Update on Pension
May 16, 2011
Based on actions taken Friday, May 13, it appears that the language in HB149 will be the current strategy that lawmakers are looking to in their effort to make changes on existing pension regulations.
(For tracking purposes, the actual bill to follow will likely be SB 512, which will adopt language based on the general proposals contained in HB 149.)
This bill would impose significant changes in the way that pensions for state employees are managed and it requires very careful attention. The next few days and weeks are critical for this issue.
The information below provides a very simple synopsis of proposals that have been reported from Springfield, and a best estimate of the impact of the current proposals. Since the bill is still being debated, and the topic is highly complex, this may not be the formal shape of the bill, and final language as not been released.
According to a briefing prepared by the State University Annuitants Association, HB 149 would require current employees to choose among three retirement plans.
Tier I: Stay in your current plan, but contribute more to it:
Employee contribution rate increases from 8% to a yet-to-be determined amount in the range of 14-16%. The rate would be subject to periodic revision and increases, possibly every 5 years.
Tier II: Participate in the second-tier plan that passed last year, which implemented reduced benefits for those hired on or after January 1, 2011:
Employee contribution rate would decrease from 8% to as low as 6.5% (simply because of the lower value of this plan).
Tier III: Participate in the 401(k)-style Defined Contribution Plan in which the State would match employees’ contributions.
The defined contribution option would remain unchanged for current participants in the Self-Managed Plan (7.5% employee contribution with a state match). This would most likely be the default if no election were made to stay in Tier I. A different defined contribution option would be made available for new employees.
The plan as currently presented would have no impact on pension benefits that employees have already accrued under the SURS to date. Any pension savings accrued up and until the legislation took effect would be paid as promised.
Hearings on the bill are scheduled as follows:
Personnel and Pensions Committee Hearing 2 p.m., May 18, 2011, Capitol Building Room 122B Springfield, IL
Personnel and Pensions Committee Hearing noon, May 19 2011, Capitol Building Room 122B Springfield, IL
For more information:
A preliminary analysis of the bill by the Institute of Government Public Affairs is available here (PDF). As this analysis makes clear, this is an extremely complex bill, and many details have yet to be worked out.