Home > Illinois Passes Police, Fire Pension Consolidation Bill
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Illinois Passes Police, Fire Pension Consolidation Bill

Move could boost returns by $2.5 billion over five years.

By Michael Katz

The Illinois Senate passed legislation that will consolidate 650 police and firefighter pensions, sending the bill to Governor JB Pritzker, who has said he will sign it into law.  

The bill, which the senate passed 42-12, amends the Cook County Article of the Illinois Pension Code to allow for the pensions to pool their funds into two statewide funds for investment purposes – one for police and one for firefighters. It will also allow contributions to be taken from any revenue source, including, but not limited to, other tax revenue, proceeds of borrowings, or state or federal funds.

The move is intended to help improve the financial stability of the pension funds, while easing pressure on local governments to raise taxes to fund those pensions.

“Bipartisanship in this general assembly has achieved what none of their peers from previous general assemblies has been able to do,” Pritzker said in a news conference after the vote passed the state senate, “consolidate the jungle of police and fire pension funds that serve first responders in the suburbs and downstate.”

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Last month, a bipartisan task force on pensions created by Pritzker released a report that said consolidating the plans’ investment assets was the single most impactful step the state can take to address the underfunding of the police and fire pension funds.

“This step is immediately actionable and beneficial to the health of the plans, retirees, and taxpayers,” said the report.

If the more than $14 billion of suburban and downstate police and fire plans were to achieve investment returns like the other larger Illinois plans over the next five years, they would collectively generate an additional $820 million to $2.5 billion alone. That is the result of analysis by the state’s Department of Insurance The report also added that if they earn comparable returns over the remaining 20 years on their statutory ramp to 90% funded status, they would create an additional $3.6 to $12.7 billion in investment returns alone.

The Illinois Municipal League, a government sector lobbying association, lauded the passage of the bill.

“This has been a top priority for municipalities across Illinois for several years and will provide much needed financial relief to local governments and their taxpayers while also protecting the retirements of our public servants,” Illinois Municipal League Executive Director Brad Cole said in a statement. “While the latest compromise isn’t perfect, this is an important first step that will benefit employees, retirees and taxpayers across the state.”

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Home > Treasury Approves Benefits Reduction for Michigan Pension
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Treasury Approves Benefits Reduction for Michigan Pension

Sheet metal workers’ union becomes 15th fund to be cleared to cut benefits.

By Michael Katz

The second time has proven the charm for the trustees of the Sheet Metal Workers Pension Fund of Troy, MI: their reapplication to reduce benefits under the Multiemployer Pension Reform Act of 2014 has been approved by the US Treasury Department.

The Treasury has now agreed on benefits reductions for 15 pension plans, while denying just five applications. Three proposed benefit reduction plans are currently under review.

The fund’s actuaries said that as of May 1 the pension was only 40.6% funded, and that it is projected to become insolvent in the plan year beginning May 1, 2033.

According to the fund’s benefit reduction plan, non-active participants who retired before Aug. 1, 2009, and all terminated vested participants, will have their benefits cut by 35%. Non-active participants who retired on or after Aug. 1, 2009 will have their benefits lowered by 30%.  For active participants the reduction is 25% for employees who were hired before May 1, 2006. There will be no reduction for those hired on or after May 1, 2006.

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The pension defines active participants as those who have worked at least 435 hours during the plan year ended Apr. 30, 2017 or Apr. 30, 2018, and who have not retired as of Apr. 30, 2018. Non-active participants include terminated vested participants, retired participants, disabled participants, beneficiaries of participants, and alternate payees.

The pension’s original application, had proposed a reduction in monthly benefits on which the revised monthly amount was based on a level accrual rate of $48, multiplied by the years of service earned through Apr. 30, 2019. Participants whose level accrual rate was already less than the $48 level accrual rate would not have had their benefits reduced. The fund withdrew that proposal in October 2018.

Before the Sheet Metal Workers Pension Fund’s reduction plan can take effect, it must first be put before a vote of the participants and beneficiaries of the fund. The vote will be administered by the Treasury Department, in consultation with the Department of Labor and the Pension Benefit Guaranty Corporation (PBGC).

The plan said the suspension would take effect as of May 1, 2020 and would continue indefinitely.

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Michigan Sheet Metal Workers Pension Applies for Benefits Cuts

Treasury Gets Benefits Reduction Happy

Treasury Approves Benefits Reduction for Pennsylvania Pension

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