by John E. Motylinski
When the General Assembly passed Public Act 101-610 in 2019, it commanded all downstate fire and police pension funds to consolidate their investment assets no later than July 1, 2022. So far, the Illinois Firefighters’ Pension Investment Fund (“FPIF”) has completed five tranches of asset transfer. In late December 2021, the Illinois Police Officers’ Pension Investment Fund (“IPOPIF”) announced it will begin its transfer process in the coming months.
IPOPIF has assigned each downstate police pension fund a transfer date of March 1, April 1, or May 2, 2022. On a pension fund’s transfer date, control of investment assets will shift permanently to IPOPIF. This aggressive timetable will undoubtedly cause logistical issues for police pension funds.
First, IPOPIF has requested each police pension fund to execute a resolution appointing authorized agents prior to February 28, 2022. Many police pension funds already executed a similar authorized agents resolution last year. However, the new resolution requested by IPOPIF is different and must be completed nonetheless. IPOPIF has also directed local funds to notify their asset custodians of the impending transfer. Once these two items are complete, copies should be sent to IPOPIF.
Moving forward, police pension funds will also need to answer other questions like:
- How much cash they should keep on hand during the asset transition phase? It is anticipated that, for at least a few months during the transition process, local pension funds will not be able to access or liquidate their investment assets. This may pose problems in the event these assets are needed to fund pension benefits or administration expenses. Accordingly, police pension funds should carefully determine how much cash they need to keep in a local account when assets are moved to IPOPIF.
- What local accounts should be maintained? After the transfer date, local funds will no longer be able to invest money themselves—that will need to be done via IPOPIF. However, local funds are always able to maintain checking and non-investment bank accounts. Police pension funds should therefore determine which accounts should carry forward following consolidation.
- When the relationship with the fund’s current investment professionals should end? Regrettably, with consolidation comes the end of many valuable partnerships with investment professionals. Pension funds will need to develop a vision for what the post-consolidation landscape will look like without these trusted advisors.
- Whether proper precautions need to be taken if the fund’s checking account will carry more than $250,000? After consolidation, many police pension funds will experience checking account balances that exceed the $250,000 insured by the FDIC. Many Article 3 and 4 pension funds are entering into additional collateralization agreements with banks to ensure that, in the event of a bank failure, their assets will still be secure. However, like all processes, this will take time to set up and eventual Board action.
Arriving at answers to these questions will require the input of a pension fund’s investment and accounting professionals. IPOPIF’s accelerated timeframe for asset transfer will undoubtedly cause many pension funds to scramble to stay ahead. If your pension fund needs assistance in navigating the consolidation process, please contact your attorney.