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Lt. Governor Releases “Report” on Pension Consolidation

January 14th, 2016


Lt. Governor Sanguinetti recently released her task force report on local government consolidation and sent it to Governor Rauner.  Charged with the task of studying issues of local government consolidation and unfunded mandates, the 400 plus page report lists detailed proposals considered by the task force and adopts recommendations based on some of those proposals.

Interestingly, in the survey of local governments conducted by the task force, Illinois municipalities reported public pensions as their most burdensome mandate.  However, asked the same question Illinois Fire Protection Districts identified pensions as only the eight most burdensome mandate.

Of particular note to pension funds, the task force recommends merging all downstate and suburban public safety pension funds into one single investment authority.  As you may recall, this follows a similar DOI recommendation reported in last quarter’s newsletter.  Without citing any specific data, the task force found managing pension benefits at the local level increases management fees and results in less public oversight and reduced investment returns.  The task force recommended consolidation of the assets of Article 3 and 4 pension funds into an IMRF type investment authority whereby each community’s pension funds obligations will be segregated to be unique to that community.

The task force also recommends giving local government the ability to opt-out of pension plans for new employees, create 401(k) style retirement plans for non-public safety employees, create defined contribution/defined benefit plans for public safety employees, and give employees investment control of their 401(k) style contributions.

Also recommended by the task force are proposals to allow consolidation or dissolving local governmental entities by referendum, adoption of the federal definition for catastrophic under PSEBA, and giving local governments the opportunity to exempt themselves from State unfunded mandates under certain circumstances.

While not adopted as recommendations by the task force, a number of pension “reform” plans were also considered.  We will continue to closely monitor any proposed legislation resulting from the task force report.