The State Universities Retirement System now says a troublesome piece of last year’s state pension-reform law may not cut retirees’ pensions after all.
William Mabe is the executive director of the retirement system. He said the language in law that would cost retirees’ a year of pension should be interpreted as if it didn’t – because it wasn’t intended to.
That’s based on the interpretation the Teachers Retirement System has been using when it looks at the law. Now SURS plans to follow suit.
* The News-Gazette broke the story…
Teachers also have a money-purchase option when they retire, and that annuity calculation was changed in the new pension bill as well. But the Teachers Retirement System chose to interpret the “legislative intent” of the added provision, preserving members benefits earned through June 30, 2014.
“From the get-go the way we read the law, the legislative intent was designed to hold members harmless,” said spokesman Dave Urbanek. “Our interpretation was fiscal year 2014 all along.”
The state pension code says that whenever a statute’s language is ambiguous, the interpretation must favor the employee, he said.
Only about 14 percent of teachers use that option when they retire, as opposed to approximately 60 percent of SURS retirees, officials said.
Mabe said SURS had been trying to get the problem fixed legislatively for months, and had been considering adopting the approach used by the teachers’ retirement system anyway when he received [House Speaker Michael Madigan’s] letter. There is legal precedent to support that approach, he said, and Madigan’s letter provided evidence of “clear evidence of intent.”
* From Madigan’s letter to Mabe…
With respect to the money purchase benefit, SURS is the only pension system interpreting the language in a manner that is inconsistent with the intent of the General Assembly. It is my understanding that SURS and the University of Illinois were directly involved in the development of the money purchase benefit language, and reviewed several drafts of the legislation prior to the General Assembly taking final action. At no point did SURS, University of Illinois, or any other pension system indicate there was a technical error with the language that would cause it to be inconsistent with the intent of the Conference Committee Report.
Given that members of the General Assembly have received numerous letters and emails regarding this issue, it is worth addressing the timeline related to the development of the language. The concept of changing the money purchase benefit was introduced on April 30, 2013, in House Amendment #1 to Senate Bill 1, and approved by the House on May 2, 2013. When the Conference Committee was appointed, the members of the Committee met with representatives from SURS and the University of Illinois, and together they drafted the language that ultimately became law. The pension systems were provided with copies of draft legislation throughout the fall and prior to the General Assembly taking action in December 2013. On November 26, 2013, legislative staff specifically asked each of the pension systems if there were any technical concerns with the language. At this time, SURS did not present this objection.
Legislative staff was advised that SURS preferred a hard date for the provision, but that this request was simply to ease administrative burden and would not impact the intent of the provision.
With respect to your concerns regarding the effective date of the bill and the method used to determine the effective rate of interest, again, SURS reviewed this language over the course of many months and did not present any objections. After passage, legislative staff was advised that these provisions could be difficult, but would not be impossible to administer.
While I support efforts to correct the technical error, I urge SURS to consider that its interpretation is inconsistent with the intent of the General Assembly, and also inconsistent with the way TRS has interpreted the same language. A similar reading by SURS may help ease the concerns of university faculty and personnel impacted by the language and assist with avoiding unintended consequences for our universities.
With kindest personal regards, I remain
MICHAEL J. MADIGAN
Speaker of the House