Illinois Nears Completion of Statewide Police Pension Consolidation

The nearly consolidated Illinois Police Officers’ Pension Investment Fund has moved into its new headquarters in downtown Peoria. The pension fund marked the occasion with an April 13 open house that included members of Peoria City Council welcoming the IPOPIF to the city.

In 2019, the Illinois General Assembly passed a bill that allowed for the consolidation of 650 police and firefighter pensions into two statewide funds for investment purposes—one for police and one for firefighters. The move was aimed at improving the financial stability of the pension funds and at easing pressure on local governments to raise taxes to fund those pensions.

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However, in early 2021, 18 police and firefighter pension funds filed a lawsuit alleging that the consolidation violated the state constitution. In May 2022, an Illinois circuit court judge ruled against the complaint, and that ruling was upheld by an Illinois appeals court in February.

Almost four years after the bill was passed, the police pension consolidation is still not complete; however, “the team at IPOPIF is seeing light at the end of the transfer process tunnel,” according to the pension fund’s most recent newsletter. IPOPIF CIO Kent Custer reported at a recent board meeting that 324 of the 357 participating pension funds have fully transferred and reconciled pension assets worth approximately $9.1 billion.

At the meeting, Custer also discussed short- and long-term asset allocation changes being enacted by the pension fund. He said the initial short-term allocation was established to accommodate the IPOPIF transition and the subsequent buildout of diversified strategies, including private market investments. He noted that initial allocations to public equities were 8% underweight to long-term allocations, reflecting awareness of heightened valuation risk in late 2021.

Due to recent market corrections, Custer said he sees the opportunity and risk for equities to be in better balance. He said the rationale to underweight equities has weakened, and there is an increased risk of missing out on equity upside.

Custer also discussed other investment initiatives at the board meeting, including:

Seeking to hire two additional investment officers to work from the Peoria office, preferably with experience in the private markets sector. The board approved the hires during the meeting;
Evaluating small-cap equity and multi-asset-class credit for a potential search recommendation. The staff is currently gathering information and planning the evaluation; and
Gathering information in preparation for potential private market consultant search.

The Firefighters’ Pension Investment Fund announced in a February statement that “approximately 99% of local firefighter pension funds have successfully completed the transition process,” with assets totaling more than $8 billion.