Chairman Kennedy blasts “insane” pension reform
Wednesday, May 7, 2014 - Posted by Rich Miller
* 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.”