Officials in more than 650 suburban and downstate Illinois towns need to be laser focused in early 2022 on the implementation of the state’s massive investment overhaul of police and firefighter pensions. Municipalities have until July 1 to transfer all assets from their locally managed pension funds into two consolidated investment funds to be managed by the state.
Why the change is happening
The changes are part of Gov. JB Pritzker’s pension reform effort, which will enable the funds to gain access to a broader range of investment options with the potential for higher returns and lower costs for managing the assets. In addition, investment fees will be more competitive, and the expenses associated with administering benefits will be reduced.
The state law, which went in effect in January 2020, gave municipalities 30 months to move their individually managed pension assets into the two statewide funds. Current local pension boards will relinquish investment authority and will cease fiduciary responsibility once these assets are transferred.
And while they will no longer be managing assets, local boards will continue to maintain sole authority to determine and award disability benefits, retirement benefits and survivor benefits for the public safety employees.
The Pension Fairness for Illinois Communities Coalition — composed of municipal leaders, regional and state government councils and community members — found that taxpayers in a typical Illinois town with 30,000 residents will save more than $60 million over 10 years as a result of the funds consolidation.
Your next steps
With the day of reckoning on the horizon, it’s important for municipalities to be aware of the major steps that need to be completed before the July 1 deadline:
- Each municipality needs to establish a transition board that is responsible for coordinating the transition of assets.
- The transition board must provide 30 days advance notice to municipalities about the transfer of pension assets to the consolidated state fund.
- Before any transfers are initiated, the transition board will require an audit of each pension fund in order to obtain a certified asset list.
- Within 10 days of the creation of the certified asset list, no purchases or sales may occur.
- Within 30 days of the transfer, the consolidated pension fund shall provide a receipt of transfer of assets.
Without professional assistance, it can be easy for Illinois municipalities to become overwhelmed by the details of this complex transfer process. A clear plan outlining the timelines and objectives of the asset transfer will help ensure your community is in compliance with Illinois law.
Find additional resources and legislative guidance from the Illinois Municipal League.
How Wipfli can help
Wipfli consultants can help your municipality stay on track in meeting all the state requirements included in Illinois pension reform in a timely manner. Connect with us to learn how our audit and tax specialists can help local governments navigate through the changes.
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