IPPAC Newsletter

Governor Rauner Announces Plan to Reform Police, Firefighter Pensions

When Brucer Rauner was running for governor, the only specifics he

would give about his plans forpolice and firefighter pensions was that

they would get a “special deal,” different from the state’s other

retirement systems.

This summer, Rauner, a Republican, finally unveiled the details of his

this deal and it’s sure to leave many Illinois police and firefighters

feeling less than special.

The most drastic change in the 500-page bill championed by Rauner

would consolidate the investments of the approximately 650 downstate

police and fire pension funds into the well-funded Illinois Municipal

Retirement Fund.

See Rauner, page 2

The Illinois Public Pension Advisory Committee is an Illinois

Not for Profit Organization that was created in 1995 by

concerned Police and Fire Pension Fund Trustees who wanted

to know about issues affecting public pension funds in Illinois.

We work closely with The Illinois Department of Insurance to

ensure our members are receiving the most up-to-date

information available.

The Public Safety Employee Benefits Act

requires a municipality to pay the full health

insurance premiums of a police officer or

firefighter injured or killed in the line of duty

while responding to an emergency.

In Illinois, it has long been understood that this

requires municipalities to pay for health

insurance benefits for an individual granted a

line-of-duty disability pension.

Recent cases have both upheld this rule and

expanded on it, though with some caveats.

In September, in Village of Vernon Hills v.

Heelan, the Illinois Supreme Court struck down

the village’s attempt to interfere in a pension

board’s decision to grant a police officer a line

of duty disability, and thus PSEBA benefits,

finding that the board had final authority to

make such a determination.

Though cities and villages may continue to

fight the granting of such benefits, this case

indicates that courts will likely not accept these

arguments.

See PSEBA, page 2

VOLUME 1 ISSUE 6

PO Box 958939 Hoffman Estates, IL 60195 847.519.1648 office • 224.535.8525 fax www.realippac.com

ILLINOIS PUBLIC PENSION ADVISORY COMMITTEE

OCTOBER 2015

www.realippac.com

The Changing Law

of PSEBA Benefits By W. Christopher Freiberg

IPPAC Newsletter

VOLUME 1 ISSUE 6

OCTOBER 2015

Rauner: Plan would merge investments into IMRF

According to IMRF, individual pension fund boards would still remain

in place, though it’s unclear how their other functions would change

with IMRF handling their investments.

Under Rauner’s plan, newly hired public safety employees would

receive Tier 3 benefits, which is a hybrid defined-benefit and defined-

contribution plan with local control on defined contribution benefits.

The bill would also change the definition of "catastrophic injury" under

the PSEBA benefits law. The new definition would preclude the injured

employee from performing any gainful work in order to have his or her

health insurance premiums paid by the municipality.

The plan would require downstate police and fire pensions to be 90%

funded by 2055, rather than 2040 as set by current law.

Finally, local governments could file for Chapter 9 bankruptcy after an

evaluation process, or if there is a declaration of a “fiscal emergency.”

For other government workers, the plan would offer them the option of

getting raises, more vacation or overtime, but only if they agree to

switch to a less-generous pension plan.

Rauner’s plan was quickly criticized by Democratic and labor leaders

who questioned if it was constitutional under the Illinois constitution’s

pension protection clause.

Though Rauner claimed the plan incorporated suggestions from

Democrats, the Democratic-controlled General Assembly has not

embraced the plan and continues to review it.

A vote has not yet been called for on the legislation, and it is unlikely to

pass in Springfield’s current political climate. Still, it gives an indication

of how Rauner may attempt to tackle future problems with the state’s

unfunded pension liabilities.

PO Box 958939 Hoffman Estates, IL 60195 847.519.1648 office • 224.535.8525 fax www.realippac.com

ILLINOIS PUBLIC PENSION ADVISORY COMMITTEE

PSEBA: Benefits expanded by court

Another notable PSEBA case that came down

earlier this year was Bremer v. The City of

Rockford.

Bremer held that a firefighter can receive PSEBA

benefits not only if he receives of a line of duty

disability pension, but also if he receives an

occupational disability pension. The Court of

Appeals for the Second District equated an

occupational disability to a “catastrophic injury” as

it is called in the first part of the PSEBA statute.

However, Bremer did not receive PSEBA benefits

because the court found that though he suffered

from heart disease, he did not suffer this

catastrophic injury while responding to an

emergency, as required by the second half of the

PSEBA statute.

This leaves the state of the law in an interesting

place where a firefighter obtaining an occupational

disease disability could receive PSEBA benefits,

but conceivably only if his or her occupational

disability becomes apparent on an emergency call.

W. Christopher Freiberg is an associate with the

Hoffman Estates law firm of Collins & Radja PC.

IPPAC Newsletter

VOLUME 1 ISSUE 6

OCTOBER 2015

Should You ‘Pull Back’ From a Bull Market?

In early 2015, the current bull market hit a milestone when it became the fourth-longest run-up since World War II. Despite the

current correction and market volatility, this bull market is technically still intact. But such a long-running rally presents investors

with a dilemma: Should they stay invested in this highly volatile market and hope for more profits, or cash out to “lock in” gains?

That isn’t an easy question to answer — and it’s especially hard this time around, when the investment gains have been so

substantial. Consider this: The Standard & Poor’s 500 index has more than tripled since it bottomed out in early March of 2009,

which means that a $10,000 investment at that point would now be worth more than $25,000. So, if you owned an equity portfolio

that mimicked the S & P 500 during that period of time, or even just held a diverse group of stocks, you probably did pretty well

over the past six years.

Furthermore, the key factors that have contributed to this bull market — low interest rates, low inflation and generally strong

corporate earnings — are still at play. But change appears to be on the horizon as the Fed appears poised to raise interest rates later

this year or next. Uncertainty over the timing of this rate has been unsettling for both stocks and bonds over the past several

months. In general, expectations are for continued economic growth and slightly higher interest rates.

Given the sheer length of the bull market, it’s not surprising that some analysts think we were long overdue for a “correction” (a 10

percent decline in the market over a relatively short period of time). While it was a long time coming, the correction finally came

this past month. Now that the correction is upon us, it is quite normal to question whether you should pull back from the market to

consolidate your gains. Instead of trying to “time” the market, ask yourself some basic questions:

• Am I properly diversified? You can’t control the external events that affect investment prices — but you have total control over

your own portfolio. And the best way to position your portfolio for all markets is to ensure that it’s properly diversified. At any

given period, stocks may be moving up while bonds are down — or vice versa. If you only owned stocks, and the stock market

stumbles, you will likely face big losses. But if you spread your investment dollars among domestic and international stocks,

different types of mutual funds, corporate, municipal or government bonds and other vehicles, you can reduce the impact of

volatility on your holdings and give yourself more chance of success.

• Am I taking on too much risk — or too little? If you consistently become frustrated by short-term declines in the financial markets

— and the accompanying results on your investment statements — you might be taking on more risk than the amount with which

you’re comfortable. If that’s the case, it may make sense for you to shift part of your portfolio from growth-oriented stocks to other

vehicles, such as short-term bonds or high quality dividend-paying stocks. This move may provide you with some peace of mind

and perhaps lower portfolio volatility. Dividend-paying stocks, compounding over the long term, have provided approximately

40% of the total return of the stock market since 1926. Conversely, if you are unsatisfied with your portfolio’s performance, and

you know that you need more growth to achieve your long-term goals, you might need to shift some assets from more conservative

investments into more aggressive ones. Ultimately, you need to balance your risk tolerance with your hoped-for returns.

It’s a good idea to ask these two questions in any economic environment. In doing so, you keep your focus on the “basics,” such as

diversifying your holdings, being aware of your risk tolerance, owning quality investments, and so on. This way you can continue

making progress toward your long-term goals — in up, down and “sideways” markets.

This article is provided by David Klein, a Financial Advisor at RBC Wealth Management. The information included in this article

is not intended to be used as the primary basis for making investment decisions.

RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional

information and guidance.

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC

PO Box 958939 Hoffman Estates, IL 60195 847.519.1648 office • 224.535.8525 fax www.realippac.com

ILLINOIS PUBLIC PENSION ADVISORY COMMITTEE

By David Klein

IPPAC Winter Seminar is Friday, December 4

This year’s Illinois Public Pension Advisory Committee Winter Seminar will be held Friday, December 4,

2015. Details are as follows: Seminar 9 a.m. – 4:00 p.m. Holiday Party at 4:00 p.m. The fee for the Holiday

Party is $50 for IPPAC Members $100 for Non-Members Location Bridges of Poplar Creek Country Club

1400 Poplar Creek Dr. Hoffman Estates, IL 60169 Phone: 847-781-3681

Attendees will receive a certificate for 8 hours of continuing education under 40 ILCS 5/1-109.3(b)

A Deeper Look at the New PSEBA case Heelan

An injured Illinois police officer who received a line-of-duty disability pension is entitled to health insurance benefits pursuant to the Public

Safety Employee Benefits Act, the state Supreme Court has ruled.

While responding to an emergency call in December 2009, William J. Heelan slipped on ice and fell on his right side. He was taken by

ambulance to the hospital where he was diagnosed with a spasm, shoulder sprain and hip bruise according to records. Later that month, an MRI

revealed preexisting, significant osteoarthritis.

Heelan filed a claim for workers compensation benefits, leading him and the village to settle for a lump sum. During the year following his

injury, the village paid Mr. Heelan his full salary pursuant to the Illinois Public Safety Employee Benefits Act. He underwent a right hip

replacement in April 2010 and a left hip replacement in September 2010, after which he didn't return to work

He applied in December 2010 for a line-of-duty disability pension, an award paid to police officers who, “as the result of sickness, accident or

injury incurred in or resulting from the performance of an act of duty, is found to be physically or mentally disabled for service in the police

department, so as to render necessary his or her suspension or retirement from the police service.”.

The board of trustees of the Vernon Hills Police Pension Fundthen granted Heelan the line-of-duty disability pension. The village didn't object

to the board's decision, but it filed a complaint the following month seeking a declaratory judgment that it was not responsible to pay the health

insurance premium for Heelan and his family as a result.

The village argued that Heelan didn't meet the statutory requirements of suffering a “catastrophic injury." However, the Circuit Court of Lake

County, Illinois, concluded that Heelan was entitled to the insurance benefits pursuant to the Public Safety Employee Benefits Act since he

“received a line-of-duty pension, and there's a stipulation that he was responding to an emergency.”

According to the act, to be eligible for insurance “the injury or death must have occurred as the result of the officer's response to fresh pursuit,

the officer or firefighter's response to what is reasonably believed to be an emergency, an unlawful act perpetrated by another, or during the

investigation of a criminal act.”

The village appealed, arguing that it was deprived of due process and denied the opportunity to “litigate the nature, extent, or causation of

Heelan's injuries,” records show.

A divided 2nd District Appellate Court of Illinois rejected this argument in July 2014, holding that a line of duty disability is a equivalent with

a "catastrophic injury" under the PSEBA statute. The dissenting justice stated that the village didn't have an opportunity to be heard regarding

the evidence of catastrophic injury.

In September, the Illinois Supreme Court affirmed the judgment of the appellate court, ruling that, under the act, employer-sponsored health

insurance should be continued for “public safety employees and the families of public safety employees who are either killed or

'catastrophically injured' in the line of duty.”