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Illinois Supreme Court to hear oral arguments on landmark pension reform law


The Illinois Supreme Court will hear oral arguments on the constitutionality of Illinois’ pension reform law Wednesday afternoon.

In November, Sangamon County Circuit Court Judge John Belz sided with employee and retiree organizations that argued the 2013 pension law violates the state’s constitutional clause that pension benefits “shall not be diminished or impaired.”

Illinois Attorney General Lisa Madigan’s office appealed Judge Belz’s ruling to the state Supreme Court on Nov. 26 arguing that the law is a “reasonable and lawful response” to the state’s pension funding crisis.

Sean Smoot, attorney for one of the plaintiffs, We Are One Illinois, predicts the justices could reach a decision by the end of May.

The pension law, which was signed by then-Gov. Pat Quinn on Dec. 5, 2013, is aimed at bringing the state’s retirement systems to full funding and reducing contributions by roughly $145 billion over the next 30 years by lowering cost-of-living adjustments, capping pensionable salaries and raising retirement ages. The law also decreases employee contributions by 1 percentage point and creates a defined contribution plan for a portion of employees.

Inadequate state contributions were a major contributor to the state’s more than $100 billion pension funding shortfall, according to report released last month from the state Commission on Government Forecasting and Accountability.

The 2013 pension law was slated to go into effect June 1, 2014, but was put on hold to determine its constitutionality.

If the law is upheld, state pension contributions in fiscal year 2016 could be reduced by roughly $1 billion. The state’s budget process for fiscal year 2016 ends May 31, 2015.

Some union officials point to an earlier state Supreme Court ruling on retiree health care benefits as an omen for the Illinois pension reform lawsuits. In July, the Illinois Supreme Court ruled health insurance premium subsidies for retired state employees are “a benefit of membership in a pension or retirement system” and as a result “are constitutionally protected from any diminishment or impairment.”

Meaghan Kilroy writes for Pensions & Investments, a sister publication of Business Insurance.

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