Pension Reform

Archived 2011 Updates

Pension update

December 20, 2011

From Clout Street

Gov. Pat Quinn said he will convene a panel to examine the state's troubled pension system and suggest changes that will prevent abuses. The complete article can be viewed here.

Civic Committee won’t push for pension vote until spring session

Capitol Fax, November 16, 2011

Media reports out of Springfield indicated that action on pension legislation maybe postponed until spring 2012.

Update to SB512

November 10, 2011

The Illinois House of Representatives has adjourned until Nov. 29 without taking action on the amended version of pension bill SB512. However, that version of the bill has been placed on the House Calendar for a third reading and short debate when the house reconvenes on the 29th.

Update to SB512

November 9, 2011 

NIU legislative liaison Lori Clark represented NIU at the Nov. 8 meeting of the Personnel and Pensions Committee to share the universities objections to SB512 as it is currently written. The meeting, in a packed committee room, drew a long list of organizations opposing the bill. Clark filed this report (.doc).

Update to SB512

November 8, 2011 - 7:48 pm

The House Personnel and Pension Committee endorsed SB512 on a 5-4 vote Tuesday evening, sending the bill to the House floor for consideration. 

The bill would create three different "tiers" of pension benefits and costs, some of which would compel employees to pay significantly more, another that would offer reduced benefits, and a third option similar to a corporate 401K plan.

House Republican leader Tom Cross, a sponsor,criticized the unions for not offering an alternative while acknowledging the state has a pension problem. 

The NIU legislative liaison, Lori Clark, represented the university at the hearing.

Update to SB512 - NIU Human Resource Services

November 8, 2011 - 6:11 pm

Human Resource Services has reviewed the proposed changes to SB512 and identified the following changes:

Employees hired on/after January 1, 2011 who have not selected the self-managed plan

  • Final rate of earnings formula utilizes the total earnings during the highest 8 years within the last 10 prior to retirement. 
  • Limits the annual earnings of the participate to $106,800, with increases provided annually to be the lesser of (i) 3% of that amount, including all previous adjustments or (ii) one half of the annual unadjusted percentage increase (but not less than zero) in the consumer price index-u for the 12 months ending with the September preceding each November  1, including all previous adjustments.
  • Beginning July 1, 2013, the maximum annual earnings amount is adjusted to $110,100, as adjusted for periods after 2012 by the formula used by the Social Security program.  This amount is adjusted based on the Social Security formula thereafter.
  • Retirement annuity age provisions:
    • Age 67 with 10 years of service credit and meets the other retirement provisions
    • Age 62 with 10 years of service credit is considered an early retirement and the annuity will be reduced by one half of 1% for each full month that the participants age is under 67. 
  • Retirement annuities are subject to annual increases after the attainment of age 67. Each is calculated at 3% or one half of the annual unadjusted percentage (but not less than zero) in the consumer price index-u. 
  • Survivor’s annuity is 66 2/3 percent of the retired participant’s annuity at the date of death. 
  • Individuals who assume employment at a full-time level in any of the retirement plans outlined in the Pension Code after retiring from this system will have their annuity suspended until termination. 

All Employees:  Required Election of Plan Options as of June 30, 2013

  • Participants hired prior to January 1, 2011 (excluding police officers and participants hired prior to July 1, 2013 who elected the self-managed plan) will be required to elect the retirement program in which they want to participate. The election must be made by January 1, 2013. The election will be made from the following:
    • Traditional or portable  benefit package
    • The revised defined benefit package (Tier II)
    • Self-Managed plan
  • Participants hired on or after January 1, 2011 will elect the plan in which they would like to participate for all service occurring after January 1, 2013. The election will be made from the following:
    • The revised defined benefit package (Tier II)
    • Self-Managed plan
  • The election must be made by June 30, 2013 or within 6 months after the first day of service, whichever is later and if applicable every three (3) years thereafter.
  • The participant election is irrevocable, except that any current employee electing the traditional or portable benefit package or the revised defined benefit package (Tier II) will make an election for a period of 3 years and will be able to make a new election during a period set forth by the System. Failure to make an election will put the employee into the revised defined benefit package (Tier II). 
  • Employees who have already made an election will be given the opportunity to make a new election every three (3) years.  
    • Those who elected the traditional benefit will have the opportunity to terminate participation and elect future retirement benefits provided under the revised defined benefit package (Tier II) or self-managed plan. 
    • Those who elected the revised defined benefit package (Tier II) will have the opportunity to elect participation in the self-managed plan.
  • Employees with accrued benefit under the traditional or portable plan who elect to move to the revised defined benefit package will have their total accrued benefit for purposes of determining their annuity calculated as follows: the sum of the benefit accruals under the traditional or portable benefit package, based on the pay and service under the traditional or portable benefit package and frozen with respect to pay for service earned subsequent to participation under those packages and the employees benefit accruals based on pay and service under the revised defined benefit package. Survivor benefits will be calculated under the revised defined benefit package with the total service counting toward the calculation. All service will also count for retirement eligibility and vesting.
  • Employees in the traditional, portable, or revised defined benefit package who elect to participate in the self-managed plan will have their total accrued benefit for purposes of determining an annuity be the employee’s benefit accruals prior to participation in the self-managed plan, based on their pay and service and frozen with respect to pay and service earned subsequent to participation in the traditional, portable, or revised defined benefit plan. The employee will also have an accrued self-managed plan benefit for the periods of covered employment on or after participation in the self-managed plan. 
  • Individuals who are not active participants as of July 1, 2013 will be able to make a selection unless they are participating in the self-managed plan. 
  • Retirement annuities – Modifies the Money Purchase calculation and provides that employee contributions in excess of the employee contribution rates that apply to the annuity to the annuity and are in effect immediately prior to July 1, 2013 will not be considered when determining the participant’s accumulated normal contributions under normal annuity or the employer contribution under the annuity from employer contributions.

Employer Contributions and Unfunded Liabilities – requires that from 2014 – 2045 the State will make the minimum contribution  equal to the sum of the contribution as defined in the statute plus an amount determined by the system to be sufficient to bring the total assets of the system up to 90% of the total actuarial liabilities. Beginning in 2017 the contribution will be calculated as a level percentage of revenue provided by the individual income tax, sales tax, and corporate income tax assuming a 2.3% average annual growth rate in these revenues. The amendment also provides for additional state contributions beginning in 2013 and each fiscal year thereafter. 

Employee Contributions – effective July 1, 2013 all participating employees will be required to make the following contributions:

  • Traditional and Portable Plan:
    • FY2014 to FY2016 – 15.31% of earnings
    • FY2017 and beyond – percentage of salary equal to the actuarially determined normal cost minus the employer contributions provided that the participants contribution is not less than 6% or more than 17.31% of the pensionable payroll.  Actuarially determined normal cost will be certified January 1, 2015 and ever three (3) years thereafter. 
  • Revised defined benefit package:
    • Percentage of compensation equal to the greater of the actuarially determined long term normal cost as calculated in 2014 or 12% minus the employer contributions in FY2014 provided that no participant’s contribution is less than 6% of the pensionable payroll. Long term normal costs are defined as the normal cost f the revised benefit package assuming that all employees are covered under the revised benefit package.
  • Self-managed:
    • Beginning in FY2014 and each fiscal year thereafter, contribute a minimum of 6%.  Employees will have the option of increasing their contributions in accordance with rules prescribed to the board. 

 All of these proposals must be authorized by passage through the General Assembly before becoming law and are, therefore, frequently subject to revision and amendment.  All pension policies, regulations, procedures, and calculations for university employees are the responsibility of and administered by SURS This summary is for your information only and is subject to correction/modification.

Update to SB512

November 8, 2011 - 11:08 am

The amended version of Senate Bill 512 will come up for discussion at 2:30 p.m. today before the House Personnel and Pension Committee. NIU's Lori Clark will testify on behalf of the university and register the university's objection to the legislation as written.

Update to SB512

November 7, 2011

Rep. Tom Cross has filed an amended version of Senate Bill 512. Changes are a indicated using strikethroughs (deletions) and underlining (additions). Analysis of the changes will be forthcoming.

'The Pension Game Continues' - Rich Miller, Capitol Fax

November 7, 2011

The Monday, Nov. 7 Capitol Fax Blog offers an excellent round up of pension related news including:

  • Prospects for SB512. Rumors in Springfield are leaning toward the bill remaining on the sidelines for the remainder of the Veto Session this week.
  • Tier 2 savings. Pension instituted for new hires in January will create major savings for the state, despite what some critics claim.
  • Shortfall contributors. A chart illustrates how various factors – including declining investment returns, lack of employer contributions, and other factors – have contributed to the pension shortfall.

Letter to Governor Quinn

November 2, 2011

This letter was sent on behalf of Illinois Public University Chancellors and Presidents to Governor Quinn, Senate President John Cullerton, Senate Minority Leader Christine Radogno, Speaker of the House Michael Madigan, and House Republican Leader Tom Cross.

Dear Governor Quinn:

We recognize the State of Illinois is faced with an unprecedented fiscal deficit that results innot only billions of dollars of unpaid obligations to state agencies and vendors, but leavesstate leaders with few options to address the estimated $85 billion underfunded pension liabilitiesshared by the five state pension funds.

The SURS defined benefit program for University and Community College employees wasestablished in 1941. Had all three required funding components been fulfilled over the years,the SURS program would now be stable, affordable and solvent. Two of the three necessary components of full funding have been steadfast and consistent: employee contributions and thereturn on assets from pension fund investments.

As chief executives of the state’s public universities, we understand all too well that the presentsituation facing the state’s five pension funds is not sustainable. Notwithstanding the state funding history, successfully resolving this financial obligation requires all parties (university employers, employees, employee organizations, and the State of Illinois) to participate together in crafting afair and equitable solution.

Within the context of the state’s fiscal crisis, examples of excessive individual pension benefitshave often been emphasized in the call for reform. But these exceptional situations do not representthe reality of the vast majority of pension system participants. Among its nearly 200,000 members,the average SURS retiree has 20 years of service and receives a monthly pension of $2,760 per month, or about $33,000 per year. Teachers and university employees do not participate in Social Security. With decades of service already invested, employees and retirees cannot turn back and recalculatetheir career choices and retirement planning measures in response to unpredictable state funding.

Senate Bill 512, backed by the Civic Committee of the Commercial Club of Chicago is but one approach. As leaders of the state’s public universities, we share grave concerns overSenate Bill 512 in its current form. However, we agree that SB512 also has favorable aspects:

  • The state would amortize the unfunded accrued liability through an enhanced funding stabilization methodology (30-year straight line).
  • The state would maintain responsibility to fund benefits accrued to date.
  • There is an assumption of adequate revenue sources (e.g., a continuation of the tax surcharge). It is very evident that the under-funding of pension obligations enabled Illinois to fundalternative legislative priorities while maintaining an artificially low income tax rate for many years.

Unfortunately, our concerns over other problematic areas of SB 512 overshadow the positive aspects of the legislation. Chief among them, state pension funding would be limited to approximately 6%of payroll as the level of state contribution for continuing benefits, leaving a significant fundingshortfall to cover the normal cost of current benefits. SB512 proposes to shift those costs to employees. Employees are the least prepared to shoulder new unplanned obligations for the normal costs of their pensions. Furthermore, the actuarial experts participating in the Working Group discussions have confirmed that enactment of SB512 would lead to a wide range of unintendedfunding consequences leading to significant new obligations for the state, with real cost reductionsnot realized for decades. It is difficult to consider such outcomes to be in the best interests of thestate, its colleges and universities, or its employees.

Pension system participants have relied upon the state’s representation and the Pension Protection Clause to expect a predictable and secure set of core pension benefits that also serve as a replacementfor Social Security. SB512 would undercut these assumptions.

Universities compete in a national, and sometimes a global marketplace, to recruit and retain the talented faculty and staff who teach our students, provide services to them and conduct ground breaking research. They have career opportunities that are not limited by the boundaries of this state. Reducing their benefits or forcing them to pay significantly more for benefits that were promised to them is likely to cause a significant migration of talented people out of this state. This is one of our greatest concerns.

There is no denying the critical nature of our current fiscal situation. We are certain that higher education employees and institutions are prepared to contribute to a long-term solution. The public higher education community is prepared to participate in the design of options and alternatives thathelp solve this critical issue. We believe it is possible to complete such work in time for the Spring2012 session of the General Assembly and we look forward to taking this opportunity to develop a durable, equitable and long-term solution, especially in the SURS sector.


Illinois Public University Chancellors and Presidents

Pension Reform Update

October 28, 2011

The NIU Operating Staff Council will host State Rep. Robert Pritchard, R-Hinkley, 10 a.m., Thursday, Nov. 3, in the Skyroom of the Holmes Student Center to address issues related to the ongoing debate over pension reform in Springfield.

Jim Lockard, legislative chair of the NIU Annuitants Association, will join Pritchard as part of the program.

The legislature is expected to resume its debate over pension reform during the final three days of the Fall Veto Session Nov. 8-10.

The State Journal Register reported Thursday that House Republican Leader Tom Cross says a deal has been reached in the House to vote on SB512. The bill proposes a three-tiered session that would give state workers, teachers and university employees the choice of paying more for the current benefit plan, paying the same for reduced benefits or entering 401-K type system. Cross says the deal is a bi-partisan one, with both Democrats and Republicans expected to put an equal number of voters toward approval.

October 27, 2011

Legislators in the Illinois House of Representatives today passed a pair of bills aimed at prohibiting union officials from collecting state benefits for time worked for the union. That practice has been the focus of much media attention in recent weeks. HB3813 passed the House on a vote of 11-3-1 and HB 3815 passed 113-2-0. Both bills now move on to the Illinois Senate for approval.

Pension legislation focusing on “loopholes”

October 26, 2011

There were a number of bills introduced within the last two weeks related to pension reform, primarily in response to recent stories by the Chicago Tribune and Fox News. These bills are intended to close "loopholes" that have allowed the type of lucrative pension benefits that have been highlighted by the media.

With the Fall Veto Session underway, the main pension bill (SB512) remains on the sidelines for now.

Update from NIU President John G. Peters

October 25, 2011

Over the next several weeks during the Veto Session, legislators are expected to take action on Senate Bill 512, which would impose significant changes in the way that pensions for state employees are managed.

The university has had and will continue to have a presence in Springfield during Veto Session to represent the interests of our university community—faculty, staff and students—in this debate.

Our primary goal is to guarantee the education an NIU student receives is the best we are capable of providing.  Northern Illinois University's academic quality is directly related to the acclaim and reputation of our faculty.  We must continue to be able to attract the best faculty and staff in order to ensure that our students are well-served through their NIU experience as they move into a highly competitive professional environment.

Towards that end, I have grave concerns over SB 512 as drafted.


Legislative update: Illinois veto session begins Oct. 25 in Springfield

The first week of the Illinois General Assembly’s fall veto session begins Tuesday, Oct. 25, and will run through Thursday, Oct. 27. It promises to be an interesting week, with many issues on the table.

The House of Representatives Personnel and Pensions Committee has posted five pension reform bills for hearing – HB 3813HB 3815HB 3827HB 3832 andSB 1673.

These bills do not deal with the larger issue of pension reform, but, rather, with closing “loopholes” in the pension systems largely in response to recent media coverage of individuals taking leaves of absence to work for a labor organization and then coming back into a pension system and claiming benefits based on their much higher salary when employed by the labor organization.

On Wednesday, the unions have scheduled a State Capitol Rotunda Rally from noon to 1 p.m. regarding the pension reform issue and protecting the benefits of current employees.

On Thursday, all of the pension reform working groups appointed by the House are scheduled to meet.

At this time, no one can say with any certainty if SB 512, sponsored during the spring session by House Minority Leader Tom Cross and House Speaker Michael Madigan, will be brought up for a vote. This is the bill that creates the three options for existing employees under the five state pension systems, including SURS. Keep checking the NIU State Pension & Budget Update website for updates as they might occur during the week.