Illinois Senate produces competing pension reform bill

Illinois capitol
Illinois Capitol

Illinois Senate President John Cullerton introduced a competing pension reform legislation Monday focused around giving participants an option between keeping the current cost-of-living adjustment and receiving retiree health care.

Mr. Cullerton worked with unions to create a bill in response to one passed by the House last week that he has said could be struck down as unconstitutional. His bill is slated for a committee vote on Wednesday and possible full Senate vote on Thursday. It is expected to save the state $46 billion.

“This plan is the best chance for the General Assembly to pass a clearly constitutional proposal that will save money and avoid an expensive and lengthy court battle,” Mr. Cullerton said in a statement. “We must calculate the risk associated with passing a plan that could save zero if the court throws it out. We need to remember that the unilateral approach is a gamble. Betting against the constitution is risky.”

The bill provides several different options for active and retired participants. Active employees can opt to switch to a simple 3% COLA with a two-year delay from a compounding 3% COLA. Under that option, participants would receive retiree health care and all future salary increases offered would raise pension benefits. Those participants can also elect to enroll in a new, optional cash balance plan in addition to their defined benefit plan.

Active participants also have two different options if they still want to receive the compounding COLA. The first option does not provide retiree health care, and all future salary increases would not raise pension benefits. If participants want retiree health care and pensionable salary increases, their employee contribution will increase two percentage points over the next two years and there will be a three-year delay in receiving the compounding COLA.

Under the proposal, retirees can receive health care if they elect to have their COLA subject to a staggered two-year freeze, or they will not receive health care if they choose to have no change to the COLA.

The bill also prohibits mandatory bargaining over the benefit changes and employee contribution increases in the bill.

The House bill is projected to save $150 billion and increases the retirement age and employee contributions, caps pensionable salaries and changes the COLA to 3% of $1,000 per year of service.