119 Comments - Just Me - Monday, Oct 26, 15 @ 12:27 pm: Switching everyone over to a 401k system conveniently ignores the fact that it makes the current pension system even more unsustainable. Those that argue for the change never explain how we’ll fund the current system’s enrollees when they retire. - PublicServant - Monday, Oct 26, 15 @ 12:33 pm: ===Pensions were underfunded in part because annual payments had been skipped and the money spent on other things.=== In part? How bout pensions were underfunded mainly because annual payments were skipped. Everything else doesn’t amount to a hill of beans. - Stones - Monday, Oct 26, 15 @ 12:34 pm: The only slight problem I see is the constitution. - Enviro - Monday, Oct 26, 15 @ 12:34 pm: The best solution to the pension crisis is called tier 2 passed by the GA and signed by Governor Quinn. Switching to a 401(k)-type plan would only benefit the 401(k) investment managers because they will charge higher fees for managing these accounts. - thunderspirit - Monday, Oct 26, 15 @ 12:35 pm: Wait, you mean to say that IPI wants to abolish pensions altogether? I never, ever would have seen that coming! (/s) Furthermore, moving everyone into a 401(k) type plan would then make the State subject to Social Security contributions in addition to any contributions to said plans. And it’s undoubtedly unconstitutional at any rate. - Carhartt Representative - Monday, Oct 26, 15 @ 12:37 pm: I think a 401K with social security would be fine for workers, but it would cost the state considerably more money. Then again, everything costs more money than not making payments. - the Other Anonymous - Monday, Oct 26, 15 @ 12:38 pm: The problem (as Just Me stated) is that you can’t walk away from the current unfunded liability by switching to a 401(k) type plan. Plus, the 401(k) type plan has to to be fully funded immediately, meaning higher current contributions. Plus, moving to a 401(k) type plan that is affordable means that the State has to start paying into Social Security, an immediate increase of 6.25% in wage cost. (You avoid this only if the 401(k) type plan is generous enough to cover more than what Social Security would pay.) But if you really want to punish state workers for just doing their jobs, it’s worth paying all this extra money. - Not quite a majority - Monday, Oct 26, 15 @ 12:40 pm: “Eighty percent of private sector employers have embraced 401(k)-type plans.” Absolutely, they’ve embraced them! They can decide how much to match, whether they want to match and then if some cleaver venture capitalist comes in, they can offer the employer/owner a tidy buy-out and then rip off that same 401 plan. Oh yes, lordy, they embrace them! And in 30 years or so, we’ll see the true cost of those plans play out across the country — it won’t be pretty. - PublicServant - Monday, Oct 26, 15 @ 12:41 pm: The 401K equivalent at the state level is the 403B plan. The state would also have to contribute to social security. Without continued contributions to the tier 1 pension plan, the fund’s underfunding continues and increases the debt problem. Individuals do not invest as well as professional fund managers, so their investment results will be less. Additionally, the IPI plan suffers from the vagaries of economic downturn, that may wipe out a retirees gains when he needs them the most. It’s a bad deal for employees, and where’s the state going to get both the money that’s lost to tier 1, as well as the additional money for the IPI plan and social security? Total BS from IPI per usual. - Hank - Monday, Oct 26, 15 @ 12:41 pm: Facts are not something Reeder or the IPI are interested in considering. - History Prof - Monday, Oct 26, 15 @ 12:41 pm: I opted for a defined contribution plan from the state of Illinois, mostly because I thought that Illinois voters would never pay up. I had defined contribution plans at previous universities, both of which used TIAA-CREF, which I was happy with. Illinois could move to such a system going forward, but can not legally do it to workers already vested. So make a switch for new hires now, raise taxes, and pay the old bill. What is difficult about this? - Anon - Monday, Oct 26, 15 @ 12:41 pm: Wonder if Scott Reeder was for personal savings account for Social Security when it was a hot topic. - Demoralized - Monday, Oct 26, 15 @ 12:42 pm: Scott Reeder might want to study the Illinois Supreme Court’s opinion on the subject. The IPI might as well be considered a press arm of the Governor’s office. - Wordslinger - Monday, Oct 26, 15 @ 12:43 pm: IPI had to take a whack at Edgar. Rauner is into them for at least a half million and has put at least three of them on the state payroll. - History Prof - Monday, Oct 26, 15 @ 12:44 pm: Or, per public servant’s comment above, stick with the current system and raise taxes to pay for it. Either way, why is this a difficult decision? - PublicServant - Monday, Oct 26, 15 @ 12:45 pm: ===So make a switch for new hires now, raise taxes, and pay the old bill. What is difficult about this?=== Apparently for some people, the raise taxes part…the pay the old bill part too. They’d just like to breach the contract and pay 10 cents on the dollar. Other than that Hist Prof, nothing difficult at all. - Shoe doctor - Monday, Oct 26, 15 @ 12:47 pm: Private businesses realized years ago that pensions are unsustainable. Illinois Government realized pensions were unsustainable years ago when they kicked the can down the road because they did not have enough money to contribute the required amount. The tier 2 system is a complete joke and those participating would be far better off with a 401K plan with low cost index funds. - BeenThereB4 - Monday, Oct 26, 15 @ 12:47 pm: ==Eighty percent of private sector employers have embraced 401(k)-type plans.== And by “embraced” he means, their employers have decided to switch from a “defined benefit” pension to a “defined contribution” pension. The first being where trained professionals invest the funds contributed by the employees and their employers, and the latter being where each employee is left to decide which square on the wall street roulette wheel to place their future. What could possibly go wrong? The problem with the current pension systems is not that the funds were poorly invested. The problem, at least in Illinois’ case is that the employer failed to make their contribution for decades. The situation got worse under Edgar, because he struck a deal where employees would not get any raises for 4 years, in exchange the state would pay employee’s portion into the pension. Before this deal, at least the employee contribution was reliably being made. - IL17Progressive - Monday, Oct 26, 15 @ 12:47 pm: Sure 80% of Eployers like 401s and such. That absolves them of all responsibilities for employees who they plundered during their working years. Defined benefit were better if they did not allow Corp script as invested $ . - Honeybear - Monday, Oct 26, 15 @ 12:51 pm: To add to this 401k’s can be very risky when steady income is needed. My spouse recently got the 401k statement from an old job in the private sector. Down 11% for the year. The fees still get paid though. I’m just glad we don’t have to depend on it and have 25 years till retirement. - nixit71 - Monday, Oct 26, 15 @ 12:55 pm: ==moving everyone into a 401(k) type plan would then make the State subject to Social Security contributions== ==I think a 401K with social security would be fine for workers, but it would cost the state considerably more money.== The initial cost could indeed be more, but how much more depends on how you value risk. I’m willing to pay a premium today to completely outsource the investment risk of employee retirement accounts onto the Feds (SS) or the employees (401k). Because as it stands today, the taxpayers assume all the risk. For all the talk of adequate past performance, that’s exactly where it is…in the past. And from what I’ve been reading regarding the actuarial assumptions used, there seems to be a significant gap of how much to value the pension liabilities. And those numbers don’t take into account guaranteed retirement health benefit obligations. Have the pension systems properly scaled over the years to account for higher salaries compared to the tax base? Or what’s going to happen when the retirees really start to outnumber employees? For example, by 2025, Cook County’s pension system will have 2 retirees/inactive members for every active member. Is that sustainable? Even if you made the necessary pension payments on time, the taxpayer portion is only going up. The state should be risk averse. - DoubleD - Monday, Oct 26, 15 @ 12:56 pm: For as long as this “sky is falling” argument has been rolling around, is there any group that has made an accurate analysis of what the true cost of all the options will be to taxpayers and employees? Once we agree on the amount and process, then perhaps a true solution will begin to take shape. At this point, as a vested member of a one of the state pension systems, I can’t help but think there are a number of people who see a boatload of money that should go to pet projects, a solution to not raising taxes, and to heck with those of us who have been paying our fair share since day 1. - Tone - Monday, Oct 26, 15 @ 12:58 pm: All the public employee comments are a big reason why Illinois voters are waking up and revolting against these outrageous bloated pensions. Keep it up, it’s a great education for the general public. - Graduated College Student - Monday, Oct 26, 15 @ 12:58 pm: ===“Eighty percent of private sector employers have embraced 401(k)-type plans.” Absolutely, they’ve embraced them! They can decide how much to match, whether they want to match and then if some cleaver venture capitalist comes in, they can offer the employer/owner a tidy buy-out and then rip off that same 401 plan. Oh yes, lordy, they embrace them! And in 30 years or so, we’ll see the true cost of those plans play out across the country — it won’t be pretty.=== Bingo. I’m 30 and I have one of those plans. I have no illusions that the money will be there when I am of “retirement age”. To be honest, I’ve come to thinking of it as another form of an income tax, only to benefit the wealthy rather than say, society. - Newsclown - Monday, Oct 26, 15 @ 1:03 pm: I was there when Edgar’s Ramp was passed, and the folks around me all agreed; Edgar, Mike, Emil and Pate had set a time bomb ticking that they all hoped wouldn’t go off until they were all safely gone/retired, in order to fix the immediate problem. By the way: (BOOM!) Not that I hate the ramp utterly. I don’t like how “steep” it is, and I think it should have been tapered shallower and longer over time. And a requirement for 90 or 100 percent fully-funded is not really needed, as long as the contributions remain steady. - JS Mill - Monday, Oct 26, 15 @ 1:04 pm: =All the public employee comments are a big reason why Illinois voters are waking up and revolting against these outrageous bloated pensions. Keep it up, it’s a great education for the general public.= You mean all of these VOTERS and TAXPAYERS comments.. Right? Or are you so obtuse as to believe public employees are imported from somewhere else? - Keyrock - Monday, Oct 26, 15 @ 1:04 pm: I actually agree with the Jim Edgar bashing for the Edgar ramp (though not the 401k nonsense). But all of this Edgar talk reminds me that the Edgar in the Governor’s Mansion I really miss is Brenda Edgar. She was very effective at pushing health and mental health issues as First Lady. (Maybe she could give Diana Rauner some advice). - Corporate Thug - Monday, Oct 26, 15 @ 1:04 pm: FYI - Mike Lawrence wrote this responding to Reeeder. Don’t know if you saw this, Rich: http://www.examiner.com/article/scott-reeder-has-no-place-lecturing-gov-jim-edgar-about-rauner-s-budget-failure - Demoralized - Monday, Oct 26, 15 @ 1:06 pm: Tone: You can whine and complain all you want but it doesn’t change the reality of the situation. But go ahead, keep holding your breath and pouting about it. It’ll go far to solving the problem. You really need to cut out all of the goofy comments you make. - Anon221 - Monday, Oct 26, 15 @ 1:07 pm: http://www.npr.org/2015/10/19/445322138/is-wall-street-eating-your-401-k-nest-egg **** And to IPI- cans, nutshells, and ramps. All kinds of “games” you can play;? - Six Degrees of Separation - Monday, Oct 26, 15 @ 1:08 pm: I have noticed the Governor has been silent on the “defined contribution plan” topic for a while now, and he was the only real champion with any real influence in the recent past. - nixit71 - Monday, Oct 26, 15 @ 1:08 pm: For all the public sector folks who deride the 401k and think the private sector should have defined benefit plans… Considering the mobility of the workforce today, how would you suggest moving pension accounts from one employee to another? What if I spent 5-10 years at Employer A? Do I move over the account to Employer B? What if I have 10 employers over a career? What about my “tenure” and total “service years”? Will I get 75% of my final “highest” salary (assuming it’s higher, because at retirement time, that’s no guarantee in the private sector) or will the result be I have a bunch of meager pension accounts? My understanding is the Central States Pension Fund was put in place to allow employees to move from job to job yet have one centralized place for their accumulated retirement. But that doesn’t seem to be working too well due to bankrupt employers and other business factors graft aside, of course). I’m OK with pensions, but I’m just curious as to how they would work from a practical standpoint. - Rich Miller - Monday, Oct 26, 15 @ 1:20 pm: ===FYI - Mike Lawrence wrote=== No, he didn’t. - Former Hoosier - Monday, Oct 26, 15 @ 1:27 pm: Rich, you are a master at pulling various pieces of information together in order to determine what’s really going on! Thanks. - Anon. - Monday, Oct 26, 15 @ 1:34 pm: ==But it’s time to move current and future employees into a more sustainable plan.== Defined benefit plans were not only sustainable, when the employers kept up their payments (as required in the private sector) the plans were often overfunded. Employers often gave into the temptation to terminate the plans, allowing the excess funding to revert to the employer. Even if the employer resisted the temptation, an overfunded plan was a temptation for takeover. Congress had to impose 10% penalty on reversions in the 80’s and increase it to 15% and then 20% to put a stop this. But by then a lot of defined benefit plans were long gone. - Liberty - Monday, Oct 26, 15 @ 1:34 pm: Put everyone in a 401K like fund and younger employees will no longer contribute to the fund and will basically make the payment ramp even steeper. - Marty Funkhouser - Monday, Oct 26, 15 @ 1:35 pm: It’s not so much that Scott opposes the current pension system, it’s that his employer pays him to oppose it. - Ahoy! - Monday, Oct 26, 15 @ 1:38 pm: –Those that argue for the change never explain how we’ll fund the current system’s enrollees when they retire.– Those that argue against the change (a 401k system used by private sector employees) only point to a tax increase as to how we will fund the pension system. - Niblets - Monday, Oct 26, 15 @ 1:41 pm: A different approach. I found the article by John Presta very interesting and I appreciate having it referenced at this site. - Give Me A Break - Monday, Oct 26, 15 @ 1:42 pm: I think Scott is still ticked off about that snow day state employees got a few years back when a blizzard hit most of Illinois. He wrote about it saying something like, private sector people had to work, why should state employees get the day off? - Ahoy! - Monday, Oct 26, 15 @ 1:46 pm: In defense of IPI and Reeder (who I don’t even like) they are correct that Edgar ramp was a rat. Thompson, Edgar & Blago never saw a spending bill they didn’t like and would gladly short the pensions to to avoid making cuts. I’ll give Quinn the most credit for at least trying to address the pension issue with reforms and a tax increase. Pension systems are not sustainable because we can’t trust CEO’s, boards or politicians to make the required payments. Those folks will gladly throw the long term institutional success under the buss for next quarters profits or next years election. - GA Watcher - Monday, Oct 26, 15 @ 1:49 pm: Let’s not forget that Governor Rauner has proposed extending the ramp for Chicago and downstate police and fire systems. His draft bill has been discussed in subject matter hearings conducted by the House Personnel & Pensions Committee. Interestingly, it has yet to be formally introduced. - A Watcher - Monday, Oct 26, 15 @ 1:57 pm: Back in May 2015 Rich had a post analyzing the components of the pension systems shortfalls. Fully 21% of the shortfall is due to actuarial risk assumption (effectively expected return versus actual), not funding. Funding is of course heavily the key, but many commenters way underweight the risk profile taxpayers are absorbing to provide a DB versus DC plan. It would seem that taxpayers would have a vested interest in reducing their risk profiles. - Try-4-Truth - Monday, Oct 26, 15 @ 2:02 pm: How does this change affect this year’s budget… Or next year’s? It doesn’t. Let’s pass a budget, then “fix” the pension. As is stands now, public employees (I am not one) take the blame for the whole “budget is a mess” disaster. They are easy scapegoats. But, as anyone with 2 brain cells to rub together can see, it’s really our antiquated tax system. Our property taxes are high in Illinois because of the state tax system. Our pensions are underfunded because of our tax system. Our social service providers are suffering because of our tax system. Overhaul the tax system and allow for “progressive” income tax and this state will be just fine. I know it takes a constitutional amendment to make it happen. So let’s get started. The longer we wait, the worse things get. - countryboy - Monday, Oct 26, 15 @ 2:05 pm: Ahoy! you’re close. Pension systems ARE sustainable if they’re controlled by pension professionals, and not by politicians who can’t see farther than the next election, or god forbid, bidness types with their quarterly horizon. - Tone - Monday, Oct 26, 15 @ 2:12 pm: Illinois collects plenty of taxes, we just spend too much. - Union Man - Monday, Oct 26, 15 @ 2:16 pm: I wonder if Rauner’s people got to Reeder’s people? I cannot take The IPI seriously until they disclose their funding sources. Caveat Emptor on what they peddle. - AnonymousOne - Monday, Oct 26, 15 @ 2:16 pm: Good luck on getting started. The courts handed down the edict that the pension funds had to be repaid and here some are, still trying to figure out how not to get started on that. As far as lack of contributions to the pension funds being the major explanation for their deficit, just imagine how much was lost on investment returns on money that never made it there. - VanillaMan - Monday, Oct 26, 15 @ 2:17 pm: The problem is that he doesn’t want to recognize the difference between a private employee and a public citizen. Another problem is that he doesn’t want to recognize that our government is a democracy and not a corporation. Applying all the business thinking you wish, you can’t change those basic facts. Government solutions and business solutions are fundamentally different. Citizens don’t give up their citizenship when they are working and serving the public. We all have rights as citizens that prevents governments from treating you like you work for a discount department store. Governments don’t have the rights to fire at will. They don’t have the rights to pay whatever they want or when they want. Citizens are protected from abusive governments and governments must respect those rights. So you can take your business solutions and stuff them. We aren’t running a Walmart. We aren’t rolling up businesses for stockholder profits. We aren’t busting out an industry. We are running a government in a democracy. What part of this set up seems so illusive to these “superstars”? - Blue dog dem - Monday, Oct 26, 15 @ 2:24 pm: -a Watcher-yes, the referenced post was good. It did underscore my ongoing comments that actuarial assumptions only factor in life expectancies at a given time. Every ten years these get addressed, and yes, Illinoisians are living longer than ever. Therefor, perceived solutions for a DB are obsolete befor the ink dries. if an universal 401K style pension were implemented today for new hires, the state is still going to have to feel the pain of bucking up for decades. - UIC Guy - Monday, Oct 26, 15 @ 2:28 pm: ==And who better to take responsibility for worker retirements than the workers themselves?== All the studies I have seen say that defined benefit plans, reasonably competently administered (with professionals doing the investing), out-perform self-managed 403(b)/401(k) type pensions. For a given level of benefit, less cost for employer and employee. —Just an inconvenient fact, of course, not going to make any difference to the debate! - Tone - Monday, Oct 26, 15 @ 2:28 pm: The pension payments must be reamortized over a longer period of time AND it must be on a straight line schedule. We must also amend the State Constitution to eliminate the retirement protection clause. It is outrageous that state workers get more rights than ordinary citizens. - A Watcher - Monday, Oct 26, 15 @ 2:32 pm: Blue Dog - I agree it’s a massively painful situation ahead. But the issues of DB plans are not just “well you didn’t fund enough.” There is fundamental risk transfer in DB plans (to employer or taxpayer). In the case of Illinois public DP plans, the value exchange of the risk transfer (because of the constitutional provision prohibiting reductions) far exceeds the private sector (just ask United Airlines pilots or the Central States Teamsters about the PBGC). We as taxpayers get no value for absorbing that significant risk in public plans. Increases in the actuarial assumptions that are worthless in 10 years according to your post just increase the taxpayers risk. How is that a good deal for taxpayers? - Tone - Monday, Oct 26, 15 @ 2:35 pm: It’s a terrible deal for taxpayers as we are now living A Watcher. And the protection provided our constitution is absolutely outrageous and needs to be eliminated ASAP. - Huh? - Monday, Oct 26, 15 @ 2:38 pm: State employees already have a 401(k) type of investment plan - 457 deferred compensation. The difference between a corporate 401(k) and the State 457 is that the State does not have any matching funds that go into the 457. Moving to a 401(k) I would expect and demand that the State match up to a maximum percentage of money that I would save. - allknowingmasterofracoondom - Monday, Oct 26, 15 @ 2:40 pm: “Additionally, the IPI plan suffers from the vagaries of economic downturn, that may wipe out a retirees gains when he needs them the most. It’s a bad deal for employees, and where’s the state going to get both the money that’s lost to tier 1, as well as the additional money for the IPI plan and social security?” Yea, welcome to the real world where the actual 99% live. You are responsible for your own retirement. What a freakin’ (dropped the g for OW) concept. - JS Mill - Monday, Oct 26, 15 @ 2:43 pm: =We must also amend the State Constitution to eliminate the retirement protection clause. It is outrageous that state workers get more rights than ordinary citizens.= Again with your ill informed statements? Last time feeding for today, state/public employees are ordinary, taxpaying, voting, living, working citizens. Good luck with your efforts to screw the ordinary citizens of Illinois. - Blue dog dem - Monday, Oct 26, 15 @ 2:49 pm: -AWatcher-it’s not, but I resigned myself to the fact that the ILSC decision is set in stone unless the state constitution gets changed. Don’t think that’s possible In the balance of my lifetime. If the state robs(and I do mean robs) any significant portion of LGDF, many entities throughout the state will become insolvent and be forced to walk away from commitments made. Maybe that’s the Grand scheme all along. Wish I were a little mouse hiding in them Caharts. - allknowingmasterofracoondom - Monday, Oct 26, 15 @ 2:51 pm: Tone - Monday, Oct 26, 15 @ 12:58 pm: All the public employee comments are a big reason why Illinois voters are waking up and revolting against these outrageous bloated pensions. Keep it up, it’s a great education for the general public. BINGO TONE. Understanding it is in the “State Constitution”….it is amazing to me the tiny percentage of workers that work for the state and somehow think this is all ok, they are somehow the chosen ones who get a guaranteed retirement because a bunch of lying politicians told them so. - Cook County commoner - Monday, Oct 26, 15 @ 2:53 pm: Can the Illinois private sector bail out the public sector pensions? That seems, at least to me, to be the most important question. The blame game is useless, unless correctable problems are identified. The funds transferred to the plans will negatively impact current private sector earnings which in turn will negatively impact immediate private sector spending and retirement savings. Can the Illinois economy survive this? - Smitty Irving - Monday, Oct 26, 15 @ 3:03 pm: Shoe doctor IMRF proves defined benefit pensions are affordable. - Try-4-Truth - Monday, Oct 26, 15 @ 3:04 pm: ======- allknowingmasterofracoondom - Monday, Oct 26, 15 @ 2:51 pm: Tone - Monday, Oct 26, 15 @ 12:58 pm: All the public employee comments are a big reason why Illinois voters are waking up and revolting against these outrageous bloated pensions. Keep it up, it’s a great education for the general public. BINGO TONE. Understanding it is in the “State Constitution”….it is amazing to me the tiny percentage of workers that work for the state and somehow think this is all ok, they are somehow the chosen ones who get a guaranteed retirement because a bunch of lying politicians told them so.======= Ok, to everyone who doesn’t understand civil service or the need for a professional public workforce, I sentence you to study Woodrow Wilson’s landmark paper on the subject. Here: https://archive.org/details/studyofpublicadm00wils Also, understand where we came from before the “Progressives” changed everything (and no, not today’s progressives, so stop before you start.) - A Watcher - Monday, Oct 26, 15 @ 3:13 pm: Smitty Irving - we created a massive moral hazard of no downside to state annuitants (because of the constitutional clause) with unions very willingly not protesting underfunding in return for certain favorable changes to the plans coupled with incredibly weak willed and lack of forethought governance that used the money for other purposes (as politicians are want to do). In private sector DB plans with those situations employees either don’t let their employers not fund (they sue, strike, negotiate plan changes, etc.) or deal with the results of the non-funding (takeover by PBGC). In IMRF the state mandates local entities fund timely or see restrictions. Those rules don’t apply to the State (or I dare say most police and fire pensions). Sustainability is only primarily achieved by the force that non-timely funding will be penalized (to either the annuitant or the sponsor). - cover - Monday, Oct 26, 15 @ 3:16 pm: = they are somehow the chosen ones who get a guaranteed retirement because a bunch of lying politicians told them so = Who adopted the Constitution with that pension protection clause? Illinois VOTERS, not politicians. - Ghost - Monday, Oct 26, 15 @ 3:22 pm: a 401k stule plan is not cheaper for the state, and they underperfrom defined benefit plans. they also have higher fee. ine of the states largest private companies uses a defined benefit tetirement plan, State Farm. they made the employer contribtuion every year and the plan is overfunded. its jot the type of plan, its not the level of benefits. the State borrowed from the fund and never put the money back. So chnageing the plan type to one with high fees and lower rates of only benefits Rauner investment company types, not employees. - allknowingmasterofracoondom - Monday, Oct 26, 15 @ 3:23 pm: Sure cover, keep telling yourself that and maybe it will be true. The majority of workers in this country have no guarantee to retirement income or health benefits. The fact that public sector employees just think it is ok with the rest of the world is the problem. If the Gov has no clothes on, the employees have been naked for 40 years. Buck up the the rest of the world and figure out how to retire on your own dime. Then we will see who you support come election time. - Rich Miller - Monday, Oct 26, 15 @ 3:24 pm: ===The majority of workers in this country have no guarantee=== You sound so proud. - nixit71 - Monday, Oct 26, 15 @ 3:34 pm: ==IMRF proves defined benefit pensions are affordable.== No, IMRF only proves you should get your money first and via direct deposit. Because if every pension fund was like IMRF, either our tax rate would be much higher or a few of the pension funds would be bouncing checks. - Union Dues - Monday, Oct 26, 15 @ 3:35 pm: Allknowingmasterofracoondom - maybe more folks should join unions to help make sure they recieve what they were promised. - Smitty Irving - Monday, Oct 26, 15 @ 3:35 pm: A Watcher The teachers sued Dan Walker about deliberate underfunding, and the Supreme Court said only payments are guaranteed. I’ve heard unions complain about underfunding for 30 years, but apparently not very effectively. - nadia - Monday, Oct 26, 15 @ 3:41 pm: DB plans in the private sector were fine with most employers until the market crashed and they had to start contributing to them. The first thing the private sector employers turned to was de-risking by way of 401(k)’s and cash balance plans. All the risk is moved from the employer to the employee, instead of reading the sports page in the morning blue collar workers now read the business/financial pages. I understand the State has not funded the public plans properly so now when it looks like they will somehow have to make contributions to the plans the first answer some turn to is de-risking, move everyone to a 401(k) plan or a cash balance plan. It comes down to employers, both public and private alike, are done with lifetime commitments to employees. To me it’s a sad thing to see, but it is what it is. As others have said professional investors protected or made revenue in the old DB plans. Now Joe the Plumber has to assume the risk of trying increase the value of their retirement fund. Reeder says who better to invest it! Fools gold, beachfront in Arizona, save it please, the employment bargain has changed and may never come back but don’t try to sell it as a better deal for employees cause it’s not. Along with all of this these right wing zealots want to reduce or eliminate social security. When the present day employees retire (if they ever will be able to) I wonder how much income they will have to live on?? A revolt will happen again, it’s just a matter of to time. - HangingOn - Monday, Oct 26, 15 @ 3:47 pm: ==Buck up the the rest of the world and figure out how to retire on your own dime.== There are *many* people who worked for or still work for the state that took less pay than they could have gotten in the private sector in exchange for that guaranteed retirement. And we have also, just in my agency alone, lost many people *back* to the private sector because the guarantee wasn’t worth the lower pay and extra stress. - nona - Monday, Oct 26, 15 @ 3:47 pm: If it’s fair to bash Edgar for the ramp, then we should also bash Pate, Lee and the Trib for supporting it. - allknowingmasterofracoondom - Monday, Oct 26, 15 @ 3:48 pm: Rich - You sound so proud. Yes, I am proud. I am proud to be self reliant. I am proud to work hard and save money for the future. I am proud to be able to contribute to society and expect nothing guaranteed back in return. I am proud to teach my children the same thing, that no one owes you a retirement, no one owes you anything just because you show up to work. I am proud I don’t have to rely on my neighbors to pay my health benefits when I retire. I am proud that I can vote for anyone who I see fit to lead instead of someone who I think can serve my own personal needs but I can’t stand them otherwise. So yea, you are right Rich, I am proud. - nixit71 - Monday, Oct 26, 15 @ 4:00 pm: ==There are *many* people who worked for or still work for the state that took less pay than they could have gotten in the private sector in exchange for that guaranteed retirement.== OK, but when are they going to pay taxes on that difference? I’ve heard this argument before. You’re saying public sector employees took a discount on their salary in exchange for the pension. So how much was that discount? 10%? 25%? Because if they’re getting that money back in retirement, they’ve never paid state income taxes on it. So whatever discount they took, that’s the percentage of their retirement income that needs to be taxed. The private sector employee, in theory, takes no such discount. Therefore, he pays 100% of his true tax liability on his wages. Even a flat income tax rate is not truly flat for some, as the effective tax rate for public sector workers is less than it should be. For 45 years, the state has failed to tax public sector salaries properly. - Andy S. - Monday, Oct 26, 15 @ 4:01 pm: I am not saying that it would necessarily be a good thing, but I believe it would be possible for the state to offer only a 401k/403b to NEW employees and still not have to contribute to Social Security. SURS already has such a self-managed plan, whereby the state contributes 7% of salary, and it does not pay into SS for these employees. Not sure, however, that this would save any money over tier 2, as the employer cost of tier 2 is probably not greater than 7% of pay. As for Edgar and his ramp, criticism is perhaps warranted. One wonders how much better shape we would be in if Tier 2 had been instituted in 1995 rather than in 2011. But then again, as HC said with regard to Bengazi, what difference does it make at this point? We can’t go back in time and change the past. - HangingOn - Monday, Oct 26, 15 @ 4:12 pm: ==I am proud to be self reliant== Well, I’m proud of you too! Proud that you’ve dug your own well and test it yourself, grow your own food, raise your own livestock, sew your own clothes, home school your children, and have enough trees in your bubble that you have plenty of clean air. That way you don’t have to worry about those pesky state workers and the jobs they do. Why, I guess you shouldn’t pay taxes at all if you’re not using the services the workers provide. - Georg Sande - Monday, Oct 26, 15 @ 4:13 pm: Former Gov. Jim Edgar voluntarily jumped into the fray by offering some unsolicited stinging criticism. That’s his opinion and is fair. The replies from any source, including Scott Reeder, criticizing the criticizer is fair too. None of this stuff is pretty these days and is not for the faint of heart or thinned skin. Edgar threw a punch and is now taking a few. Big surprise. By the way, Mike Lawrence’s rejoinder was weak, in my opinion. - Try-4-Truth - Monday, Oct 26, 15 @ 4:16 pm: ====- nixit71 - Monday, Oct 26, 15 @ 4:00 pm: ==There are *many* people who worked for or still work for the state that took less pay than they could have gotten in the private sector in exchange for that guaranteed retirement.== OK, but when are they going to pay taxes on that difference? I’ve heard this argument before. You’re saying public sector employees took a discount on their salary in exchange for the pension. So how much was that discount? 10%? 25%? Because if they’re getting that money back in retirement, they’ve never paid state income taxes on it. So whatever discount they took, that’s the percentage of their retirement income that needs to be taxed. The private sector employee, in theory, takes no such discount. Therefore, he pays 100% of his true tax liability on his wages. Even a flat income tax rate is not truly flat for some, as the effective tax rate for public sector workers is less than it should be. For 45 years, the state has failed to tax public sector salaries properly.==== I’m going to try really hard to be nice here. Ok, here goes… All retirement income is tax deferred. When people receive their retirement, it is not taxed in the state of Illinois. See, everyone gets the same benefit. Try again, and please try harder. - Rich Miller - Monday, Oct 26, 15 @ 4:17 pm: ===Mike Lawrence’s rejoinder === What rejoinder? - Georg Sande - Monday, Oct 26, 15 @ 4:19 pm: Check that. John Presta’s. Mea culpa. - Blue dog dem - Monday, Oct 26, 15 @ 4:26 pm: -all knowing….3;48. Just exactly who did you vote for that fits that line of b.s. It sure isn’t the Raun Man. The person you voted for sure as heck wouldn’t dole out EDGE tax credits, or hire expensive consultants. - JS Mill - Monday, Oct 26, 15 @ 4:30 pm: =Because if they’re getting that money back in retirement, they’ve never paid state income taxes on it. So whatever discount they took, that’s the percentage of their retirement income that needs to be taxed.= You are right, retirement income, all retirement income should be taxed. SSI, pensions all of it. - Wordslinger - Monday, Oct 26, 15 @ 4:31 pm: Lawrence put Rauner’s contributions to IPI at $625K over the years. Who knows how much he persuaded his pals to kick in. Just a big fan of independent news, I guess. - Mama - Monday, Oct 26, 15 @ 4:50 pm: ++The private sector employee, in theory, takes no such discount. Therefore, he pays 100% of his true tax liability on his wages.++ Where the heck do you live? In Illinois, public employees pay the same taxes as the private sector employees. - forwhatitsworth - Monday, Oct 26, 15 @ 4:54 pm: Sounds like a great John Fogerty song … “Deja vu (All Over Again)” !! - jdcolombo - Monday, Oct 26, 15 @ 4:56 pm: @racoondom 3:23 I’m really tired of folks talking about the state pension as though it were a gift to employees, unlike that “real” private sector world. It is not a gift. It is part of a negotiated employment agreement. I accepted employment with the state that included an agreement regarding my pension benefits and took a 50% cut in pay from the private sector partly because of those benefits. Having dutifully executed my part of that agreement for 28 years, I now fully expect the state to execute its part of the agreement. You are simply not correct that “nothing is guaranteed” in the private sector. In fact, we expect the private sector to honor its contractual commitments, and “guarantee” that through judicial process (you get to sue). If you sign an employment agreement with a private company that promises to match a 401(k) contribution up to 7%, I am pretty certain you would be angry and aghast if the employer told you AFTER you had performed your services “hey, we’ve decided to renege on that match. Tough.” Almost certainly, you would sue to receive your rightful benefit. Saying “no one owes you anything just because you show up for work” is false: I’m pretty sure you expect to get paid for your work at the agreed rate; you are “owed” that payment and if you failed to receive it, you would sue to receive it. And I’m pretty sure that you expect the bank where you have housed your lifelong savings to pay out those savings on demand, per the terms of your deposit contract, and if it doesn’t do so, you will also be very angry and would sue them if they refused. And I’m pretty sure that if that bank goes bankrupt, you will be pleased that the FDIC insures your account for up to $250,000, and I’m pretty sure you would be angry if Congress then said to you “Hey, you know what, we’d have to raise taxes to pay you, so forget it.” You rightfully expect contracts and prior agreements to be honored whether they are from the private sector or the government. So do I. Quit talking like my pension is some gift from above. It’s not. I earned it. Just like you earned whatever you have. It’s not your money; it’s not the state’s money. It’s mine. - Enviro - Monday, Oct 26, 15 @ 5:06 pm: allknowing @ 3:48 pm: ==I am proud to be able to contribute to society and expect nothing guaranteed back in return.== No Social Security? No Medicare? Do you even build your own roads and bridges?/s - nixit71 - Monday, Oct 26, 15 @ 5:16 pm: ==All retirement income is tax deferred. When people receive their retirement, it is not taxed in the state of Illinois.== But that’s not the argument put forth here. @HanginOn implied public sector folks take a lower SALARY in exchange for a better, “guaranteed” retirement benefit. For example, say private sector accountant makes $50K and contributes 5% to his 401k and a state accountant makes $40K and contributes 5% to his pension. The argument here is that the state worker SHOULD make $50K, but instead chooses to get paid $40K and get a better pension. In essence, he gets back that $10K difference in retirement, plus his retirement balance (employee portion + state portion + interest) just like the public sector guy with the 401k would. Obviously, both workers defer some of their salary to retirement. But the private sector worker never took a discount on the FMV of their services. Hence, he paid his true state income tax obligation on his wages. The public sector worker has not. Whatever that % of “salary discount” is, that’s what the public sector worker needs to have subject to tax on his pension or as a premium rate on his current earnings. Otherwise, public and private are not paying the same taxes. - AnonymousOne - Monday, Oct 26, 15 @ 5:23 pm: There are a whole lot of people in this state who pay a significantly lower percentage of tax on their income and most of them probably make many multiples of my earnings. If equality of tax percentage is the issue, then we have lots more folks to be looking at than public retirees. And those people would add a LOT more cash to the coffers than public retirees. The plan to divide and conquer works so well for some. As Ty, Rauner and the multimillionaires watch middle class workers rip each other up, they just breathe a sigh of relief that no one’s looking their way. - nixit71 - Monday, Oct 26, 15 @ 5:24 pm: ==If you sign an employment agreement with a private company that promises to match a 401(k) contribution up to 7%, I am pretty certain you would be angry and aghast if the employer told you AFTER you had performed your services “hey, we’ve decided to renege on that match. Tough.” == Big difference…the company can change that on a yearly basis. Just because I’m hired under “7%” doesn’t mean I’m entitled to that every year until the end of my employment. The company is pretty much allowed to “diminish and impair” that match at any time. BTW…can you direct me to all the companies providing a 7% employer match? - Enviro - Monday, Oct 26, 15 @ 5:40 pm: ==BTW…can you direct me to all the companies providing a 7% employer match?== That would be all employers who pay the employer Social Security / Medicare contribution of 6.2% plus whatever they pay for the employer’s share of their employee’s 401k plan. - jdcolombo - Monday, Oct 26, 15 @ 5:47 pm: @nixit 5:24 No difference at all. I knew (or thought I knew) exactly what the terms of the pension part of my employment agreement was at the time, which is why (partly) I took such a large discount from my private sector earnings. If I had thought that the state could change my pension at any time, I would have demanded a higher salary, or else would have stayed in the private sector (probably the latter). Or in other words, I negotiated away current income for less retirement risk. You could certainly do the same if you wish. Microsoft Corporation matches 50% of 401(k) deferrrals up to $9000, which is the equivalent of 7% of a $65,000/yr salary, which is about the same as the median state worker salary in Illinois per http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2013/07/02/comparing-state-salaries-to-private-pay - nixit71 - Monday, Oct 26, 15 @ 5:51 pm: ==That would be all employers who pay the employer Social Security / Medicare contribution of 6.2% plus whatever they pay for the employer’s share of their employee’s 401k plan.== Wow, you’re comparing employer SS contributions to an actual 401k match?!?! That same SS that pays out at 3%?! And then they redistribute your payout even lower the more you earn?! That employer match?! Yikes. Disconnect indeed. - countyline - Monday, Oct 26, 15 @ 5:52 pm: –took a 50% cut in pay – Please dispense with that lie, we all have access to the state employee database and know what you make. - countyline - Monday, Oct 26, 15 @ 5:55 pm: JSMill…when it comes to state taxes, you are a net tax consumer, not a tax payer. - Enviro - Monday, Oct 26, 15 @ 6:06 pm: -nix- @ 5:51 ==Wow, you’re comparing employer SS contributions to an actual 401k match?== Social Security is in itself a guaranteed defined contribution retirement plan and guaranteed benefit that must be funded by the employer, period. It includes an annual compounded cost of living benefit. In addition the SS/Medicare plan provides a guaranteed medical benefit when the employee turns 65 that cannot be diminished or taken away because of health conditions. These are benefits that can’t be replaced by a 401k plan for most people. - Tier 2 Employee - Monday, Oct 26, 15 @ 6:26 pm: == Wow, you’re comparing employer SS contributions to an actual 401k match?!?! That same SS that pays out at 3%?! And then they redistribute your payout even lower the more you earn?! That employer match?! Yikes. Disconnect indeed. == Are you starting to realize what a good deal the state of Illinois has to be exempt from Social Security? For employees like myself, the state can actuarially cover all defined benefits from the employee’s retirement contribution. Pushing for defined contribution plans is myopic when the state can continue to pocket the spread between market returns and Social Security for all new employees. - Young State Worker - Monday, Oct 26, 15 @ 6:54 pm: Countyline, you’re out of your element when you accuse Professor Colombo of lying. Dude’s a professor of law with a specialty in contracts. He could have made bundles more in the private sector and is the exact type of authority whose expertise is sorely needed on this issue. - Big Tom - Monday, Oct 26, 15 @ 7:00 pm: After the Governor tears down the Thompson Center, he should strip mine Jim Edgar Wildlife Area. It is too bad Gov. Stratton isn’t around to mouth off. - Norseman - Monday, Oct 26, 15 @ 7:06 pm: jdcolombo, well said. To Young State Worker, folks that say things like that are trolls. Facts and logic don’t matter to trolls. They hate and like to spew their venom at others because of their own low self-esteem. We don’t feed trolls. That encourages them to stick around. Please don’t feed the trolls. - Blue dog dem - Monday, Oct 26, 15 @ 7:12 pm: Jdcolumbo—feel your pain a bit, but, “a negotiated employment agreement”. Let’s call it what irritates most taxpayers the most. Politicians buying or paying back votes. As regards your 28 years service, was the the 3% COLA before, or after your startup, and I know Microsoft doesn’t bump 401k’s 3% after retirement., and lastly, the Microsoft retirees can’t withdraw til there “how old”? - Demoralized - Monday, Oct 26, 15 @ 8:04 pm: ==you are a net tax consumer, not a tax payer== Oh please. Enough with that garbage. We are all tax consumers goofball. - Demoralized - Monday, Oct 26, 15 @ 8:07 pm: @allknowingmasterofracoondom Contrary to your goofy beliefs state workers do everything you are “proud” to do. Now why don’t you stop sitting on your porch yelling at people. Man some of people really love to whine. - RNUG - Monday, Oct 26, 15 @ 8:19 pm: == The situation got worse under Edgar, because he struck a deal where employees would not get any raises for 4 years, in exchange the state would pay employee’s portion into the pension. Before this deal, at least the employee contribution was reliably being made. == Point of fact - the State religiously paid the EMPLOYEE portion under that deal (while it lasted) but the State continued to short / skip the EMPLOYER portion - RNUG - Monday, Oct 26, 15 @ 8:28 pm: == is there any group that has made an accurate analysis of what the true cost of all the options will be to taxpayers and employees? == A number of analyses have been done by varying partities. Switching from the ‘Tier 1′ plan to something else was shown to cost more short and medium term but would save money long term. Exactly how much depended on whether the choice was ‘Tier 2′ or some 401K like plan. The 401K was quite expensive short and medium term since the State still had to pay off the $110B plus make immediate 401K contributions plus make Social Security payments for a large portion of the employees (mostly everyone except the majority of SERS members). ‘Tier 2′ was shown to be less costly that either the current plan or the 401K proposal in that it not only slowed the future liability for new employees, it was structured such that the ‘Tier 2′ contributions would exceed any payout and therefore help pay off a small portion of the ‘Tier 1′ liability. It doesn’t get any better than “free” money going into the pensions systems, so we ended up with ‘Tier 2′ as the reform. The only question is if ‘Tier 2′ benefits will hold up scrutiny under SS exemption rules in the mid-term future. - RNUG - Monday, Oct 26, 15 @ 8:30 pm: == Put everyone in a 401K like fund and younger employees will no longer contribute to the fund and will basically make the payment ramp even steeper. == Understand you can’t change existing employees to a 401K type plan. You can only do it for new hires … where your point would be valid. - RNUG - Monday, Oct 26, 15 @ 8:36 pm: == The courts handed down the edict that the pension funds had to be repaid … == Actually, the courts have never said that, they have only said the actual pensions can’t be cut and must be paid when due. What the courts also said was the General Assmbly could choose to fund the Pension Funds any way the GA wanted to. That 1975 decision in IFT v Lindberg is the ROOT of the pension underfunding problem. - RNUG - Monday, Oct 26, 15 @ 8:41 pm: == How is that a good deal for taxpayers? == Still cheaper than adding Social Security on to of 401K contributions. The ONLY benefit I can see to a 401K type plan is it would FORCE the State to lay out CASH EVERY MONTH to pay their CURRENT pension liability. - RNUG - Monday, Oct 26, 15 @ 8:45 pm: == with unions very willingly not protesting underfunding … == The unions sued (see IFT v Lindberg, 1975 and subsequent cases) and were told by the courts they could not force the GA to properly fund the pensions. - nixit71 - Monday, Oct 26, 15 @ 9:25 pm: ==Social Security is in itself a guaranteed defined contribution retirement plan and guaranteed benefit that must be funded by the employer== Based on 75% of my highest salary? Nope. Well then, how about calculated using only my top 4 years of earnings? Nah, the govt uses 35. OK, well, can I keep every penny contributed on my behalf? Not if I did well as some of my benefits are redistributed to those less fortunate. And all for the rate ROI of 3% Look, we’re not exactly comparing apples and oranges here. But I would encourage you to fill out a SS and see just what payback you get from 6.2% investment of your wages over a lifetime. Spoiler alert…not good. - nixit71 - Monday, Oct 26, 15 @ 9:28 pm: ==Are you starting to realize what a good deal the state of Illinois has to be exempt from Social Security?== Not if you value risk. - Wordslinger - Monday, Oct 26, 15 @ 9:36 pm: So, RNUG, are you saying that suing over a course of action is not the same as “very willingly” going along with it? These guys are incapable of playing it straight. - RNUG - Monday, Oct 26, 15 @ 9:41 pm: - nixit71 - I agree with you that SSI is not a good DB plan in terms of ROI. If you are a low wage earner (which is who SS is really aimed at), it is fairly decent deal for that worker. It’s the highly paid worker who comes out on the short end of the SS deal. And you are right, it is comparing apples and oranges. You have to also consider the multiple insurance portion benefits of SSI: Disability, Spousal and Survivors. Yes, statistically speaking not a lot of people use the Disability portion, but it is a godsend for those who do legitimately need it. And Survivors falls into the same category, if you are unfortunate to need it. And almost all of us end up having someone use the Spousal portion. SSI may not be a great retirement plan but it serves a vital purpose in the social safety net. - RNUG - Monday, Oct 26, 15 @ 9:42 pm: -word- @ 9:36pm You made me laugh … - Tier 2 Employee - Monday, Oct 26, 15 @ 9:52 pm: == Not if you value risk. == Your value of risk would have to be of the “hoard gold and bullets” variety for making SS payments for Tier II employees to be a better option than defined benefits. - Anonymous - Tuesday, Oct 27, 15 @ 6:28 am: Private and public employees both benefitted from decades of artificially low tax rates while the legislature “borrowed” form the public pension funds. Now that the bill is coming due, many want public employees to pick up the tab for everyone. - SAP - Tuesday, Oct 27, 15 @ 6:30 am: Comment at 6:28 was SAP. - Aldyth - Tuesday, Oct 27, 15 @ 7:39 am: I’ve heard Edgar described in many ways. I’ve never heard anyone describe him as a fool who could be played by even the most savvy politician. Sorry, comments for this post are now closed.