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IFT Urges Lawmakers to Engage in Open Dialogue

12/05/2012
We welcome this effort by lawmakers to reopen the important discussion about public employee pensions. Although we have concerns about House Bill 6258 as released today by State Reps. Elaine Nekritz, Daniel Biss and other legislators, we look forward to having an open dialogue about solutions that don’t place the entire burden on our backs.

The IFT and We Are One Illinois coalition have asked to meet with lawmakers to discuss pension solutions on multiple occasions. We welcome any opportunity to work with legislators to craft a pension solution that does not unfairly diminish benefits, will be sustainable and involves shared sacrifice. Our union and the coalition are currently analyzing the proposal to determine how it would impact members of the systems.  
  
The following summary about HB 6258 was released from State Representatives Elaine Nekritz and Daniel Biss:

Reforms for Tier 1 Members (public employees hired before 2011)
  • Cost-of-living adjustments apply only to the first $25,000 of the employees’ pension
    • That limit is reduced to the first $20,000 for employees eligible for Social Security
  • COLAs are delayed until the employee turns 67 or five years after retirement, whichever comes first
    • This applies to all employees and retirees who are currently receiving COLAs
  • Retirement age is increased by:
    • No increase for employees age 46 and older
    • One year for employees age 40 to 45
    • Three years for employees age 35 to 39
    • Five years for employees age 34 and younger
  • Employees would be required to contribute more toward their pensions by:
    • One percent during the first year the legislation is in effect (not before Fiscal Year 2014)
    • Two percent thereafter
  • Pensionable salary – the amount of salary that counts toward a pension – is limited to the higher of the Social Security wage base or the participant’s salary when the legislation becomes law

Reforms for Tier 2 Members
 (public employees hired since 2011)
  • All new employees in the Teachers Retirement System and State University Retirement System are placed in a cash balance plan
    • Employees are guaranteed a minimum defined benefit but employers have predictable costs and are protected from investment risk -- this combines the best features of defined contribution (or 401(k)) plans and defined benefit plans
    • Local school districts can negotiate the generosity and cost of the benefit with employees
  • TRS and SURS employees hired before the effective date can choose to remain in Tier 2 or join the cash balance plan
  • COLAs for General Assembly Retirement System members will match those of Tier 2 members in the other pension systems

Employer Contributions and Funding Guarantees
  • Schools and colleges/universities will assume employer costs at a rate of 0.5 percent of payroll per year, with the state still responsible for all previously incurred costs
  • Employer contributions will be on a 30-year level-funding plan to achieve 100 percent funding
  • Employer contributions will be enforced through court action or intercept of other state funds
  • Revenue currently being used to repay pension obligation bonds will be used to pay down our unfunded liability once the pension obligation bonds are paid off
    • This amounts to $693.5 million per year beginning in Fiscal Year 2016, plus an additional $900 million per year beginning in FY 2020, plus $1.1 billion per year beginning in FY 2034
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