* House Republican Leader Tom Cross and Rep. Elaine Nekritz have filed a new pension reform bill, HB 3411. Video of the press conference, via BlueRoomStream.com, is here.
It appears to have a sorta kinda cost shift in it. From the press release…
• Creates Tier 3 defined benefit/defined contribution plan for SURS and TRS members who start work after January 1, 2014. Local Employers and employees will be responsible for funding these plans.
* Moving on to the fact sheet, this is for public employees hired before 2011…
Members (public employees hired before 2011)
• Cost-of-living adjustments apply only to the first $25,000 of the employees’ pension
o 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
o This applies to all employees and retirees who are currently receiving COLAs
• Retirement age is increased by:
o No increase for employees age 45 and older
o One year for employees age 40 to 44
o Three years for employees age 35 to 39
o Five years for employees age 34 and younger
• Employees would be required to contribute more toward their pensions by:
o One percent starting July 1, 2013
o Two percent starting July 1, 2014
• 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
* For public employees hired since 2011…
• All new employees in the Teachers Retirement System and State University Retirement System are placed in a stacked hybrid plan (combination defined benefit and defined contribution plan)
o Employees are guaranteed a minimum defined benefit
o Employers and employees contribute an additional amount in to a 401(k) style benefit plan
o Local school districts can negotiate the generosity and cost of the 401(k) benefit with employees
• TRS and SURS employees hired before the effective date can choose to remain in Tier 2 or join the stacked hybrid plan (Tier 3)
• COLAs for General Assembly Retirement System members will match those of Tier 2 members in the other pension systems
* For TRS and SURS members who start work after January 1, 2014…
• Hybrid Defined Contribution, Defined Benefit plan
• Defined Benefit component:
o Employee contribution is 4% of pay
o Final Average Salary = Highest 8 out of last 10 years
o Unreduced retirement at 67 and 5 years of service
o Reduced retirement at 62 and 10 years of service
o 1.1% annual accrual rate
o COLA is lesser of 3% or ½ CPI, simple starting at age 67
• Defined Contribution component:
o Employee contribution is 5% of pay
o Local employer can make optional matching contribution (pursuant to local contracts) of between 3% and 10% of pay
o Ability for the DC plan to be invested in existed investments in the system and managed by the system for employees.
o 5 years to vest in the employer contributions.
• Employer contributions will be on a 30-year level-funding plan to achieve 100 percent funding
• State 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
* From the bill’s synopsis…
Amends the General Provisions, General Assembly, State Employee, State Universities, and Downstate Teacher Articles of the Illinois Pension Code. In the Downstate Teacher and State Universities Articles, creates a Tier 3 composite defined-benefit, defined-contribution retirement plan for employees hired on or after January 1, 2014 and certain others. Makes corresponding changes in other parts of those Articles and in the Retirement Systems Reciprocal Act. Increases the retirement age for certain Tier I members and participants. Changes the conditions of eligibility for, and the amount of, automatic annual increases for Tier I retirees. Increases required employee contributions for Tier I members and participants. Limits pensionable salary for Tier I and Tier 3 participants. Changes the required State contribution to each of the affected retirement systems so that those systems are 100% funded by 2043. Adds State funding guarantees. Makes other changes. Amends the Illinois Public Labor Relations Act to provide that this amendatory Act takes precedence. Amends the State Finance Act. To the list of standardized items of appropriation, adds “State retirement contribution for annual normal cost” and “State retirement contribution for unfunded accrued liability”. Defines those terms. Amends the Governor’s Office of Management and Budget Act. Adds those terms to a list of classifications to be used in statements and estimates of expenditures submitted to the Office in connection with the preparation of a State budget. Amends the State Mandates Act to require implementation without reimbursement. Includes an inseverability provision. Makes other changes. Effective immediately.
*** UPDATE *** SJ-R…
The latest plan does not give employees a choice of retirement benefits, something Senate President John Cullerton, D-Chicago, has said is essential for a pension reform plan to be found constitutional. Cross and Nekritz said they believe the plan is constitutional anyway.
“We feel very strongly that there are legal opinions that support this as constitutional,” Nekritz said.
“Anything is going to end up in the courts,” Cross said. “The reality is nobody knows (how the courts will rule).”