By: Ted Dabrowski and John Klingner

Most of Illinois’ 650 police and fire pension funds are in dire shape. They are deeply underfunded. Too many have more beneficiaries than active workers. And some are beyond repair.

So you’d think a newly-implemented law that allows pension trustees to effectively garnish monies owed to their funds would be getting lots of use.

Police and fire pension trustees in Harvey and North Chicago have already successfully used the intercept law to shore up their pensions, so the path has been cleared. (Click here for details on the intercept crisis and the latest on Harvey.)

If that’s the case, why haven’t the trustees of the nearly 400 other pension funds that have been shorted in recent years requested intercepts from the State Comptroller?

They have a fiduciary responsibility to the pensioners they represent, but most are not requesting intercepts.

Read Wirepoints’ special reports on Harvey:

Almost 100 funds have less than 40 percent of the money the need on hand today to pay out future benefits.

Officials have begged for a pension funding guarantee for decades, but now that they have it, they aren’t acting on it.

We have talked to parties close to the decision making in some of those municipalities and compiled a list of ten potential reasons why.

1. Some funds fear their city will lay off workers or cut services just like Harvey did.

2. Some funds don’t have attorneys on staff to help with the intercept process.

3. Some funds don’t have the expertise to calculate if their city actually paid the money it was required to.

4. The funds aren’t getting help from the Illinois Public Pension Fund Association, as far as we know. The IPPFA does not publicly advocate for garnishment or help with the process.

5. Some funds simply don’t care if their city failed to pay in full.

6. Some funds have gotten full or almost-full funding from their cities just by threatening to garnish. They don’t want to mess up the deals they’ve made to get money owed in previous years.

7. Some funds don’t want to garnish because some parts of the law are still unclear. For example, now that it’s 2018, funds are unclear as to whether they can request an intercept for monies due in 2016 or 2017.

8. Dozens of pension funds have been shorted by their sponsoring fire protection districts. But those districts rely almost entirely on local property taxes, so there is no money for the state comptroller to intercept.

9. Many funds have different accounting calendars, so they can’t demand garnishment for missed 2018 money until later this year.

10. Nearly 400 pension funds were shorted in 2016 – the most recent year comprehensive data is available. But fewer pension funds could have been shorted in 2018 due to the threat of the garnishment law.

This is a complex issue, there is still a lot to unravel, and it’s unclear how things will ultimately play out. But one thing’s for sure, the next recession will put even greater pressure on those funds already in trouble.

Some will say that pushing for garnishment will foster a crisis – ending in layoffs and cuts in city services. But so will a continual worsening of underfunded pensions.

Either pension funds create a crisis by taking city revenues, or they create one by going insolvent.

Some trustees can help their funds avoid a deeper crisis by garnishing revenues. But for others, garnishment will have to be accompanied by a slate of reforms, from a renegotiation of benefits to 401(k)s for new workers to salary freezes to bankruptcy protection.

The crisis is now playing out in real terms – people are being hurt – and every single reform available to government officials must be used to reverse the collapse. The intercept law available to pension trustees is just one of them.

Read more about the downstate pension crisis here:

Illinois pension trustees’ failure to request intercepts exposes ugly reality

Special Report – Beyond Harvey: Many Illinois municipalities running out of options

Why a bankruptcy option for municipalities is essential

Second domino falls in Illinois: North Chicago revenues garnished for pensions

Harvey, the first domino in Illinois: Data shows 400 other pension funds could trigger garnishment

How the now feared ‘pension intercept’ became law

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Tough Love
2 years ago

There are ZERO effective “solutions” to the now-existing pension mess that do not include (as just ONE of many necessary steps) a VERY … think 50+% …… material reduction in the value of future service DB pension accruals for all CURRENT workers ……………… REGARDLESS of what the Law, the Regs, the Constitution, or Case Law says.

2 years ago

Are the trustees shielded from liability on this issue? You’d think the threat of litigation from pensioners would push them to demand intercepts.

Kvetch 22
2 years ago
Reply to  Erik

One would have to check Illinois immunity statutes and cases. Elsewhere public pension systems are considered to be public entities and trustees are considered to be public officers. That means they are not subject to prosecution or personal liability for actions they take in their official capacity. Maybe there’s an insurance policy to be tapped, but generally these “public officers” lack the resources to pay a fraction of the damages they have caused or to which they have contributed. If they were personally enriched from plan assets they might go to jail (like the Mayor of Detroit) but I don’t… Read more »

2 years ago
Reply to  Kvetch 22

Thank you for the thoughtful response. The lack of legal exposure allows the trustees to be motivated more by politics than by fiduciary responsibilities. The differences between the public and private sectors never ceases to amaze me. As the trustee of a private 401K plan I can tell you that any misstep on my part would expose me to massive personal liability.

Kvetch 22
2 years ago
Reply to  Erik

In cases you want to dig further into the rationale: BAY CITY, MICHIGAN, TRUSTEES IMMUNE FOR UNAUTHORIZED INVESTMENT: Bay City Police and Fire Retirement System Board of Trustees invested approximately 20% of the system’s assets in a single entity. Michigan’s Public Employee Retirement System Investment Act limits investments to smaller percentages of a system’s total assets. Accordingly, Michigan Attorney General concluded that the Board’s investment was unauthorized under PERSIA. Several retirees commenced an action, asserting a breach of fiduciary duties against the trustees. The trial court denied the trustees’ motion for summary disposition on the basis of governmental immunity. The… Read more »

2 years ago
Reply to  Kvetch 22

Very interesting. I wonder though if failure to demand an intercept would constitute “gross negligence” which would strip them of immunity. I would consider it so if I were a pensioner.

Kvetch 22
2 years ago
Reply to  Erik

It would be an interesting project for a lawyer who was indifferent to getting paid for about 5 years — provided he or she could find a few clients who didn’t mind being ostracized by their union friends. If they could get before a jury comprised mostly of taxpayers they might have a shot. First get the trustees removed, then get a court order that they pay their own lawyers, Find a way to get it into Federal Court and get the Illinois judges out of it: Should anyone be interested in following up, I suggest they contact Eva… Read more »