Pensions
Public pension plans in Illinois and most other
states operate as a defined benefit program for participants. Defined
benefit pension plans guarantee a pension amount at retirement based
upon final average salary and the number of years of service at the time
of retirement. Lately there has been an increasing push in the public
arena by those advocating for switching Illinois' public pensions from
defined benefit to defined contribution plans. Defined contribution
plans are 401(k) type plans most commonly seen in the private sector and
do not guarantee the level of retirement benefits a participant will
receive.
Articles and news reports often focus on this issue. Proponents of
switching plans usually fail to mention that individuals in the private
sector who participate in defined contribution plans also receive Social
Security benefits. In Illinois, public school teachers and university
employees do not participate in Social Security and often rely on their
pensions to sustain them after retirement. For educators and other
public employees, changing to a defined contribution plan would be risky
and unwise. The state would not benefit from such a change either;
switching from a public pension like the Teachers' Retirement System
(TRS) to Social Security and a defined contribution plan would cost the
state more than the current defined benefit plan does.
Here is
a quick comparison of the two retirement benefit plans:
Defined
benefit plans
• Guaranteed benefits
• Lifetime benefits
• Survivor and disability benefits included
• Encourages stable workforce
• Investment fees paid by retirement system
Defined
contribution plans
• Benefits based on investment
earnings
• Benefits terminate when account is exhausted
• Survivor and disability benefits are not included
• Allows for portable assets
• Investment fees paid by plan participant
Traditionally, retirement planning has focused on the three-legged stool
of defined benefit plans, Social Security and defined contribution
plans. Illinois' public pension systems provide retirees stable and
secure retirements.
The IFT strongly opposes any attempt to “cut the legs off the stool,”
that is, to switch to a defined contribution retirement plan. The union
will fight any efforts to undermine the benefit structure of the current
system under which all the pension systems listed previously operate.
Retirement security is a major component of the benefits to which you
are entitled after a career in public service. IFT members can be
confident that your union will fight with you to protect your pensions.
State Universities Retirement System (SURS)