue to exist for now, but they would no longer have any authority to invest money for local police officers. Instead, all of the money would be held and invested by one statewide fund.
The consolidated fund would initially be controlled by individuals exclusively appointed by the Governor. After 3 years, the fund would be managed by a board including mostly mayors, with some elected active employees and an elected annuitant trustee. The proposed board would have the lowest participant control/participation of any pension fund in the State. This represents a loss of police officers’ control over their own money.
Not surprisingly, the labor unions representing law enforcement have been working hard against this proposal. The Illinois Police Benevolent and Protective Association, Fraternal Order of Police and the Metropolitan Association of Police have been working together, hand in hand, to defeat this legislation.
Our biggest obstacle is the Governor’s simplistic catch phrases sound great. Phrases like “eliminate unnecessary government,” “reduce operational costs,” and “reduce property taxes” all sound great, but they are not based on any reliable analysis or any verified numbers. This proposal will require municipalities to spend a massive amount of money up front in the hopes they will recover their cash outlay over a period of at least a decade. Over the long term, it might reduce some costs and it could potentially allow some funds to achieve higher returns, but it will take years.
This complex issue requires diligent study from actuaries, investment professionals, and other industry experts. It requires inclusion of, and buy-in from, all stakeholder groups. More than anything, this proposal needs time to be fully vetted and fairly analyzed. It needs to be publicly debated based upon reliable information. It can not be like so many of Illinois’ recent pension ideas like Tier II, Tier III and SB1 which all failed because they were pushed through quickly without proper discussion with professionals and affected parties, resulting in numerous unintended consequences.
Consolidating $8 billion requires thoughtful, transparent due diligence. Certainly, the upcoming veto session does not provide an adequate amount of time to vet the Governor’s consolidation gambit.
We do appreciate the Governor’s inclusion of some much needed benefit fixes for downstate and suburban police officers who are under Tier II. The Governor has proposed some fixes, but realistically, the fixes he has proposed are not enough to hand over control of $8 billion to the State of Illinois, especially considering the state’s abysmal track record in managing its own pension funds.
We can certainly use the help of all our members in communicating your concerns. We have seen many great letters to the editor reiterating our concerns. We also encourage our law enforcement community both active and retired to contact their State Senators and Representatives and let them know this proposal is bad for police officers, bad for communities, and bad for taxpayers.
IF YOU DO NOT KNOW WHO YOUR STATE SENATOR AND REPRESENTATIVE ARE FOLLOW THIS LINK TYPE IN AND CONFIRM YOUR ADDRESS AND YOU CAN SEE WHO THEY ARE AND WHERE TO CALL THEM!
October 18, 2019
FOR IMMEDIATE RELEASE
Latest Department of Insurance Figures Show Downstate Pension Systems are Lowest in Administrative Costs
SPRINGFIELD – The latest figures released by the Illinois Department of Insurance show that the Illinois Municipal Retirement Fund (IMRF) and downstate police and fire pension systems have the lowest administrative costs of any pension systems in the state. This new data is key information that should be carefully considered during any discussion of pension fund consolidation, according to the Illinois Police Benevolent and Protective Association (IPBPA).
“Much of the current talk focuses on the alleged administrative cost savings by pension consolidation, yet this latest information shows the IMRF, police and fire pension funds already have lower administrative costs than anybody else,” said PBPA Executive Director Sean Smoot. “In fact, those local system costs are far lower than those for the State of Illinois' pension systems. Those who favor the consolidation of police and fire pension funds will need to explain how moving millions from a lower-cost system to a higher-cost system will save the taxpayers money.”
The Bi-Annual Department of Insurance Public Pension Division's October 2019 report shows that 6.2 percent of the total funds administered by the IMRF go toward administrative costs. The figure for downstate police pension systems is 7.97 percent, and for fire pension systems it is 8.37 percent. The administrative cost for the State of Illinois' employee pension system is 14.36 percent.
“We want to stress that this data comes directly from the State of Illinois, not from any group pushing for or against consolidation,” Smoot said.
The PBPA suggests that, rather than consolidating the local systems, the Illinois General Assembly should allow the smaller systems to invest their funds at a much higher rate of return like the IMRF is allowed to do. Without the investment restrictions, which are placed only on small police and fire pension funds, and with no consolidation, the local pension funds could generate their own higher returns, meaning no extra cost to the taxpayers to keep the funds healthy. ...
3 months ago
FOR IMMEDIATE RELEASE
Thursday, Oct. 10, 2019
Task Force Recommends Consolidating Downstate and Suburban Police and
Consolidating Assets of Suburban & Downstate Police & Fire Pension
Fund Assets Worth As Much As $2.5 Billion over 5 Years
The Pension Consolidation Feasibility Task Force issued a report to
Governor JB Pritzker today recommending that the state take action in
the veto session to consolidate the nearly 650 suburban and downstate
police and fire pension plan assets into two new statewide systems,
which could generate as much as $1 million a day in additional returns
for the funds and help stabilize pensions and protect the retirement
security of our brave first responders.
The consolidated funds would total more than $14 billion in assets,
generating an additional $820 million to $2.5 billion in investment
returns alone over the next 5 years and an additional $3.6 to $12.7
billion in investment returns alone over the next 20 years, based on
the performance of the statewide municipal employees’ fund.
The two consolidated funds – one for police and one for fire – would
pool assets to lower administrative costs and gain access to better
investment opportunities, improving performance and easing the growing
pressures on local property taxes to pick up the tab when funds
“Under the current arrangement, Illinois’ suburban and downstate
police and firefighter pension funds are underperforming by nearly one
million dollars per day. That’s not just a missed opportunity – that’s
a hole these funds are digging deeper every year – and then
municipalities have to ask taxpayers to fill the hole,” said Governor
JB Pritzker. “We’ll be proposing legislation this fall to consolidate
the assets of the 649 suburban and downstate pension funds into two
statewide funds. This consolidation will improve the financial health
of the plans and help secure the future for the retired workers who
rely on them – and it will alleviate some of the property tax burden
plaguing homeowners and renters across our state.”
Because most of the existing 650 funds are so small – nearly half have
less than $10 million in assets – returns on their investments have
been significantly lower than other pension systems. Currently, the
array of smaller funds each pay higher administrative fees and see
significantly lower investment returns than larger pension plans in
Illinois, averaging 2% less annually during the past 10 years than the
statewide municipal employees’ fund.
With regard to the two new funds, the task force also recommends that
the state make some changes to Tier 2 beneficiaries’ plans to address
future concerns about the safe harbor standard of the Social Security
Administration and Internal Revenue Code, as well as avoiding
substantial and sudden future costs to municipalities resulting from
In the future, the task force could consider consolidating the benefit
administration of the suburban and downstate police and fire pensions,
as well as the advantages of further consolidation of other state and
local benefit plans, including Chicago’s funds.
Governor Pritzker established the task force less than a month into
office, on Feb. 11, 2019. Former Chicago Board Options Exchange
Chairman and CEO William J. Brodsky, Associated Fire Fighters of
Illinois President Pat Devaney and former Illinois Senate Minority
Leader Christine Radogno co-chaired the 10-member committee. ...
4 months ago
From: RICHARD KING
The September FOP general meeting is 17 Sept 19 at 1200 hours. This is the month By-Laws are voted on. AGAIN there is another anti-retiree proposal. The proposal in question would limit members from serving more than four (4) terms on the FOP board. This By-Law would be legal on its own but they want to make retroactive to the formation of Lodge 7. The effect would be to remove about 6 trustees all of whom are retirees.
If you are read the second city blog you see many comments that they would give up the COLA to get rid of the residency requirement. It’s the retirees that add suitability to this board. This was proposed by a officer who will be running for president of the lodge. He has run many times before and has never won an election. Its not his first attempt to remove retirees from the board.
This By-Law was passed by the By-Law Committee but voted down by the full FOP board 16-9. Two retirees actually voted to accept the By-Law (Donahue and Dougherty). Remember those names come election time! All retirees are not equal. We need more worker bees and less good time Charlie’s!
This By-Law may still may come to a vote at the General Meeting. So anyone who could make the meeting would be appreciated. Hamburgers and hot dogs will be served. Parking is tight so car pool and let the guy/gal who is most ambulatory drive and drop the others at the door.
Good news with Aetna Insurance the rates will drop $10 next year and we will gain Silver Sneakers, Optical, and $2000 for hearing aides every two years. More info to follow.
Have a great day and stay safe!
Member FOP Retirement Committee
019 Retired ...