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Illinois

* It’s just a bill (actually, two bills) and there’s no push on to pass these measures right away. With that in mind…

State Representative Stephanie Kifowit (D-Oswego) today has filed HB 4098, the result of a significant amount of Subject Matter hearings of the Illinois House Personnel and Pension Committee, of which she is Chair.

“Members of the General Assembly are taking the state of Illinois’ pensions situation very seriously, and the members of the Personnel and Pension Committee have devoted numerous hours listening to experts testify about the issues that we face with our Tier 2 pension system,” stated Kifowit. “It is time to stop talking about fixing our system, it is time for action. This bill encompasses a beginning point to a more comprehensive discussion on true solutions that need to be enacted as soon as possible for the state of Illinois.”

“It is not lost on any member of the General Assembly that fixing our pension system comes at a cost, but that cost compounds every year that we fail to address the needs of the employees of the state of Illinois,” continued Kifowit. “The purpose of holding additional Subject Matter hearings throughout the summer and fall will be to have discussions with regards to the expenses and revenues needed to achieve a sound pension system”.

HB 4098 encompasses many different components that have been discussed in the Personnel and Pension Committee along with input from various stakeholder meetings throughout the session.

Most notable is the discontinuation of the General Assembly Retirement System (GARS) and the Judges’ Retirement System. Future members would be offered enrollment into the existing State Employees’ Retirement System (SERS).

“These two systems are the worst funded in the state of Illinois,” stated Kifowit. “The only reason why these two systems were created is to provide better benefits than the average state employee. That is unacceptable and there should be no avenue for additional perks to elected officials.”

Additionally, HB 4098 creates a statewide Deferred Retirement Option Program (DROP) and expands the Pension Buy-Out program to more participants, while meeting the safe harbor provision over an eight-year time frame and creating an average COLA percentage over a three-year running average rather than a year-to-year calculation. It also creates a tiered retirement age schedule.

Furthermore, HB 4098 changes the target funding percentage from 90% to 100%, and identifies a funding of $1 Billion a year when two issues of bonds are retired. This shift allows additional funding that is already accounted for in the current budget. However, over the proceedings of the future Subject Matter hearings, additional revenue will be discussed to achieve 100% funding by 2050 or earlier.

“This legislation is the first substantive step towards fixing our Tier 2 system, identifying dedicated revenue sources, and ensuring that benefits are fair for our workers that give so much for the state of Illinois,” stated Kifowit. “I look forward to input from all stakeholders as we hold meetings throughout the summer and the fall.”

Kifowit has also filed HB 4099, which adjusts the pension age for individuals who provide various security duties for the state of Illinois. This bill will also be considered in full throughout the summer and fall months.

“These individuals work in very stressful situations and we need to evaluate HB4099 in conjunction with HB4098 to ensure that they receive the proper pension they deserve,” stated Kifowit.

Minority Spokesperson, Representative Steve Reick (R) is listed as Chief Co-sponsor on both bills.

* The Question: Your thoughts on these provisions? Please stick to the proposed bills. Don’t go off on tangents or spew rants.

posted by Rich Miller
Friday, May 19, 23 @ 10:56 am

Comments

On first glance, eliminating GARS and JRS for future participants does nothing to address the existing unfunded liabilities for those systems absent a separate revenue stream (if there is one listed in the legislation, this becomes much less of an issue). Additionally, DROP and pension buyouts sound like shades of the ERI of the early 2000s, which was a mixed bag at best for the pension systems, and for similar reasons. The three-year average for COLA is an interesting idea, and might be better for the systems as far as calculating their fiscal needs for a given year. Overall, this is an ambitious starting point, for which I appreciate Rep. Kifowit and Reick taking. A comprehensive Tier Two fix is needed sooner rather than later, in order to avoid class-action lawsuits, if nothing else, and this legislation is a good starting point.

Comment by Former ILSIP Friday, May 19, 23 @ 11:08 am
I like what she is saying, the real question is are they really going to take a serious look? It is one of those “I will believe it when I see it” deals.

Comment by JS Mill Friday, May 19, 23 @ 11:10 am
I’m anxious to see what the tiered schedule looks like, since the current Tier 2 schedule is a joke - 67 is the minimum age for 100%, and it drops down to as low as 70% for retiring at 62 (0.5% penalty per month prior to 67).

Comment by The Dude Abides Friday, May 19, 23 @ 11:16 am
Said it when it passed.

You can’t run prisons with the bulk of your staff 45 and older.

Comment by Flyin' Elvis'-Utah Chapter Friday, May 19, 23 @ 11:20 am
Allowing T2 members to retire before age 67 with no reduction, provided they meet certain service requirements is a very good step in the right direction. It will add liability, but I would contend that is a good investment to attract and retain quality workers.

Increasing the Tier 2 salary limitation will help improve meeting/exceeding the SSA-standard.

The AAI change applicable to T2 GARS and JRS is a benefit diminishment because it will no longer be the lesser of the full annual increase or 3%, rather, it would be the lesser of ½ the 3 year rolling annual CPI-U increase or 3%. That is probably an oversight though.

I contend that under many scenarios, the Tier 2 AAI change applicable to articles SERS, SURS, TRS and CTPF is a benefit diminishment. I’m sure there are scenarios in which a member will benefit from this new method, this just seems problematic.

The State won’t be willing to pay the proposed supplemental contributions, which represent the deficit between the “level as percentage of payroll to 100% by 2050″ contribution method and a true GASB 67/68 funding plan.

Comment by Davos Friday, May 19, 23 @ 11:21 am
Tier II is a problem and it is compounding. The long-term problems are immense but it is starting to effect short-term and the quality of whom is applying… or should I say, not applying.

Comment by Lurker Friday, May 19, 23 @ 11:23 am
This Tier 2 Safe Harbor compliance issue is analogous to the federal debt ceiling debate. There’s a “clean fix” available - pegging the Tier 2 pensionable salary to the Social Security Wage Base. But that isn’t what the unions want - they want a wholesale dismantling of Tier 2. They loath Tier 2, always have. So yeah, the committee can indulge itself with all the subject matter hearings it wants, but they’ll very quickly find out that the politics of the issue trump some illusory technical solution that will make everybody happy. Just like the old 2009 Pension Modernization Task Force failed in its mission to forge an agreement on Tier 2, so too will these hearings fail to broker a compromise that provide a “clean fix” to the Tier 2 issues.

Comment by The South Springfield Shoplifter Friday, May 19, 23 @ 11:31 am
Yes, pass HR4099.

Comment by DuPage Friday, May 19, 23 @ 11:43 am
Folding GARS into SERS makes the legislators have some skin in the game. I like that idea.

Comment by Give Us Barabbas Friday, May 19, 23 @ 11:45 am
Compliments to State Representatives Kifowit (D) and Reick (R) for opening up a forward looking and inclusive approach to pension issues.
In terms of Tier 2, why not let the majority of workers in the workforce that are in Social Security catch up to the benefits of Tier 2 employees before making changes in Tier 2 provisions?
In terms of going from 90% to 100%, we are having problems getting to 90% with pension costs squeezing out other necessary state expenditures. At 90% everyone will get paid in full and on time. We don’t need to get to 100% to insure meeting our obligations to public employees.
The idea of using pension benefits for all public security employees is certainly worth pricing out and thinking about as an option that might attract state residents or the increasing immigrant labor pool to those important job openings - - if the state is having problems finding people to fill these positions.

Comment by Back to the Future Friday, May 19, 23 @ 12:04 pm
== “The only reason why these two systems were created is to provide better benefits than the average state employee. That is unacceptable and there should be no avenue for additional perks to elected officials.”==

So it sounds like legislators and judges who have not yet taken office would get lesser benefits than current and retired ones. Creating another Tier 2 scenario where folks doing the same job will have wildly different pensions.

Comment by Big Dipper Friday, May 19, 23 @ 12:10 pm
“… a true GASB … .”

Reflexively holds up a Cross a la Dr. Van Helsing …

Comment by Anyone Remember Friday, May 19, 23 @ 12:13 pm
===changes the target funding percentage from 90% to 100%===

This is the only part of 4098 that I don’t think is necessary as a component of good policy making.

===individuals who provide various security duties ===

Tier 2 replaced a rule of 85 with a hard 67 retirement age for full benefits. Security duties are not the only work being done that is incredibly physically demanding and depending on when a person in those titles start working for the state we are essentially creating an expectation that someone perform those physically demanding job duties for in excess of 4 decades.

Under tier 1 there was not really a need to take a serious look at how destructive physically demanding work can be on employees that aren’t in security related positions because of the rule of 85. If we’re going to do this, we should do it right. It shouldn’t just be able the kind of physically demanding work, but all physically demanding work.

Tier 2 pensions remain a joke without a punchline.

Comment by Candy Dogood Friday, May 19, 23 @ 12:22 pm
I have read some of the bills’ language, but not all.

It sounds very similar to the current Social Security plan (e.g., 10 years service = 40 quarters; early retirement at 62, full retirement at 67; annual wages for calculating benefits not to exceed Social Security wage levels, etc.).

This begs the question: why not just abandon state retirement system and pay FICA taxes? If our state retirement system is to mirror the federal, then there is no real justification for this system. A person such as myself who has worked both retirement systems (i.e., SS and SURS), might even be penalized for doing so when the WINDFALL reduction to SS is applied.

Additionally, I have always felt that the state’s early retirement option has always been problematic. I have seen lots of people retire with full benefits at age 50 or so. In that context, I do like the state saying “new hires are only eligible to receive retirement pay at age 62, and that pay shall be reduce up to 6% per year prior to age 67. That aspect I think makes a lot of sense to me. Retirement should be associated with retirement from work. It should not be considered a second income for those who change jobs.

Comment by H-W Friday, May 19, 23 @ 12:25 pm
== I have seen lots of people retire with full benefits at age 50 or so.==

Even if you were hired right out of high school (and how many were?) you wouldn’t hit the Rule of 85 at 50. Who are these people?

Comment by Big Dipper Friday, May 19, 23 @ 1:20 pm
== I have seen lots of people retire with full benefits at age 50 or so.==

Perhaps I am generalizing too much.

But I have seen secretaries and colleagues retire after 30 years who I have had friends literally tell me they can can retire (in their fifties), and start receiving the same pay as their current salaries after subtracting dues and deductions )like retirement payments). Some of these have them taken jobs in the private sector. I have a relative (a teacher) who retired and is now working in the same district, and receiving retirement pay.

Comment by H-W Friday, May 19, 23 @ 1:45 pm
=Even if you were hired right out of high school (and how many were?) you wouldn’t hit the Rule of 85 at 50. Who are these people?=

State policemen and correctional guards in Tier 1 can retire as early as age 50 with 25 years of service.

SURS Tier 1 members can retire at any age with at least 30 years of service.

Comment by Davos Friday, May 19, 23 @ 2:04 pm
And you get an instant 4.95% raise when you retire.

Comment by don the legend Friday, May 19, 23 @ 2:12 pm
=====changes the target funding percentage from 90% to 100%

This is the only part of 4098 that I don’t think is necessary as a component of good policy making.==

Were you planning to pay out only 90% of every pension?

The 100% rule actually aligns with the actuarial assumptions currently made by the pension systems. It also ensures those who used the services when they were accrued paid for them.

Comment by City Zen Friday, May 19, 23 @ 2:15 pm
==And you get an instant 4.95% raise when you retire.==
As does anyone.

Comment by Big Dipper Friday, May 19, 23 @ 3:06 pm
==And you get an instant 4.95% raise when you retire.==

Also that assumes your pension is equal to your salary. For many in SERS, it is less than half.

Comment by Big Dipper Friday, May 19, 23 @ 3:08 pm