The Illinois Department of Insurance (“IDOI”) issued The Siren on February 8, 2024 addressing the amount of money Article 3 and 4 pension funds may keep in a retained local account to cover benefit payments and expenses.
According to the IDOI, Article 3 and 4 funds are permitted to retain a local investment account for the purposes of benefit payments and other reasonable expenses. The IDOI has determined that a money market mutual fund is a permitted account. However, money market mutual funds can only be utilized to make benefit payments and other reasonable expenses.
According to the IDOI, the amount of money any fund may keep in a retained account is limited to an amount “imminently needed to make benefit payments or cover reasonable imminent expenses.” (Emphasis Supplied). The IDOI does not provide guidance on what is considered “imminent.” Because the IDOI interprets section 3-132.1 of the Pension Code by adding language to the statute, specifically the word “imminent” to the amount of monies to pay benefits and cover reasonable expenses, it is debatable whether the IDOI’s interpretation would pass judicial scrutiny utilizing a proper statutory construction analysis.
The IDOI recommends local funds communicate with the consolidated fund for guidance on cash management needs. However, there has been little guidance on what is considered a reasonable amount of money to keep locally in order to provide payment of benefits and expenses. Pension Boards should consult with its financial experts to consider the time frame for obtaining monies from the Consolidated fund to address liquidity needs of the fund and the amount of money it will need on a monthly basis to cover benefit payments and expenses.
Reference: 40 ILCS 5/3-132.1 and 40 ILCS 5/4-123.2.