Capitol - Your Illinois News Radar » CTBA: Tier 3 plan will cost government, employees more, won’t save much money
SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
To subscribe to Capitol Fax, click here.
CTBA: Tier 3 plan will cost government, employees more, won’t save much money

Wednesday, Sep 27, 2017

* From the Center for Tax and Budget Accountability…

Illinois’ fiscal year 2018 budget introduced major changes to the state’s public pension systems in an attempt to grapple with Illinois’ roughly $130 billion in unfunded liabilities. One of the most important aspects of these changes was a new package of benefits. This new package, called “Tier 3,” introduced a hybrid defined benefit-defined contribution plan in addition to the defined benefit plans of Tier 1 and Tier 2.

This month, the State Universities Retirement System (SURS) released the first long-term actuarial analysis of the effects of Tier 3 and other changes contained in the FY2018 budget.

CTBA has identified three major takeaways from SURS’ analysis:

    * The “normal cost” of Tier 3’s defined benefit plan-that is, the cost of funding the benefits earned by current employees in a given year-will be higher than many observers expected. As a result, public employers-in this case, public universities and colleges-will be required to make larger payments on behalf of their Tier 3 employees.

    * The larger normal cost also means that Tier 3 employees will pay the maximum 6.2 percent of their income towards the defined benefit portion of their retirement benefits. When added to the 4 percent of income they will pay towards the defined contribution portion of their retirement benefits, that means Tier 3 employees will pay 10.2 percent of their income in pension contributions-significantly more than the 8 percent current SURS workers pay.

    * Contrary to some reports, which concluded that because Tier 3 will not be implemented in FY2018 it will not be able to produce any savings in this fiscal year, SURS still projects $61 million FY2018 savings from Tier 3. Over the long run, however, the pension changes made in the FY2018 budget do not meaningfully reduce the state’s projected pension payments.

The full report is here.

Apparently, the new plan is just about as “This Is Illinois” as you can get.

- Posted by Rich Miller        

  1. - Macbeth - Wednesday, Sep 27, 17 @ 11:37 am:

    So — here’s a question: given Rauner’s 2 year plus tenure. Has he — at anytime during his administrastion — actually *solved* a problem?

    What I’m getting — sensing — is that Rauner — and his incredible world of business savvy — has *caused* many problems.

    And here, this is one more problem caused by Rauner.

    Is it one of those perspective things? Like, Rauner sees this as a success? Not as a problem?

  2. - walker - Wednesday, Sep 27, 17 @ 11:45 am:

    Can we please stop the posturing about “pension reform” as a campaign meme. There is one legal way to reduce our accumulated pension obligations — pay them down.

    Next issue please.

  3. - A Stounded - Wednesday, Sep 27, 17 @ 11:53 am:

    About right for Governor 1.4%….winning!

  4. - Annonymous - Wednesday, Sep 27, 17 @ 11:59 am:

    “Over the long run, however, the pension changes made in the FY2018 budget do not meaningfully reduce the state’s projected pension payments.”

    True, but the pension payments going forward are primarily due to under funding of past pensions. Tier 3 is a shift toward defined contribution plans and helping shield the state away from pension holidays/under funding whether it be due to corrupt politicians or unsteady economic conditions

  5. - Casual observer - Wednesday, Sep 27, 17 @ 12:00 pm:

    IIRC, RNUG has been saying these things about Tier 3 since it started being discussed. No news here.

  6. - My button is broke... - Wednesday, Sep 27, 17 @ 12:05 pm:

    Tier III wasn’t really designed to save money, it is a Tier II fix. (Maybe it was perceived to save money and no one fixed the misperception.) TRS has been saying for a while that Tier II will eventually violate Social Security minimum benefit levels and either the State would have to increase their benefits or the employees would join Social Security which would cost their employers. Tier III fixes this. This is why Tier III only applies to employees that don’t participate in Social Security (SURS and TRS). Tier III does not apply to the majority of SERS employees (with the exception of State troopers and others that do not participate in Social Security).

  7. - Name/Nickname/Anon - Wednesday, Sep 27, 17 @ 12:05 pm:

    The SERS savings will be miniscule as compared to SURS savings. Tier 3 will impact only a very small group of SERS employees.

  8. - California Guy - Wednesday, Sep 27, 17 @ 12:08 pm:

    Am I missing something here? Tier 3 increases the payments of employees toward their pensions. It also increases the amount that the employing institution must pay - which would be the universities. How is that a bad thing? The state’s pension liabilities remain high because of past pension debt. I thought the point of this plan was to “stop the bleeding?”

    This looks like another example of “this isn’t perfect, so let’s do nothing” that added to Illinois’ pension problems in the first place. You have to start somewhere.

  9. - DuPage - Wednesday, Sep 27, 17 @ 12:27 pm:

    None of the new pension schemes will eliminate the need to pay back the money previously “borrowed” (by the state not paying in required contributions). They owe the money, and will need to pay it.

  10. - JS Mill - Wednesday, Sep 27, 17 @ 12:59 pm:

    =This looks like another example of “this isn’t perfect, so let’s do nothing” that added to Illinois’ pension problems in the first place. You have to start somewhere.=

    No, it is more like this does not save any money because Tier 2 is doing that and the biggest cost is the old long term debt.

    In addition, very few people will opt for Tier 3. So there is that.

    @ Walker is right, paying the debt is the only way to reduce long term costs.

  11. - City Zen - Wednesday, Sep 27, 17 @ 1:27 pm:

    “Tier 3 employees will pay 10.2 percent of their income in pension contributions-significantly more than the 8 percent current SURS workers pay.”

    So a 28% increase is significant? How did CTBA describe the recent tax hike that was 32%? I’m sure they didn’t use the word “significant.”

    PS - And if 10.2% is significant, what does CTBA think of my working family contributing 13% towards our 401k’s, and that doesn’t include SSI. What about that “significant” burden?

  12. - G'Kar - Wednesday, Sep 27, 17 @ 1:29 pm:

    Once again, perception (Tier 3 will fix pensions) is more important than reality.

  13. - City Zen - Wednesday, Sep 27, 17 @ 1:47 pm:

    This report includes none of the risk analysis one would expect in a financial assessment. Typically, one spends more today to offset the risk of tomorrow. Does Tier 3 accomplish this for Tier 3 participants?

  14. - Hieronymus - Wednesday, Sep 27, 17 @ 1:58 pm:

    @CZ 1:27pm

    IMO, as long as the level of benefits is reasonably matched to its actuarially required contributions, and those contributions are actually made, then what is the beef?

  15. - Demoralized - Wednesday, Sep 27, 17 @ 2:43 pm:

    ==So a 28% increase is significant? ==

    I would say yes. If my withholdings went up 28% that would be significant and I would imagine it is for most people.

    It’s pretty easy to not have a problem with what comes out of someone else’s paycheck isn’t it?

  16. - City Zen - Wednesday, Sep 27, 17 @ 2:53 pm:

    ==I would say yes. If my withholdings went up 28% that would be significant and I would imagine it is for most people.==

    Never said it wasn’t. Just that CTBA seems to suffer from selective significance syndrome.

  17. - Anonymous - Wednesday, Sep 27, 17 @ 3:28 pm:

    California Guy - where does the money come from that the Universities would have to pay?

  18. - California Guy - Wednesday, Sep 27, 17 @ 3:45 pm:

    @ Anonymous

    Their budget. I’m assuming they will make some admin cuts that are probably already needed anyways. The alternative would be the State’s budget.

    The only way to pay down pension debt is to put more revenue towards pensions. This guy makes it sound like going from 8% employee contribution to 10.2% is some kind of deal breaker. The only legal route currently available to fix the pension issue long term is to reduce future benefits and increase pension funding (from employee, the employing institution, and the State if needed).

  19. - RNUG - Wednesday, Sep 27, 17 @ 5:28 pm:

    Always nice to have your analysis validated … /s

  20. - Ron - Thursday, Sep 28, 17 @ 1:48 am:

    No future state employee should have a pension. Ever again

  21. - Carl LaFong - Thursday, Sep 28, 17 @ 12:06 pm:

    I will bet that Ron is unaware that the State pays no FICA for its employees.

  22. - Tierd - Friday, Sep 29, 17 @ 9:55 am:

    What the state, county and city need to do is buy out the tier 1 employees who are an aging work force that expend more than they contribute. In terms of salary, health care cost, benefits ect.. use the payroll savings, which can total in the hundreds of millions of dollars to pay into the pension obligations in stead of constantly hiking taxes. And if they have to backfill any of the vacant positions. Those positions can be filled with younger people at half the salary and benefits and pay more into the pension obligation. Like the tier 2 and 3’s.

Sorry, comments for this post are now closed.

* Reader comments closed for the weekend
* Taking a sick day
* *** LIVE *** Session coverage
* Yesterday's stories

Visit our advertisers...









* Atlas shrugged off as thriving Illinois metropolis..
* Automatic voter registration big step forward -.....
* Illinois receives $16M federal grant to fight o.....
* Illinois receives $16M federal grant to fight o.....
* Illinois Receives $16-Million Federal Grant to .....
* Illinois receives $16M federal grant to fight o.....
* Pritzker 'glad' to see McCann amplify Rauner's .....
* Pritzker 'glad' to see McCann amplify Rauner's .....

* White Sox reliever Farquhar has brain hemorrhage during game
* White Sox reliever suffers brain hemorrhage during game
* Illinois receives $16M federal grant to fight opioid abuse
* Ramsey Lewis to play Chicago Jazz Festival before retiring
* Illinois universities see rise in union activity
* Astronomical society opens observatory in Central Illinois
* Marker dedicated for W. Indiana's 'Little Syria' community
* Race to raise college scholarship money for Dreamers
* EXCHANGE: Veteran talks about building during wartime
* EXCHANGE: Former Peru resident restores old family tavern

* Government consolidation efforts gain traction in General Assembly
* Bill: Put therapists, not armed security, in Illinois schools
* Report: Improvements to veterans home could cost $265M
* Rauner's point person on Legionnaires' outbreak makes $20K monthly
* Presidential library publishes digital archive of papers from Lincoln's first 33 years
* McCann to run for governor as Conservative Party candidate
* Duckworth, daughter make Senate history
* Report: Raoul hired ex-state worker convicted in fraud case
* Central Illinois couple suing DCFS over handgun ban at home day cares
* Meet the Springfield Fire Department's first female division chief

* Chicago's largest privately held companies
* Yes, we need the United Way
* Techie Neal Sales-Griffin takes aim at Emanuel
* Corrections
* The 0.3%: Million-dollar earners in Illinois

* Cubs catcher: Yu Darvish ‘too comfortable’ with 2 outs, unravels again in loss
* Yoan Moncada hurt, Lucas Giolito awful in White Sox’ latest ugly loss
* Horoscope for April 22, 2018
* Man critically injured in shooting in Homan Square
* Man critically injured in shooting in Homan Square
* Athletics left-hander Sean Manaea no-hits MLB-best Red Sox
* Elderly woman found pushing dead body around in shopping cart
* White Sox’ Tim Anderson’s antics offend Astros’ Justin Verlander
* 2 buildings catch fire in Back of the Yards
* Man fatally shot during gun sale robbery on Far South Side: prosecutors

* Yu Darvish’s fifth-inning struggles continue in Cubs’ 5-2 loss to Rockies
* A tough day gets worse for White Sox in another blowout loss to Astros
* Man killed in random knife attack at California steakhouse
* Last known person born in the 19th century dies in Japan at age of 117
* Sean Manaea throws no-hitter in Athletics' 3-0 victory over Red Sox
* Mitt Romney must compete in Utah primary for Senate nomination
* Off-duty officer involved in shootout during pharmacy robbery in Edgewater
* Toddler unharmed when gunman opens fire, killing 1 woman and injuring another on West Side
* Elderly woman found pushing dead man in shopping cart
* Nicaraguan President Daniel Ortega agrees to talks as deadly protests rage on

» Official: Pop Tax Repeal Could Mean Late Tax Bills, Budget Headaches
» Casino Sale Raises Questions About A Windfall - Or A Conflict - For Pritzker
» Eliminating Golden Parachutes in Illinois; Children’s Author M.J. Mouton; Illinois Budget
» Obamacare Protection Measure Fails in Illinois House
» State Week: McCann Makes Three; Blagojevich Makes Appeal; Preckwinkle Makes History
» WBEZ’s Chicago and Illinois News Roundup: April 20, 2018
» From Columbine To Parkland: Art And Activism
» Web Extra, The Week in Review: Is there a Newspaper War in Chicago?
» The Week in Review: Dorothy Brown Enters Mayoral Race
» #647 Jason Isbell & Opinions on Cardi B

* Guest View: Doing nothing on transportation funding is no longer an option
* Our View: Let the people vote on fair maps
* United Way: Dedicated volunteers affect lives every day
* Government consolidation efforts gain traction in General Assembly
* Statehouse Insider: Governor's race could set records beyond spending
* Guest View: A nation at risk
* Ed Rogers: Anyone who wants to connect with people could learn a lot from Barbara Bush
* Thumbs Up: To women who break down barriers
* Bill: Put therapists, not armed security, in Illinois schools
* Report: Improvements to veterans home could cost $265M

* 'Illinois River is an artery of the well-being of Illinois'
* Pepsi plant CEO from Southern Illinois injured in I-57 rollover crash involving semi
* Carbondale passes more than $54 million operating budget
* Fire at Arconic creates smoke, but no injuries
* Illinois universities see rise in union activity
* Tickets still available for Skillet, For King & Country at SIU Arena on Thursday
* Ebertfest 2018: Day 4
* Illinois receives $16M federal grant to fight opioid abuse
* Midwest engineering students show off skills at SIUC's concrete canoe races
* I-64 driver hits cow, gets rear-ended by state trooper going after speeding suspect

* Girls soccer: St. Edward wins Rosary invite
* Softball: Late run lifts Huntley over St. Charles East
* Tough opening month continues for White Sox
* Softball: Patient Palatine pulls in RM title
* Boys gymnastics: Glenbard West's big day includes lopsided invite victory

* Rep. Randy Hultgren recognizes Loyola men'...
* US Rep. Randy Hultgren visits McHenry's Pi...
* Are Illinois Congressmen safe in wake of D...
* Capitol - Your Illinois News Radar...
* It's official: If you prepaid your propert...
* Underwood hopes winning primary formula ca...
* House approves Curbelo, Hultgren bill prot...
* Bustos pushes to make 'blue wave' happen i...
* Pritzker, other Illinois Democrats in DC: ...
* A record number of women are running for o...

* Booker, Durbin, Krishnamoorthi Introduce H......
* Durbin, Duckworth demand accounting of All......
* Area US senators' votes on Trump nominatio......
* What's the Deal With Chuck Schumer's Pot B......
* Durbin, Duckworth press Allegiant for flig......

* Tammy Duckworth becomes first senator to v......
* Few mothers could do what Tammy Duckworth ......
* Four stories that mattered this week, expl......
* 4 stories that mattered this week, explained...
* Sen. Tammy Duckworth bringing baby to Sena......

* The Columbia University student revolt. 1968.
* IEA RA delegate writes their disappointment in vote on NRA.
* TenMarks to shut down operations after 2018-19 school year
* University of Akron to lift the curtain on new esports program at forum in April
* Trump says he ‘doesn’t know what a community college means’
* Report: Instructional Design Support Helps Increase Student-to-Student Interaction in Online Courses
* Universities must expand reach to stay competitive
* Class Central Learner Survey (2017): MOOC Users Highly Educated, Have Experienced Career Benefits
* "Meeting House Tavern" Coming Soon To Clark & Winnemac
* The Week In Chicago Rock

* IEMA Highlights Role of Volunteers in Disasters
* Governor Rauner activates State Emergency Operations Center in Springfield
* February Flooding Information
* IEMA Urges People to Prepare for Severe Weather
* Governor issues state disaster proclamation for flooding in Iroquois, Kankakee, Vermilion Counties

* Huawei’s upcoming AI assistant is a Black Mirror episode in real life
* eSim collusion: AT&T, Verizon being investigated by US
* Apple is replacing some 13-inch MacBook Pro batteries
* Apple is replacing the batteries for some 13-inch MacBook Pros
* Amazon won’t let users review James Comey’s new book if they didn’t purchase it through the site
* Netflix’s Cargo has a few new ideas for the zombie genre
* The Wikileaks Shop says that Coinbase has suspended its account

* White Sox can't find rhythm with heavy hearts
* Farquhar looms over White Sox in 10-1 loss
* White Sox can't find rhythm with heavy hearts
* Moncada pulled after 2nd inning by Renteria
* Moncada pulled after 2nd inning by Renteria
* Farquhar stable after ruptured brain aneurysm
* Lopez looks to work deep in finale with Astros

Main Menu
Pundit rankings
Subscriber Content
Blagojevich Trial
Updated Posts

April 2018
March 2018
February 2018
January 2018
December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005


RSS Feed 2.0
Comments RSS 2.0

Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller