On the last day of the veto session, a new pension proposal aimed at mending the state's $96 billion unfunded liability was rolled out. Rep. Elaine Nekritz and Rep. Chris Nybo join us to talk about the new pension reform bill in Springfield on Chicago Tonight at 7:00 pm.

The new bill spearheaded by Rep. Elaine Nekritz and Rep. Daniel Biss is trying to set the framework for pension reform, before the lame-duck session ends and the new legislature is sworn in. Illinois’ $96 billion unfunded pension liability is the worst in the nation, with a 39% funded ration (80% is considered healthy). The legislature’s failure to take action will most likely result in lowering Illinois’ credit rating. Here’s a break-down of key points in the bill.

COLA (Cost of Living Adjustments)

-Cost of living adjustments would apply only to the first $25,000 of someone’s pension if the retiree does not receive Social Security, and $20,000 if they do. The COLA adjustments wouldn’t take effect until a pensioner reaches age 67 or five years after retirement, whichever comes first. This would apply to current retirees.

Retirement Age

-Retirement age increases would not apply to employees age 45 and older.

-One year is added to the current retirement age for employees between 40 – 44 years old.

-Employees between 35 -39 add three years to current retirement ages.

-Employees 34 and younger add five years to current retirement ages.

Employee Contributions

Tier I employees (employees hired after January 1, 2011)

-Pension contributions would go up by 2% points, phased in over two fiscal years.

Tier II (employees hired after January 1, 2011)

-New Teachers’ Retirement System and State Universities Retirement System employees hired after July 1, 2013 join a cash balance plan.

Existing Tier II (employees hired after January 1, 2011 and before July 1, 2013)

-Employees have the option to join a cash balance plan, essentially a hybrid between a traditional pension and 401(k).

State Contributions

-Contributions set on a 30-year funding plan with 100% funding goal by 2043.

-Unions are allowed to take court action to force state, school districts and universities to pay their required pension contributions.

-Once Illinois pension bonds mature, revenue that had been used for debt service payment would be used to pay off unfunded pension liabilities.

Pensionable Salary

-The salary that counts toward a pension would be capped at the higher of the Social Security wage base or the employee’s salary when the bill becomes law.

Cost Shift

-School districts, community colleges and universities would take over the state’s normal pension cost at a rate of .5% payroll per year for normal costs incurred after July 1, 2013.

Consideration

-The new bill doesn’t offer “consideration,” meaning employees don’t have to choose between retirement health benefits and pension benefits.

Related Links:

Bill Status of HB6258

More on Rep. Elaine Nekritz

More on Rep. Chris Nybo

Daily Herald article on How would new teachers’ pensions work?

Patch article on State Pension Hole Creates Dilemma for Deerfield, Highland Park Schools

Chicago Magazine article on Illinois Gets a New, Bipartisan Pension Plan; Here’s How It Works