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DOI Cites City of Harvey for Not Properly Funding Pension Funds

March 13th, 2013

On February 20, 2013, the Illinois Department of Insurance (“DOI”) issued a Notice of non compliance to the City of Harvey, pursuant to the provisions of 40 ILCS, §5/1A-113 of the Illinois Pension Code. The DOI concluded the City failed to properly fund its Police and Fire Pension Funds as required by the Pension Code.  In the Notice of non compliance, the DOI alleges the City of Harvey failed to make the required municipal contributions from 2007 through 2012. The DOI found the City of Harvey owes the Police and Fire Pension Funds at least $10,043,072.00. The effect of the City’s failure to fund the Harvey Police Pension Fund, has left the Harvey Police Pension Fund 65% funded, and the Harvey Firefighters’ Pension Fund only 40.5% funded.

The Notice of non compliance requires the City to provide the DOI with written evidence of any remedial action it takes to the DOI concerning the funding issue. Within thirty (30) days from the date of the Notice of non compliance. In the event that the City fails to provide such written evidence, the DOI may issue administrative orders requiring the City to appear and show cause for its non compliance.

The statutory authority, which enables the DOI to issue a Notice of Non Compliance and assessment of potential penalties lies in a little utilized provision of the Pension Code, §5/1A-113(d). After a hearing, the DOI can order the City to comply. In the event that the City fails to comply within a prescribed time period, the DOI is empowered to assess a civil penalty of up to $2,000.00 against the City, for each instance of non compliance. In the event that the penalties are not paid within thirty (30) days of the assessment, the DOI can refer this matter to the Illinois Attorney General or the Cook County States Attorney to file a civil action on behalf of the People of the State of Illinois.

Police and Fire Pension Fund Trustees should welcome the DOI’s actions and hope that this trend continues. The DOI’s actions may be a powerful new tool in the fight with Municipalities that have blatantly ignored the requirement to properly fund their Police and Fire Pension Funds. What, if any, impact the DOI’s actions will have on these municipalities remains to be seen. Reimer & Dobrovolny’s attorneys will continue to monitor this important development. Updates regarding this case will be posted on Reimer & Dobrovolny’s website