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Unpublished Paper
Illinois State Pension Plans: Do Participants Have Standing to Demand a Minimum Funding Ratio?
ExpressO (2009)
  • Barry Kozak
Abstract

The Illinois Constitution of 1970, Article XIII, section 5, provides a contractual protection for state employees from their pension benefits being diminished or impaired. The courts have interpreted this pension protection clause as a protection for employees to receive the benefits that they have been promised. However, the courts have not held that the Illinois Constitution provides a protection for state employees that secures actuarially sound funding of those pension funds. The courts have also held that the Illinois Constitution does not provide for a cause of action requiring the pension funds be maintained at the required statutory level of 90%. The Illinois state pension funds have historically, and are currently, funded at an actuarially unsound level, 62.6%. The courts have held that only if the funds are on the verge of default or bankruptcy, do the participants and beneficiaries of these pensions have an actionable right to mandate funding from the courts.

This article provides the history and structure of the Illinois Pension System, bifurcating the legal environment into the period before the 1970 State Constitution and the period after its ratification. It provides the basic issues with funding a pension plan, starting with a general primer on how any employer would fund a plan, and then illustrating how well funded the Illinois State plans were as of 2007. The main emphasis of the article is an exploration of how the Illinois State Courts have interpreted issues arising from the benefits promised and funding levels maintained by the State in regards to Illinois State Supreme Court decisions that have looked at a plan participant’s standing to sue to force the pension plans to be funded at a certain level. The article concludes that the three Illinois State Supreme Court holdings, collectively, leave an ambiguity as to when exactly a plan participant (i.e., a current state worker or retiree expecting a pension) has standing to sue and, even with proper standing, there is uncertainty as to what remedies are available to the plaintiffs. In the conclusion, a bright line test is offered for the Illinois State Supreme Court to adopt in its next review of these issues or for the Illinois General Assembly to craft into an amendment to the pension protection provision, either through an ad hoc amendment of the State Constitution or upon the voters calling for a complete Constitutional Convention.

Keywords
  • public sector pension plans,
  • Illinois,
  • funding ratio,
  • standing to sue
Disciplines
Publication Date
June 2, 2009
Citation Information
Barry Kozak. "Illinois State Pension Plans: Do Participants Have Standing to Demand a Minimum Funding Ratio?" ExpressO (2009)
Available at: http://works.bepress.com/barry_kozak/1/