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The big lie on teacher pensions

Thursday, May 3, 2012 - Posted by Rich Miller

* This is not true

Teachers are supposed to pay almost 9.5 percent of paychecks into their own retirement accounts. But two-thirds of all public school teachers in the state don’t contribute anywhere near, and many contribute nothing at all, according to a report set for release Thursday by the Illinois Policy Institute, a government watchdog.

* The Teachers Retirement System addressed this canard last year

When a school district “picks up” the contribution, the money still comes from the teacher’s total compensation package. The “pick up” is in reality only a difference of when the district deducts the contribution from the teacher’s salary – either before taxes are deducted or after taxes are deducted. Teacher unions for years have negotiated this point with school boards as part of overall salary and benefit packages for teachers. There is an income tax savings for teachers if the contribution is deducted pretax.

In practical terms, no teacher writes TRS a check every month and mails it, so no teacher in Illinois directly “pays” TRS. All contributions from every teacher in every school district are deducted from paychecks by the school districts and sent to TRS in one lump sum. Member contributions to TRS in fiscal year 2011 totaled $909.6 million.

The IPI conclusion that taxpayers are paying “extra” for the pick-up rings false because, in the end, taxpayers pay for everything in a school district, including all teacher salaries. There is no “extra” $400 million.

If you carry the IPI’s conclusion about TRS contributions to other examples you’ll realize that everyone who participates in Social Security hasn’t paid their share of federal Social Security taxes because their employer is paying the tax for them. No one writes a check to Social Security when they get paid. The FICA tax is deducted from the paycheck. It’s the same thing for TRS contributions. One of the reasons Illinois teachers don’t contribute to Social Security or get a Social Security benefit is because they make the same type of paycheck contribution to TRS.

Teachers negotiate that pension pickup in their contracts, almost always in exchange for wage concessions. Things usually even out, but lower wages mean lower costs to the pension system in the long run. The Policy Institute claim is just plain silly.

* In other news, TRS’ executive director tried to fire up the base this week

While many questions remain about the future of Illinois teacher pensions, hundreds of people attending a forum Wednesday were told to get politically active if they want to keep what they have.

“Contact them (Gov. Pat Quinn and state lawmakers), call, email, write a letter. Get on a bus and go to Springfield. Be engaged with legislators all along. Describe your personal stories,” Teachers Retirement System Executive Director Dick Ingram told about 400 teachers, retirees and members of the public at a town hall-style meeting at Normal Community High school.

* And a Senate committee killed off a pension reform bill

An Illinois Senate committee on Wednesday rejected a measure that would force local government to pick up the tab when it gives an ex-lawmaker a big paycheck to fatten his pension.

The bill passed the House on a 110-0 vote in March. The legislation sought to require cities, villages or other governments employing a former lawmaker for short periods of time to pay for the additional pension expenses that go with the new job, said House Republican leader Tom Cross of Oswego, who sponsored the bill in his chamber.

Surprise, surprise.


  1. - soupperk - Thursday, May 3, 12 @ 10:20 am:

    Rich, thanks for “de-bunking” the misrepresentations about TRS contributions. To get them, took wage concessions. Obviously, the floggings of our public employees must continue until morale improves.

  2. - Freeman - Thursday, May 3, 12 @ 10:24 am:

    Good catch, Rich. I, and certainly many others, can attest to the fact teachers definitely pay into their retirement accounts.

    Some of the most honest, hardworking people I know are now the most scared and likely to face benefit cuts. They didn’t game the system and have no clue what to expect next as retirement approaches after many years of service. It’s not OK.

    I appreciate some of IPI’s work, but appreciate you calling them out on this much more.

  3. - Irish - Thursday, May 3, 12 @ 10:25 am:

    So state employees should tighten their belts. School employees pensions should be paid by local districts, raising property taxes. Retirees should pay for their insurance. All because the state is broke. But wait a minute it is not soo broke that it can’t afford to pick up fattened pensions of lawmakers who get second jobs working for other governments and add that time to the pension they got for their original part time job. Did I get that right? And this is how much different than the two lobbyists?

    And then we wonder why the employees are upset and angry.

  4. - too obvious - Thursday, May 3, 12 @ 10:25 am:

    Can’t get enough of the “not for profit” IPI and its leaders paying themselves 6 figure salaries, knocking gov’t workers who make a lot less. To John Tillman, have you no decency sir?

  5. - Rich Miller - Thursday, May 3, 12 @ 10:26 am:

    ===should be paid by local districts, raising property taxes===

    There is such a thing as property tax caps.

  6. - Cincinnatus - Thursday, May 3, 12 @ 10:29 am:

    “Can’t get enough of the “not for profit” IPI and its leaders paying themselves 6 figure salaries, knocking gov’t workers who make a lot less.”

    No different than union leaders, some of whom are actually on the state payroll getting those same high salaries, no? Oh, yeah, except the IPI funds itself using private dollars…

    This idiotic class warfare nonsense has to stop.

  7. - Rich Miller - Thursday, May 3, 12 @ 10:31 am:

    ===This idiotic class warfare nonsense has to stop.===

    Good for the goose…

  8. - Adam Smith - Thursday, May 3, 12 @ 10:35 am:

    Talk about canards…

    Attack IPI for its salaries? Typical nonesense from the entitled left. IPI raises its money privately and pays staff at its discretion. That has nothing at all to do with its Non-profit status. But facts make little difference when your purpose is to change the subject from the state’s financial crisis.

    And asking government employees who work for the taxpayers to sacrifice is not “attacking” or “knocking” those individuals. It is a valid and necessary public policy discussion.

    It is also very telling that Mr. Ingram at TRS is not acting as an administrator of a pension fund, but as a political advocate to keep the cash flowing into his fiefdom. Too Obvious seems to ignore Ingram’s six-figure salary as long as he is shilling for the unions.

  9. - Sue - Thursday, May 3, 12 @ 10:37 am:

    It is one thing for either the IFT or IEA to urge political action by their members but it is unseemly for the TRS Executive Director to do so- Mr. Ingrahm should stick to managing his Fund’s investments and leave politics to the appropriate representatives- As a State Employee, perhaps he needs to remember that he is not employed by the teacher Unions

  10. - Irish - Thursday, May 3, 12 @ 10:44 am:

    Yes there are, and when your district hits that point your only choice is cuts. Cuts to any program that is not mandated. So the local education system is decimated which affects the quality of the education. Which probably affects school scores. That leads to further failure of the district to meet NCLB. It is a downward spiral that does not produce a skilled workforce. so in ten or twenty years all of the IPI’s and the CCC’s etc. will be facing a disaster of their own because there will be few skilled employable poeople. But that does not have anything to do with making money NOW and satisfying the greed today.

    Ironically, there is one final measure a school board can take when it is faced with an impossible budget situation. It was a step that was suggested once at a board meeting I was in about 10 years ago. The board can close the schools, declare bankruptcy and hand the keys over to the state for the state to run the District. And at this stage of the game there might be more takers on that suggestion than the GA could handle.

  11. - foster brooks - Thursday, May 3, 12 @ 10:44 am:

    There are alot of school districts that are not under prop tax caps

  12. - OneMan - Thursday, May 3, 12 @ 10:45 am:

    Yet again I am reminded of the words of my Grandfather…

    “Everyone else is overpaid and you are underpaid”

  13. - Cincinnatus - Thursday, May 3, 12 @ 10:47 am:

    Snark was full on, Rich.

  14. - Innate2003 - Thursday, May 3, 12 @ 10:48 am:

    From Rockford Register Star:

    “All public employees are required by law to contribute a fixed percentage of their salaries, usually around 10 percent, to their pension plans. Their contributions are one-third of the so-called ‘three-legged stool’ of pension funding, along with employer contributions and investment income.

    But a common contract perk is to have the employers — in effect, the taxpayers — pay those contributions as part of the employee’s compensation package.”

  15. - too obvious - Thursday, May 3, 12 @ 10:50 am:

    “No different than union leaders, some of whom are actually on the state payroll getting those same high salaries, no?”

    As bad as they are and despite their own huge problems, at least the union leaders don’t ride their high horses around preaching about why others are monsters for making less than IPI people do for doing really nothing but sitting around writing about what others do. Duh.

  16. - Pot calling kettle - Thursday, May 3, 12 @ 10:57 am:

    ==Things usually even out, but lower wages mean lower costs to the pension system in the long run.==

    So true. I have been on both sides of the negotiating table discussing this. School districts like to do this because they get to pay the teachers a bit more, which reduces turnover, while showing a lower salary, which the voters seem to prefer. For the teachers, the benefit is less clear; they save money in lower income taxes now, but lose out in lower retirement wages in the future.

  17. - Anonymous - Thursday, May 3, 12 @ 10:58 am:

    “… at least the union leaders don’t ride their high horses around preaching…”
    Umm… Karen Lewis..?

  18. - MichaelQuotes - Thursday, May 3, 12 @ 10:58 am:

    “Teachers negotiate that pension pickup in their contracts, almost always in exchange for wage concessions. Things usually even out, but lower wages mean lower costs to the pension system in the long run. The Policy Institute claim is just plain silly.”

    Creditable earnings, upon which TRS pensions are calculated, INCLUDE the pension pickup. This is not saving the state money by negotiating for lower wages. - See Chapter 3 Page 1.

  19. - Irish - Thursday, May 3, 12 @ 11:05 am:

    Innate2003 - is that why I am paying 8.0% out of my own pocket? The article you refer to lumps state employees in with teachers with no intelligent explanation of the pension payment differences between state employees, school teachers, those who will get social security and those that will not.

  20. - Foxfire - Thursday, May 3, 12 @ 11:08 am:

    I have never seen a local school district, or the teachers, claim that wages were artificially depressed because of the existence of a pick-up. I always thought that this was a benefit that was negotiated on top of negotiated wage increases. Congratulations to teachers for being able to get that.

    Also, I’m not sure the social security comparison is fair. There’s a difference between who processes the payment and who bears the burden for the payment (i.e. incidence). While there is an employer share for SS, there is also an employee share that is deducted from my paycheck. The burden falls on me.

    I think IPI is saying that teachers have negotiated wage packages that pay a certain salary and then also negotiated for local school districts to cover the employee share for the pension, meaning their getting something above and beyond. Perhaps the argument that they negotiated it as part of “total compensation” doesn’t pass muster with IPI because they believe teachers are overcompensated.

  21. - Quiet Sage - Thursday, May 3, 12 @ 11:10 am:

    To Sue: If it’s “unseemly” for Director Ingram of TRS to suggest employee action in protest of the Governor’s proposed pension legislation, it’s certainly equally unseemly for Ingram to say, as he did earlier, that teacher retiree pensions should be cut (even more unseemly,in my opinion).

  22. - Alegra - Thursday, May 3, 12 @ 11:10 am:

    Live in the lower income section of Lake County,Il & our equilized value shows $40K,x3=property value about $120K, although probably would get half of that if we sold. Using some of the PENSION TAXES listed on OUR tax bill for these figures, I realize that many pay more, some less.
    County of Lake PENSION TAX $39.10 x approx 239,246 households (
    $9,354,518. (Lake Co tax=$154.34)
    Lake Co Forest Preserve Dist PENSION TAX $3.50 x approx 239,246 households=$837,361. ($67)
    College of Lake County PENSION TAX=$00 none listed
    (College of Lake Co tax=$83.80)
    High School District PENSION TAX $55.66x appox 9922 households(wikipedia)=$577,658. (HStax=$1131)
    Elementary School PENSION TAX $39.45x approx 3636 households= $143,440. (Elem school tax=$1441) Public Library Districy PENSION TAX $10.13x 9922 households=$100,509.86. (Library tax $86.94)this one surprised me, because it’s a small library) Fire protection PENSION TAX $40.15x ???households
    (Fire Protection tax $265.37) Township PENSION TAX $2.45 x 6006 households= $14,714.70. (Township tax $42.25 & road/bridges township tax of $12.25)
    Numebers other than my tax numbers are of course approximate & some data may not be up to date. Although I cannot interpret all of these numbers, it looks like we all pay for a lot of peoples pensions, whether we want to or not.

  23. - Plutocrat03 - Thursday, May 3, 12 @ 11:12 am:

    If a teacher has a salary of 50K, does the W-2 show a 4,750 contribution to a pension plan or not?

    If there is no deduction from the base salary, then the reports are correct and the employee is not contributing to a pension plan. That means the real salary is 54,750. (or thereabouts)

    If there is a deduction, then the employees is contributing to the plan.

    Which way is it?

  24. - MichaelQuotes - Thursday, May 3, 12 @ 11:16 am:


    Check out Chapter 3 Pages 15-18 for how the pension pickup (aka Employer-paid 9.4 percent retirement contributions) is calculated.

  25. - Frank - Thursday, May 3, 12 @ 11:22 am:

    Everyone says they were negotiated in lieu of raises. But I’ve never seen anyone able to back that up with actual facts. Assertions don’t make facts. Show me the contracts.

  26. - MichaelQuotes - Thursday, May 3, 12 @ 11:31 am:


    They are phased into contracts over a number of years on top of step and lane wage increases. When people try to claim that they negotiate lower wages (this varies based on the contracts I’ve looked at - some go lower, some include the pension pickup with base salary increases), they don’t mention that teachers still get step and lane increases as well.

    Check out our original report here upon which today’s report was based:

  27. - Cook County Commoner - Thursday, May 3, 12 @ 12:14 pm:

    The minutiae of public pensions, especially considering the variety in Illinois, appeals to political strategists. The real issue is arithmatic going into the future. Check the annuity and healthcare benefits received by a particular gov employee at retirement at 62. Now go out and price an immediate annuity with a 3% COLA to replicate those numbers as close as possible. The first conclusion you will reach is that 90% of the pensioners could never have saved that ammount of money to purchase an annuity in the time they were in government service. Not even close. The next conclusion you should reach is the low probability that IL state and local government is going to fund these myriad plans in a tepid investment market and a state ranked with California and NY at the bottom of the barrel for employers, without significant benefit cuts or increased taxes or both. Third, you will conclude that state and local governments have violated their fiduciary obligations to their employees and taxpayers for decades.
    The only open questions are how long state and local government will delay resolving the issue and the extent of taxpayer/governemt worker backlash when government acts.

  28. - Knowing one - Thursday, May 3, 12 @ 12:18 pm:

    I usually get quite a laugh reading this blog and realizing how the State of Illinois got into the mess it is in but this one takes the cake:
    >>lower wages mean lower costs to the pension system in the long run

  29. - Amused - Thursday, May 3, 12 @ 1:20 pm:

    It is insane to EVER compare Social Security to a pension. Social Security was NEVER intended to be a payment a retiree could LIVE ON! It was a supplement to what that worker had saved for their own retirement. Doesn’t everyone know that? As a public worker peon, you take far lower wages (and don’t start talking about 100K salaries —— you might get there right before you retire after 30+ years if you don’t die first) and don’t have the income to SAVE for retirement………….thus the pension. How SS and pension every get into the same sentence if beyond me! And for those who get pensions AND social security………….well, maybe we should be talking about taking one or the other away from them!

  30. - TwoFeetThick - Thursday, May 3, 12 @ 1:59 pm:

    Pardon me Amused, but I have paid into both a pension and Social Security over the so-far 20+ years of my working life. Why am I not entitled to what I have paid for? Oh, and writing in ALLCAPS makes you look irrational and crazy. Stop yelling.

  31. - Demoralized - Thursday, May 3, 12 @ 2:01 pm:

    Why does anyone care what the IPI has to say? Sure, they can issue all of the little reports they want if it makes them feel good about themselves, but the bottom line is that they are a heavily partisan hack shop with a set anti-government agenda. And I would say the same thing about any group, no matter their leanings. I have no interest in anything they have to say.

  32. - Joey - Thursday, May 3, 12 @ 2:19 pm:

    ==Why does anyone care what the IPI has to say? Sure, they can issue all of the little reports they want if it makes them feel good about themselves, but the bottom line is that they are a heavily partisan hack shop with a set anti-government agenda. And I would say the same thing about any group, no matter their leanings. I have no interest in anything they have to say.==

    Isn’t this the report that signs off on the Democrat plan to shift pension costs? Aren’t most Republicans against that?

  33. - Today - Thursday, May 3, 12 @ 3:20 pm:

    Thanks, Commoner for your analysis. In Springfield a 24 year teacher with a baccalaureate makes $66,861. If this teacher began teaching at 23 they would be 47 and earning this amount. If they taught four more years the average salary would be about $68,000. At 70 percent at age 51 this individual would be entitled to a $47,600 pension benefit. A million dollar investment would have to return 4.76 percent to make this payout. Over a 29 year period, I don’t have the math skills to do this, but what would one have to put away annually and at what rate of return would be necessary to save the million dollars?

  34. - Horace Mann - Thursday, May 3, 12 @ 3:22 pm:

    I don’t see why it’s wrong for the Director of TRS, or any other State agency, to suggest that folks tell their legislator what they think about a particular piece of legislation.
    What I don’t understand, especially in light of Ingram’s widely reported comments about the current COLA, is why TRS thinks it’s wrong for them to propose specific legislation. They certainly did in the past. Can anyone shed some light on this?

  35. - Demoralized - Thursday, May 3, 12 @ 3:59 pm:


    I don’t think anybody really knows what they are “for” or “against” yet. If something is gonna pass they will have to be told by leadership at a later date.

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