CHICAGO — Despite widespread belief to the contrary, proposals to dump Illinois’ state employee pension plans in favor of 401(k)-style individual accounts actually would cost taxpayers more in the long run, a union-backed research group asserts.
The Center for Tax and Budget Accountability, a Chicago-based think tank, said in a report released May 7 that switching to a defined contribution system from a defined benefit would cost $275 million to $610 million a year in extra administrative costs while doing nothing to eliminate the $40.7 billion in unfunded liability in the existing funds.
Jourlande Gabriel, co-author of the report, acknowledged the unfunded liability at least would not grow if a defined contribution system were implemented for new state employees, as some business-backed groups have been suggesting.
But the switch would not reduce the unfunded liability and must still must be covered somehow by taxpayers because current state workers and retirees presumably will stay in the system and draw benefits, she added.
