Suburban & Downstate IL Fire & Police Pension Consolidation Recommended By Taskforce

By Benjamin Cox on October 10, 2019 at 4:24pm

A task force created by Governor J.B. Pritzker announced a plan today to save the state nearly $2.5 billion over the next 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 for first responders. “This consolidation plan will improve the financial health of the plans and help secure the future of the retired workers who rely upon them; and it will alleviate some of the property tax problem that has burdened homeowners and renters all across our state. The current system of investing 649 funds is failing and taxpayers are paying a high price. Under the current arrangement, Illinois suburban and downstate police and firefighter pension funds are under-performing by nearly $1 million a day.”

Consolidating the pension funds down to two, a separate one for fire and another for police, will consolidate nearly $14 billion in assets. The consolidation plan still allows for some control at the local level, as municipalities will still govern pension awards and disability determinations.

Brad Cole, Executive Director of the Illinois Municipal League, describes some of the benefits. “It reduces the administrative overhead, because there is 650 of everything – attorneys, fund managers, boards, training requirements, etc. It consolidates the assets so there can be a higher rate of return. The bottom line expectation is to see at least a two-fold percentage point increase in investment returns because of this consolidation plan.”

Cole went on to say that it stabilizes pension funds for first responders and helps the state overall with their pension solvency problem in a collaborative effort with the governor’s office. With regard to the two new funds, the task force also recommended that the state make some changes to Tier 2 beneficiaries’ plans to address future concerns about the standard of the Social Security Administration and Internal Revenue Code, as well as avoiding future costs to municipalities resulting from non-compliance.

Governor Pritzker said he now wants the task force to turn their attention to the nine Chicago and Cook County funds with a funding gap of $44 billion and six statewide pension funds that are short by $131 billion dollars. The General Assembly will return to session on October 28 to vote on the proposal.