Landmark pension reform legislation backed by Cook County Board President Preckwinkle to responsibly ensure full funding of the County’s pension obligations was signed into law today by Illinois Governor J.B. Pritzker.
“This is a historic and important step to make sure County pensions are fully funded,” said President Preckwinkle. “I am thankful to Governor Pritzker for signing this meaningful legislation, Senator Robert Martwick and Representative Kelly Burke for their advocacy and our dedicated finance team for their hard work to confront our pension challenges.”
Now law, the County pushed for House Bill 2352 to build on the success of its supplemental contributions that have increased pension funding levels by $2.3 billion. The pension system is estimated to now have enough funding to cover more than 65% of its future liabilities – up significantly since its introduction in 2016. The County has been making larger pension fund contributions than state law requires over the last seven years through an intergovernmental agreement (IGA) and wanted to make this annual agreement permanent.
To enshrine the County’s commitment to fully fund its pension obligations and avoid insolvency, the County worked with lawmakers, the County Pension Fund and various other stakeholders to have the contribution schedule in the IGA codified in state statute to help reach a 100% funded pension system in the next 30 years.
All pension payments will be covered exclusively by the County with no cost to the state. As part of the new law, the County can now use any funding source for pension fund contributions, not just property tax revenues, to provide flexibility.
“I am pleased to be signing this important reform into law and commend President Preckwinkle’s commitment to responsibly tackling Cook County’s pension challenges as well as ensuring veterans receive the pension credit they deserve,” said Gov. J.B. Pritzker.
Notably, the law expands eligibility for military/veteran employees to accrue retirement service credit for military service. Previous statute allowed veterans hired before 1993, with 25 years of service, to apply for creditable service of up to two years of military service. Under this new law, eligibility is expanded to military/veteran employees hired after 1993.
The law also addresses a potential issue under the current statute where increases in the pensionable salary cap for members hired after January 1, 2011 (Tier 2) have not kept pace with increases in the Social Security Wage Base. The pension reform ensures that the County is consistent with Federal Safe Harbor guidance which says pension benefits provided to an employee instead of Social Security must be comparable to the value of Social Security benefits to make sure employees are not receiving less than what they would under Social Security.
The County estimates that the Tier 2 fix will cost approximately $3 million each year over the next 30 years for a present value cost of $98.8 million. Total pension payments, including the supplemental payments, can fluctuate but has generally been around $500 million a year. The Tier 2 costs, which will be a part of these payments, represents a minimal portion – less than 1%.
“I am thankful for all of the hard work to get this measure to the governor’s desk and signed into law,” said Sen. Robert Martwick, D-Chicago. “We are putting forward a reasonable Tier 2 fix, ensuring the County fully funds its pensions and are making sure veterans receive credit for serving our Country. This is good policy on many fronts.”
“I admire the strong fiscal management of our pension funds by Cook County President Toni Preckwinkle and our Cook County Commissioners,” said State Rep. Marcus C. Evans, Jr. (D-Chicago). “All retirees deserve the compensation they were promised, and I was proud to led the passage of HB 2352 to help solidify and protect the future and funds of our Cook County retirees.”
The governor’s signing of this legislation is now law and will be effective January 1, 2024.