What We Believe
Alphabetical Listing of Corporate Members
Pensions & Retiree Benefits
The call for reform of the State’s pension systems, including the Teachers’ Retirement System (TRS), continues to be high on the legislative agenda. As reported in the Alliance Legislative Report dated January 20, 2012, Governor Pat Quinn is forming a panel to review the state pension systems and their sustainability. Senate President John Cullerton and recently, House Speaker Michael Madigan have made their interest known to address the issue this spring. Quinn, Cullerton and Madigan have suggested shifting much of the cost of the teacher pensions to local school districts. That could result in cuts to public education funding or, if a levy is provided, property tax increases for local taxpayers.
A pension reform bill is likely to be called for a vote in the Capitol this year and the School Management Alliance continues to be involved in the discussions.
**UPDATE (5/16/12)**
Among the hot topics at the Capitol to be resolved before adjournment, pension reform is expected to be addressed soon. Several reports from observers have indicated that the proposal to surface may include many of the same items proposed by Governor Quinn in April – increased retirement age to 67, higher employee contribution rates, and major reductions to the Cost of Living Adjustment (COLA).
IPA and Alliance members have advocated that any changes to the pension system for current or retired members must be constitutional and fair. Please contact your local legislator today to encourage them to carefully consider the constitutionality of any proposal that comes forward.
In addition, a proposal to shift the normal cost of employer contributions from the state to local school districts will be debated during the House Executive Committee today (Wednesday) at 2:30 p.m. Speaker Madigan has submitted three amendments to House Bill 3637 that would shift dollars from the Corporate Personal Property Replacement Tax (PPRT) from local municipalities, including school districts, to fund the Teachers Retirement System, effective July 1, 2012.
Amendment #1 would shift approximately $536 million from CPPRT from only school districts outside of Chicago to TRS; Amendment #2 would shift $982 million from all taxing districts outside of Chicago to TRS; and finally, Amendment #3 would shift $1.4 billion from the entire state’s CPPRT fund (including Chicago) to TRS. Essentially, any money that a local district would normally receive from CPPRT will be shifted away from the classroom to solely pay the Teachers Retirement Fund.
We will continue to update you on any progress on pension reform, changes to retiree benefits, and updates on pension funding. Please call Alison (Mormino) Maley at 217-525-1383 with any questions.
On Wednesday, the Illinois House voted to end free health insurance to state retirees, including teachers, administrators, university employees, judges and legislators. Currently, state employees with 20 years of service qualify for premium-free health insurance. (General Assembly members qualify after only four years.)
Senate Bill 1313 would also place responsibility for determining future premiums in the hands of Central Management Services (CMS) with veto authority from the Joint Committee on Administrative Rules (JCAR). Communication from the current CMS director indicates that premiums would be based on a retiree's pension benefits on a sliding scale. It is expected that those retirees eligible for Medicare will also pay less than younger retirees.
Savings from this proposal are unknown at this point.
News Articles:
**UPDATE (4/23/12)**
On Friday, April 20, Governor Pat Quinn held a press conference to announce his recommendations for Illinois’ public pension reform. While legislation is not yet available to further define these components, below are highlights of the proposal:
- Fund the systems under a 30-year closed actuarially required contribution, basing the funding schedule on actuarial estimates rather than on payroll.
- Reach 100% funding for the pension systems by 2042
- Increase employee contributions by 3%
- Modify the COLA to be equal to the lesser of ½ of CPI or 3% (simple interest, not compounding) also
- Delay the COLA to the earlier of 5 years after retirement or age 67, to be phased in.
- Allow state pension systems to provide pensions only for public sector employment.
- Requires unanimous approval of this increase by employees. If that approval is not obtained then salaries for pension calculations would be frozen at current levels for calculating pension benefits and elimination of state subsidy for retiree health care.
Under the governor’s plan employees of the systems are offered a continuance of pensionable wage increases, continued access to retiree health insurance and a guarantee that the state will continue to fund the systems. The governor did NOT include a provision for passing on the state’s share of the normal cost to local school districts. However, during questioning he did not dismiss the idea and commented that it had not garnered consensus of the working group members.
Legislation will be necessary to implement the governor’s pension initiatives. Much will be debated on these and other “solutions” to the pension crisis over the coming month as the legislature is scheduled to adjourn May 31.
Contact your legislators today!
Illinois Bills to Watch
| HB 4513 | Increases the required employee contributions of persons who first became employees of the Metropolitan Water Reclamation District Fund or certain reciprocal systems before January 1, 2011. The new contribution amount is calculated as the employers normal cost plus the annual amount needed to amortize the unfunded liability by the year 2050 as a level percent of payroll. Returns the employee contributions to their current level beginning with the first pay period paid on or after the date when the funded ratio of the Fund is first determined to have reached the 90% funding goal. Status: Passed Senate Pensions and Investments Committee; placed on calendar for 2nd reading |
| HB 3637 | Shifts employer pension costs for suburban and downstate teachers to school districts. Amendment 1 moves $500M from PPRT funds to TRS; Amendment 2 moves $982M from municipal taxing districts outside Chicago to TRS; Amendment 3 moves $1.4B from the fund to TRS. Status: Amendments assigned to House Executive Committee (5/16/12 at 2:30pm) |
| SB 1313 | House Amendment 6 to Senate Bill 1313 would remove provisions to pay for health insurance for SURS and TRS members at the rate of 5% per year of service and without premiums for those members with over 20 years of service. The amendment also allows the Director of Central Management Services to determine the amount the State will contribute toward the group health benefits of annuitants, retirees, and survivors. Status: Passed House (74-43); sent to Senate for Concurrence on Amendments 8,9 |
| HJRCA 49 | Provides that no bill, except a bill for appropriations, that provides a benefit increase under any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall become law without the concurrence of three-fifths of the members elected to each house of the General Assembly. Provides requirements for passage if the Governor vetoes a bill or returns a bill with specific recommendations for change. Provides that no ordinance, resolution, rule, or other action of the governing body, or an appointee or employee of the governing body, of any unit of local government or school district that provides an emolument increase to an official or employee that has the effect of increasing the amount of the pension or annuity that an official or employee could receive as a member of a pension or retirement system shall be valid without the concurrence of three-fifths of the members of that governing body. Provides that no action of the governing body, or an appointee or employee of the governing body, of any pension or retirement system created or maintained for the benefit of officers or employees of the State, any unit of local government or school district, or any agency or instrumentality thereof that results in a beneficial determination shall be valid without the concurrence of three-fifths of the members of that governing body. Defines terms. Effective January 9, 2013. Status: Passed in both House (113-0-0) and Senate (51-2-0) |
IPA Platform Statement on Pensions
Useful Resources
IPA Leadership In Focus, January 2012, Volume 1, Number 7 - Featuring Article from Dick Ingram, TRS Executive Director
Pensions and Retiree Benefits in the News
Quinn sets up panel to examine pension system (Chicago Tribune) - 12/20/11
