* Phil Kadner writes about the problem with Gov. Bruce Rauner’s pledge to swich current state workers and teachers into defined contribution 401(K) plans…
Dave Urbanek, a spokesman for the Illinois Teachers Retirement System, said any such change would not be nearly as simple as it sounds.
He said there’s roughly a $104 billion deficit in the state’s five pension funds, and “that’s money the state owes. There are currently 395,000 people in the (TRS) system, including 159,838 active teachers.
“If you close (TRS), freeze it so there are no new members coming in and current members can no longer contribute to the pension system because they would be making contributions to their 401(k) plans, the state would still have to find a way to pay the $928 million a year contribution (to TRS) for active members who are eligible to retire in the future.
“They (active members) would no longer be contributing to the pension system but would still be eligible to collect a pension for their years of service prior to the switch.
“In addition, the state would have less time to make up the $104 billion debt to its pension systems. When you have an open system, you can project costs far into the future. But when you have a closed system, you have a defined end date. So you have to make larger payments in a shorter time frame to fulfill the state’s commitment.
“Also, the amount generated by investment would decrease because of the shorter time frame of a closed system.
Urbanek pointed out that the state would have to make some form of contribution to the 401(k) plans of active teachers, while also making payments into TRS.
“Someone would have to figure out, in the end, if the state would actually be saving money or if it would cost more to make the switch,” he said.