In re Pension Reform Litigation (Heaton v. Quinn)

The State of Illinois had five retirement systems for the state’s public employees. The systems provided benefit plans that allowed members to earn benefits based on their years of service, income, and age. The systems were funded by (1) state contributions, as allocated by the state legislature; (2) member contributions; and (3) interest and other money derived from the retirement funds’ deposits and investments. Pursuant to the pension-protection clause in the Illinois Constitution, membership in the state’s pension and retirement systems was considered a contractual relationship, and the benefits of that relationship could not be “diminished or impaired.” One benefit that members of the state’s retirement systems received were retirement annuities. The amount of the annuity payments and the member’s eligibility to receive payments depended on when the member started contributing to the retirement systems. Members who first contributed before January 1, 2011 received “Tier 1” annuity benefits. Throughout the history of Illinois’s retirement systems, the members had paid the appropriate amount into the systems. However, the state legislature had consistently failed to allocate enough money to finance the state’s pension obligations. In the fall of 2013, Illinois’s credit rating had been downgraded, and the state was facing serious financial hardship. In an effort to address the state’s negative financial circumstances, the state legislature passed a bill that restructured four of the state’s five retirement systems and reduced the Tier 1 annuity benefits. Doris Heaton and other members of the four retirement systems (plaintiffs) brought an action against Illinois Governor Pat Quinn and other state officials (defendants), challenging the new law’s validity. Heaton and the other plaintiffs argued that the law violated the constitution’s pension-protection clause. The trial court held that the law was unconstitutional, and the matter was appealed directly to the Illinois Supreme Court.