Illinois' five state defined benefit plans would be closed to new state employees who would be put into new defined contribution plans under a bill by state Sen. Bill Brady, Republican nominee for governor.
Current state employees would be allowed to move to the new defined contribution plans, forgoing their continued participation in the DB plans, according to another bill sponsored by Mr. Brady.
Both bills were referred March 8 to the Senate Assignments Committee.
The defined contribution plans' investments would be participant directed, according to the bills. Funding for the plans would come from a combination of contributions from state employers and participants.
The new defined contribution plans' assets, including selection of investment managers, would be overseen by the $32 billion Illinois Teachers' Retirement System, Springfield; and the $9.4 billion Illinois State Board of Investment, Chicago, which now has oversight of the Illinois State Employees' Retirement System, the Illinois Judges' Retirement System and the Illinois General Assembly Retirement System.
Illinois State Universities Retirement System, Champaign, would place new employees in its existing $649 million 401(a) plan; participants now have a choice between that DC plan and SURS' $12.56 billion defined benefit plan.
Mr. Brady couldn't be reached for comment.
A bill introduced by Rep. Mike Fortner would direct contributions applied to new state employees' annual pay over $106,000 to new DC plans administered by the existing state systems, while the amount of pay below that level for new workers would continue to apply to the state's existing defined benefit plans. The House Personnel and Pensions Committee has scheduled a hearing on his bill today, Mr. Fortner said.
Now “there is nothing to cap the income exposure to the defined benefit systems,” Mr. Fortner said.
Mr. Fortner said he is working on quantifying the cost saving to the state his bill would provide, but said it would reduce the state's overall pension contributions.
A provision of Mr. Fortner's bill would bar all new state employees who work under contracts and all new politically appointed employees from participating in the state defined benefit systems and place them into the new defined contribution plans.
The bill “strikes a good balance between line workers and … high-wage employees,” Mr. Fortner said.
Mr. Fortner said he opposes the Brady bills because under them the existing state defined benefit plans would lose all contributions from new employees, which “could cause assets to get dangerously low … and put them in jeopardy.”
Gov. Pat Quinn on March 10 proposed cutting pension benefits for newly hired state employees, while keeping them in the state's defined benefit systems. Mr. Quinn, appointed in 2009 to replace impeached Gov. Rod Blagojevich, is the Democratic nominee for governor.