Pension proposal analysis

Today, Gov. Quinn announced a proposal to address the Illinois pension problem.  The governor’s proposal applies to active employees enrolled in most state funded pension systems, including the Teachers’ Retirement System (TRS) and the State Universities Retirement System (SURS).

According to the governor, this proposal would only affect current employees; retirees would not be impacted.

The details are largely unknown, but we do know the proposal would:

  1. Require current active employees to pay an additional 3 percentage points of salary towards the funding of their pension.  (TRS would go from 9.4% to 12.4% and SURS would go from 8% to 11%)
  2. Reduce the Cost of Living Adjustment in retirement (COLA) for Tier 1 employees (Participants before January 1, 2011) to a COLA that is not compounding and is the lesser of 3% or ½ of the Consumer Price Index.  This is the same COLA that is applied to Tier 2 participants (Participants after January 1, 2011).  It is believed that the proposal will require a delay of the COLA to either 5 years after retirement or age 67, whichever occurs earlier.
  3. Increase the retirement age to 67 for current employees (This may be phased in).
  4. The proposal requires that the state fully fund the retirement systems over 30 years and not over 33 years as required by current law.

The proposal the governor outlined would be posed to active members as a choice. Members could choose this benefit package, as previously outlined, and receive their health insurance premium subsidy. Or, members could keep the pension benefit structure they currently have but future salary increases would not count toward their pension and their health insurance premium subsidy would be dramatically reduced or possibly eliminated.

Again, the details are minimal and the implications of many of these ideas have not been fully fleshed out by the crafters.

IEA is opposed to any proposal that is in violation of the Illinois Constitution.

Comments

  1. James Beal says:

    The state should pass a law in which the school district can levy for TRS contributions. They could modify the existing IMRF levy and phase this in over time.

  2. James Beal says:

    I am not happy with IEA’s seeming emphasis on changing retired peoples benefits as being unconstitutional. It is unconstitutional for all of us. We are in a contractual relationship with TRS. We have paid money for years for a service. There is not question that the IL Constitution covers this.

  3. Hey Springfield, have you thought of the end game of your actions?

    Has anyone in Springfield thought what the education system in IL is going to look like after the continued onslaught of Springfield’s unfunded mandates (nearly 100 since 1999), cut to educator benefits, destroyed communities by putting the pension on the locals, required teacher evals be determined by standardized tests,…who in their right mind would go into education…one without a “right mind” is going to be teaching our children. Stop the madness.

  4. Run the numbers–it doesn’t work! The governor’s recommendations are actually moderate except for the ridiculous 67 retirement age. Teachers need to get real, and in the game or we will loose it all! I have a retired suburban, teacher friend who received a $3000 COLA increase this January– just for staying alive! The COLA for retirees (like me) should go to “the inflation rate or 3%, whatever is less.” In my opinion no teacher should receive an initial, tax payer supported pension in excess of $100,000 (adjusted over time for inflation), and unless substantial changes are made the system will implode! Even with a 3% increase in contributions, TRS will still be one of the best pensions in the Nation! Make some deals, lower the retirement age recommendation to 62, and go away blessed!

    • James Beal says:

      Teachers are professionals. We should demand professional salaries and benefits. The general assembly needs to pay up the money they STOLE from pension. I earned that money as just compensation for labor performed. Anyone else that steals from pension funds goes to jail.

      I beleive the proposal is for one have the cost of living and not compunded. That is not a cost of living increase.
      I have no problem with districts/indiviuals picking up the cost. District’s have skated by for years getting away with not paying the equivelent in Social Security contributions.

      For many of use near retirement age, it is too late to change.

    • Joe,

      Most of those getting over $100k pension are administrators (School CEOs, Superintendents, CSBOs, Curriculum Director) and not teachers. Only a few teachers make over $100k and those are the ones that have worked in costly areas and/wealthy school districts that are trying to attract the best. I’ve called TRS to ask them if they can separate the teachers from the executives and they asserted they have no means of doing so.

      • Again, I ask: have you directed all these comments and questions to your state legislators and the governor? I doubt that they are reading this page. Do the triple whammy: CALL them, EMAIL them, and WRITE a snail mail letter to them. Do it now.

  5. roberta goldsmith says:

    I have worked hard teaching young children for the last 25 years in the present district and I have put money into TRS so I would have a good pension. I have also worked outside of school and given money to Social Security. Unfortunately, when I retire. I will not receive most of my social security because Illinois is one of a few states that does not allow you to receive a pension and social security. If my husband dies, I will not be able to receive his social security either, which is not fair. My husband put in money for his social security. I should be able to receive his if he dies. I oppose Quinn’s plan.

  6. I wouldn’t mind this providing they pay the employers’ share of Social Security….which is more costly than funding the budget.

    I ask you this: “Why haven’t these lawmakers considered making the same changes to the state Judges Retirement System (JRS)?” If they did, the judges would surely rule this unconstitutional.

    • James Beal says:

      Excluding the judges was intentional in the hopes that any of these bills would not be thrown out by the courts.

      • James Beal says:

        The state is already in violation of its contractual obligation by not paying the money into the system. IEA and the other state unions should file lawsuits now in order to force compliance. (or threaten to do it behind closed doors in order to twist a few arms).

        I also have heard some people say that the ILL Constitutional protection governs only those that have retired. This is not the case, since those of us in the system have a contractual relationship with TRS now as participants.

  7. James Beal says:

    Tier II people should be brought back into Tier I to make it work. Why have 2 broken systems?

  8. We should not have to work to age 67! Current teachers should be grandfathered into the system that we signed up to teach under. SB7 is going to create major probelms along with pension reforms for schools and teachers who have reached the top of their pay scales.It will be only a matter of time before school districts look to layoff teachers who make more money in the name of excellence. We have given up too much already!

  9. James Beal says:

    We need better representation on the TRS board. It should be all member driven, and not have any political cronies on it. When the poltically appointed state superintendent is in charge, it is only natural that TRS would not want to ruffle any feathers and ask for proper funding. State supt has to be off the board as well as any others with conflicting interests such as that.

  10. michael hastings says:

    This is NOT a pension problem. The is NOT a problem of a Great Recession.
    This is a “corruption problem”. This and previous General Assemblies and the Governors created fraudulent budgets for 25 – 30 years. 30 years of bullshit bugets! Quinn is a fraud. Madigan is a fraud. Every legislator who votes yes on this plan is saying yes to a “manufactured crisis”.
    They failed to pay their bills for 30 years. NOW they want another 3% of our pay. And that’s not all! They want to cost shift this “manufactured crisis” to the local school districts forcing them to raise our property taxes! Remember !!!! Quinn and Madigan just raise our state income tax. We face a triple whammy! Increased pay roll tax! Increased income tax! And an increased property tax. And for what! Another Madigan-Quinn-General Assembly “promise”. We would be crazy to give them another penny!!!! Put a STOP! on that check.

    Start the lawsuit now. Long overdue.

  11. James Beal says:

    The General Assembly Retirement is fully funded AND
    “The funding legislation also provides for the
    establishment of a continuing appropriation of the
    required state contributions to the System. This has,
    in effect, removed the appropriation of these funds
    from the annual budgetary process.”

    http://www.state.il.us/srs/PDFILES/oldAnnuals/GARS11.pdf

  12. James Beal says:

    General Assembly Retirement is FULLY FUNDED and its annual appropriation is automatic and NOT included in the state budget!!

    From the General Assembly Retirement Web Site:

    http://www.state.il.us/srs/PDFILES/oldAnnuals/GARS11.pdf

    The funding plan for the System, enacted in 1994
    with subsequent modifications, requires that state
    contributions be paid to the System so that by the
    end of fiscal year 2045, the ratio of accumulated
    assets to the actuarial accrued liability will be 90%.
    For fiscal years 2011 through 2045, the required
    state contributions are to be computed as a level
    percentage of participant payroll.
    For fiscal years up through 2010, the required state
    contributions, except for fiscal years 2006 and 2007,
    were to be increased incrementally as a percentage
    of the participant payroll so that by fiscal year
    2011 the state is contributing at the required level
    contribution rate to achieve the financing objective
    by the end of fiscal year 2045. For fiscal years 2011
    and 2010, the statutorily required state contributions
    were $11,039,000 and $10,454,000, respectively. The
    total amount of contributions received from the state
    for fiscal years 2011 and 2010 was $11,047,010 and
    $10,411,274, respectively.
    The funding legislation also provides for the
    establishment of a continuing appropriation of the
    required state contributions to the System. This has,
    in effect, removed the appropriation of these funds
    from the annual budgetary process.

  13. James Beal says:

    Changing the retirement age would gravely affect those of us who have already put in our 4 year notice to retire. Mine, like most cannot be rescinded. I think those with letters already in shoul be exempted from an earlier retirement date.
    I like Paul’s idea of increases coupled to state behavior. I also believe there should be a local tax levy like IMRF has. This could wrapped into the IMRF levy and raised incrementally over the next 10 years. This too should be tied to state funding behavior.

    I also think that IEA should move forward with a lawsuit to recover the 85 billion dollars the state stole from us. Each legislator and official should be name and held both civily and criminally accountable.

    Last, the General Assembly retirement fund should be dissolved to pay the money they stole from us.

    • The part about exempting those of us who have turned in our letters of intent to retire needs to be phoned and written (snail mail AND email) to the governor, your state rep and senator, and the four members of Quinn’s Pension Reform Committee. Now.

  14. You are all preaching to the choir. Every one of you needs to write letters to Quinn, to your own state senator and representative, and to the four legislators on the “pension reform” committee. I hope you’ve done this. They especially need to hear that no one wants a 60-something teacher.

  15. Robert Hanrahan says:

    Teachers and school districts have always paid into TRS – the state has taken pension holidays and not funded their share.

  16. It is time for the IEA to ask the NEA to propose and lobby for a federal law that requires State governments to meet their annual fiduciary obligations to State employee pension funds in States that have exemptions from paying into Social Security. This type of law should carry penalties for failure to fully fund the employee pension funds. Such penalties could include loss of Federal Funding, or criminal proceedings against responsible elected officials. If the State of Illinois were a corporation, it’s behavior would be considered a criminal act. The State of Illinois cannot be trusted to meet it’s “30 year” promise. History will just repeat itself. It is time to solve what is at the heart of the problem.

  17. See you in court Gov. and bye bye next election tough guy!

  18. I am sick and tired of IEA being complacent with these actions. We need real leadership that will speak truth to power.

  19. Paul Donahue says:

    67 is not good for the students, the teachers, or the school districts. Add costs to the districts with teachers going that long, and more sub costs as health issues will be a problem.

    Why not something like this?
    Raise teachers portion to 10.4% (1% increase). This is good for 3 years. In during that time the state doesn’t make 100% of their payments then it goes back to 9.4%
    Raise retirment age to 38 years teaching and 60 years old.

    In year 4 it goes up to 10.9% if state meets all payments in first 3 years. It stays at 10.9% if state meets all payments. It stays this way for 5 years. Any time during the 5 years the state doesn’t make the payments it goes back down.to 10.4%
    Also if the state increases GSA to school districts and makes all their payments to school districts in the next 3 years then the district portion can go up .5% If they don’t increase GSA then it goes back to the current amount. This stays for 5 years as well.. ANy time during the 5 years the payments to schools aren’t made or GSA doesn’t increase the % goes back.

    This increases funding for TRS.
    Puts real pressure on State to make payments to school districts and their payments to TRS
    Teachers are paying more.
    School districts will pay more.
    Gives school discticts more more as current level funding isn’t level funding
    Teachers work longer to get full retirment.

  20. David Coker says:

    As a member of Danville Education Association-IEA-NEA, I must point out that IEA endorsed Governor Quinn back in 2010 (http://ieanea.org/newsroom/iea-recommends-pat-quinn-sheila-simon/ in case no one remembers). Sure, there are naysayers who will claim Brady would be worse — a non-argument on two levels because Brady did not win, and secondly, anything he did could hardly be worse and would have required Madigan/Cullerton to back. To quote the then IEA president, “There never has been a more clear-cut choice for governor and lieutenant governor of Illinois. The Illinois Education Association enthusiastically recommends Governor Pat Quinn and Sheila Simon to our members and to everyone who supports public education,” Swanson said. (BOY oh boy was he wrong! Anyone connected with that decision should be immediately removed and placed on Quinn’s staff. Also, has Walker or Daniels done anything this dastardly to their teachers? To my knowledge, no, they did not destroy their states’ retirement systems.)

    Besides wanting prisons and kindergarten classrooms to be staffed by sexagenarians, the idea that people who paid in for 2-30 years are now told that they can either freeze their current salary (Ok, freeze 2012′s pay and get 75% of that in 2042. Really!) or decide to commute from the nursing home. While I could harp on no mention of reforming welfare and entitlements for people that NEVER paid one dime into anything, I will not because people that paid nothing and have benefited off of past actions of stealing TRS money apparently are above the fray, but those that work and seniors are out of luck.

    Still, something needs done. Raising the amount paid by taking several years to increase the rate, gradually having districts pay more/all, offering tiers or options, reducing COLA’s, and reducing immediate benefits versus waiting for retirement are some options. Do I have any easy answers? No. Well, telling a profession that they can essentially no longer retire — which is the same for all new hirees since the 67-year requirement was instituted — means that anyone would be a fool to work in Illinois. Getting 44% at 50 years of age in Indiana (under some scenarios) would now prove much more intelligent.

  21. Al Moncrief says:

    The Civic Federation of Illinois has a nice piece out this morning (4/21) about Rhode Island’s pension reforms. Addition of the following might have made the piece more complete:

    FOR THE EDIFICATION OF THOSE WHO WOULD ABANDON CONTRACT LAW IN RHODE ISLAND, THE RECENT RULING:

    “The case law does not preclude but rather supports this Court’s holding that Plaintiffs, as ten-year veterans of the State, possess a contractual relationship with the State pertaining to retirement allowances and COLA benefits which are not subject to collective bargaining.”

    Friend Save Pera Cola on Facebook, Visit saveperacola.com, Support the Colorado pension theft lawsuit!

  22. Denise Bellendir says:

    I have two questions regarding the new pension proposal rules:

    1. If I choose to remain in the current plan, would my present 9.4% contribution increase incrementally (3%, etc.) as described in the new proposed plan.?

    2. Will my COLA continue to be a compounded by 3% at retirement, rather than change to a “simple 3% or the lesser” of the CPI thing?

    Denise

  23. I would encourage members to start looking into a lawsuit agains he state on the healthcare provision provied in the governor’s speech. We have faithfully paid into Medicare fully know we will never be a recipient to this program. By our membership paying into Medicare the state saves billions. The past practice has been that we pay ino Medicare and in return the state provides healthcare at a lower cost to the state. If the claim is that healthcare is not mentioned in the constitution and the governor has threaten to stop providing healthcare, we should be eligible for Medicare. The governor, who I like for the most part, has issued a weak threat that will not hold water in the eyes of the court. I have workd hard, paid my share faithfully, raised my children the best way I know how, helped to raise other peoples children…I WILL NOT BE THREATENED BY FALSE CLAIMS.

  24. This is an outrage! This proposal clearly violates our constitutional protection. Moving the retirement age from 55 to 67 is unfair and cruel. It is time for IEA to fight more assertively.We must be One Voice.Occupy Springfield and remain there to prevent passage of this insult . Quinn has clearly sided with the forces that seek to destroy the middle class and make life harder for working people. He has betrayed all of our members. We will have to work diligently to prevent this proposal from being approved.

  25. Why don’t the “We Are One” form it’s own reasonable pension proposal reform? Specific proposal (contribution, cola, state funding, district funding, and savings) it looks from the outside world, talking to friends and neighbors we are not willing to compromise or negotiate at all. I don’t want to rely just on the courts to determine my retirement.

  26. What % will the State of Illinois in for each teacher’s pension. Right now the State and local districts have quite a deal, the only money they are paying in is the equivalent of what they would pay into Social Security. To many promises have been broken, if this passes, there must be a way to insure the State of Illinois won’t yet again fail to meet their promises. If a business fails to pay into Social Security, the IRS chases them down and prosecutes the business. Where is our access to justice?

  27. This is the worst of everything! Governors Quinns’ plan is to basically make current public employees pay for the unfounded liabilities. With the proposed retirement age of 67, teachers with 45 years of service paying 12.4% would be contributing more money into TRS with very conservative returns then they would receive in benefits. Think about this, 12.4% over 45 years, that is a lot money! We will all die before we receive the money we contributed, with nothing matching from the state. Under this plan, public employees would be much better off with social security and individual 401k options (not suggesting this, just showing how bad of plan this is.)

  28. Jerry Mulvihill says:

    Oh great! I get to now pay more money for something that won’t be there when I finally retire. This is theft!!!!

  29. What do we do if the Board of Education has approved your retirement plans and you will retire and not be 67 years old??????

    • Keep in mind this is a proposal, not a bill. Many specifics have yet to be spelled out. according to the governor, the intention is to gradually roll this out over years.

      • James Beal says:

        Lets hope any changes are gradual. Schools cannot stand the economic pressure of keeping older higher paid teachers who want to retire. While their continued work is good for the pension plan, districts are not only paying them higher salaries, but, in general they drive up insurance costs. BTW, I am one of them looking forward to retirement in 4 years.

  30. Jon Ramsey says:

    Why are we not as a union protesting this? What is our union dues going towards? We need to unite and fight!

  31. His proposals are near what will be required to save the system in crisis due to the failure of the IEA to correct obvious excesses a decade ago! I agree with the 3% increase in teacher contribution, and the districts definitely need to pay more (3%), but retirement should be advanced to age 62, not 67, and the COLA should be set at “the inflation rate or 3%, whichever is less!” Even with all this TRS will still provide one of the best pensions in the nation, and the IEA needs to educate its members on this reality!

    • Tim you need to be educated on the state constitution pal,then you can comment.

    • Glenda Townsend says:

      IEA excesses? Is borrowing and not paying back an IEA excess? You are kidding, right?

    • Tim,
      The system is in crisis because lawmakers unconstitutionally borrowed from the fund without repayment, and they unconstitutionally took 15 years off from paying into the TRS system. Educators save the state billions of dollars by not opting for Social Security. Under Quinn’s proposal, Social Security will be needed to keep millions out of poverty.

  32. Bob Fair says:

    Is he talking about taking the 3% raise (COLA) from current retirees or just those who are retiring in the future. Either way it is wrong but we retirees retired based on the fact that we WOULD receive 3% raises each year.

    • According to the governor, this proposal ONLY impacts active employees. Those who are already retired will not be impacted.

  33. Jake Grant says:

    Looks clearly unconstitutional to me. According to the constitution you cannot diminish a public employee retirement benefits. Bye bye Gov Quinn you have always had my support up until this proposal. Good luck getting re-elected.

    • Pete Struck says:

      What choice do we have?
      Do you think we’d be any better off with Brady in the Governor’s Mansion?

  34. Vincent Camille says:

    We have done our part and have ABIDED BY THE LAW. You CROOKED politicans have NOT ABIDED BY LAW by robbing from Peter to pay Paul. You have broken the law by not living up to your end, why is there no ramifications? Now, current members have to pay for politicians breaking the law and not living up to their part. Don’t you realize that these are peoples’ lives you are messing with?…or just don’t care.

    • Vincent, I agree with you! Those lawmakers who voted for a pension holiday and/or borrowing from the pension without repayment should be sued personally. Additionally, since the lawmakers created this mess, the monies should all come from the GARS trust fund.

      GARS is the retirement trust fund for Illinois lawmakers who receive on average $80,000 annually. Also, a typical GARS retiree is 60 years old and has served only 14 years in the IL General Assembly.

      Whereas a typical teacher/school administrator under TRS retirement gets a little over $60,000, has over 29 years of service in IL schools, and is 60 years of age. Shame on Quinn and any lawmaker who tries to place the burden on those that put in more, get less, and have paid their share are no better than the IL politicians who are in prison.

      Illinois lawmakers have acted dishonorably by not abiding by the IL Constitution while they ensure they get 33% more in pension than educators (teachers, principals, & superintendents), serve less than half the time than educators, and retire at much earlier age than educators. “Dishonorable politician” is becoming a redundant term in Illinois.

  35. Carla Benard says:

    What does this mean if we have already declared our intention to retire?

    • What does this mean if you have 4 years left to teach? Could someone explain how you would “gradually” increase the retirement age

  36. Kevin Morton says:

    Quinn actually came up with something worse than sb512. Jesus.

  37. Roger Seitzinger says:

    There are NO choice offered. The key components of his proposal are in clear violation of the constitution.

    • Jake Grant says:

      It is unconstitutional and will cost our cash strapped state a ton money in the courts. Quinn wants to go down that road “game on”. He will lose and good luck at election time without NEA support.

    • RAYMOND says:

      DEAR SENATOR OR MEMBER OF ILLINOIS HOUSE:

      We need to put an end to ALL pension madness.

      You work for 6-20 years and getting paid a pension handsomely for the rest of your life?

      That include COLAs and free health care provisions?

      Let’s Start By Cutting Your Own Benefits First.

      Cut the Illinois house and senate in half / you don’t do anything / just take kick-backs
      you layoff teachers / let’s recall the house and senate / tax-payer don’t need so many of you

      You must Work For 35 Years & Be Age 67 to collect your first pension check

      It was good for the teachers it will be good for You!

      • Jodi Bouris says:

        I agree with all of the comments in support of teachers and other state employees’ pensions. Teaching is one of the most difficult jobs and possibly the most important job in the world and teachers in this country and state are treated with abominable disrespect by our government. Action speaks louder than words and what is going on regarding the changes to the teachers’ pension system in Illinois is sickening. I hope that our legislators do the right thing and find ways to leave the pension system alone and fund it as the constitution requires. Teachers work WELL BEYOND 40 hour work weeks and 9 months a year and many have graduate education levels equivalent to, if not, that of a PhD. Most teachers’ salaries and pensions are not enough to support a family and many work multiple jobs most of their careers and beyond, just to make ends meet. What they must do in a typical day is way beyond what most politicians could handle for even an hour. Legislators need to take a hard look at their own pensions, insurance, and additional benefits to see how they might subsidize the deficit in our pension system.