HB-1334 RE-ENTRY INTO ACTIVE SERVICE AMENDMENTS

The Illinois House passed Amendment 1 to House Bill 1334 on April 14, 2016.  The bill amends the re-entry provisions in Articles 3 and 4 of the Pension Code.

The bill essentially provides that if a person who first enters service in an Article 3 or 4 on or after January 1, 2017 is receiving pension benefits from that fund and becomes a member or participant in any other pension fund created by the Illinois Pension Code and is employed on a full-time basis, then the Article 3 or 4 pension must be suspended while the person is employed on a full-time basis.

The bill was sent to the Senate on April 18.

PENDING ARTICLE 3 AND 4 PENSION BILLS

On April 6, 2016 the Illinois House will hold hearings on the following bills regarding Articles 3 and 4 of the Pension Code:

HB-5811 would amend the “mistake in benefit” provisions in sections 3-144.2 and 4-138.10.  The bill removes the definition of “mistake” in those provisions to allow Pension Boards to correct any mistakes in benefits.

HB-4640 would increase the population threshold from 5,000 to 10,000 before a municipality is required to establish a police or firefighter pension fund.

HB-5936 would amend the re-entry provisions.  If a police officer or firefighter retires and re-enters service with the same municipality or becomes a “full-time employee in the same municipality”, the Pension Board would have to suspend that person’s pension benefits while the person is employed.  HB-1334 would also address the issue of re-entry.

HB-6030 would require each pension board to implement by June 30, 2017 a process for identifying deceased annuitants.

HR-752 is a House Resolution that would encourage the legislature to hold hearings with respect to creating a lump sum exchange option in lieu of standard annual pension annuities.

 

JONES v. MUNICIPAL EMPLOYEES’ ANNUITY AND BENEFIT FUND OF CHICAGO

On March 24, 2016 the Illinois Supreme Court issued its Opinion in Jones v. Municipal Employees’ Annuity and Benefit Fund of Chicago.  The Court held that Public Act 98-641 was unconstitutional because it diminished or impaired benefits in violation of article 13, section 5 of the Illinois Constitution (the “pension protection clause”).  The law essentially increased employee contributions, reduced cost of living increases for current beneficiaries and retirees, and required the City to begin funding at an actuarially required amount in 2021.  The defendants argued that the law did not diminish or impair benefits because it resulted in a “net benefit” to participants because it would prevent the inevitable pension fund insolvency.  The defendants also argued that the reduction in benefits was a bargained for exchange between the Unions and the City.

Citing Heaton and Kanerva, the Court rejected the Defendants’ arguments.  The pension protection clause attaches when a member begins employment and becomes a member of a pension fund.  Therefore, any reduction in annuities or cost of living increases violates the pension protection clause. Additionally, the Court again rejected the argument that the state or a municipality can rely on a fiscal crisis to circumvent the pension protection clause.

The Court rejected the defendants’ “net benefit” argument because legislative funding choices are not benefits that are protected by the pension protection clause.  The Court also rejected the bargained for exchange argument because the Unions were not acting as authorized agents within the collective bargaining process.