Illinois Top Court Gives Pritzker Win With Pension Funds’ Merger

The Illinois Supreme Court on Friday upheld lower courts’ rulings to allow the merger of billions in assets from hundreds of local pensions to move forward, a win for Governor J.B. Pritzker’s goal to shore up ailing public retirement plans in the state.

The court said a state law requiring the pooling of assets held by more than 600 downstate and suburban fire and police funds does not violate the state constitution’s pension protections as the plaintiffs had argued.

“Simply put, the 2020 amendment to the Pension Code has no impact on plaintiffs receiving their promised monetary benefits,” according to a so-called slip opinion released on the court’s website on Friday. Slip opinions are not final and can be subject to change if parties seek a rehearing or if the court decides to modify its opinion.

The plaintiffs, which included members from local pension funds, asked the state’s top judiciary to overturn rulings from lower courts that had upheld the law. A circuit court and appellate court had ruled in favor of the defendants which included Pritzker.

They argued that the state law strips them of the authority to make decisions regarding retirement assets by consolidating into two newly-created, state-wide funds, according to a briefing. They argued the legislation requires individuals to bear the cost of the transfers and violates protections including the pension protection clause of the state constitution.

“The ability to vote in elections for local pension board members is not such a constitutionally protected benefit, nor is the ability to have local board members control and invest pension funds,” according to the opinion delivered by Chief Justice Mary Jane Theis. “The Act does not change plaintiffs’ right to elect members of their local funds’ boards or the local boards’ authority to determine the amount of benefits plaintiffs are entitled to receive. It only changes the local boards’ power to invest the assets of the local funds.”

Pritzker Victory

Pritzker had championed the pooling of local public safety pensions into two funds, one for firefighters and another for police, to cut costs and improve returns. The consolidation doesn’t include pensions funded by Chicago or the state, which have also boosted resources for their underfunded systems.

“The Illinois Supreme Court upholding the constitutionality of this landmark, bi-partisan pension reform law today is confirmation that smart, thoughtful pension reform can be accomplished in Illinois,” Pritzker said in an emailed statement. “Today’s Supreme Court ruling is a victory for Illinois taxpayers, local governments and first responders.”

The deadline to pool assets was June 30, 2022 and the fire funds have completed the merger. Of the 357 police pensions mandated by the law, 333, or about 93% have transferred assets worth $10 billion to the consolidated fund.

Those still missing include 15 litigants and the consolidated entity is planning for the transfers, which would bump up the total to about $11.5 billion under management, according to a statement on Friday from the Illinois Police Officers’ Pension Investment Fund.

“The IPOPIF team will remain a transparent, trusted, and financially responsible steward of the pension fund assets entrusted to our care and we will diligently serve all our stakeholders,” according to the statement. “We are laser-focused on investment excellence.”

(Updates with comments from Illinois governor in eighth paragraph and police fund in final paragraph.)

To contact the reporter on this story:
Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story:
Danielle Moran at dmoran21@bloomberg.net

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