SYCAMORE - Friday afternoon, House Speaker Mike Madigan and MInority Leader Jim Durkin released an outline of their agreed-upon pension reform plan to state lawmakers. State Rep Bob Pritchard (R-Sycamore) sent the list of proposed reforms to constituents, and asked for their feedback.
The union ad hoc coalition "We Are One" is encouraging their union members to actively lobby in opposition to the effort. They are telling their members that the "extreme, pension-cutting proposal" is the same as House Speaker Mike Madigan's Senate Bill 1 they defeated this past spring.
Speaker Madigan told reporters Wednesday the Democrats expected the pension reform vote next week to be "difficult," meaning he will need the votes of Republicans to offset Democrat Caucus members' whose constituency's heavy union presence will not allow them to support the plan.
In those cases, especially if those districts are where Madigan sees possibly endangered seats in 2014, "no" votes will weaken any outright retalitory election opposition by unions and their members.
If Madigan can get Republicans to vote against the unions, he could be hoping their votes will help him strengthen his Democrat majority in November 2014 and still allow him to boast that the Democrats passed pension reform. Madigan wins both ways.
The proposed pension reforms sent out by State Rep. Pritchard include:
- Retired employees will have more assurance that they will continue to receive their pensions
- Funding schedule and method for certifying contributions: Establishes an actuarially sound funding schedule to achieve 100 percent funding no later than the end of FY 2044. Contributions will be certified using the entry age normal actuarial cost method (EAN), which averages costs evenly over the pensioner's employment and results in level contributions.
- Supplemental contributions: The State will contribute (i) $364 million in FY 2019, (ii) $1 billion annually thereafter through 2045 or until the system reaches 100 percent funding, and (iii) 10 percent of the annual savings resulting from pension reform beginning in FY 2016 until the system reaches 100 percent funding. These contributions will be "pure add on," which means State contributions in any year will not be reduced by these amounts.
- Funding guarantee: If the State fails to make a pension payment or a supplemental contribution, a retirement system may file an action in the Illinois Supreme Court to compel the State to make the required pension payment and/or supplemental contribution set by law each year.
- Employee contribution: Employees will contribute 1 percent less of their salary toward their pension.
- Annual annuity adjustment (COLAs): Future COLAs will be based on a retiree's years of service and the full CPI. The annual increase will be equal to 3 percent of years of service multiplied by $1,000 ($800 for those coordinated with social security). The $1000/$800 will be adjusted each year by the CPI for everyone (retirees and current employees). Those with an annuity that is less than their years of service multiplied by $1000/$800, or whatever the amount is at the time of retirement, will receive a COLA equal to 3% compounded each year until their annuity reaches that amount.
- Additionally, current employees will miss annual adjustments depending on age: employees 50 or over miss 1 adjustment (year 2); 49-47 miss 3 adjustments (years 2, 4, and 6); 46-44 miss 4 adjustments (years 2, 4, 6, and 8); 43 and under miss 5 adjustments (years 2, 4, 6, 8, 10).
- Pensionable salary cap: Applies the Tier II salary cap ($109,971 for 2013), which is annually adjusted by the lesser of 3% or ½ of the annual CPI-U. Salaries that currently exceed the cap or that will exceed the cap based on raises in a collective bargaining agreement would be grandfathered in.
- Retirement age: For those 45 years of age or under, the retirement age will be increased on a graduated scale. For each year a member is under 46, the retirement age will be increased by 4 months (up to 5 years).
- Effective rate of interest (ERI): For all purposes, the ERI for SURS and the rate of regular interest for TRS will be the interest rate paid by 30-year U.S. Treasury bonds plus 75 basis points.
- GARS Tier 2 fix: Brings GARS Tier 2 salary cap and annual adjustment in line with other Tier 2 benefits.
- Pension abuses:Prohibits future members of non-governmental organizations from participating in IMRF, SURS, and TRS. Prohibits new hires from using sick or vacation time toward pensionable salary or years of service (applies to SERS, SURS, TRS, IMRF, Cook County, and Chicago Teachers).
- Defined contribution plan: Beginning July 1, 2015, up to 5% of Tier 1 active members have the option of joining a defined contribution plan. The plan must be revenue neutral and employee contributions will be equal to those for the defined benefit plan. If a member chooses to opt into the defined contribution plan, benefits previously accrued in the defined benefit plan will be frozen.
- Collective bargaining: All pension matters, except pension pickups, are removed from collective bargaining.
- Healthcare payments:Prohibits the State pension systems from using pension funds to pay healthcare costs.
Minority Leader Jim Durkin (R-Western Springs) added his name as co-sponsor to SB 1 on Wednesday. How your Republican and Democrat House members voted on Speaker Madigan's Senate Bill 1 this past May 2 is here:
