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Chairman Kennedy blasts “insane” pension reform

Wednesday, May 7, 2014

* The State University Retirement System is the only state pension system to interpret the new pension reform law as calculating an employee’s pension benefits using last year’s salary instead of this year’s. They’ve been asking for a legislative fix, but it hasn’t moved as of yet.

Chris Kennedy, who chairs the University of Illinois Board of Trustees, wants another fix

Kennedy said the U. of I. trustees insist that the Legislature has to correct a second issue: A change in the guaranteed investment earnings rate for employees from 7.75 percent a year to a market-based rate based on the 30-year U.S. Treasury bond rate as of July 1, plus 0.75 percent. The market rate amounts to about 4.5 percent.

Kennedy said he hopes Legislature will correct the second issue by the end of May or the state will stand to suffer a tremendous brain drain of senior faculty members, mostly ages 45 to 60, who will take their higher retirement payout now and get new positions elsewhere.

“They [legislators] can watch the intellectual leadership of the state move to the coasts, because all of the university leadership in a certain age bracket who have at least a decade or two left in their careers will be incentivized to move somewhere else,” Kennedy said in a phone interview. “We will pay them to leave. That’s the sick thing. That is insane.”

* It doesn’t seem likely, however

Steve Brown, spokesman for Illinois House Speaker Michael Madigan, said the interest rate change was meant to stabilize the precarious pension system.

“It will make the system stable,” Brown said. “The system prior to the legislation was completely unstable and could go out of business in a few years. Some of these artificial return figures were brought back to a real basis.”

Discuss.

- Posted by Rich Miller        


52 Comments
  1. - Ghost - Wednesday, May 7, 14 @ 10:47 am:

    They will be missed.

    When do the job add’s go up to replace them? The supply of prospective teachers for university teaching positions far outstrips any demand.

    So we get to hire new teachers at lower salaries and benefit costs to replace the ones that leave. dont let the door hit them in the [blank] on their way to the east cost….

    Lets get those jobs posted….


  2. - Grandson of Man - Wednesday, May 7, 14 @ 10:47 am:

    “They [legislators] can watch the intellectual leadership of the state move to the coasts, because all of the university leadership in a certain age bracket who have at least a decade or two left in their careers will be incentivized to move somewhere else,” Kennedy said in a phone interview. “We will pay them to leave. That’s the sick thing. That is insane.”

    So now there’s speculation of people leaving because of pension cuts and not taxes. Interesting.

    I was wondering that if we strip unions and enact policies to put downward pressure on wages and benefits in exchange for lower-paying jobs coming to Illinois, would that also drive people out of the state? Why stay here for crappy wages and benefits if they could be had in warmer places like Florida and Texas?


  3. - VanillaMan - Wednesday, May 7, 14 @ 10:48 am:

    Mr. Kennedy seems to be saying that the currently employed pensioned intellectual leadership in Illinois will be incentivized to move.

    There are dozens willing to take those leadership positions as they will be incentivized.

    A stable university retirement system is an attractive incentive as well to new intellectual leadership.


  4. - Federalist - Wednesday, May 7, 14 @ 10:51 am:

    A rational approach to determine the guaranteed investment return rate would be adjust it each year based upon a 30 year moving average of the net return earned by SURS.

    This would be fair to all concerned, boht taxpayer and employee.

    Of course, the state has no intention of being fair or honorable as they have already proven.


  5. - Befuddled - Wednesday, May 7, 14 @ 10:55 am:

    When will universities begin to be part of the solution instead of part of the problem?

    Our universities used to be leaders in the legislative arena. Now they are chronic whiners.

    Just keep raising tuition. You’ll be ok.


  6. - Walker - Wednesday, May 7, 14 @ 10:56 am:

    Don’t worry Kennedy. The “best” and highest paid faculty won’t actually leave. If they’re really that valuable in some boards’ minds, the U’s will just hire them back on a contract basis at higher costs.

    If they really wanted to leave, but were holding on because of higher net pension rates of return for themselves, (which I find hard to believe), then adios. The turnover would be healthy.


  7. - Jimmy - Wednesday, May 7, 14 @ 10:57 am:

    Maybe Kennedy can put his (family’s) money where his mouth is?


  8. - wordslinger - Wednesday, May 7, 14 @ 10:57 am:

    –A change in the guaranteed investment earnings rate for employees from 7.75 percent a year to a market-based rate based on the 30-year U.S. Treasury bond rate as of July 1, plus 0.75 percent. The market rate amounts to about 4.5 percent.–

    Um, is SURS long on T-bonds or something?

    The DJIA compound average annual return over the last 30 years is 9%.


  9. - DuPage - Wednesday, May 7, 14 @ 11:03 am:

    SURS actual earnings were more then 7.75% most if not all years.


  10. - tberry - Wednesday, May 7, 14 @ 11:10 am:

    That’s the sick thing. That is insane.”

    The sick, insane thing is that government employees can game the system for gold-plated retirement benefits at age 55, while most of the people expected to pay for this don’t even have any pension and can’t retire until age 66.


  11. - Arthur Andersen - Wednesday, May 7, 14 @ 11:13 am:

    word, the “guaranteed investment rate” is a misnomer. The rate setting has nothing to do with the investments or performance of SURS.

    The benefit in question is a SURS-only deal that can pay substantially higher than the “formula” benefit all other State retirees get. Why is a professor, or a UI administrator, more valuable than a classroom teacher, a prison guard, or a social worker?

    Besides, Mr. Kennedy’s employee, UI president Easter, specifically recommended this change as one of the Uni Presidents’ “Six Principles of Pension Reform.” Oops.


  12. - Norseman - Wednesday, May 7, 14 @ 11:14 am:

    There is no need to worry. Everybody knows that as long as you belong to the Big Ten Conference you have a quality school despite the quality of the faculty. That’s why we had an effort by GA members to study getting more state schools in the conference. Pensions and salary be damned, it’s the sports teams that matter.


  13. - Ghost - Wednesday, May 7, 14 @ 11:20 am:

    my attmept to bate rich by using add instead of ad didnt work :)


  14. - Andrew Szakmary - Wednesday, May 7, 14 @ 11:24 am:

    Those of you who believe the supply of university educators greatly exceeds the demand and that Illinois would benefit from existing faculty leaving: I can assure you that while this may be true in some fields of the liberal arts, it most decidedly is not true in business, engineering, medicine and most of the sciences. Typically it costs as much to hire new, raw faculty in these fields as you are currently paying senior faculty. Moreover, now that Illinois public universities probably have the least attractive pension benefits in the entire United States, you will probably have to pay above market salaries if you wish to attract even remotely decent, qualified new faculty.


  15. - Federalist - Wednesday, May 7, 14 @ 11:31 am:

    @Wordslinger

    Thanks! That’s my point! And if it would decline so be it, again fair to both taxpayer and employee.

    “Um, is SURS long on T-bonds or something?

    The DJIA compound average annual return over the last 30 years is 9%.”


  16. - Joe M - Wednesday, May 7, 14 @ 11:33 am:

    Any new state university employees will have to come in at the Tier II retirement plan that the General Assembly put into effect on January 1, 2011.

    The benefits for Tier II are predicted to soon be less than one would get with only having Social Security, yet 8% is being taken out of one’s paycheck instead of the 6.2% Social Security would take out. Not exactly an incentive to attract high quality new faculty.


  17. - anon - Wednesday, May 7, 14 @ 11:33 am:

    If you think pension theft is saving you loads of money by lowering your tax rate, wait until you have to shell out mucho $$$ for private or out-of-state tuition once the Illinois university system tanks and the diploma isn’t worth much. Kennedy’s points are well taken but why limit his criticisms to the university system alone? It will take longer but the remainder of skilled professional positions in state and local government are going to experience the same brain drain when confronted with low pay and poverty level retirement benefits.


  18. - Soccermom - Wednesday, May 7, 14 @ 11:40 am:

    Walker, it’s not that they wanted to leave but were “holding on” because of their pensions. It’s that they want to remain employed, but if they retire after the cutoff date their pensions will be dramatically reduced. So even if they really want to keep on working, they’ll be forfeiting tens of thousands of dollars in retirement.


  19. - Ghost - Wednesday, May 7, 14 @ 11:41 am:

    the Ill university system tank? lol

    never happen.

    First, we lose teachers every year, senior teachers either retire or go to other schools. And for the hundred plus years our universities have operated we havent missed a beat….

    Everytime the universites post those business, engineering medical etc etc they get far more applicants then they need.

    If they all want to leave over this the university will hire more smart people and move along as it always has.


  20. - Dazed and Confused - Wednesday, May 7, 14 @ 11:48 am:

    So they won’t leave? I left in 2012 after 30 years in Illinois. I am currently working happily at a higher salary for the next ten or so years. Not only that but I’m collecting my Illinois pension, not paying for any medical benefits from Illinois and I’m paying into a new and much more generous pension plan. (Which I can begin collecting in ten years, I’ll be 68) My new university actively recruited me, and a colleague, after Illinois reneged on the health care benefit. I could see the writing on the wall then! Others are already sending out their vitae.

    We loved Illinois and were treated well for 30 years but that ended in 2012. Illinois may or may not miss me and my colleague but I guarantee they miss the $16 million in research funding I took with me!

    We are in Dublin Ireland for the next month while I work with the EU on research and just happened to check the blog. I suppose you can trace my IP.

    Will senior faculty leave? Folks they are leaving in droves already!


  21. - Capo - Wednesday, May 7, 14 @ 11:51 am:

    Personally not taking the risk of working beyond May 31 no matter what changes may be made before June 1. June 1 is the effective date of the new pension law and don’t want to risk getting caught on the wrong side of this date. Nothing is certain but this so called pension crisis has been brewing for a long time. The particularly galling part is within the last few years people finally started to wake up and realize the system in its current form is unsustainable. Now it is my fault for expecting to receive these so called overly generous benefits. No it’s not my fault, it’s the fault of the large segment of the populous that didn’t pay the least bit of attention during the economic boom times. In most cases you only get the talent that you are willing to pay for.


  22. - Chad - Wednesday, May 7, 14 @ 11:52 am:

    The hyperventilating here is not justified. We need to right-size what is a non-sustainable university system, and clearing out a lot of these “coasties” will be a great start.


  23. - Grandson of Man - Wednesday, May 7, 14 @ 11:55 am:

    “The sick, insane thing is that government employees can game the system for gold-plated retirement benefits at age 55″

    State pension employees who retire at age 55 will have worked 30 years to retire based on the Rule of 85 (age plus years worked=85). That’s a long time to work. The “sick insane” thing is working until you’re near death, so that you can’t enjoy your final years. It’s even crazier to do that willingly so that wealthy corporations and individuals don’t have to pay a little more.

    “while most of the people expected to pay for this don’t even have any pension and can’t retire until age 66.”

    That’s partially their problem. Why don’t they advocate for better wages and benefits? Why do they support policians who are backed by super-wealthy interests who want to squeeze every drop of labor out of workers for the least possible compensation? We Americans are working much harder for less wages overall. When will we stand up and try to reverse this trend?


  24. - anon - Wednesday, May 7, 14 @ 12:09 pm:

    As “intellectual leaders” the university presidents should have endorsed the four leader agreement on pensions, knowing that shared sacrafice from all state employees was necessary to save the state’s pension funds. Instead, the covered their collective asses and opposed it. Now Kennedy will either look ineffective in his efforts to pass a fix or foolish when the “flood” of retirements don’t occur.


  25. - lovecraft - Wednesday, May 7, 14 @ 12:11 pm:

    Well said, Grandson of Man.


  26. - Norseman - Wednesday, May 7, 14 @ 12:11 pm:

    I do think the quality of Illinois higher education will be harmed by the pension reduction law. Others don’t agree. We’ll see. It doesn’t personally affect me anymore. My kids are out of school. One went to a State university and received an average education. The other went to an out-of-state school and received an excellent education.


  27. - Pete - Wednesday, May 7, 14 @ 12:22 pm:

    Let’s keep this in perspective.

    The University relies on the staff to do more than teach. The rearch and grants that these people bring in also provides the funding for graduate students and staff. The salary that the pensions are based off of are not the significant share of thier income. So now you remove the only reason that these people stay at the prestigious university… a pension after the research and book writing is done. When they start knocking on the doors of other Universities, it’s not to teach… it’s to bring along the reseach grants to that school and the generous corporate donations that follow.

    Boeing has a significant presence in the U of I aerospace program. It will be interesting to see if that program could survive a fall out or loss of talent.


  28. - Arizona Bob - Wednesday, May 7, 14 @ 12:33 pm:

    I just looked up the average salaries of full professors at UIC and UIUC. The average full professor at UIC makes $127,800, and at UIUC $137,200.

    In engineering, that would put them in the top 10% of all salaries for professionals even if you don’t include the rich pension plans.

    Some could make that much in the private sector, but my guess is that this is WAYYYY more than the private sector market value for most English, political science, sociology, and psychology profs could make outside academia.

    Of course, every once in a while a liberal arts graduate is smart enough to get his own political blog at $500 per subscriber and becomes a “one percenter”….and raises the curve!


  29. - tberry - Wednesday, May 7, 14 @ 12:35 pm:

    Grandson of Man—

    Re: government employees faring better than taxpayers expected to support government employees

    “That’s partially their problem. Why don’t they advocate for better wages and benefits?”

    In the private sector employees are only able to successfully advocate for better benefits when the enterprise is doing well financially…in the government sector it is just the opposite it seems–the worse the government does financially the greater the benefits of working for that government. That’s because the labor unions are in bed with the politicians who use public money to buy support for their agenda. THERE IS NO EXCUSE FOR GOVERNMENT EMPLOYEES DOING SO MUCH BETTER THAN ORDINARY TAXPAYERS.


  30. - equivocator - Wednesday, May 7, 14 @ 12:41 pm:

    I agree with Capo. As a university professor for 28 years I am retiring June 1. What is being proposed is too little, too late. I disagree with those who believe replacing faculty is simple or easy as if there are hordes of people out there who are highly qualified and wanting academic jobs. I know, I have chaired 4 search committees in the last 2 years. What we get are relatively small pools of persons who want to be faculty but who are not well qualified. Half of all applicants are non citizens seeking US jobs. Many speak poor English. In the late 90s and early 2000s many PhD programs stopped producing as many doctorates and the supply is now low. Today, and we just made an offer to a candidate, most will opt for portable pension plan arrangements rather than traditional defined benefit, pension plans. This is because many do move on. Given the N of retirements, poor pension benefits, and the negative reputation of Illinois, our state universities will experience much difficulty in the next few years recruiting top flight academic quality.


  31. - Rusty618 - Wednesday, May 7, 14 @ 12:42 pm:

    =The sick, insane thing is that government employees can game the system for gold-plated retirement benefits at age 55=

    Meeting the “rule of 85″ at 55 years of age only gets you the bare minimum pension, far from being gold-plated. It takes 44.7 years of work to max out in SERS.


  32. - PublicServant - Wednesday, May 7, 14 @ 12:43 pm:

    The U of I is ranked 5th overall on the list of National Engineering programs where a PhD is offered. The Engineering professors there are among the top researchers in their respective fields. They pull in millions in research dollars each year, and they’re teaching a lot of Illinois children who are lucky enough to get in there. They also attract non-resident students both nationally and internationally, many of whom remain after obtaining their degrees. Those dopes that think that if one professor leaves that there are two waiting to fill the position just don’t get it. Replacing Einstein with Rube Goldberg will destroy the reputation of U of I, and I doubt it will recover, but as long as we’re saving a buck, some clowns don’t care what happens to the quality of education at our flagship campus.

    The 30 year average rate of return for SURS investments is north of 8%. Artificially pinning it to the 30yr bond rate doesn’t reflect reality, or “stabilize” anything.


  33. - Earl Shumaker - Wednesday, May 7, 14 @ 12:48 pm:

    Does Madigan and his supporters (both Democratic and Republican) really care about the future of this state? Do they care about breaking contract law and the Illinois Constitution? Apparenty not. We know already that they do do care about the welfare of state employees and their families.

    As an university faculty member, while at NIU , I was offered other university positions at out-of-state universities. If I knew at the time what I know now I would never have taken employment in this state, and I would have accepted employment elsewhere. So yes, the universities are going to experience problems recruiting and retaining good faculty and staff. At least those individuals seeking employment today can make the decision about accepting employment at our state universities. For those of us who have retired, we no longer have that option.


  34. - Living in Machiaville - Wednesday, May 7, 14 @ 12:52 pm:

    In the end, we get what we pay for or can afford. The GA passed a poorly written pension bill. The Universitites will be loosing a lot of high caliber professionals and profs. SURS is designed differenly than SERS in that employees have been investing about 9% of their take home into it. They do not get SS. I know those that would like to continue their work there but cannot afford to take the financial hit. Another sad page in the book of mis-governing by our elected representatives.


  35. - Andrew Szakmary - Wednesday, May 7, 14 @ 12:59 pm:

    Those of you who think the SURS money purchase formula is a sweet deal are mistaken, unless you coinsider Walmart’s 401k plan a sweet deal as well. Let me explain how the money purchase formula actually works.

    Employee normal contributions of 6.5% of salary are combined with deemed employer contributions of 9.1%. These then compound forward at something called the effective rate of interest, which is set by the Illinois State Comptroller and is loosely based on the system’s past actual investment returns (in reality the effective rate, on average over the past 40 years, has been slightly below average actual investment returns). When an employee retires, the accumulated contributions are then annuitized based on the remaining life expectancy (using the 7.75% return assumption - prior to SB1), and the retiree receives a monthly pension that is actuarially equivalent to his/her accumulated contributions with interest. Prior to SB1, the retiree also received a compounded 3% AAI each year on his/her initial pension, that was paid for, in part, by separate contributions (beyond the normal contribution used to determine the initial benefit) made during his/her working years.

    In essence, the SURS money purchase plan is very much like a defined contribution plan. The total cost to the state is a fairly well-defined 9.1% of salary, plus whatever the differnce in cost bewteen the 0.5% of salary the employee contributed for the AAI, and the 1% the employee contributed for survivor benefits, versus the actual cost of providing these benefits. Most estimates that I have seen peg the actual cost to the state of providing the AAI at around 3% of salary, but claim that the cost of providing the survivor benefit is less than the 1% the employee contributes.

    Let us, for the sake of argument, peg the actual cost to the state of providing the pre-SB1 money purchase retirement at between 11 and 12% of salary. Is this excessive? Is this a sweet deal? Well, remember that the state does not pay 6.2% of salary into Social Security like private employers do - so for anyone earning less than the SS maximum of $117,000, this means the State of Illinois was required to pay the equivalent of SS plus perhaps 5-6% per year. Which is exactly what Walmart pays. And kudos to Walmart, by the way, because their 401k plan is slightly more generous than average.


  36. - Rizzo - Wednesday, May 7, 14 @ 1:20 pm:

    Yo, old money rich dude, I’ll worry about brain drain in Illinois as soon as I have saved enough to have a decent private sector retirement (at 66 or later). In the interim, keep my taxes low so I can do that. BTW, it’s cheaper to send my kids to school out of state than to public colleges in Illinois so why should I care who’s teaching at these schools?


  37. - mythoughtis - Wednesday, May 7, 14 @ 1:27 pm:

    ==BTW, it’s cheaper to send my kids to school out of state than to public colleges in Illinois so why should I care who’s teaching at these schools==

    Because you don’t just interact with your children or the people who got their education at out of state schools. I assume you would like the doctors who are educated at SIU and then practice in Illinois (and therefore treat you) to be well educated? Same with your dentist, lawyer, tax accountant, co-workers, etc, etc, etc.


  38. - Grandson of Man - Wednesday, May 7, 14 @ 1:27 pm:

    “In the private sector employees are only able to successfully advocate for better benefits when the enterprise is doing well financially”

    Wealthy corporations and individuals are doing very well financially. They are reaping record profits, while wages remain stagnant. CEO pay is through the roof in many cases, yet when people advocate for a small minimum wage increase, who leads the fight against them? Politicians and their super-wealthy backers.

    I saw a story of one person who owned something like 37 franchise restaurants, who was complaining about having to pay for Obamacare. Thirty seven franchise restaurants, and who pays this dude’s workers’ medical bills? We the taxpayers. It’s about time that these people pay their fair share.

    In the past, corporations and wealthy individuals had a smaller slice of the pie, and wage earners had a larger share than they do today. If now is not the time for wage earners to stand up for better pay and benefits, then such a time should never exist.

    “That’s because the labor unions are in bed with the politicians who use public money to buy support for their agenda”

    Where have you been lately? Unions took multiple hits from the very political party and politicians they support. When was the last time Republicans told the Koch brothers and Club for Growth sorry, but times are tough and you have to do shared sacrifice, you’re earnings and pensions are too rich and you have to take cuts. Some leading politicians on the right practically bring out the knee pads when they’re before the likes of Sheldon Adelson and other super-wealthy donors.

    “THERE IS NO EXCUSE FOR GOVERNMENT EMPLOYEES DOING SO MUCH BETTER THAN ORDINARY TAXPAYERS”

    You can play the divide and conquer game and rile up the gomers on other comment sites, but you won’t play that with me. Government workers are not doing “so much better” than ordinary taxpayers. You know who’s doing “so much better” than regular taxpayers? People like the Koch brothers. When they’re asked to pay a little more in taxes, or raise the minimum wage a little more, a few of them act like they’re being physically persecuted, even when they make billions of dollars a year.


  39. - Arizona Bob - Wednesday, May 7, 14 @ 1:32 pm:

    Bottom line is that there are two main functions of public universities;instruction and research.

    Instructors whould be paid their market value, and better be real “difference makers” to the students if they expect to get raises and promotions.

    Good researchers earn their keep financially, and universities should be able to create retirement annuities for them in addition to their state retirement plans, much as K-12 public adminstrators do in Illinois (bet you didn’t know about that littel scam, didya?) in addition to the ridiculously generous TRS system.


  40. - Demoralized - Wednesday, May 7, 14 @ 2:02 pm:

    ==ridiculously generous TRS system==

    Anything beyond nothing is generous in your eyes I’m assuming.

    Oh, and by the way they don’t get Social Security.

    You are either insanely jealous of other people’s pensions or have a general hatred of teachers. I’m not sure which it is.


  41. - Arthur Andersen - Wednesday, May 7, 14 @ 2:24 pm:

    Andrew, kudos on a thorough explanation of the money purchase option.
    What you forgot to mention were that many years less than 9.1% of pay was received from the State, but you got it anyway. Or that the SURS Board for years set the “effective rate of interest” for money purchase higher than their investment earnings assumption.
    Even without the actuarial nuances, the facts remain that the Unis wanted it changed, it was a perk available only at SURS, and it disproportionately benefits high-earners with short careers.


  42. - northshorecynic - Wednesday, May 7, 14 @ 2:36 pm:

    Can we just rename the Champaign campus - U or I community college?


  43. - Dirt diver - Wednesday, May 7, 14 @ 2:37 pm:

    Andrew

    Great explanation. You understand this benefit much better than those in the legislature that voted to drastically reduce (eliminate) money purchase. The one area I would correct you on is that unlike a defined contribution plan, if a member outlives his or her projected mortality rate (which is a factor used to calculate the benefit), then that member will continue to receive benefit payments. Other than that, great explanation which help sheds light on this “confusing” benefit that the folks who voted to decimate this benefit still fail to understand.


  44. - Norseman - Wednesday, May 7, 14 @ 2:39 pm:

    === The hyperventilating here is not justified. We need to right-size what is a non-sustainable university system, and clearing out a lot of these “coasties” will be a great start. ===

    Quality is just so hard to sustain. Let’s not worry about it and go ahead and let our education fall further in the hole.

    === THERE IS NO EXCUSE FOR GOVERNMENT EMPLOYEES DOING SO MUCH BETTER THAN ORDINARY TAXPAYERS ===

    Such an informed statement must be acted upon by us immediately. We should immediately set an “ordinary taxpayer” cap on public salaries and pensions. We don’t need the best and brightest working in government. The average and apathetic will do just fine.


  45. - Soccermom - Wednesday, May 7, 14 @ 3:47 pm:

    One other issue that is creating an incentive for university folks to leave:

    Under the current plan, senior faculty who have accrued the maximum pension benefit continue to pay into the system. Upon retirement, they currently receive a check for the excess funds they have paid in, along with interest based on the pension funds’ actual performance. This can be a large sum: University employees pay 8% of earnings into the retirement system each year. And with the money purchase option, the cost to purchase an annuity that pays 80% of salary decreases as the employee ages, so retiring faculty historically have received a rebate on those excess contributions as well.

    The new pension law apparently is silent on how changes will affect the “excess contribution rebate”. If that silence is interpreted as meaning the rebate program has been eliminated (unlikely, in my view), this would create strong incentives for experienced faculty to leave their posts to avoid continuing to pay 8% of their salaries into the system without any increased benefits. But even if the rebate program continues, it appears that the interest paid on those contributions will be greatly reduced in future. So again, it would make financial sense to exercise the option before the new rules go into effect on June 1.

    But just one thing — although the “head for the coasts” prediction sounds nice and scary, many of these profs have spouses who are employed here, and kids who live nearby. So this might actually be a bonanza for private Illinois colleges that can then hire these folks on a contract basis.


  46. - Andrew Szakmary - Wednesday, May 7, 14 @ 4:36 pm:

    Arthur, between 1973 (when SURS first began meaningfully investing in stocks) and June 30, 2013, on a geometric mean basis that controls for the fact that the two returns series have vastly different volatilities, SURS actual investment return has been 8.63% per year, and the effective rate of interest has averaged 7.98% per year. So the returns credited to member accounts via the money purchase formula have on average been lower than the true investment earnings.

    It is true that the effective rate of interest (ERI) exceeded the long-term investment return assumption (which was 8.5% until July 2, 2012) in some years, but in other years the ERI was lower. On average, the ERI prior to 2012 was lower than 8.5%.


  47. - D.P. Gumby - Wednesday, May 7, 14 @ 4:56 pm:

    Anyone who doiesn’t retire as soon as they can is a fool. It is only going to get worse as the legislature and whoever is the gov follows the futile path of trying to make up for the failure to properly fund the pensions for those years when they stole the money and spent it for other purposes.


  48. - Upon Further Review - Wednesday, May 7, 14 @ 4:57 pm:

    The Supreme Court of Illinois has yet to hear oral arguments and already the Biss pension law is causing myriad problems for higher ed. In addition to the full-time faculty members opting to retire early, several college districts have unilaterally decided to not hire any SURS annuitants as part-time faculty members (emeritus professors or adjunct lecturers).

    Somehow, I doubt that the double dipping pension fat cats were intended to include part-time instructors earning a few thousand dollars per course. Some college districts simply want to avoid any SURS annuitants, including some who would be eligible to teach, because the administrators do not want to tally up the hours and earnings of lecturers needed to avoid violating the law.

    The Biss law is fast becoming a dirty word on campus. Did anybody actually read it before voting?


  49. - RNUG - Wednesday, May 7, 14 @ 5:34 pm:

    A few people did read it before it was passed, and some of the problems were identified by university personnel. A more accurate statement would be that most of the legislators voting for it didn’t understand all the ramifications that are now becoming clear.

    FWIW … I didn’t fully understand the impact of the “money option” changes but I did write this (complete with misspelling!) on Monday, Dec 2, 13 @ 5:07 pm about the overall bill’s impact:

    … it could be an even uglier brain drian than 2002.


  50. - Federalist - Wednesday, May 7, 14 @ 8:31 pm:

    Dirt Driver,

    A rational explanation means nothing to those in control of the GA as wells as the Governor or Rauner for that matter.

    They want the money for other political purposes that will buy them more votes!

    - Dirt diver - Wednesday, May 7, 14 @ 2:37 pm:

    Andrew

    Great explanation. You understand this benefit much better than those in the legislature that voted to drastically reduce (eliminate) money purchase


  51. - Oh Come On! - Wednesday, May 7, 14 @ 9:20 pm:

    The Biss amendment stunk from the word “Go.” But, hey, we had to do something and anyway the courts will deal with it. Just like McCain-Feingold or Obama Care.


  52. - 20yrs to life - Monday, May 12, 14 @ 11:13 am:

    As an hourly - non-union - civil service employee, payed 7.5 hours per day in stead of 8, I already give up THOUSANDS of dollars in wages compared to the private sector. I get NO Social security benefits for 20 years of prior employment. And, I traded away 30% of my wages I could have earned in the private sectore for the benefit package promised me when I hired on.

    Let’s see… If I made 12 dollars an hour that would figure out to … about $14,500 per year in lost wages.

    Gee! I’m so glad I’m a civil service employee…

    Continuing to be a “public servant” becames a lot harder when I hear your comments …idiots.


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