Capitol Fax.com - Your Illinois News Radar

Cullerton’s plan mentioned in ruling’s footnotes

Posted in:

Illinois

* Footnote 12 of the Illinois Supreme Court’s pension ruling…

Additional benefits may always be added, of course (see Kraus v. Board of Trustees of the Police Pension Fund, 72 Ill. App. 3d at 849), and the State may require additional employee contributions or other consideration in exchange (see Gualano v. City of Des Plaines, 139 Ill. App. 3d 456, 459 (1985). However, once the additional benefits are in place and the employee continues to work, remains a member of a covered retirement system, and complies with any qualifications imposed when the additional benefits were first offered, the additional benefits cannot be unilaterally diminished or eliminated. See, e.g., Taft v. Board of Trustees of the Police Pension Fund, 133 Ill. App. 3d 566, 572 (1985); Carr v. Board of Trustees of the Police Pension Fund, 158 Ill. App. 3d 7, 9-10 (1987); cf. Kuhlmann v. Board of Trustees of the Police Pension Fund, 106 Ill. App. 3d 603, 609 (1982) (member not eligible for increase in benefits where he had ceased contributing to the pension fund prior to the change in the law). [Emphasis added.]

To my eyes, the footnote seems to imply that Senate President John Cullerton’s “consideration” theory may pass muster. Cullerton would give workers a choice of allowing their raises going forward to be pensionable without the 3 percent compounded COLA or keep the compounded COLA without calculating raises going forward.

Indeed, I talked with Cullerton this morning and he believes that the footnote fully exonerates his approach. His ideas need to be considered as soon as possible. Tick freaking tock, people.

Also, too, it doesn’t look like the Supremes believe that Gov. Rauner’s idea - move all current employees into a Tier 2 system without providing consideration - will pass constitutional muster.

* And speaking of footnotes, the Supremes have in the past refused to order the General Assembly to fully fund the pension systems. However, check out Footnote 3…

Consistent with an earlier opinion by this court in McNamee v. State, 173 Ill. 2d 433 (1996), and comments at the Constitutional Convention, we did not, however, foreclose the possibility that a direct action could be brought by pension system members to compel funding if a pension fund were on the verge of default or imminent bankruptcy. Sklodowski, 182 Ill. 2d at 232-33.

It’s debatable whether state and local pension systems can declare bankruptcy, but the systems could lapse into technical default. If that does happen, the court has staked out its authority to “compel funding” and that footnote was a crystal clear warning shot.

posted by Rich Miller
Monday, May 11, 15 @ 11:35 am

Comments

I didn’t read it that way. Consideration for “additional benefits,” yes. But Cullerton’s schemes are all about extorting cuts. The only “consideration” is a promise to keep the status quo which is not an additional benefit. Cook County used to have an optional plan where enployees voluntarily paid in additional contributions to get a slight increase in pension benefits. I read the opinion as talking about those kind of plans which are clearly constititonal.

Comment by anon Monday, May 11, 15 @ 11:41 am
The state could pass necessary statutes to layoff all current Tier 1 employees and let their benefits to date be vested then offer them new employment under Tier 2 rules. Existing liabilities would remain but would not continue to grow under Tier 1 benefits standards. The consideration is new employment.

Comment by old-pol Monday, May 11, 15 @ 11:43 am
This would affect current employees but would not appear to be applicable to retirees as our pensionable salary has already been determined.

Comment by No Raise Monday, May 11, 15 @ 11:43 am
Cullerton has had this issue identified from the start. Unlike many of his colleagues, he appears to be less interested in the optics of pension reform and more interested in actual pension reform.

It is difficult to put much too hope in a footnote but every word of this decision was placed there for a reason. Remember, this Court rejected amicus briefs. It has taken much care in drafting this decision. We shall see…

Comment by Jake From Elwood Monday, May 11, 15 @ 11:43 am
The problem with Cullerton’s approach is whether it can be interpreted as consideration or extortion. I see this as dealing with the situation like when the GA added the AAI and increased employee contributions as a part of the action.

Comment by Norseman Monday, May 11, 15 @ 11:44 am
The culleton plan does not seem like much of an additional benefit. Agree with anon

Comment by Facts are stubborn things Monday, May 11, 15 @ 11:45 am
Footnote 3 is a nice add.

Comment by Norseman Monday, May 11, 15 @ 11:45 am
For the younger employee, raises vs COLA may represent a choice. As for me, and as if there are future raises in the hopper in the short term (fat chance)…I’ll choose to keep the promised 3% compounded COLA, please.

Comment by Kippax Blue Monday, May 11, 15 @ 11:46 am
Footnote 3 - a successful lawsuit to compel funding would seem to render a bankruptcy filing moot.

Comment by Bill White Monday, May 11, 15 @ 11:47 am
Cullerton’s plan would be self-executing with non union state workers but the unions would have to sign off on it for their members. In effect, he would condition pay increases on an agreement to forgo existing pension rules.

Comment by tominchicago Monday, May 11, 15 @ 11:50 am
I believe anon 11:41 is correct, but let’s ask Madiar.

Comment by Juvenal Monday, May 11, 15 @ 11:51 am
P.S. To that outrageous IPI tweet after the ISC ruling I say BITE ME you misleading and disingenuous sycophants of the extreme right.

Comment by Norseman Monday, May 11, 15 @ 11:56 am
My raises going forward already count and I already get 3% compounded - so the Cullerton “consideration” is illusory. There are no “additional benefits” being added.

Comment by skeptical Monday, May 11, 15 @ 11:59 am
What are the odds rauner will give raises in the next 8 years?

Comment by foster brooks Monday, May 11, 15 @ 11:59 am
The Miller ruling said the higher benefit applies if there are two ways to calculate a pension. The state can’t save money by cutting benefits.

Comment by Ret Prof Monday, May 11, 15 @ 12:00 pm
While I agree that “consideration” is a valid way to modify the pension contract, I’m not sure Cullerton’s forced approach will pass muster. I’m basing this on previous ISC decisions where changes that would have capped the amount of pensionable salary (such as a forced younger retirement age that would have meant less years and final salary). There MIGHT be a way to structure the payment in such a way it was not considered part of salary but I’m not seeing a clear path forward. If they just made it a “bonus” that was repetitive every year, it would be pretty easy to argue it was just salary in another form and should be pensionable.

The only way I see a consideration change surviving is if you get “maintaining the status quo” as one of the choices.

Guaranteed to be another lawsuit over something like that.

Comment by RNUG Monday, May 11, 15 @ 12:02 pm
I think the Court was very deliberate in using the term “additional benefits” instead of “changes” when discussing consideration. It is basic contract law that consideration must be a thing of value and not a sham.

Comment by anon Monday, May 11, 15 @ 12:03 pm
besides being “not gonna happen”… this wouldn’t work:

====- old-pol - Monday, May 11, 15 @ 11:43 am:

The state could pass necessary statutes to layoff all current Tier 1 employees and let their benefits to date be vested then offer them new employment under Tier 2 rules. Existing liabilities would remain but would not continue to grow under Tier 1 benefits standards. The consideration is new employment.====

Comment by zonz Monday, May 11, 15 @ 12:04 pm
My comments as recently as Friday praised Cullerton for his leadership regarding the pension legislation. Eric Madiar had also done good work on this issue.

But their interpretation of Gualano and other relevant case law appears to be a misreading, whether it be intentional or unintentional. Giving someone a choice between ==Diminishment A== or ==Diminishment B== still amounts to a diminishment of benefits.

The Supremes seem to understand this as well. The key word in that first sentence quoted by Rich is ==and==. Additional benefits may be added (not subtracted), and the state may require additional employee contributions or other consideration in exchange for those added benefits. There is no ==or== which allows for the subtraction or diminish meant of existing benefits anywhere, only the addition of new benefits.

Comment by Formerly Known As... Monday, May 11, 15 @ 12:05 pm
== The state could pass necessary statutes to layoff all current Tier 1 employees and let their benefits to date be vested then offer them new employment under Tier 2 rules. Existing liabilities would remain but would not continue to grow under Tier 1 benefits standards. The consideration is new employment. ==

Wouldn’t work. It’s the date of FIRST HIRE, regardless of gaps in service, that determines which Tier the employee belongs in.

Comment by RNUG Monday, May 11, 15 @ 12:05 pm
-old-pol- has it right. What makes Rauner’s plan constitutional is that all employees can be “terminated”, thus ending their contractual relationship (without diminishing retirement benefits), then “rehired” at previous pay, starting a new contractual, Tier III relationship. So they end up with Tier I benefits for the years acrrued under that system, plus Tier III for the remaining years.

The contractual relationship between employee and the state does not mean that the employee has to employment forever. Ending the employment on paper is the key to getting around the constitutional limits. Not sure why no one seems to get this.

Comment by mcb Monday, May 11, 15 @ 12:05 pm
Seeing as I don’t expect many raises in the remaining years until my retirement, I will opt to keep my 3% annual adjustment in retirement. I will be retired or many more years (based on average life span) than I have left to work.

Opting to keep what I already have (3%) in exchange for not counting my raises doesn’t seem like an additional benefit for consideration event either - since there is no additional benefit.

Now, if you want to do something like -
lower cost (I won’t qualify for free) insurance in my retirement in exchange for limited COLA or
freedom to add dependents in exchange for limited COLA, or my spouse will get 100% of my pension after I die in exchange for limited COLA…. then I may be on board.

Comment by mythoughtis Monday, May 11, 15 @ 12:06 pm
to add for RNUG, the new rules of Tier III are part of the conditions of hiring for the “new job”. Don’t take Tier III, then the termination becomes real and permanent.

Comment by mcb Monday, May 11, 15 @ 12:08 pm
Go back and look at why Cullerton lost out in the wrestling … the biggest problems with Cullerton’s scheme:
1. too uncertain how many ‘ees would take the deal; and
2. saves WAY TOO LITTLE money

Comment by zonz Monday, May 11, 15 @ 12:08 pm
This is vindication for Cullerton and the unions, who worked together for reform. I think I read or saw on the news that unions are willing to work again on pension reform, which I believe they should do.

Comment by Grandson of Man Monday, May 11, 15 @ 12:08 pm
Rich,
I think you have seriously misread Footnote #12: read in context it applies to an enhancement to the pension system benefits that require an additional payment/consideration by the employees. I believe this occurred in the late 90s early 2000 with the alternative formula people of SERS. In exchange for increasing their contributions from 9.5% to 12.5% max retirement was lowered from 30 years of service to 28.5 years of service an percentage changing from 75% of final pay to 80% of final pay. I believe RNUG will confirm this.
Thus, the ISC was very clearly laying out that “enhancements” to any pension system may require addition contributions by the member. This would not apply to existing pension benefits and “enhancements”
Also although everyone calls it a COLA we have an AAI, which is paid for by the members (1% of member pension contribution are applied to pay/fund the AAI). As I read this, Cullerton’s proposal would be a non-starter both under this ruling and the contracts clause.

Comment by Frank Ambrose Monday, May 11, 15 @ 12:09 pm
The only diminishment avenue left is to reduce the value of health care benefits for retirees and see how the ISC rules on that.

Comment by Anotheretiree Monday, May 11, 15 @ 12:10 pm
Read the whole decision, it is over for the politicians. Pay the bill.

Comment by Liberty Monday, May 11, 15 @ 12:12 pm
Rich, could you please provide a link to Cullerton’s original pension proposal?

Comment by Anon Monday, May 11, 15 @ 12:12 pm
== to add for RNUG, the new rules of Tier III are part of the conditions of hiring for the “new job”. Don’t take Tier III, then the termination becomes real and permanent. ==

More extortion, another losing court case unless (in a lot of cases) the State can prove the firing was for cause.

Comment by RNUG Monday, May 11, 15 @ 12:12 pm
Cullertons plan is still a diminishment. If you are not allowed to keep what you had at the time you were hired (Raises count towards Final Average Compensation and Time work counts towards Service Credit), it reduces your benefits.
If they want to work on reducing the costs, they have to provide options that are in addition to keeping the current plan. For example. Current retirees may choose to move to simple interest in exchange for 5 years of frozen health care premiums and copays, then over the next five years, they are gradually brought up to the level of everyone else. For people with health problems, this would be advantageous. It would have an impact on health cost, but it would reduce the Pension liability. For Active employees, you could offer a 5 and 5 buy out, but you only get simple interest. This would also reduce the unfunded Pension liability.

Comment by My two cents worth Monday, May 11, 15 @ 12:18 pm
== - Anotheretiree - Monday, May 11, 15 @ 12:10 pm ==

I agree. Healthcare premiums, deductibles and co-pays will triple within two years.

Comment by Poster Monday, May 11, 15 @ 12:19 pm
Rich, I noticed that on first reading and didn’t think the “consideration” term of art meant the same thing in the footnote as opposed to the Cullerton definition. After a second read and reading the comments here, I haven’t changed my mind.

I thought the Court was saying that if members paid higher contributions or some other consideration (delayed or earlier retirement date for example) for an increased benefit that the increased benefit couldn’t be taken away without an impairment occurring. In contrast, Cullerton offers a forced choice of benefit reduction or salary reduction; either way the benefit is impaired. Am I missing something?

Comment by Arthur Andersen Monday, May 11, 15 @ 12:20 pm
As for anyone talking about their 3% (COLA—it is NOT A COLA. It is an Annual Adjusted Income that is a way of determining how your annuity is paid out each year) AAI………..you already paid for that AAI in your payroll deduction. No one is giving you anything you didn’t already pay for.

Comment by AnonymousOne Monday, May 11, 15 @ 12:22 pm
I believe a voluntary reduction in benefits, in exchange for some consideration, would be allowable IF the employee was offered a choice to stay in the current plan with no changes. Refer to a voluntary state pension buyout that occurred in the Blago administration where some people got a lump sum refund of their contributions (and I think it was actually more than that) in exchange for their resignation and severance from the retirement system. The key there was that there was an exchange of value by both parties, and a choice between keeping what you have or taking the deal.

Comment by Six Degrees of Separation Monday, May 11, 15 @ 12:25 pm
Cullerton’s idea definitely merits a look. Unlike pension benefits, getting a pay raise is not constitutionally protected. But such a proposal would have many collective bargaining issues. And as @skeptical points out, withholding a raise ain’t exactly an “additional” benefit.

Still, if this proposal does pass muster and become law, there might be a lot of state employees and teachers (particularly those far from retirement,) who will wish the Supreme Court upheld SB 1.

Comment by Phil Monday, May 11, 15 @ 12:29 pm
I think where this may be headed is considering pension benefits as part of “compensation”, as is typically the case just about everywhere except Illinois. for the state of Illinois the cost of benefits and “make up” contributions must be figured in any future contracts. Pension contributions need to be provided entirely by the “employer”, such as must be the case for schools, universities, and municipalities. It was always fiscal idiocy for one entity to create the pension obligation (schools, etc.), and another to pay for it (state). With no cost to end of career spiking and late promotions and step increases, the schools got to give a way a fortune without sacrificing for it. that NEEDS to change. When this necessary shift happens, it ain’t gonna be pretty, so that strike prohibition better happen soon.

Either the costs need to shift, or the pension funding, needs to be deducted from revenue sharing and grants.

The other choice is to drop direct employee to “privatized” services by firing them and rehiring them in the new “privatized” firm.

I wish it weren’t so, but education and Illinois public service is going to have to have a draconian reformation to address this crisis.

What a shame the press never made a big deal about this to the voters a couple of decades ago and denied endorsements to those who wanted to spend the money on pet projects and entitlements instead of the needed pension contributions. the worst of the perps on this was Blago and Quinn. How many times were they endorsed over their opponents. Was the press really that ignorant of what was coming on this pension mess?

Comment by Arizona Bob Monday, May 11, 15 @ 12:31 pm
Gualano involves ==the vesting of right to an additional pension benefit.== Gualano gained this ==additional== benefit by continuing to contribute to his pension fund in exchange for that additional benefit.

Changes made to the pension code ==could not constitutionally diminish his vested rights. Therefore, the reduction of (Gualano’s) pension benefits by the amount of his worker’s compensation was improper.==

The court is very clear in this case, in light of the Sellards and Taft rulings, that an employee can gain additional benefits in exchange for additional consideration by the employee but that vested benefits are constitutionally protected and can not be diminished regardless of any ==consideration== supposedly being offered.

Comment by Formerly Known As... Monday, May 11, 15 @ 12:31 pm
- Six Degrees of Separation -

The lump sum payout and severance from the system was always / is still an option.

As to “consideration”, what could be offered that would be better than the current deal AND cost the State less? I can’t think of a thing …

Comment by RNUG Monday, May 11, 15 @ 12:32 pm
Basics of contract law, a choice or change cannot be unilaterally compelled or forced. In other words the status quo must be one of the choices. Cullerton’s notion of consideration is valid as far as it goes but one of the choices must be the status quo. The notion of salary increases used as consideration has been tried in contract law before and failed…..you can’t force me to choose from diminishment a or b.

When I was in law school we called this the “heads I win, tails you lose” option.

I suspect that the real problem with any consideration scheme is going to be that it will not save nearly enough to make it worthwhile. After all, you are trying to find a way to diminish your payments or liability and the only way to accomplish that is to diminish what the pensioners collect! If they have a choice, and they will, they will refuse.

My professional legal advice? Pay up! Save the state the time and bad fiscal optics…….

Comment by Old and In The Way Monday, May 11, 15 @ 12:33 pm
== My two cents worth==
Not sure what you mean by frozen premiums. We won that lawsuit, premiums are gone again. I’ll go out on a limb and predict that in two years the ISC will rule that retiree health care benefits are guaranteed to stay within the ACA definitions of health care plans (Platimum,Gold,Silver,Dirt). In other words a 90%plan can’t be reduced to an 60%. The ACA gives us a definition of value for health care plans.

Comment by Anotheretiree Monday, May 11, 15 @ 12:35 pm
AA- you aren’t missing anything (except maybe Cullerton’s spin).

Comment by Anonymous Monday, May 11, 15 @ 12:36 pm
RNUG… I always appreciate your insight. To further the “Ponzi” scheme that is TRS… If you are say 20 years into Tier 1… And you leave your position for the private sector, you can if you wish, take your contributions and roll them in at no penalty. If you return, you could “buy back”. Under the illusion of taking Tier 1 and “firing” them. Don’t kid your selves that anyone in around the 20 year mark would not jump at the chance to remove their money they have been charged almost 10% of every check. Then what would happen to the system? Many people would trade what they have paid to at least control their futures… Instead of a gamble that the future “fixes” result in some magic change when retired and no earning power? There are real consequences to any action other than keep promises. Either get it right this time, or it’s a mess.

Comment by Walter Mitty Monday, May 11, 15 @ 12:37 pm
As an alernative formula member I would gladly take simple interest instead of compounded if:
1. The state would let me retire with 20 years on, no age, and immediately start paying me the simple interest (heck, I’d even take 2% instead of 3%) at whatever salary I’m currently at instead of the 26 years 8 months, age 50, can’t collect compounded until age 55.
2. I was able to keep my healthcare.
You’d be able to move a lot of Tier 1 alternative members out this way and they’d still be young enough to start another career.

Comment by Anon Monday, May 11, 15 @ 12:38 pm
Concept of Cullerton is still valid, but new specifics required now. Further, it doesn’t address the money gap now. That’s where Matire or other alternatives raised by court need to be considered.

Comment by D.P.Gumby Monday, May 11, 15 @ 12:39 pm
Rich, I don’t often disagree with you but I do on this point. Those two sentences made it clear that Cullerton’s plan is out the window.

you can offer considered for NEW benefits, but not for existing benefits. Existing benefits are off limits.

Comment by readingisfundamental Monday, May 11, 15 @ 12:43 pm
Cullerton was right when he said the law was not constitutional. He may have something. That the consideration theory may be a way to do it.

Comment by Mokenavince Monday, May 11, 15 @ 12:56 pm
I think many people would take lesser benefits as “consideration” in exchange for an earlier retirement. Governor and the GA, are you reading this???

Comment by Anon Monday, May 11, 15 @ 12:57 pm
Cullerton’s plan is just as problamatic constitutionally. It basically forces an employee choose how they would like their pension deminished and calls the choice “consideration.” This last decision makes it pretty clear the SC will see right past that and we’ll be in the same spot two years from now.

Comment by here we go again Monday, May 11, 15 @ 1:00 pm
I think any consideration would have to skew 55%-60% in favor of the employee. Hey, 40%-45% of something is better than 0% of nothing.

Comment by Anon Monday, May 11, 15 @ 1:01 pm
Ain’t the rule of law great? (No sarcasm intended)

Comment by Connie Stutional Monday, May 11, 15 @ 1:03 pm
RNUG ==As to “consideration”, what could be offered that would be better than the current deal AND cost the State less? I can’t think of a thing …==

The only thing that might have a chance is to exchange the fixed 3% AAI for CPI or some fraction of CPI. Inflation expectations are well below 3% for the foreseeable future, so the state would save money in expectation and retirees would be insured against the chance of high inflation. But, there’s the chance that the state could be on the hook for even more money if inflation runs higher than 3%.

Comment by Mostly Harmless Monday, May 11, 15 @ 1:06 pm
Cullerton’s approach certainly is worth serious consideration and work. One reason the Biss/Nekritz bill was pushed was that it came significantly closer to solving the funding problems long-term.

Comment by walker Monday, May 11, 15 @ 1:17 pm
- Mostly Harmless -

That’s a possibility, one that I and numerous others have suggested at one time or another.

Historical fact: over most long periods except recently, the CPI average has been between 2.9% and 3.2%. That is true all the way back to when the feds started calculating it. So the people who settled on the 3% AAI knew their history.

If the state offered a full CPI, they might win short term but the long term costs would be roughly the same.

The biggest problem with a CPI-based COLA as opposed to the flat 3% AAI is budgeting for it. It’s easy to accurately project the AAI out many years. DO it for a CPI and you have to have multiple footnotes to cover the assumptions that may or may not prove true.

And, from the employee / retiree perspective, if you know your financial history, why would you choose to receive less than the full CPI?

Comment by RNUG Monday, May 11, 15 @ 1:22 pm
Its not really a choice in contract law if you don’t have the choice to keep the status quo, or what you already have. I don’t think a choice of two negatives is what contract law is talking about when it comes to considerations.

Issues also arise as to who can negotiate considerations for multiple unions and many other people, such as members of administration - and some non-administration employees at the state universities, who don’t even belong to a union

Comment by Joe M Monday, May 11, 15 @ 1:22 pm
Certainly a well researched and well written decision.

Comment by walker Monday, May 11, 15 @ 1:24 pm
For SERS Tier 1 with Social Security, here is an option that some might take. Each pension has a cash value that the employee has contributed.

Opt out of the pension system and the state will give you double your current cash value. Plus, not being in the system will result in a 4% increase in pay.

The state will triple your payout if you opt out of healthcare.

Some will do it, it would be dumb but some would.

Comment by Poster Monday, May 11, 15 @ 1:30 pm
SIMPLE PLAN - posed for now w/o union complexity:

We will be cutting the pay of every non-union state employee by 5% … HOWEVER, if an employee accepts the following pension modification (details) he/she will be exempt from the salary cut.

Who DOESN’T see that scheme as constitutional?

Comment by zonz Monday, May 11, 15 @ 1:35 pm
“Cullertons plan is still a diminishment.”

Obviously it is as will any pension reform legislation dealing with current employees or retirees. Pension reform legislation which does not reduce pension costs makes no sense. Where will the savings come from?

Comment by CapnCrunch Monday, May 11, 15 @ 1:43 pm
zonz

Your plan would mobilize massive union organization.

Comment by AnonymousOne Monday, May 11, 15 @ 1:45 pm
Opt out of the pension system and the state will give you double your current cash value. Plus, not being in the system will result in a 4% increase in pay.

See my 12:25pm post. I think the “double your current cash value” opt out deal was the one offered during the Blago admin in the mid 2000’s. The only catch was that you had to quit the state to claim it. I am sure that it would make financial sense for some to do the deal; one of my private sector friends took it when he was with the state, rolled it into a 401k at his new place of employment and has no regrets.

It would save the state a lot of long term pension payouts, but if a bunch of people claimed it, the state would have to come up with a bunch of payout $. As it was, I think far less than 1,000 employees statewide took the deal.

Comment by Six Degrees of Separation Monday, May 11, 15 @ 1:45 pm
zonz…with the state workforce being 95% unionized thanks to Blago, even if the courts didn’t throw it out, it wouldn’t save all that much money.

Comment by Six Degrees of Separation Monday, May 11, 15 @ 1:47 pm
Here’s a report on the 2006 offer of “Alternative Retirement Cancellation”. It was limited to a maximum of 500 employee slots, and only 257 took it. The payout was “all of the employee’s contributions to the retirement system, with interest at 6.5% annually, multiplied by two.” Based on the history of that program, I doubt there would be enough takers this time to make a difference.

http://cgfa.ilga.gov/Upload/Rpt%20on%202006%20Alternative%20Retirement%20Cancellation%20Pmt%20Option%20PA%2094-0109%20JAN%2008.pdf

Comment by Six Degrees of Separation Monday, May 11, 15 @ 1:59 pm
I wonder how many Tier 1 employees with quite a while to go before retirement would accept extra time off, working from home, or a shortened work week in exchange for being switched to simple interest (or whatever). It would be a consideration, and something that they don’t currently have.

Comment by CharlieKratos Monday, May 11, 15 @ 2:00 pm
Others with more legal background than I have weighed in on this - not much to add.

While the ISC has ruled that any benefit tied to membership in the pension system cannot be diminished (including the current pension formula and health care during retirement) - what about benefits during employment that are NOT tied to retirement or the formula?

For example, I think salary is tied into the formula (so a direct salary cut to coerce a change to lower pension benefit would likely run afoul of these rulings). However, health insurance subsidy during employment is not part of any pension formula. Could an employer reduce health insurance subsidy for Tier 1 and keep it at the current level for Tier 2 or those that accept a lessened retirement benefit?

Note - I am referring to the employee health insurance (given to employees during employment), not the retiree health insurance

Comment by archimedes Monday, May 11, 15 @ 2:00 pm
Kratos is correct.

There are all kinds of considerations that the Governor could offer, a pension is just like a market.

And there are no doubt workers who would voluntarily switch from Tier I to Tier II for some thing of value $X.

Maybe an extra week of vacation a year?

Comment by Juvenal Monday, May 11, 15 @ 2:05 pm
The footnote was clearly referring to additional benefits. C’mon, man.

Comment by Anon Monday, May 11, 15 @ 2:11 pm
Rauner would never go for anything that would considered constitutional simply because then, he wouldn’t “win”. He’s not that kind of guy.

Comment by CharlieKratos Monday, May 11, 15 @ 2:12 pm
From the legal dictionary;

consideration:
n. 1) payment or money. 2) a vital element in the law of contracts, consideration is a benefit which must be bargained for between the parties, and is the essential reason for a party entering into a contract. Consideration must be of value (at least to the parties), and is exchanged for the performance or promise of performance by the other party (such performance itself is consideration). In a contract, one consideration (thing given) is exchanged for another consideration. Not doing an act (forbearance) can be consideration, such as “I will pay you $1,000 not to build a road next to my fence.” Sometimes consideration is “nominal,” meaning it is stated for form only, such as “$10 as consideration for conveyance of title,” which is used to hide the true amount being paid. Contracts may become unenforceable or rescindable (undone by rescission) for “failure of consideration” when the intended consideration is found to be worth less than expected, is damaged or destroyed, or performance is not made properly (as when the mechanic does not make the car run properly). Acts which are illegal or so immoral that they are against established public policy cannot serve as consideration for enforceable contracts. Examples: prostitution, gambling where outlawed, hiring someone to break a skater’s knee or inducing someone to breach an agreement (talk someone into backing out of a promise).

Does anyone (including Cullerton while connected to a polygraph - snark)) really believe his plan fits within that framework?

Comment by Angelo Mysterioso Monday, May 11, 15 @ 2:14 pm
^[should have ended] is valid and the reason why this isn’t going to happen.

Comment by Mostly Harmless Monday, May 11, 15 @ 2:21 pm
If Cullerton beleives this will pass muster, I don’t, he gets his passed by the GA and Governor then it is back to the ISC.

Even if the unions back, so what. There will be someone who contests it.

Comment by Federalist Monday, May 11, 15 @ 2:22 pm
Raises vs AAI? A Choice? Not really as it represents disminishment of benefits.

Nice try! You are going to all kind of contortions like this as the State tries get out from the ISC decision.

So far, every proposal I have seen will not fly with the courts based upon their present reasoning.

Could be wrong, but we will see. Again, some people will not take this sitting down so look forward to years of legal battles.

Comment by Federalist Monday, May 11, 15 @ 2:28 pm
Several people have indicated that using raises as leverage to push people to accept a Tier 3 would be unconstitutional. Would that also apply if raises were withheld from Tier 1 employees with no option to switch tiers (i.e. an permanent, lifetime salary cap)? It may be a terrible idea but that would be a surefire way to encourage turnover among Tier 1 employees and replace them with Tier 2 employees.

Comment by thechampaignlife Monday, May 11, 15 @ 2:51 pm
==AnotherRetiree==
What I was referring to is that each year, Health Care cost will most likely raise. I agree that at some point, they will be tied to ACA. What I was proposing is that you would make an irrevocable choice to have your premiums and health care level frozen for 5 years. In other words, in 2015 you had a plan equivalent to the Bronze ACA plan for $100 a month. That would stay the same for years 2015-2019. Starting in 2020, Your plan would stay as a Bronze, but your premium would raise 20% plus the percentage that everyone else would be paying, for example 10%. So in 2020, your premium would be $100 + $20 (20% increase) + $10 (10% increase) = $130. This rule would apply for years 2020-2024). In 2025 you should be paying the same premium as everyone else.

Comment by My two cents worth Monday, May 11, 15 @ 2:52 pm
Our state would rather spend millions and millions on court battles and watch the debt rise than do the legal, moral thing, which is start paying back what was taken away from employees/retirees. What goes around comes around. What kind of employee with what kind of work ethic and attitude would you expect in return for this honest treatment?

Comment by AnonymousOne Monday, May 11, 15 @ 3:02 pm
. I agree that at some point, they will be tied to ACA.

Most probably which is frightening because we will be given the lowest level of coverage. But the liberal establishment wanted this, including our unions. As usual we retirees will suffer the negative effects.

I already paid $1248 last in taxes for ACA and I am not even on it. So I expect that we will be tied to it, get far less coverage, and at least for me pay ever higher deductibles, co-pays (beyond inflation) as well as the taxes to support it.

Hopefully it will be repealed but once it is in place that is far less likely. Even if the Republicans take the White House and Congress they are far more likely to use it as a campaign wedge rather than significantly revise it or eliminate it.

Comment by Federalist Monday, May 11, 15 @ 3:17 pm
Cullerton’s proposal was coercive, forcing the member to accept one or the other diminishment.

I’ll just keep my current benefits, thank you.

Comment by Harry Monday, May 11, 15 @ 3:20 pm
- zonz -

Based on previous rulings, I see it as clearly unconstitutional … and I highly suspect the courts would also.

Comment by RNUG Monday, May 11, 15 @ 3:28 pm
Raise taxes and pay what you owe!!!

Comment by Joe Blow Monday, May 11, 15 @ 3:43 pm
Illinois Supreme Court ruling made Fox Business. Some yahoo on there, I suspect from from the IPI advocating constitutional amendment changing the pension law. Ooops, not a yahoo, it was Dan Proft!

Comment by NewWestSuburbanGop'er Monday, May 11, 15 @ 3:53 pm
- Juvenal - Monday, May 11, 15 @ 2:05 pm:

Kratos is correct.

There are all kinds of considerations that the Governor could offer, a pension is just like a market.

And there are no doubt workers who would voluntarily switch from Tier I to Tier II for some thing of value $X.

Maybe an extra week of vacation a year?

Nobody would switch to tier 2 but an extra week of vacation would make people accept something else maybe simple interest. Nobody wants to wait until 67 more the pension.

You must be Rauner or must not work for the Dtate or have a family member that does or you must be Tier 2.

Comment by Anonymous Monday, May 11, 15 @ 3:53 pm
Dan Proft. Yahoo. There is a possibility that they are one and the same.

Good to watch both FOX and CNN. Usually different spins.

Comment by Federalist Monday, May 11, 15 @ 4:00 pm
Doesn’t additional mean “more” than what you already have?

Comment by forwhatitsworth Monday, May 11, 15 @ 4:29 pm
For those who wished the isc would provide a clue as to what might pass for reform next time, the did ….. Pay the benefits promised plus inhancments from the time the pension system was joined. The also suggests refining the pension debt. All these other silly schemes will waste more time and end up costing the state more money, because the isc could not be clearer!

Comment by Facts are stubborn things Monday, May 11, 15 @ 4:58 pm
Tier 2 is a great example of a legal solution.

Comment by Facts are stubborn things Monday, May 11, 15 @ 5:00 pm
I am not seeing how the Cullerton “consideration” plan passes the Constitutional test.

If you are a relatively recent hire, say 5 years of service, when given the choice between forgoing the COLA or forgoing any raises being pensionable, it’s really no choice at all.

That means that hypothetical worker has given up a COLA entirety and their pension payment will be the same on the day they retire as the day the day, which could be 30 years or more.

How is that not an impairment?

If you are a few years from retirement it’s really a very small impairment for you. Probably a few hundred dollars a month, at the most.

Comment by CrossTabs Monday, May 11, 15 @ 5:07 pm
Perhaps an offer to employees to accept less pension benefits for future years in exchange for 2 percent more raises then those approved each contract. Must be a choice that includes what you already have. The problem with legal choices is they don’t save much money..

Comment by Facts are stubborn things Monday, May 11, 15 @ 5:07 pm
You could offer to purchase a tier 1benefit with a lump sum payment in exchange for moving to tier 2

Comment by Facts are stubborn things Monday, May 11, 15 @ 5:13 pm
- Facts are stubborn things - Monday, May 11, 15 @ 5:13 pm:

You could offer to purchase a tier 1benefit with a lump sum payment in exchange for moving to tier 2

Nobody in their right mind would accept this

Comment by Anonymous Monday, May 11, 15 @ 6:54 pm
More Vacation time for less salary, yes

More flexibility for less salary, yes

Move out of Tier 1, NO NO and NO

Nobody in Tier 1 would move out of it, why don’t the elected officials volunteer to take no pension.

Comment by Anonymous Monday, May 11, 15 @ 6:57 pm
After reading all the comments, I went back and found the FAQ for why the IEA said that this would be considered “consideration”.

From the IEA FAQ fact sheet:
“Isn’t losing access to State-provided healthcare a violation of the constitution?
o No. Access to State-provided healthcare/insurance for teachers and most
university staff is currently not guaranteed by the constitution. If SB 2404 is
passed, State-provided healthcare would become a vested and enforceable
contractual right, a status it does not have today.

Since I pay a portion of my salary to TRIP, why isn’t continued access to TRIP
contractual under the provisions of the Illinois Constitution?
o A law does not create contractual rights unless it specifically states that it
does. The TRIP statute does not provide that it creates a contractual right to a
state-provided program of health benefits, even though teachers make
contributions to help fund TRIP during their active teaching careers.
o The TRIP statute further states that it may be amended by the state and is not
intended to be a pension or retirement benefit protected by the pension
clause of the state constitution.
”

Did Kanerva nullify these arguments made by the IEA?

Comment by Person 8 Monday, May 11, 15 @ 8:02 pm
=== Did Kanerva nullify these arguments made by the IEA? ===

I’m not an expert on TRIP but I would say YES. Check back with them. At least TRS members were part of the class involved in Kanerva.

Comment by Norseman Monday, May 11, 15 @ 8:52 pm
interesting, thanks RNUG
So you see the requirement of consideration to mean
====> to be constitutional, the ‘ee must gain something in return for diminution of a pension benefit
====> it is insufficient (& would be unconstitutional) if the ‘ee benefits only by the avoidance of a detriment - - in my example, avoiding a pay cut - - in return for diminution of a pension benefit

……… RNUG - Monday, May 11, 15 @ 3:28 pm:

- zonz -

Based on previous rulings, I see it as clearly unconstitutional … and I highly suspect the courts would also……….

Comment by zonz Monday, May 11, 15 @ 10:53 pm
Access to State-provided healthcare/insurance for teachers and most
university staff is currently not guaranteed by the constitution

Most state university employees are state employees.

So why do you make this statement?

Comment by Federalist Monday, May 11, 15 @ 11:33 pm
Sorry, it is no obvious to me that you were repeating what IEA stated. Can you give me the name of the fact sheet and where you obtained it. Sounds like the IEA has no idea of what they are talking about.

Comment by Federalist Monday, May 11, 15 @ 11:40 pm
Federalist:
http://www.ieanea.org/media/2013/04/2404-FAQ-May-20.pdf

Comment by Person 8 Tuesday, May 12, 15 @ 5:20 am
How someone could understand the Cullerton “plan” as consideration is beyond me. It amounts to: “I see that you have a lollipop and a candy bar. Now I’m going to take your lollipop away from you. Hey, if you give me your candy bar, I’ll let you have my lollipop!”

Comment by Nick-o Tuesday, May 12, 15 @ 9:36 am
@anonymous

A young worker might take it with 20 to 25 years to retirement if you made the amount substantial. Tend to agree though and was trying to point out the types of items that would be legal consideration that could be part of a package.

Comment by Facts are stubborn things Tuesday, May 12, 15 @ 10:58 am