New Illinois Bill Would Consolidate more than 650 Police and Fire Pensions

Debates ensue over projected returns, transition costs, and throwing the fund’s impeccable funded ratio off-balance.

Legislation introduced a few weeks ago could merge Illinois’ fire and police pension funds into the Illinois Municipal Retirement Fund (IMRF), in an effort to save on administrative costs and assist the pensions in securing enough funding to pay out their benefits.

 “Pension boards currently are governed by about 3,300 pension board trustees from over 650 funds that require training, have their own investment managers, business managers, attorneys, actuaries and accountants,” Mount Prospect Mayor Arlene Juracek said. “Consolidation into the [Illinois Municipal Retirement] Fund as proposed in House Bill 1567 will increase investment returns, significantly reduce administrative costs, and mitigate the property tax burden, all while not encroaching on constitutional protections.”

 President of the Illinois Public Pension Fund Association James McNamee opposed consolidation into the IMRF during a recent hearing on the matter, citing that many of these local police and fire pensions are underfunded relative to the IMRF.

The pensions are about 55 percent funded on average, officials said during the meeting.  Consolidation could potentially save them about $35 million to $50 million on an annual basis. The IMRF is approximately 98.2% funded as of December 31st 2017, in large part due to a rule that requires municipalities to prioritize their contributions to the fund over other matters.

The bill represents a years-long continuation of lawmakers’ investigation into consolidating the pensions into the IMRF.  A task force was formed in February by Governor J.B. Pritzker for the sole purpose of studying the feasibility of consolidating local pensions into the municipal fund, and is tasked with reporting their recommendation by July 1.

Transition costs from merging the pensions is also a big part of the debate. Sean Smoot of the Police Protective and Benevolent Association said “There are upfront costs and we have a lot of funds that will be burdened by them. This is going to cost some real money. It could take 15 to 20 years to recover it.”

He proposed that respective funds should be left whether to decide if they want to merge with IMRF. “It’s their money, it should be their vote,” Smoot said.


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