Bureaucratic Costs For Darien Pensions?

DARIEN, IL — In the last budget year, Hinsdale spent $163,000 on managing its police pension fund, which works out to 7.6 percent of the fund's total expenditures of $2.2 million. Percentage-wise, that's the highest administrative costs for 11 suburbs analyzed by Patch. Clarendon Hills and La Grange Park fall closely behind at 7.2 percent.

On the other end is Elmhurst, where 1.6 percent of police pension expenditures last budget year went toward administration. Elmhurst's administrative expenditures of $88,000 were considerably less than both Hinsdale and Darien, even though their pension funds are less than half the size of Elmhurst's.

In Illinois, the police and fire pension funds for suburban and downstate municipalities are kept separate, numbering about 650. Most other municipal employees are covered by the Illinois Municipal Retirement Fund, which also also covers workers in government entities such as counties, townships and schools. In 2018, IMRF's administrative costs only accounted for 1.4 percent of total expenditures.

In December, Democratic Gov. J.B. Pritzker signed a bill administratively consolidating the 650 police and fire funds. The belief is that the new law can save millions of dollars every year, pumping that money into police and firefighter pensions rather than administrative costs such as stockbrokers, lawyers and accountants.

All the money spent on administration has failed to result in better investment performance for police and fire pension funds. From 2012 to 2016, the 650 funds together received a 5.1 percent annual average return, compared with 8.3 percent for IMRF and 6.2 percent for other statewide systems, according to a state task force's report.

In an interview, Hinsdale Village President Tom Cauley said the village does not oppose pension consolidation, as long as the village still maintains some control.

"Anytime costs are spread over a wider group, there is an opportunity for savings," Cauley said. "We were OK with the pension consolidation because of the potential savings. Economies of scale helps."

Kevin Barr, Clarendon Hills' village manager, said he hoped the economies of scale of consolidation would reduce his village's pension costs. No matter the size of a pension fund, some costs are "baked in" such as investment management and attorneys, Barr said.

"We'll watch to see how this shakes out," he said.

The consolidation will be phased in through mid-2022.

In recent weeks, Darien's police pension board has been considering how much it should spend on investment managers during the transition. The fund is split between two managers, Fifth Third Bank and Elmhurst-based Sawyer Falduto Asset Management. The fund spent $84,000 on managers last budget year.

Sgt. Jason Norton, the board's chairman, said members are considering whether to remove one of the managers or keep both of them.

"It's an open discussion. Nothing officially has been done," Norton said in an interview.
The board has already met with Sawyer Falduto, but has yet to set a date with Fifth Third. "We'll see if we can get a better deal with one of them," Norton said.

The expected statewide consolidation is expected to generate $820 million to $2.5 billion a year in investment returns, the task force report says.