A bipartisan group of Illinois House members proposed a pension reform bill Wednesday that would increase the retirement age and employee contributions for active employees and implement a cash balance plan for new hires in the state's teachers and university pension plans.
House Bill 6258 would increase the retirement age by one to five years for employees hired before 2011, depending on their current age. Contributions would increase two percentage points — one percentage point the first year the legislation is in effect, but not before fiscal year 2014, and an additional percentage point the following year. Cost-of-living adjustments will also apply to only the first $25,000 of a participant's pension, $20,000 for employees eligible for Social Security.
All new employees in the $37.5 billion Illinois Teachers' Retirement System, Springfield, and the $14.1 billion State Universities Retirement System, Champaign, would be placed in a cash balance plan. TRS and SURS employees hired since 2011 and up until the legislation is enacted may also elect to join the cash balance plan. Under the bill, schools, colleges and universities will assume employer costs from the state at a rate of 0.5% of payroll per year.
“This bill contains ideas drawn from business, labor and civic groups, as well as our colleagues in the General Assembly,” said state Rep. Daniel Biss in a news release. Mr. Biss spearheaded the bill with state Rep. Elaine Nekritz, who is chairwoman of the House Personnel and Pensions Committee. “We believe it is a road map for solving this problem in January, and we stand ready to work with anyone to do so and build a better Illinois.”
The bill also includes a guarantee that the state will make its full pension payments every year. Employer contributions would be on a 30-year funding plan to achieve 100% funding.
Brooke Anderson, spokeswoman for Gov. Pat Quinn, said the bill is a “welcome contribution” to the pension reform discussion.
“This latest bipartisan proposal by Rep. Nekritz addresses the three areas that the governor laid out in April — employee contribution, COLA and retirement age — but also is different in other ways,” Ms. Anderson said in an e-mail. “We are working with her and others to assess the numbers/savings.”
State Sen. President John Cullerton is encouraged House members are looking at ways to capture the local share of pension costs from school districts, said spokeswoman Rikeesha Phelon in an e-mail. “However, the larger proposal appears to impose unilateral pension reductions without offering voluntary acceptance by participants,” Ms. Phelon said. “We appreciate the efforts of Rep. Nekritz and her colleagues, but we will take a closer look at the plan to see if it can be squared with the pension clause.”
The General Assembly is expected to tackle the pension reform bill when the lame-duck legislative session starts Jan. 3. The state's five pension funds have a combined $96 billion in unfunded liabilities.