Illinois Gov. Faces Legal Pushback on Pension Reform

On December 27, a group of eight members of the Illinois Retired Teachers’ Association filed a class action lawsuit in Cook County Circuit Court seeking to void an amendment limiting pension benefits set to go into effect on June 1, 2014.

The eight, through law firm Tabet DiVito & Rothstein LLC, argue that Public Act 98-0599, which was approved by the state legislature and signed into law by Illinois Governor Pat Quinn, would violate what is known as the Pension Protection Clause of the Illinois Constitution. The clause, which was ratified in the 1970s, states that the benefits of pension or retirement system membership “shall not be diminished or impaired.”

Furthermore, the lawsuit states that the courts have “consistently invalidated amendments to the Pension Code where the result is to diminish benefits,” the lawsuit stated citing the court’s decision of a 1996 case.

The lawsuit states that the new law would impair or diminish pension benefits in three ways: it would lower the rate at which pensions would be calculated, it would raise the retirement age for certain members, and it would impose a new cap on pensionable salaries.

But given the pension’s US$ 100 billion in unfunded liabilities, Governor Quinn is not about to back off a deal that proponents say could save about US$ 160 billion over the next 30 years.

“We believe the new law is as constitutionally sound as it is urgently needed to resolve the state’s pension crisis,” Quinn spokeswoman Brooke Anderson said in a statement.

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