Ken Sarni

Ken Sarni

New studies show simple way to improve local pension funds and warn of consolidation pitfalls
Source: IPPFA

CHICAGO – Two new studies focusing on police and fire pension systems in Illinois have shown that much is to be gained by easing a key pension system restriction. The studies, performed for the Illinois Public Pension Fund Association (IPPFA), also show that the consolidation of local funds into one large state entity is risky and offers no real benefit to taxpayers.

“These studies tell us that when you ease a single arbitrary restriction on local pension systems, you get the best bang for the buck for taxpayers and retired police and firefighters,” said IPPFA President James McNamee. “They also demonstrate that bigger isn’t always better, and that consolidating local pension funds is risky, may not generate the expected cost savings, and may harm local economies.”

The studies, performed by Anderson Economic Group, LLC of Chicago, examined what would happen if the Illinois General Assembly voted to ease the investment restrictions on local pension funds with less than $10 million in assets. The studies showed that gains for these approximately 228 smallest funds in Illinois would average as much as 1.8 percentage points per year if the restrictions were eased, and this action would increase average annual pension fund returns statewide by at least $418 million over 20 years.

“Higher returns means it won’t cost taxpayers extra to keep these pension funds healthy,” McNamee said. “Expanded investment authority is the least cumbersome and most effective way to ease the local contribution responsibility.”

The easing of investment restrictions will result in near-certain higher returns even when taking into account the higher volatility of riskier assets, the studies said.

The studies also concluded that any move to consolidate all 641 downstate Illinois police and firefighter pension funds into one massive state pension system would be expensive and fraught with risk. Such a consolidation would require that almost all assets from each local fund be liquidated and then re-invested in the larger fund. This move could generate a one-time cost of up to $155 million in commissions, taxes, fees and potential market losses, which would increase the pension funds’ unfunded liability by that amount as well. It would take many years to recoup that cost in the minor administrative savings realized by consolidation.

Consolidation poses a particularly high risk if the transfer occurs during a period of stock market growth and the local pension funds miss out on the resulting gains from their existing investments, the studies found. In addition, economies may suffer when the local banks and asset managers who handle individual pension funds are set aside in favor of larger, out-of-state investment firms that would likely handle the consolidated pension fund.

“There’s also the issue of local control,” McNamee said. “A consolidated fund means community residents have much less input on how their tax dollars are spent.”

Retirement benefits are provided to police officers and firefighters through local pension funds in Illinois. The funds are regulated by state law, but they are managed by local boards of trustees. There are 643 pension funds for police officers and firefighters in Illinois, 641 of them downstate and two in Chicago.

The IPPFA was founded in 1985 as a not-for-profit organization whose mandate was to educate public pension fund trustees. In 2009 the IPPFA became the primary education provider for public pension fund trustees in the state of Illinois, and its members manage more than $18 billion in pension assets.

Anderson Report on Easing Investment Restrictions

Anderson Report on Impact of Consolidation

Read more

Certified Trustee Program 19-2 – Registration Now Open
Source: IPPFA

Certified Trustee Program 19-2 is being held at Embassy Suites Conference Center, East Peoria, Illinois starting April 29, 2019.

For over 30 years, the IPPFA has offered public pension trustees the best and latest in trustee training education, striving to offer the best available training. Please join us for sessions in ethics, investment procedures, fiduciary responsibilities, and legal and legislative updates, all presented by nationally renowned speakers.

Register NOW

Read more

Certified Trustee Program 19-5 – Registration Now Open
Source: IPPFA

Certified Trustee Program 19-5 is being held at NIU Campus, Hoffman Estates, Illinois starting October 21, 2019.

For over 30 years, the IPPFA has offered public pension trustees the best and latest in trustee training education, striving to offer the best available training. Please join us for sessions in ethics, investment procedures, fiduciary responsibilities, and legal and legislative updates, all presented by nationally renowned speakers.

Register NOW

Read more

How Much Income Do Retirees Actually Have?
Source: Center for Retirement Research

The brief’s key findings are:

  • Recent research has re-documented that the Census Bureau’s Current Population Survey (CPS) understates retirement income.
  • Some have wondered if this problem also applies to other surveys and calls into question decades of research that suggest many are ill-prepared for retirement.
  • To answer this question, the analysis compared estimates from five commonly used national surveys to administrative data from the IRS and Social Security.
  • This comparison shows that:
    • the CPS continues to substantially understate retirement income, but
    • the other four surveys – the SCF, HRS, SIPP, and PSID – track closely with administrative data, and
    • estimates of retirement preparedness using a reliable survey find that roughly half of older households may fall short in retirement.
Read more

Certified Trustee Program 19-1 – Registration Now Open
Source: IPPFA

Certified Trustee Program 19-1 is being held at NIU Campus, Naperville, Illinois starting March 4, 2019.

For over 30 years, the IPPFA has offered public pension trustees the best and latest in trustee training education, striving to offer the best available training. Please join us for sessions in ethics, investment procedures, fiduciary responsibilities, and legal and legislative updates, all presented by nationally renowned speakers.

Register NOW

Read more

Cost of Care Survey 2018
Source: Genworth

For 15 years, Genworth has developed the Cost of Care Survey to help families understand the costs of varying types of care across the U.S. Since 2004, the Cost of Care survey has become the foundation for long term care planning. The 2018 survey, conducted by Carescout®, covering 440 regions is based on data collected from more than 15,500 completed surveys. Get started today. Calculate the Cost of Care in your area.

Read more

Welcome Pontiac Fire Pension Fund to IPPFA
Source: IPPFA

Welcome Pontiac Fire Pension Fund to IPPFA.

 

Read more

Trends in Retirement Security by Race/Ethnicity
Source: Center for Retirement Research

The brief’s key findings are:

  • The earnings and wealth gaps between whites and minorities are enormous. The question is how these disparities translate to retirement preparedness.
  • In 2016, the share of whites at risk in retirement was 48 percent vs. 54 percent for blacks and 61 percent for Hispanics, smaller than the earnings/wealth disparities.
  • The retirement gap is smaller simply because minorities have a lower pre-retirement standard of living to maintain.
  • From 2007-2016, retirement risk for all three groups increased, but the gap between whites and blacks narrowed while Hispanics fell further behind because:
    • a sharp decline in earnings among low-income blacks was buffered by Social Security; and
    • Hispanics were hit much harder than either whites or blacks by the bursting of the housing bubble.
Read more

Police Officers Why We Do It
Source: IPPFA

It would be easy to think that the police officer is a figure who has existed since the beginning of civilization. That’s the idea on display in the proclamation from President John F. Kennedy on the dedication of the week of May 15 as “National Police Week,” in which he noted that law-enforcement officers had been protecting Americans since the nation’s birth.

In fact, the U.S. police force is a relatively modern invention, sparked by changing notions of public order, driven in turn by economics and politics, according to Gary Potter, a crime historian at Eastern Kentucky University.

Read more

Welcome Carbondale Fire Pension Fund to IPPFA
Source: IPPFA

Welcome Carbondale Fire Pension Fund to IPPFA.

 

Read more
Top