For Immediate Release
November 18, 2009
A new report released by the Pension Modernization Task Force shows that Illinois’ current pension system is actually more affordable than retirement benefits provided by comparable companies in the private sector. An actuarial report prepared for the task force by the Teachers' Retirement System (TRS) shows that the state’s pension cost for a new teacher hired this year will be 5.4 percent of salary. (page 154) This is below the 6.2 percent every private employer is required to pay for Social Security alone. Studies by the 401(k) Council of America and other groups show that private sector companies pay an average 3 percent match to an employee’s 401(k) contribution, bringing average private sector employer costs to 9.2 percent of salary.
“When you get past the rhetoric and look at the data on pension costs for employees hired today, it’s clear that Illinois’ public pension systems are actually a good deal for the taxpayer,” said IFT President Ed Geppert, Jr. “It’s important to separate the normal everyday cost of the pension systems from the massive debt caused by the unfunded liability. Even the Civic Committee of the Commercial Club agrees that pension benefit levels aren’t the primary cause of the unfunded liability. Changing pension benefits would do nothing to help pay off the debt owed on benefits already earned by employees.”
The task force report also found that the state's pension benefits are not out of line when compared to benefits earned by public employees in other states. (page 28) A comprehensive review of 85 public employee pension systems showed Illinois pension benefits in the statistical median, just about average.
That benefit analysis also states that 78% of public employees in Illinois do not receive Social Security benefits. Benefits provided by public employee pension plans are the only source of retirement income for the vast majority of public employees in Illinois.
The task force report also analyzed Governor Pat Quinn's proposal to make massive cuts to pension benefits for teachers, university faculty and staff, and state employees The report found that significant savings would not be realized until 25 to 30 years after the reforms had been adopted (page 29).
“Every employer in the private sector contributes at least 6.2 percent of an employee’s salary to Social Security; most comparable employers contribute more than that," said Geppert. "Illinois' pension contributions should be in line with what the private sector pays towards an employee’s retirement. The task force report confirms that public pensions in Illinois provide a decent, moderate benefit at a reasonable cost. The burgeoning pension debt is not caused by normal pension costs or employee benefit levels, but is the result of Illinois elected leaders of both parties raiding state pension funds over decades to pay the state's bills."
The members of the task force did find agreement on the data cited above and the subcommittee reports, but the report in its entirety was not approved by a majority of the members.
Follow this link to download the full report:
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