The State of Illinois Department of Insurance in February sent a warning letter to the village of North Riverside to start making an effort to make required annual contributions to its fire and police pension funds or face sanctions from the state.
Andrew Boron, director of the Illinois Department of Insurance signed the notice of noncompliance on Feb. 20 and gave North Riverside officials 30 days to “take immediate steps to bring [the village] into compliance” with the Illinois Pension Code.
According to Kimberly Parker, communications manager for the Illinois Department of Insurance, the deadline for North Riverside to respond to the notice is April 2. Parker said the village has indicated it will meet that deadline and that the matter “is an open and active case.”
Calls to North Riverside Village Administrator Guy Belmonte and Finance Director Sue Scarpiniti, were not returned prior to press time.
Parker said the department flagged North Riverside after reviewing the village’s annual police and fire pension statements for the years 2008 through 2012.
“The annual statements revealed a pattern of significant municipal underfunding for both pension funds,” said Parker. “In addition, the Department of Insurance conducted compliance examinations of the pension funds which confirmed the municipal underfunding issue.”
That review came after “innumerable” letters sent to the village and Department of Insurance by the pension funds, said Cary Collins, the attorney for the North Riverside Police Pension Board.
“[The Department of Insurance] finally decided to take steps to bring them back [to compliance],” Collins said.
Parker said North Riverside is one of five municipalities which have received the notices of noncompliance in 2013. The others are Washington Park, Harvey, Stone Park and Loves Park.
“One case has reached the administrative hearing stage and a director’s order is expected to be issued soon,” Parker said. “The other four cases are currently awaiting a formal response from the impacted municipalities.”
State law requires municipalities to levy taxes annually to allow it to reach 90-percent funding of the actuarial liabilities of the pension fund by 2040. The law also states that if a municipality fails to fund contributions for more than 90 days after the payment of those contributions is due, the state comptroller, beginning in fiscal year 2016, must deduct a portion of any grant funding the municipality receives and deposit that money in the pension funds.
By 2018, the total amount of money received by the municipality in the form of grants must go toward pensions.
Since 2008, North Riverside has struggled to pay anything toward its pension contributions. The notice of noncompliance points out that between 2009 and 2012, North Riverside paid just $100,000 of the $2,052,502 it was required to pay into its fire pension fund.
In addition, the village from 2008 through 2012 paid just $631,422 of the $3,824,374 it was required to contribute to its police pension fund.
As of the end of 2012, as a result of the slow payments, the village’s police pension fund stands at 47.4 percent of the assets needed to meet its projected liabilities, while the fire pension fund stands at 50.7 percent, according to the notice from the state.
The state’s Department of Insurance has demanded the village “take immediate steps to bring itself into compliance” with the pension code and must provide evidence it is doing so.
If the village can’t or won’t comply with the Department of Insurance’s demand, Boron could convene a hearing and demand that the village show cause for the noncompliance. If the village can’t show cause, the Department of Insurance can assess a fine of up to $2,000 against the village. If the fine isn’t paid, the Department of Insurance can refer the matter to the Illinois Attorney General.
North Riverside officials have promised to begin rectifying the pension-funding issue once Costco begins bringing sales tax revenue to the village. While that may be the case, Collins said there’s no guarantee the village will follow through on its promise.
Collins said that in the past the pension funds were told that the village’s non-home-rule sales tax would be used to fund pensions, but the practice never materialized.
“When sales taxes comes in, the pension fund does not have access to it,” Collins said. “The property tax levy pays directly into the funds. I like that a lot better. And under the code, it says you’re supposed to levy it, not that you can do it however you want.”