Capitol Fax.com - Your Illinois News Radar » Civic Federation urges caution on pension consolidation plan
SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Civic Federation urges caution on pension consolidation plan

Friday, Nov 8, 2019

* Short version…


The Tier 2 fix is what convinced the Associated Fire Fighters of Illinois to sign on to the plan. So, any changes to that could imperil the whole thing.

* Excerpt from long version

As indicated by the discussion above, determining when or if Tier 2 benefits will violate IRS rules is not simple. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. Supporters of Senate Bill 616 have not as yet shown whether the proposed changes are needed to satisfy legal requirements and, if they are needed, whether they must be implemented immediately.

To the extent that growth in the pensionable salary cap is an issue, it remains to be seen whether Senate Bill 616 solves the problem. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. This is clearly a faster rate than the current formula of the lesser of 3% of one-half of the inflation rate, but it does not match the national average wage index used to calculate growth in the Social Security wage base. The difference might be accounted for by the proposed change in the calculation of final average salary, which lowers the required multiplier under IRS rules.

Up to now, neither the Governor’s task force nor supporters of Senate Bill 616 have publicly provided actuarial reviews showing the cost of the Tier 2 changes for the affected police and fire funds. In the task force report, the cost is estimated at $70 million to $95 million over five years, or $14 million to $19 million per year, but there is no supporting documentation for the estimate.

The task force also noted that these estimated costs are minor compared to increases in investment returns projected to be earned by the consolidated funds compared with the 649 existing police and fire funds. The task force estimated that the consolidated funds could generate an additional $820 million to $2.5 billion in investment returns over five years, or $164 million to $500 million per year.

However, it should be noted that these increased returns are not guaranteed. Any increase in actual returns will be partly due to the consolidated funds’ ability to invest in riskier investments. State law restricts the securities that the existing police and fire funds are allowed to hold. In addition, because the assumed rate of return is used as the discount rate for pension liabilities, an increase in the expected return rate by the consolidated funds would also reduce statutorily required annual pension contributions. Senate Bill 616 requires that contribution changes due to changes in actuarial assumptions be phased in over three years.

Since Tier 2 applies to nearly all pension funds across the State, there could be a move to simply apply the same changes to all funds statewide, also without first determining whether the changes are the minimum necessary so as not to impose additional fiscal hardship on already struggling governments.

In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. The latest example involved pension buyouts, which were budgeted to reduce General Funds contributions by more than $400 million in FY2019 but ended up saving about $13 million that year. The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers.

The Civic Federation urges the Governor’s Office and sponsors of Senate Bill 616 to demonstrate the need for the specific Tier 2 enhancements in the legislation. In addition, they must ensure that the financial impact of any proposed Tier 2 changes is fully evaluated by pension actuaries and publicly disclosed before any action is taken by the General Assembly.

I’m hearing there could be an announcement this afternoon about the consolidation bill. Stay tuned.

- Posted by Rich Miller        

10 Comments »
  1. - thechampaignlife - Friday, Nov 8, 19 @ 2:27 pm:

    Can we just add language to the statute saying you get the higher of: our formulas or the minimum required by IRS/SS? And then call it a day on this issue?


  2. - City Zen - Friday, Nov 8, 19 @ 2:47 pm:

    In the pension world, what’s given cannot be taken back. Take your time.


  3. - RankandFile - Friday, Nov 8, 19 @ 3:00 pm:

    While we are at it, can we get some more independent information on transition costs regarding forced consolidation and arbitrary sale of existing assets? Also, why is consolidation mandatory? Why the effort to ram this thru in veto? What about local funds that are performing well? What about local control?


  4. - revvedup - Friday, Nov 8, 19 @ 3:17 pm:

    There is a false urgency to ramrod this through in the veto session, merely so some electeds can “Look, we fixed the police/fire pension issue”, while ignoring the points raised above and in the Federation’s comments. Maybe “Leap before Looking” should be the State’s new motto.


  5. - Davos - Friday, Nov 8, 19 @ 3:19 pm:

    Maybe “Leap before Looking” should be the State’s new motto.

    Such is life in the “pension reform” arena.


  6. - the Edge - Friday, Nov 8, 19 @ 3:26 pm:

    The Civic Federation again can’t see the trees in the forest. This is such a big development get over it and support the consolidation.


  7. - LocalGovGuy - Friday, Nov 8, 19 @ 3:31 pm:

    What about the 100 municipalities whose officers are in both a pension plan and social security? I don’t believe they need any Tier 2 pension enhancements to address the alleged issue.


  8. - Municipal CPA - Friday, Nov 8, 19 @ 3:56 pm:

    I have said it before, this is a gift to the Police and Fire unions. It is not saving Tier 2. Raising their retirement pay and doubling the COLA is not necessary. Even the IML’s legal says so itself in footnote 14. This will only drive up the pensions costs for municipalities that already cant afford the pensions granted by the legislature.


  9. - Sue - Friday, Nov 8, 19 @ 4:34 pm:

    Just what we all need- higher pension costs. These Dem legislators and their new Governor never learn- promise an additional benefit to get union by in and years later someone recognizes the additional cost. A substantial number of townships already are near bankruptcy due to pension costs so why not increase their burden


  10. - Buford - Friday, Nov 8, 19 @ 4:48 pm:

    Anybody know where Sheriff’s employee pensions fit into all this? I understand from speaking to county board members that Sheriff employee plans are more expensive to taxpayers, but I don’t know if that’s accurate.

    When Whiteside county consolidated 911 centers from three to two in 2017, all Sterling and Rock Falls dispatchers became Sheriff’s employees, which was a major mistake as far as good old boy and political hiring under Kelly Wilhelmi IMO.


TrackBack URI

This is not Facebook, so uncivil comments, profanity of any kind, rumors and anonymous commenters will not be tolerated and will likely result in banishment.



* Feds recorded McClain phone calls
* Lightfoot leaves Springfield with no promises
* Question of the day
* Get ready for 2020 shenanigans, campers
* Lightfoot corrects aldermen who say she's proposing a property tax increase
* Police poison pill puts Pritzker pension consolidation bill in jeopardy
* Meh
* It's just a bill
* Caption contest!
* Sen. Martinez joins Ald. Reboyras in lawsuit threat over Arroyo seat
* All's well that ends well
* Rate the new Defend American Democracy ad
* Ban these sweepstakes machines
* Fight continues over aircraft maintenance tax forgiveness plan
* Um, no
* Welcome to Springfield, mayor. Let's see what you've got
* Huge layoffs at News-Gazette
* It's a start, but it's only a start
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* *** LIVE COVERAGE ***
* *** UPDATED x1 *** Madigan to Arroyo: Don't even try naming your replacement
* Yesterday's stories

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............


Loading


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
November 2019
October 2019
September 2019
August 2019
July 2019
June 2019
May 2019
April 2019
March 2019
February 2019
January 2019
December 2018
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
May 2018
April 2018
March 2018
February 2018
January 2018
December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress




Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller