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* Gov. Quinn was cautiously optimistic about the pension reform committee’s work product so far...
Illinois Gov. Pat Quinn called the outline of a pension overhaul proposal floated by a bipartisan panel “positive” and “progress,” but he shied away Sunday from saying whether he’d fully back it.
The so-called conference committee — a 10-member panel formed in June to come up with a solution to Illinois’ nearly $100 billion crisis — is considering a framework that would, among other things, end automatic 3 percent cost-of-living increases for retirees. Increases would instead be linked to the rate of inflation.
“It appears … that some progress is being made,” Quinn told reporters after an unrelated Chicago event. “We still have to get to the finish line but I think the concepts … are very positive indeed.” […]
He said although some of the concepts in the plan are familiar and his own budget office is heavily involved in the committee’s research, he wants to see final details of a plan before he weighs in.
* Background on the framework, from Friday’s post…
A bipartisan panel tasked with solving Illinois’ multibillion-dollar pension crisis is considering a framework that would save the state about $145 billion over 30 years, largely by ending automatic 3 percent cost-of-living increases for retirees. […]
It calls for setting retirees’ annual cost-of-living increases at half the rate of inflation, though it would set both floors and caps — which were not included in the outline — for what the rate would be. That formula would likely equate to smaller adjustments than the current 3 percent increases, compounded annually.
Employees would contribute 1 percent less to their own retirement, according to the document. But their annual pension benefit would be based on their salary over their career, rather than on the higher amount they’re making right before they retire.
It would reduce the state’s nearly $100 billion unfunded pension liability by about $18.1 billion and fully fund the retirement systems within 30 years.
Keep in mind here that there’s no deal yet.
* Also keep in mind that when Gov. Quinn talked to reporters over the weekend, he wouldn’t commit to actually putting votes on the bill, which is a demand of House Speaker Michael Madigan. Listen…
From the audio…
“Well, uh, it has to get to my desk. They still have to vote on it, the Legislature. I sure hope that they can expedite that. If the members of the House, the Senate pass the bill, put it on my desk, that does the job, erases the pension liability, moves us forward, then I’ll be able to sign the bill into law.”
* And, of course the Tribune editorial board didn’t care for the ideas…
Led by state Sen. Kwame Raoul, the pension committee has been hyperfocused on meeting the constitutional wording that pensions cannot be diminished or impaired. But without more ambitious reform that would save the pension system more money, the benefits may not be there for retirees at all — or taxpayers may have to pay more.
The committee’s draft plan assumes: 1) The state can and will continue to afford to make huge payments annually into the pension system. 2) The legislature will honor that “savings” commitment long after paying off old debt and not spend the money elsewhere. 3) All pension investments will meet an annual return of 8 percent … for three decades.
Taxpayers would be on the hook if any of those assumptions fail.
The pension committee continues to work out the details of the proposal, which its members hope to unveil the week of Sept. 9. So far, their proposal does not include giving workers the option of a 401(k)-style plan. That idea should be resurrected.
Committee: You’ve come this far. Keep going. You can do better than this. Give taxpayers and public sector workers a more ambitious plan that will stabilize the system. No wings, no prayers — just basic math.
The Tribune led the charge against Senate President Cullerton’s A-B plan, which could’ve solved this problem months ago. If they actively try to kill the pension reform compromise which eventually emerges from the conference committee, then they should be looked at as part of the problem here. You just can’t pass everything. There comes a time for compromise.
posted by Rich Miller
Monday, Aug 26, 13 @ 9:49 am
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==There comes a time for compromise==
That should be part of the platform of every candidate.
Comment by walkinfool Monday, Aug 26, 13 @ 9:56 am
–No wings, no prayers — just basic math.–
“No wings, no prayers” would include passing Constitutional muster.
And who are the Tribbies kidding about Basic Math? They’re the ones leading the hysteria on the math, which isn’t nearly as dramatic when you assume regular contributions and historic investment growth.
They and Ty’s Basic Math involves grabbing what lawfully and morally belongs to someone else and calling it “reform.”
The old truism in Illinois still rings true — when someone says “reform,” hold on tight to your wallet.
Comment by wordslinger Monday, Aug 26, 13 @ 9:56 am
“the pension committee has been hyperfocused on meeting the constitutional wording that pensions cannot be diminished or impaired.”
Oh, god forbid that they should worry about the constitutionality of the legislation.
I’d far rather they were “hyperfocused” on that question rather than not focusing on it at all, which is, sadly, far too common in the GA. Do we really want to do this all over again?
Comment by Joan P. Monday, Aug 26, 13 @ 10:05 am
The last time the rate of inflation was over 6% was 1982. So if half the rate drops below 3%, will that be a diminishment of pension benefits? I can see this one ending up in court as soon as it is signed by Quinn. Why not have the state employees pay more into the fund (as AFSCME reps have suggested) and keep the 3% COLA? It appears that the committee also wants a pension payment holiday until 2019! Why does resolving the pension shortfall always mean punishing the state employees before any other idea (reamortize, close tax loopholes) are tried first?
Comment by Rusty618 Monday, Aug 26, 13 @ 10:06 am
…annual pension benefit will be based on salary over their career…
So those of us that were hired pre-Blago/Quinn and started at the bottom of our pay scales will be severely punished. Those hired during the Blago/Quinn endemic hiring fraud years and started at 80, 90, 100k/yr will feel no such penalty. Can’t beat that for fairness.
Comment by Joe from Joliet Monday, Aug 26, 13 @ 10:06 am
For any new hires, they can do this.
For those already working or already retired, they can not.
They CAN, of course, raise new revenue to begin paying into the pension system both political parties have so nobly ignored for years.
That pesky old Constitution gets in the way again.
Comment by Jechislo Monday, Aug 26, 13 @ 10:07 am
They and Ty’s Basic Math involves grabbing what lawfully and morally belongs to someone else and calling it “reform.”(Truer words were never slung!)
“the pension committee has been hyperfocused on meeting the constitutional wording that pensions cannot be diminished or impaired.”
Yes they have Joan, ever since their paycheck was “unconstitutionally” frozen by PQ.
Comment by anonymouse Monday, Aug 26, 13 @ 10:14 am
@Joe from Joliet
I couldn’t believe that when I saw it. I started out at $800 a month and figure that clause would reduce my pension by over 43%! I’m ready to get out today!
Comment by Ready To Get Out Monday, Aug 26, 13 @ 10:16 am
But we also have to remember this WILL be in court as Rusty618 says, immediately after it is signed, if it makes it that far.
Comment by Ready To Get Out Monday, Aug 26, 13 @ 10:18 am
I find it interesting that whenever I read any media article on this topic it never mentions that the CC has considered the three levels of employees, i.e., new hires, those currently employed, those already retired.
No legislator or Quinn commentson this distinction and no reporter seems to ask any relevant questions on this matter.
Everbody, at least when I read it, seemsto lumped together. Is there something I am missing?
Is it possible that the CC and legislators are not even considering those distinctions? If they are not that would almost be unbelievable. And to me anyway, would indicate extraordinary stupidity or they just could care less about any sort of integrity and honesty.
Again, am I missing something?
Comment by Federalist Monday, Aug 26, 13 @ 10:30 am
The Tribune has been part of the problem for at least a year now.
Comment by Yossarian Lives Monday, Aug 26, 13 @ 10:30 am
It’s pretty hard to make 8% on your money for 3 decades. Are those numbers right?
Comment by Phineas J. Whoopee Monday, Aug 26, 13 @ 10:31 am
*** It’s pretty hard to make 8% on your money for 3 decades. Are those numbers right? ***
Is it? Some quick Google research on long-term stock market performance, I note that since 1926, the average annual return on large-cap stocks has been 9.62 percent. Only five years out of the last 83 had a return that was +/- 2 percent from the average return.
Comment by Slick Willy Monday, Aug 26, 13 @ 10:44 am
–It’s pretty hard to make 8% on your money for 3 decades–
Not so you’d notice, and not if you don’t get hysterical at every bump in the road.
Over the last 100 years, average rate of return in the stock market is 9.6%.
Over the last 25 years, it’s 12.5%.
Read Warren Buffett on the subject. He made his first stock market investments right after Pearl Harbor, when there was a real fear of a Japanese invasion of the West Coast.
His friends thought he was crazy. He seems to know what he’s doing, in lean times and fat.
http://www.whitfieldco.com/blog/?p=39
Comment by wordslinger Monday, Aug 26, 13 @ 10:48 am
Whatever the plan, it’ll never be good enough for the Tribune. I just hope Quinn signs off without the drama the Trib will be encouraging.
Comment by Wensicia Monday, Aug 26, 13 @ 10:48 am
For those still working, paying one percent less of a contribution towards their pension in exchange for lower COLAs sounds like a very bad deal for all public workers - but especially those close to retirement.
About this contract “consideration” they are discussing, as someone earlier pointed out, “It’s not a contractual choice if you don’t have the option to keep what you already have”
Comment by Joe M Monday, Aug 26, 13 @ 11:05 am
Retired Teamster!
The Governor, legislature, Civic Club, Illinois Chamber of Commerce and We Are One Illinois are all going to be disaappointed when they lose all of this so called pension reform in court.I attended the first special committee pension hearing several months ago.
It was amazing because at the beginning Chairman Senator Kwame Raoul laid the ground rules and stated ” We want new ideas and not the same old stuff we have been hearing the past 2 years.” We want to hear new ideas. Well their were the same old ideas from the Illinois Chamber, Civic Club etc. Rehash. I placed a request to speak slip in and sat for 4 1/2 hours listening to all the smoke! The only person who made sense was Asst. Majority Leader Lou Lang. He had several recommendations that included keeping the income tax increase in tact and dedicate those dollars towards paying off the pension liabilty.
After 4 1/2 hours he adjourned the meeting. Myself and several retired teachers approached him about not allowing us to speak. He said that a lot of people put in a slip! I couldn`t believe it as I expressed to him and Lou Lang why would anyone hear from those most affected The Retirees. I was prepared to answer several of the questions that those who testified were unable to do so if he had let me testify. I administrated a pension and 401 (K) Plan.
Most importantly there is case law on the diminishment of benefits from past Illinois cases where particpants sued and won and a U.S. Supreme Court decision that states ” That unions cannot negotiate for current retirees because they are no longer members of the union and do not share a common interest. I have those decisions listed below:
” Di Falco v. Board of Trustees, 521 N.E.2d 923 (1988)(holding that contractual relationship is governed by terms of pension code at the time the employee becomes a member of the retirement system); People ex rel., Sklodowski v. State, 695 N.E.2d 374 (Ill. 1998)(holding that under funding claim alleging failure to make required contributions was not actionable since state constitutional provision was intended to create contractual right to benefits, without freezing politically sensitive area of pension financing).
The Rhode Island Supreme Court stated in Arena v. City of Providence, 919 A.2d 379, 389-390 (2007) that (a) the plaintiff retirees were not members of or represented by unions; (b) the plaintiff retirees are retirees and, as such, cannot be treated as employees as the United States Supreme Court found in Allied Chemical v. Pittsburgh Plate Glass, 404 US 157 (1971); and (c) the plaintiff retirees do not share a “community of interest” with active union members as current union members and retired members could have adverse interests.
Comment by Teamster Monday, Aug 26, 13 @ 11:08 am
Hyperfocusing on the constitutionality of pension reform is what legislators should be doing. Passing something that would satisfy the Trib but would be likely struck down by a court is wasteful. I think the British call the Trib approach “clever by half.”
One could say the Trib is hyperventilating.
Comment by Grandson of Man Monday, Aug 26, 13 @ 11:09 am
I agree that it sounds like diminishment but is that really what’s at issue at this point in time.
Is the idea to get something going and claim to have solved the pension problem in the runup to the primary? It’ll take the court a while to rule and I assume there would be a stay in the meantime. So how much in “savings” can the state govt claim and spend while the case is in court. Cash may not rain down for pet projects right away.
If Pat Quinn gets to sign pension “reform” you know it’ll be a big deal for his campaign and he’ll spend the runup to March talking about how he singlehandedly saved the state’s finances. Do the Republicans really want to hand him that advantage? Or the currently unpaid legislators?
And where are all the folks who are so mad about state employee pensions anyway. Will they be rushing to the ballot box to express their anger in 2014 if “reform” doesn’t pass. True, most of them don’t have defined benefit pensions these days but they probably wish they did. Maybe some of them are waking to the fact that when you yank benefits from one segment of the declining US middle class, the bell is tolling for other segments too. This would be one of many many examples in recent decades.
Comment by Cassandra Monday, Aug 26, 13 @ 11:42 am
hyperfocusing on the meaning of constitutional words, instead of going for numbers that make some feel good while inflicting pain, all in the name of “reform”. “we screwed it up so bad to get to this point, we have to screw over the retirees, or they get nothing.”
now, why would anyone expect tribster editorialists to focus on the meaning of words? just plain stupid, to use some words that are easy to understand.
Comment by langhorne Monday, Aug 26, 13 @ 11:47 am
Employees would contribute 1 percent less to their own retirement, according to the document. But their annual pension benefit would be based on their salary over their career, rather than on the higher amount they’re making right before they retire.
When I read this I dug out my letter of acceptance to the State Police Academy. The letter was from Director James Zagel, August 1982, at the starting salary of $1486 per month.
Employees will have to retire if this passes as averaging your salary over your career will dramatically reduce their pensions.
Comment by Tsavo Monday, Aug 26, 13 @ 11:47 am
It’s dumbfounding that seniors( (retirees), most of whom are unemployable, and therefore, unable to make up for lost income, would be the targets of cuts. Would this wash with social security benefits? Those who are still employed, and choose to work in this arena have the ability to save, supplement their income change employment, etc. Why age discrimination would be the soup de jour for our legislators is amazing. It’s not as if retirees are deadbeats, having given scores of years to the service of our state’s citizens. They’re not on the dole! They’ve contributed not only their expertise, time, effort, and money, never having missed a payment. I know this is just a plan under consideration, but it’s really shocking that seniors–some in nursing homes– would be the target of savings, rather than those more able to pay. But then again, that’s how our tax code is. Those most able to pay don’t (won’t).
Comment by JC Monday, Aug 26, 13 @ 11:50 am
Quinn can say whatever he wants, but he doesn’t really have any say in it. In this case, the only people that matter are the members of the ISC.
While the GA can make these terms apply to new hires, they can’t apply them retroactively. I won’t bother to cite the ISC rulings (you can research them yourselves) but almost any involuntary change to the retirement terms of existing employees and retirees is a violation of the pension clause.
The COLA change won’t pass muster. Neither will the change in calculating the salary basis for the pension calculation. Both those actions have been tried in the past and shot down by the ISC. In fact, minor reductions of less than $50 a month have not been allowed … and both these changes would be have a much larger impact than $50 a month.
Others have identified the fact that 8% return is historically realistic, so I’ll skip over that.
As far as the 3% AAI, history over the part 40 years and since the government started measuring the CPI in 1913 has shown it runs about 3% over the long term. Actual numbers are 2.9% and 3.1% for those periods.
The only things I’m reading in the ‘new’ proposal that will actually pass constitutional muster is retaining the current income tax level and redirecting the current pension bond payments to the actual pension funds once the bonds are paid off.
Paying what is already owed the pension funds is the only legal action …
Comment by RNUG Monday, Aug 26, 13 @ 11:52 am
Teamster, thanks for the Court cases.
By the way IMRF had a 85.9% funded status at the end of 2012 according to their June 2013 Annual Report. Look it up for yourself and remember this.
And the reason is not more investment success but because all required contributions were met over the years- you will often see on your property tax bill the amount for pensions separately listed. In short, they were not allowed to be deadbeats.
I assume Quinn et. al. know this but could care less. They want more money for government purposes that expand their political power and voting clout.
Comment by Federalist Monday, Aug 26, 13 @ 11:54 am
Not only is the average RoR in the stock market well above 8% on average over any 30 year(or more) period you’d care to measure, but so is the average RoR for each of the pension funds.
Comment by PublicServant Monday, Aug 26, 13 @ 11:55 am
Reactions: Quinn = positive, but impotent; Trib = irate but irrelevant; Madigan = silent and pondering; Cullerton = strategizing; Cross = How will it effect my treasurer’s campaign?; Radogno = Waiting for Ty to give direction; Ty = Still smarting from the last time he opened his mouth; We are One = Not sure; and, public workers and retirees = we’re going to get screwed.
Comment by Norseman Monday, Aug 26, 13 @ 12:10 pm
PublicServant @ 11:55 am:
Yep. The irony of this entire mess is IF the GA had put the money in as they should have, that +8% compounding would have the made the current fund solvent and let the GA have lower payments today.
Comment by RNUG Monday, Aug 26, 13 @ 12:17 pm
So a $145 Billion cut wont count as a “diminishment” of earned pension benefits?
Quite amazing, these politicians.
Comment by Cod Monday, Aug 26, 13 @ 12:35 pm
Should us older folks retire now or will this affect already retired folks? At least eliminate the SS windfall provision so we can collect all of our SS.
Comment by affect Monday, Aug 26, 13 @ 12:38 pm
Hyperfocused on following the consitution…those evil !@#% We need to vote them out and flesh out government with folks who dont let those pesky laws stand in the way of doing whatever they want… it served Ryan and Blago well, I see no reason to get bogged down in legalities now….
Comment by They said What? Monday, Aug 26, 13 @ 12:44 pm
If they’re looking to reduce the deductions for current employees by 1% — then why don’t they go full monty and consider the next obvious (and most likely constitutional next step):
Simply give employees the choice of more money in the short term (decreased deductions, smaller pensions) or more money in the long term (increased deductions, pensions as-is). I know most employees would seriously consider this an authentic choice — and it would give folks the option to use the short-term cash or invest it or whatever.
I dunno — this is the first thing I thought of when I read the stories and realized, well, if I were given that choice — it’d be an interesting decision. It’s the first thing that seems fair to me — and would seem to skirt around any contract issues since you’re actually getting something for the diminishment.
Comment by Frenchie Mendoza Monday, Aug 26, 13 @ 12:46 pm
” That formula would likely equate to smaller adjustments than the current 3 percent increases, compounded annually.”
DUH….if they are limiting the cola to 1/2 of the CPI or 3% which ever is less and the average for the CPI is 3% then there is no “likely” about it.
Pass something and send it to the courts. Taxpayers need to be paying for all the services that Illinois has been providing, not just part of them.
Comment by Kevin Highland Monday, Aug 26, 13 @ 12:48 pm
affect @ 12:38 pm:
Assuming you are referring to the same SS windfall / offset I am, it is a federal rule that the State GA has no power to change.
Just like those people who chose to take the level payment option under the State retirement plan, that was an irrevokable choice under the Federal IRS tax code on pensions … so you can’t undo it even if the State changes things.
Any action that is taken, other than paying what is owed, opens up another can of legal worms.
Comment by RNUG Monday, Aug 26, 13 @ 12:55 pm
All the action is on the COLA. Obviously, that’s what’s driving increased costs…particularly with retirees living for decades on the pensions instead of years.
But I wonder if their is a legal strategy in targeting COLA too. The 3 percent compounded COLA is relatively new for the state funds, enacted in 1989. Almost everyone who is drawing a pension today starting working for the state before ‘89…so that COLA was not part of the deal they signed up for.
Don’t get me wrong, the constitutional language is so strong I’m not sure there’s a single proposal out there that’s legal. I just wonder if targeting COLA gives the court an out.
Comment by middle ground Monday, Aug 26, 13 @ 12:55 pm
affect @ 12:38 pm:
The State already owes the money. It has to affect everyone, both employees and retirees. If it doesn’t, there isn’t any “savings”.
Comment by RNUG Monday, Aug 26, 13 @ 12:57 pm
middle ground @ 12:55 pm:
Don’t think so. To date the ILS has been pretty consistent in ruling the “the terms at time of hiring plus ENHANCEMENTS GRANTED BY THE GENERAL ASSEMBLY” are the terms of the protected pension contract. The key point, of course, being the GA granted the AAI.
If that is the committee’s intent to focus on changing the AAI for people hired before it was implemented, some of us might have a loop hole also. Speaking personally, even though I have “continuous” service, I had to actually submit written resignations and resign my current position a couple of times to accept new appointments under the Vinson Bill rules. So, if the court is going to slice and dice based on hiring date, which pension contract applies to me?
Comment by RNUG Monday, Aug 26, 13 @ 1:07 pm
“Kraus vs Board of Trustees…. court held that section 5 of article XIII of the Illinois Constitution prohibits legislative enactments that diminish the benefits of employees who become members of the pension system before the legislative enactment takes effect.” Handbook Of Illinois Pension Case Law (published by the legislature)
Comment by Liberty First Monday, Aug 26, 13 @ 1:09 pm
As of Friday, Aug. 23, the breakeven 30-year inflation rate between ordinary U.S. Treasury bonds and Treasury Inflation Protection Securities (TIPS) was 2.29%, calculated as the yield to maturity on nominal bonds (3.80%) minus the yield on TIPS (1.51%). For the latest yields or historical yield information, go to the U.S. Treasury’s website (http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). If you prefer surveys of professional Economists, then the expected annual %change in the CPI over the next 10 years is 2.2% according to the latest survey just released by the Philadelphia FED (http://www.phil.frb.org/research-and-data/real-time-center/survey-of-professional-forecasters/2013/survq313.cfm).
So the so-called compromise legislation would reduce expected AAI’s going forward from 3% annually to about 1.1-1.2% annually. This move would affect everyone - current retirees, future retirees, etc. - and it is a huge diminishment. I have emailed every member of the pension reform committee similar information 2 months ago, laying out how this is a huge diminishment and how easy it will be to document that it is such in court, apparently to no avail.
One other issue with regard to this: anyone retiring under the SURS money purchase formula specifically contributed 0.5% of salary in order to receive the 3% AAI in retirement, and I suspect similar arrangements prevail in some of the other pension systems. How is cutting something one has already paid for not an absolutely clear-cut contractual breach?
Comment by Andrew Szakmary Monday, Aug 26, 13 @ 1:11 pm
Middle, the supreme court sued over removing thier COLA’s. They found as a matter of law that COLA’s are part of the compensation.
Very simple litmus test, the GA will not make these changes to the judicial pension system. That should say it all.
More distrubing is that there is no outcry from the civic union or tribune about leaving the monstourously generous judicial pension alone. This is basically a high level bribe to the judge to rule in favor of the reform. We should be greatly ditrubed about a legal process that carves out a lucrative judicial benefit in exchange for taking from others.
Where does it stop? maybe a Bill that says the GA can excercise the authority of the executive branch, tied to a bill that doubles judicial pay and reduces their period of fully vesting?
Do judges really need to make 80% of their last day pay after 20 years of work? or 31 % after only 9 years? https://www.srs.illinois.gov/Judges/retireben_jrs.htm
So a judge pays 4 thousand or so a year, and receives 136000+ a year, plus COLA if they retire after 20 years.
An average state employee recieves 40,000 a year on retirment, and a COLA… and the pension we are worried about is the Sta employee??
Comment by They said What? Monday, Aug 26, 13 @ 1:11 pm
At some point it will be smarter for a decades long employee to quit rather than retire and get a lump sum disbursement to invest than to stay in such a system. Hey, PQ, by the time I’m eligible to retire in a half dozen years, you ready to send me my lump sum separation? What if the legislature makes retirement so awful that we all do that? Can the budget handle it?
Comment by Realist Monday, Aug 26, 13 @ 1:16 pm
What does it mean that a pension would be based on salary “over their career”? Will it be an average of all of a teacher’s salaries?
Comment by Dinosaur Monday, Aug 26, 13 @ 1:19 pm
Dinosaur
I believe it means just that. Your average salary over your entire career would be the salary basis for your pension.
Comment by Wishin I Was Fishin Monday, Aug 26, 13 @ 1:28 pm
Dino, the devil is in the details. This outline doesn’t really tell us much. There is the addition to the university proposals to offer up some consideration for current employees by reducing contributions. It doesn’t discuss what consideration is given to retirees for their reduced benefits. We also don’t know the specifics on COLA caps or delays beyond the original university proposal of 1/2 of CPI.
Comment by Norseman Monday, Aug 26, 13 @ 1:46 pm
Changing the base will be a huge diminishment. I started 33 years ago at 1/9th of what I make today. The difference between an average over my career and the average of my highest 4 years is about 60%.
And they are going to do that to people already retired-Oh by the way, you know that pension check you get each month? It is going to go down by 60%.
Comment by SIUPROF Monday, Aug 26, 13 @ 2:08 pm
Has anyone actually seen the so called CC document that lists the options being considered? I agree that calculating one’s salary over a career will likely diminish the salary base upon which most retirees pay is calculated. Such calculations would include oldest and newest salaries. This will ensure that the retirement annuity does not reflect current market reality which is the reality that we have to pay for in retirement. This, more than the AAI could result in substantial cost savings, akin to lowering the cap on salaries upon which retirement can be based on.
Comment by equivicator Monday, Aug 26, 13 @ 2:15 pm
MiddleGround,
Not certain where you got the info that the 3% COLA started in 1989. My information is different:
Here is the complete message. I am sorry I didn’t send the complete email earlier. I hope this addresses your questions.
On 9/1/1969, the contribution rate changed from 7% to 8%. 6.5% of that is for the Normal/Regular contributions, 1% for the Survivor, and 0.5% for the Automatic Annual Increase (AAI). Prior to that date, no part of a member’s contributions went toward the AAI (or COLA).
Regarding the amount of the COLA:
If a member terminated prior to 8/15/69, the AAI was not automatic. If they qualified, they could elect to pay to receive the increase.
Beginning 9/1/69 1.50%
Beginning 1/1/72 2%
Beginning 1/1/80 3%
Also the Constitution reads as follows. Does not say that it would have to be operation when you BTH began and ended your employment.
XIII, Section 5, “the Pension Clause,” which states that “membership in any pension or
retirement system of the State, any unit of local government or school district, or any agency or
instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
If you have any additional questions, please let us know.
Member Service Representative
State Universities Retirement System of Illinois
1901 Fox Drive
PO Box 2710
Champaign, IL 61825-2710
Any further information or Comments?
Comment by Federalist Monday, Aug 26, 13 @ 2:16 pm
No one knows the details, but I think it’s highly unlikely that the “career earnings” concept would be applied retroactively to current retirees. It’s such an obvious diminishment that I can’t believe it would even be considered.
Realist, you would be a fool to take your own money out of the pension system and think you will do better than with a State pension. You have no State contribution, for starters, and your contributions accumulate whether or not the fund has a bad year.
Comment by Arthur Andersen Monday, Aug 26, 13 @ 2:35 pm
For those of you interested in some “simple math,” take a look at:
http://illinoissqueezy.com/questions.html
This model mimics the SURS Tier I plan (under which I am retired) and seems to work pretty well – if only the employer (State) kicks in it’s share on a regular basis.
I would think a reasonable amount for the employer share would be what they save in Social Security payments (6.2%) plus another 2% – the average large employer 401(k) match. Also, as has been pointed out, 8% average earnings is about on target.
Anyway, try out the model and see if it will work for you.
Comment by JohnTwig Monday, Aug 26, 13 @ 2:37 pm
==But their annual pension benefit would be based on their salary over their career, rather than on the higher amount they’re making right before they retire.==
Social Security benefits are based on one’s lifetime earnings. But under Social Security, one’s actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received.
However, nothing in the Committee’s outline so far about adjusting or indexing one’s lifelong earnings to reflect current wages.
Comment by Joe M Monday, Aug 26, 13 @ 2:41 pm
Federalist strikes a chord in reference this morning to the IMRF’s 85-plus percent funding level. The local pols have no choice; they MUST by law contribute the employer’s full pension contribution.
Interestingly, they get what they sow. Many of those who collect the IMRF pensions are mayors, village board presidents and council/board members. And keep this in mind, because it’s important: the IMRF members also contribute to Social Security, which means the IMRF employers (the local governments) must pay the equal 6.25 percent employer’s share. Why? Because the feds would never allow the local governments to short their responsibility to fund the federal government’s retirement program known as Social Security.
Paraphrasing the eminently wise Federalist once more, remember this, because it’s important: the next pension battle will be fought over first responder retirement benefits.
The mayors, presidents and their fellow local government lawmakers will cite the funding crisis and moan they cannot fund such lavish retirement benefits for cops and firefighters. All the while they will neglect to mention that cops and firefighters are banned from participating in Social Security, hence saving the 6.25 percent employer share of benefit costs.
Finally, they will also forget to tell you they gamed the system by taking advantage of a state law that allows most of them to misrepresent the anticipated growth of pension investments. Then when they short the employer’s share of funding, they can blame the actuaries who do their bidding as directed.
Those who make the laws benefit the most from their handiwork, no matter the level of governing.
Comment by Wallinger Dickus Monday, Aug 26, 13 @ 3:05 pm
They say it would fully fund the retirement systems within 30 years. Maybe it will maybe it won’t if they borrow or not pay into it the problem is not solved we are back into the same boat. Pay back what you borrowed and maybe the light at the end of the tunnel will be seen.
Comment by No Sense Monday, Aug 26, 13 @ 3:06 pm
No proposal yet and no bill. Doubt that MJM and Cullerton will give Quinn a bill until courts rule on salery issue. Most of this being floated would be illegal. Quinn can’t un do his veto so there will be no salery until courts rule. Don’t see an overide in the near future.
Comment by facts are stubborn things Monday, Aug 26, 13 @ 3:18 pm
Thank you Rich for putting together the post on the limited outlines of a compromise position on benefit reductions for current retirees and future public sector retirees. I have also read all of the posts, many of which were extremely interesting. But I think the majority here are missing the real reason why the Tribune is opposing even the general outlines of this deal or framework if you like.
The Chicago Tribune editorial board, like the Mayor of Chicago who wants to base reductions to teachers and municipal employees retirement packages on the state framework, have been telling the public that there is a “free lunch” if they support so called pension reform. Effectively the public is being told cut and cut again public sector workers’ benefits and you will not have to pay more taxes. But now we see that not only will public sector workers take a haircut, but taxpayers will also have to pay more eventually.
In a city like Chicago where the property tax rate is lower than that of any other town in Cook County, and as it relates to schools lower than Springfield’s rate, this will mean the rate will eventually have to rise and the legislature will have to allow the tax caps to be raised. Mayor Emanuel and Governor Quinn have known full well taxes would have to rise to keep pensions solvent even with benefit reductions, but they want to be “forced” to carry out these tax increases in order to have plausible denial for being tax and spend Democrats.
The real question on the constitutionality of the “reforms” will to a degree be based on who are the plaintiffs in any litigation. If the plaintiffs are individual retirees and future beneficiaries, but not the trustees of the pension funds then their standing will be weaker. The real question for this deal or a similar deal to cross the constitutional barrier is to get the Board members of the pension funds to agree that the deal is better than no deal at all which could lead to the collapse of the funds eventually. Retirees are at risk because the federal Pension Benefit Guaranty Corporation provides a minimal level of benefits to retirees when a private business goes bankrupt, but it provides no such security at all to pensioners in the public sector. This is a rough game and we are all going to get hurt in the end. I am sure taxpayers who are not public pension beneficiaries will not like the tab they will get stuck with and I am also sure public sector employees will be even more disturbed.
Comment by Rod Monday, Aug 26, 13 @ 3:21 pm
For RUNG on your comment at 12:55 p.m. I always enjoy your comments, learn from them and they are spot on. I wanted to add that the State doing whatever they want. I retired under SURS on 30 Apr 2008 at age 65 with 17 years of service. On 14 Jan 2008 in SURS office in Champaign Il I signed an Irrevocable Election form that allowed me to receive a reduced pension in exchange for health insurance benefits (public act 91-0395)at no cost to me. Well, as of July I this year I started paying for my health insurance and had no choice. I wouldn`t trust these people any further than I could throw them.
Comment by Chuck Monday, Aug 26, 13 @ 3:28 pm
– RNUG — — They said what? –
You make sound legal arguments against my theory, but I have a feeling the courts will be looking for something to hang their hats on, even if that “something” is a bit of a stretch. Kinda like the US Supremes upholding the ACA based on Congress’s taxing authority.
– Federalist — Not sure where I first heard it or saw it, but the 3 % compounded COLA benefit expansion of 1989 has been referenced many times in media coverage of the pension issue. Here’s one story:
http://qconline.com/archives/qco/display.php?stopRedirect=true&id=594838
Comment by Middle ground Monday, Aug 26, 13 @ 3:40 pm
==There comes a time for compromise. ==
I wholeheartedly agree. Unfortunately for some, “compromise” means passing nothing. I’ve said it before and I’ll say it again - I don’t want my pension changed. But I’m also sick and tired of this back and forth and uncertainty. The courts are going to decide this anyway. I say that the focus should be to get the best deal that can be passed in case the court doesn’t interpret the Constitution like all of the armchair quarterback constitutional lawyers out there think they will. Passing nothing isn’t an option. People need to accept that and let the court weigh in so we know once and for all.
Comment by Demoralized Monday, Aug 26, 13 @ 4:18 pm
If they base the benefit on a career average salary, it will be difficult to retire. If the career average doesn’t take effect until a future date, their will be a mass exodus unless you’re willing to risk that MJM does’t have the ISC votes he is confident of.
Comment by skeptical Monday, Aug 26, 13 @ 4:24 pm
If they do a career average salary it really stinks if you are merit comp. You haven’t had the benefit of any raises for years so you have an extended period of time with a stagnant salary. Of course it stinks for everybody also, whether you have gotten raises or not.
Comment by Demoralized Monday, Aug 26, 13 @ 4:29 pm
@Demoralized - Monday, Aug 26, 13 @ 4:18 pm:
The choice should not be between passing nothing and passing something illegal. There are many changes that can be made that are legal. The pension issue can be addressed legaly, but that would force the GA to be accountable.
Comment by facts are stubborn things Monday, Aug 26, 13 @ 4:29 pm
“Not certain where you got the info that the 3% COLA started in 1989.”
The 3% COLA did not start in 1989, the COMPOUNDED 3% COLA began January 1990 as a result of legislation passed in 1989.
Comment by capncrunch Monday, Aug 26, 13 @ 4:41 pm
http://www.weareoneillinois.org/news/statement-on-conference-committee-outline
Statement released from WeAreOne
Comment by Tsavo Monday, Aug 26, 13 @ 4:46 pm
Chuck @ 3:28pm,
We haven’t heard the end of the health insurance story yet. At least the State has to escrow that money until things get decided legally. ‘Maag’ will get decided sometime this fall, probably October / November.
And Marconi v Joliet is basically the same case; Right now it was sent back to the ‘trial’ level but the orders from the appellate level were pretty clear as to what the appellate court’s opinion was. To simplify and summarize: the appellate court thinks there is no need to invoke the pension clause protection because a valid health insurance contract exists via contract law unless the employer can definitively prove in writing there is not.
It’s nerve racking to have to sit and listen to the GA try to take away what clearly are earned rights / deferred compensation from government employees who played by the law(s) while the GA, at least in spirit if not in legal fact, violates the same laws. If the GA can get away with this, the precedent would be set that the GA can retroactively void every contract the State has ever entered into, including defaulting on every bond or other debt instrument ever issued.
Comment by RNUG Monday, Aug 26, 13 @ 4:59 pm
If the Committee has to choose a focus, making the ISC hapy is far more important than making the Trib Editorial Board happy.
The ISC is the ultimate authority here.
The Tribune is not particularly relevant anymore.
Comment by titan Monday, Aug 26, 13 @ 5:03 pm
Tsavo @ 4:46 pm:
SB2404 has the same legal problems. The only reason the union gropups are supporting it is because it is less of a haircut than any of the other proposals and, I assume, the unions are thinking better to try to control the cuts.
Comment by RNUG Monday, Aug 26, 13 @ 5:03 pm
State Rep Jill Tracy from Quincy will vote for anything to cut Retiree pensions at any cost. She has nothing to worry about.
Comment by qUINCY Monday, Aug 26, 13 @ 5:07 pm
On this issue of basing the pension on the career average salary rather than the highest 4 years: many/most people in SURS would not be affected by this, because (like myself) their pension under the money purchase formula is higher than under the general formula, and this only impacts the general formula. The money purchase formula is already based on actual employee and (imputed) state contributions, compounded forward at the approximate long-term rate of return earned on SURS’ investments.
A greater danger for SURS employees would be changes in how the effective interest rates that compound contributions are determined. Unfortunately, this was also part of the original Universities plan (and the Madigan bill); I don’t know if it is in the latest iteration.
Comment by Andrew Szakmary Monday, Aug 26, 13 @ 5:13 pm
==SB2404 has the same legal problems. The only reason the union gropups are supporting it is because it is less of a haircut than any of the other proposals and, I assume, the unions are thinking better to try to control the cuts. ==
I think that’s a good strategy. If we truly believe that anything they do will violate the constitution then at least you have a fall back you could halfway stomach should the Court decide otherwise.
Comment by Demoralized Monday, Aug 26, 13 @ 5:13 pm
Quincy,
Why do you think that Tracy will vote for anything that is a pension cut. I believe you are correct, but it is my impression that she is much more dug in than she used to be.
Any thoughts?
Comment by Federalist Monday, Aug 26, 13 @ 5:28 pm
@Demoralized - I get it, you’ve given up. So sit back and watch the show as those of us who won’t give up without a fight do what we can.
You lament about the uncertainty of having an end to the debate. You’re not alone. The situation has been stressful to my family and thousands of other public workers and retirees. These are the folks who are lamenting the uncertainly of whether they will have the quality of life in retirement that they were promised and worked so hard to achieve.
In your resignation over the issue, you seem to have forgotten a lot of the history on this issue. Let me refresh you. There has been pension reduction already enacted in the State of Illinois. That effort was legally directed at new hires. Pension costs are going to be less because of that reform. Additional changes for new hires can also be enacted with complaints but no legal repercussions. Reducing pension benefits is the only effort pushed by the leaders, but it has not been the only suggested solution. There have been other suggestions by Martire, Lang and Fortner.
You’re keen on compromise, but how is that to be achieved. I’ve not been invited to participate. I’m guessing that you haven’t been invited to participate either. A compromise plan worked out with the major unions was approved by the Senate. As we all know, one leader chose not to call it for a vote because it didn’t cut enough money. So much for compromise.
I count my self as one of those people you like to deride for opposing a compromise. I do so because I believe this will not be the end of “shared sacrifice” by public employees. There will be additional efforts to reduce benefits. If it’s not stopped now, it will never be stopped. All workers will be able to count on is the refrain that “at least we have a job.”
I was naïve to believe that a constitutional provision would protect my benefits from political attack. I’m not going to naïve enough to believe some lame promises that come along with some legislative enactment that can be changed by any future General Assembly.
Comment by Norseman Monday, Aug 26, 13 @ 5:29 pm
Andrew, the SURs money purchase formula will be impacted by the career averaging. It must have an average salary upon which your age and contributions is based to determine what your monthly stipend will be. Just check your surs statement and they report the average salary figure that your estimated retirement is computed on.
Comment by equivocator Monday, Aug 26, 13 @ 5:35 pm
Some clarification. the maximum you can make in the SURs money purchase formula is 80 percent of your highest 4 year average. So, if your 4 year average is $100,000 your retirement annuity would be $80,000 if you maxed out. SURs reports this by first calculating your average monthly income on the highest 4 year average, in this case $8333. If you take .8 x this figure the maximum monthly annuity you can receive based on your contributions, your age, and an acturial chart is $6666. Consequently, the higher your average monthly salary (presently based on the highest 4 consecutive years) does influence your retirement payout significantly
Comment by equivocator Monday, Aug 26, 13 @ 5:50 pm
Joe from Joliet - if you think Blago and Quinn were the only governors to hire overpaid political hacks, you must have been living in a cave for the last 30 years. All the governors did it, Thompson, Edgar, Ryan. Dont just single out the last two.
Comment by Kathryn Monday, Aug 26, 13 @ 6:56 pm
“Joe from Joliet - if you think Blago and Quinn were the only governors to hire overpaid political hacks, you must have been living in a cave for the last 30 years. All the governors did it, Thompson, Edgar, Ryan. Dont just single out the last two.”
No comparison with Blago. He hired more overpaid, unqualified, politcal employees and hacks than all of them combined. He had the audacity to campaign against that practice to boot. Unacceptable and appauling.
Comment by Holdingontomywallet Monday, Aug 26, 13 @ 7:12 pm
Federalist Tracy has vote for every retirement bill that been put out there to cut retirees pension benefits and now Iam paying $98.00 a month for my insurance is she.
Comment by QUINCY Monday, Aug 26, 13 @ 7:48 pm
Just an FYI … most of us didn’t / don’t have the SURS cash balance option as a choice. In a lot of cases, we have zero choice … there is one plan. You don’t even have a choice to take it or leave it; you are automatically enrolled.
Comment by RNUG Monday, Aug 26, 13 @ 8:17 pm
“based on earnings over your entire working time” doesn’t,t mean based on the average of what you made. It means based on your total contribution to the system during your working career. So you will always eventually get a higher pension if you keep working and put more in.
Comment by Jake Monday, Aug 26, 13 @ 11:28 pm
We don’t know what the floor and cap numbers are on the COLA. Might be interesting if it is say 1 1/2 to 2% base and then 1/2 the CPI up to a cap of 5%. Is there any talk of a COLA freeze?
Comment by facts are stubborn things Tuesday, Aug 27, 13 @ 9:12 am
@Jake - Monday, Aug 26, 13 @ 11:28 pm
- Jake - Monday, Aug 26, 13 @ 11:28 pm:
=“based on earnings over your entire working time” doesn’t,t mean based on the average of what you made =
I would think the committe is floating the idea that rather then “last days pay” or the average of the highest 48 months in the past 10 years type of formula they are trying to spread that out even further. I beleive it would be based on your earnings. Say the average of the last 10 years for example. Penions would be based on earnings.
Comment by facts are stubborn things Tuesday, Aug 27, 13 @ 9:26 am