Jones v. Mun. Employees’ Annuity & Benefit Fund

Illinois has four public pension plans for Chicago city employees; all subject to the pension protection clause of the Illinois Constitution: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” The funds provide traditional defined benefit plans. As with state-funded pensions, for employees hired before 2011, annuity payments were subject to 3% automatic annual increases beginning after the member’s first full year of retirement, and compounded annually. For later-hires, the annuity adjustments were tied to the Consumer Price Index (CPI). Before Public Act 98-641, employees contributed 8.5% of their salary toward their pension. The city contributed based on a fixed multiplier, paid largely from property tax proceeds.The pensions were inadequate to cover benefits. The funds are on “a path of insolvency.” Public Act 98-641, effective in 2014, was based on a finding that financial crisis could not be addressed by increased funding alone. Under the Act, the city’s contribution progressively increases beginning in 2021; employee contributions are also increased. For two city funds, the Act: reduces the annual benefit increase to the lesser of three percent or half the annual unadjusted percentage increase in the CPI; removes the compounding component; eliminates increases in specific years, and postpones the initial increase. The Illinois Supreme Court found the Act unconstitutional. Nothing in the legislative process that led to its enactment constituted a waiver of members’ rights under the pension protection clause.Whether members may be “better off” under the Act is not for the General Assembly to decide unilaterally. View "Jones v. Mun. Employees' Annuity & Benefit Fund" on Justia Law