Representative Peter Breen Files Legislation to Address IMRF Pension Spiking

State Representative Peter Breen (R-Lombard) has filed legislation that would close the loophole on pension windfalls for end-of-career payments to public employees who are part of the Illinois Municipal Retirement Fund (IMRF).

Across the state, local governments are being hit with unexpected pension liability due to regular end-of-career payments, such as accrued sick and vacation time, along with other severance payments. In the Village of Lombard, which Breen represents, one such payment translated to a $12,000 boost per year in pension liability for the village. “We must root out and stop pension spiking, wherever it is found, in every government unit. Our pension liabilities are at unsustainable levels across the state, and it’s the taxpayers who are forced to pay the extra costs,” said Breen. “My HB 5684 will close the loophole in municipal pensions that has plagued towns across Illinois.”

Municipal pension spiking often occurs when longtime public employees who have accrued large balances of unused sick time and vacation time are allowed to convert those days into cash. Combined with retirement bonuses, which are also prevalent, this new income drives up the amount of final paychecks. Many such pensions are based on an employee’s best four years of employment, which is typically the last four years on the job. Today, the statutes only limit how much of the final three months of an individual’s compensation can count toward their IMRF pension—but if these one-time benefits and bonuses are paid out more than 3 months before retirement, they count toward and increase pension payments for the rest of the pensioner’s lifetime.

Through HB 5684, the IMRF Article of the Illinois Pension Code would be amended to state that any income increase that exceeds 6% during an employee’s final 12 months of employment would not be deemed as “pensionable” income. The bill allows for an exception in cases when the governing board of the municipality has separately confirmed the additional payment, by ordinance or resolution, at an open meeting that conforms to the provisions of the Open Meetings Act.