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Legislation

Chicago mayor bypasses state, introduces plan to raise city contributions for 2 pension plans

Chicago Mayor Rahm Emanuel
Chicago Mayor Rahm Emanuel

Chicago Mayor Rahm Emanuel introduced on Wednesday an ordinance that would raise the city's contributions to the city's municipal and laborers' pension plans, a city spokeswoman said in an email.

The City Council could vote on the proposed ordinance next month.

The ordinance calls for Chicago's pension contributions to be increased over the next five years, reaching actuarial required levels in budget year 2022, payable in 2023.

Revenue received from a 2014 increase in the city's emergency phone surcharge and a new water and sewer tax would help cover the increase in the city's contributions.

The city contribution changes, which are expected to help bring the $4.3 billion Chicago Municipal Employees' Annuity & Benefit Fund and $1.2 billion Chicago Laborers' Annuity & Benefit Fund's funding ratios to 90% each by 2058, formed part of a municipal and laborers' pension reform bill that was passed by the Illinois Legislature in April and is awaiting Gov. Bruce Rauner's signature.

An identical version of the bill was passed by a lame-duck Legislature in January and vetoed by Mr. Rauner in March.

The spokeswoman said that Mr. Emanuel's administration is "still pursuing a change in the pension code at the state level that reflects the increased contributions and the necessary reforms to employer contributions." However, "given the ongoing dysfunction in Springfield, the city is acting to codify in the municipal code the necessary pension contribution increases to the municipal and laborers' pension funds to prevent these funds from going insolvent," she said.

While the city can increase its contributions without a state law change, it does not have the authority to adjust employee contributions or benefits. Along with raised city contributions, the Legislature's bill raised payroll contributions for participants of both pension funds hired after Jan. 1, 2017, to 11.5% from 8.5%, and reduced their age of eligibility for full benefits to 65 from 67. Employees hired on or after Jan. 1, 2011, would have the option of increasing their payroll contributions to 11.5% from 8.5% in return for their retirement age being reduced to 65 from 67. Those changes were excluded from the mayor's proposed ordinance.

The municipal fund had a funding ratio of 24.7% as of Dec. 31, 2015. The laborers' fund has a funding ratio of roughly 45%.