Former House Speaker Michael Madigan, after 50 years as a member of the Illinois House and a contributor into one of the state’s five pension funds, … Compliance Guide for Fire Departments. 7—Pension reform is a favorite campaign refrain of candidates across party lines. Learn More about 2021 Scholarship Application . In 2013, members of the General Assembly proposed landmark bills that provided that government workers would be paid everything they’ve earned so far in the pension system and started a 401(k)-style system – modeled on the self-managed plans for state-university professors in which 18,000 employees are enrolled – for all benefits going forward. New York and Massachusetts: early retirement incentives on tap, boosting pension costs. “Under the agreement, the teachers will now get 6 percent annual increases in the last four years of their careers, up from the current 3 percent. That’s precisely what’s happening in Illinois today. a. Illinois has 667 government-worker pension funds that are supposed to provide retirement security for more than 1 million government workers and retirees. “Average pension benefits are modest.” The Chicago Teachers Union, for example, claims “the average Chicago Teachers’ Pension Fund (CTPF) retiree earns $42,000 per year.” But that’s a misleading number because the average includes short-term workers who receive relatively smaller pensions due to their limited time working for the government. b. COLAs: Most retirees receive cost-of-living adjustments that are automatic, annual 3 percent compounded boosts to their pensions. Bill explores creation of legal services for immigrants facing deportation in Illinois. By Cole Lauterbach - Illinois Radio Network. I write about retirement policy from an actuary's perspective. The combination of these three factors has driven Illinois’ pension systems closer to insolvency. pension reform in Illinois. React to Pritzker signing criminal justice reform bill. Sen. Martwick, chair of Illinois Senate pension committee, actually talks about reforming lawmaker pensions (Part 1) – Wirepoints March 6, 2021 It’s been several years since we’ve heard an Illinois Democrat talk pension reform, but in the last 30 days, Sen. Bob Martwick (D-Chicago) has mentioned the need for reforms twice. Coming to the General Assembly with experience as a mayor, state Rep. Mark Luft, R-Pekin, also said pension reform is a legislative priority. By Peter Hancock / Capitol News Illinois • 16 hours ago. Unfortunately, in May, the Illinois Supreme Court struck down Senate Bill 1 – a modest pension-reform law meant to bring some relief to Illinois’ fiscal crisis. “You have to reform the systems. 190 South LaSalle Street | 1500 | Chicago, IL 60603 However, the state’s taxpayers can no longer afford to offer such benefits going forward. Since the Illinois Supreme Court’s ruling on SB1, debate over how to fix Illinois’ pension crisis has come to a screeching halt. Making Sense Of The Medicare Part D Drug Plan Deductible, How Some Home-Business Owners Can Get The Government's New PPP Loans, Navigating Your Career Through The Changing World Of Work, Curiosity: The Most Important Trait For Financial Advisors, Bad News For Workers Is Good News For The Stock Market, Cautionary Advice About Small-Business Credit Cards, Medicare Could Be Insolvent In 2024: How To Prevent It, employer contribution rate is the same for either type of plan, already the case for public employees in Florida, teachers do not participate in Social Security in Kentucky, ‘An Act to provide a retirement enhancement opportunity to members of the Massachusetts Teachers Retirement System,’. Illinois Gov. half of all city workers retire before age 60, 60 percent of the state’s current pension shortfall, the average annual Social Security benefit, has contributed to fiscal crises in municipalities across Illinois, self-managed plans for state-university professors, Offer optional 401(k)s to current employees, Require all teachers to make contributions toward their own pensions, Get the state out of the business of managing local school-district pensions. Illinois House Speaker Emanuel "Chris" Welch prepares to address the media after being elected as speaker on Jan. 13, 2021, at the Bank of Springfield Center in Springfield. The pension decision was unanimous, but I … Chicago’s police and firefighters pension funds now have only a quarter of the money they need today to pay out future benefits. Bond rating agencies and Illinoisans considering flight would take significant comfort in that. Those funds include: In contrast to DB plans, in a defined-contribution, or DC, plan such as a 401(k), both the employer and the employee contribute directly to a portable retirement account owned and controlled by the employee. . Over the course of a decade, Chicago politicians redirected $3 billion in contributions away from the teachers’ pension fund, toward teachers’ salaries. “This is not a way to fix the systems,” Durkin said. 401(k)-style plans for new government workers. BREAKING NEWS: Illinois Financial Crisis To Worsen In 2021 Due To Poor Leadership And Incompetence By JB Pritzker And Gang. Twenty states have pension plans that are less than two-thirds funded, and five states have pension plans that … Pension funds in each of these groups – the state, Chicago and other municipalities – are in crisis. Facebook. Jim Edgar created a culture of kicking the can down the road when he enacted legislation that pushed state pension contributions far into the future – through 2045. “Pensions need funding guarantees.” Supporters of the status quo also claim that Illinois’ pension systems need funding guarantees to ensure the plans receive their required contributions. The Illinois Municipal League remains committed to publishing the Illinois Municipal Policy Journal and we take great pride in releasing this fifth volume. The measure, if passed, would put teachers and others covered by the Kentucky Teachers Retirement System hired after Jan. 1, 2022, into a new hybrid pension plan that includes foundational and supplemental benefits. Tying it to pension REFORM would be a winner. As a resident of Illinois, you are invited to use the form below to nominate yourself for membership on Illinois boards, commissions, committees, councils, and task forces. Despite the deepening pension crisis, defenders of the status quo – including government unions and many politicians – continue to argue against any reforms to the state’s pension systems. They point to the only well-funded pension system in the state: the Illinois Municipal Retirement Fund, or IMRF. Illinois ranks as the highest taxed state in the nation; Illinois ranks as one of the worst financially managed states in the U.S. `The state is being … Employees currently are allowed to choose whether to take part in the pension plan or the investment plan. “Pension benefits are a promise.” Citing the Illinois Constitution’s pension-protection clause, which states that pensions may not be “diminished or impaired,” union officials say pension benefits for current government workers cannot be reformed – including, even, those benefits that have yet to be earned. A new report by the credit rating agency Moody’s says Illinois will set a new record this year when it reports a total net pension liability of more than $300 billion, the highest of any... Read more. SPRINGFIELD, Ill. – Following the Illinois House of Representatives announcement of committee assignments for the 102nd General Assembly, state Rep. Suzanne Ness, D-Crystal Lake, is underscoring her commitment to build a stronger Illinois through fiscal responsibility, creation of new jobs and properly funding social services. Wirepoints key points often mention: 1) Constitutional changes are needed to permit pension reform 2) The size of government needs to be reduced 3) The power of the public unions needs to be addressed/reduced 4) None of the above reforms are likely until Illinois hits rock bottom and is forced. Since then, Illinois politicians have borrowed, skipped payments and taxed to fund pensions rather than seek comprehensive reforms. Opinions expressed by Forbes Contributors are their own. The most recent calculation of Illinois’ pensions liabilities stands at a debt of $137.3 billion, as of fiscal 2019 year-end. Our state's dealing with it. The crisis threatens to burden taxpayers with massive, ever-escalating taxes to bail out a system that is not sustainable – government-worker pensions consume a fourth of the state’s budget. A graphic from the Commission on Government Forecasting and Accountability's February 2021 economic forecast shows the rate of growth for the state's gross domestic product compared to that of the U.S. Commission on Government Forecasting and … Like a teenage barback trying to front a monthly payment on a Lamborghini, state politicians have kicked the can, borrowed and lied to keep up appearances. “’It is better that longtime employees retire with guaranteed income than governments be forced to lay off employees who then seek unemployment benefits,’ said Abinanti. Nearly half of all city workers retire before age 60, and recently retired career workers (30 years of service or more) receive $65,000 average annual pensions. A majority of the pension systems’ underfunding is due to the flaws inherent in DB plans. Another major weakness of DB plans is that if funds don’t have enough money to pay out future benefits, it’s taxpayers who must bail them out. Not surprisingly, the bill comes with no actuarial analysis of the long-term cost of these benefit increases. Illinois is home to 667 government pension funds. These Are the New Illinois Laws Taking Effect in 2021 ... while opponents warned that Illinois needs structural changes like pension reform before looking to increase revenue. There was a pension reform bill passed, some years ago. Kentucky’s governor has also set his sights on 401(k)-style plans for new government workers. Of course, the pension boosts won’t be free — but it will be Illinois taxpayers who will bear the cost, and quite substantially so. In all, 60 percent of the state’s current pension shortfall can be attributed to such failed assumptions. As described by WDRB as well as by the Louisville Courier Journal, the bill is not without opponents but there is a degree of consensus that reform is needed. "We're all dealing with it. If one examines the math of Illinois’ budget, the path to reform becomes clear. In addition, the amount a retiree receives increases each year through an annual cost-of-living adjustment, or COLA. 2021 Scholarship Application. Under state law, local cities are mandated, through a court-enforced funding guarantee, to fund IMRF pensions before anything else. In June, Moody’s released a report using fiscal year 2011 pension information to compare what states owe to what states have. Twitter. Mar. In Florida, that’s not the case — at least nominally not so: the employer contribution rate is the same for either type of plan, and varies only by employment class. As always, you’re invited to comment at JaneTheActuary.com! Almost 40,000 (18 percent of all retirees) will receive $2 million or more in benefits. Pension plans are inherently flawed and unsustainable. In exchange for these contributions, the pension fund promises a guaranteed amount of money every year to the employee for life once he or she retires. "We're all dealing with it. Illinois struggles to pay its pensions, but these lawmakers signed up for them anyway https://ift.tt/2MUMUqp Pension reform is a favorite campaign refrain of candidates across party lines. In addition, employees at least 55 years old with 25 years of service would be spared the early retirement reductions that would otherwise apply — reductions which are as high as 27%, depending on age. The Illinois State Capitol on Jan. 13, 2021. For example, the average recently retired (from Jan. 1, 2013, through 2015) career (30 years of service) State Universities Retirement System member contributed only about $145,000 (6.5 percent) of the $2.2 million he or she will receive in lifetime retirement benefits. But when it comes up signing up for their own state retirement benefits, few Illinois lawmakers say no. Illinois’s pension debt is the worst in the nation relative to the size of each state's economy. . Coming to the General Assembly with experience as a mayor, state Rep. Mark Luft, R-Pekin, also said pension reform is a legislative priority. The pension decision was unanimous, but I digress. However, that doesn’t mean the state is without remedies in the meantime. “The proposal, sponsored by Senate Governmental Oversight and Accountability Chairman Ray Rodrigues, R-Estero, would require new employees as of July 1, 2022, to enroll in a 401(k)-style “investment” plan. © 2021 Forbes Media LLC. These groups oversee and advise Illinois' elected officials, state agencies and organizations on a wide range of issues that affect the public welfare. Illinois is in awful economic shape. Finally, according to MassLive, in Massachusetts. A round-up of reports across the country. “After years of discussions about the tricky issue of overhauling Florida’s retirement system for government employees, a Senate committee this week approved a proposal that would shut future workers out of a traditional pension plan. 1. 1. In general, a DB plan works by having an employee and employer contribute a set percentage of the employee’s annual salary to a pension fund over the course of the employee’s career. For many, serving on a board or commission is one of the most rewarding experiences of their lives. d. Payouts: The average career (30 years of service) teacher who retired recently (within the last three years) receives a $71,000 pension and will collect over $2 million over the course of her retirement. Solutions such as the seven reforms above would reduce the severity of the pension crisis and pave the way for bigger reforms. Dec 2, 2020. . And, although the plan is fully funded (based on the public plan funding methods), the new costs still must be paid by taxpayers. Now, generally speaking, when an employer switches from a traditional pension to a defined contribution plan, this means a significant drop in plan benefits for employees. 64. All Rights Reserved, This is a BETA experience. The current state of the Chicago teachers’ pension fund is the best example of how politicians manipulate pensions. “House Bill 258, sponsored by Rep. C. Ed Massey, moved to the House floor on a 14-4 vote and cleared the lower chamber hours later on a 68-28 vote. e. Benefits in Chicago: Employees for the city of Chicago also receive generous pension benefits. Learn More about BASIC ASSESSOR CERTIFICATION COURSE . Illinois Pension Reform: My address to members of the State Universities Annuitants Association (April 26, 2013) …Instead of protecting public pension rights and benefits, which have a legal basis under Illinois State Law; instead of restructuring the state’s revenue base to pay for the state’s growth in expenditures and its recklessly-accumulated debts and obligations, current policymakers … These investments are expected to grow enough to meet the fund’s future pension obligations. Long-term economic outlook shows … The growing cost of pensions has trapped the state, the city of Chicago, and hundreds of municipalities in financial crises, forcing many governments to raise taxes and shortchange programs on which lower-income Illinoisans rely. Tennessee is right behind with a 97 percent ratio. By Tim Shelley • Feb 9, 2021. Thursday, March 4, 2021. Report: Illinois’ pension debt tops $300 billion. If you have problems completing the form, please email So District 86 won't suffer the long-term costs of the end-of-career pay hikes.”. Florida: ending pensions for new employees? Feb 20, 2021 at 4:14 PM. Not only did this cause the teachers’ pension shortfall to skyrocket, but it also inflated teacher salaries, pushing teacher pension benefits to unaffordable levels. Report: Illinois’ pension debt tops $300 billion. 2. . . J.B. Pritzker Doubles Down on Disastrous Policies in Illinois. In DB plans, governments make promises to retirees based on certain assumptions – such as expected investment returns and mortality rates – which often fail. In Illinois, COLAs automatically increase a retiree’s yearly benefit, typically by 3 percent each year. As Illinois’ pension funds fall farther into insolvency, the money needed to prop up the funds is growing far faster than Illinois’ budget. "This is a huge bill. Gov. The Institute has long supported moving all government workers to 401(k)-style retirement plans. Once the employee retires, neither the employer nor taxpayers have any future obligation to fund the worker’s retirement. Share Tweet Email. Yes, I'm a nerd, and an actuary to boot. Article 4 Pension; Donate . “The pension plan was considered fully funded from the 1997-1998 fiscal year to the 2007-2008 fiscal year but then started running actuarial deficits, said Amy Baker, coordinator of the Legislature’s Office of Economic & Demographic Research. In Illinois, hundreds of billions of dollars in pension debt are dragging residents and the government at every level, under water. “The bill backed by Sen. Peter Harckham and Assemblyman Tom Abinanti would create early retirement incentives for workers 55 and older who have 10 years of service with state or workers with 25 years of government service. Politicians use pensions as a political slush fund. Illinois’ public pensions are among the worst funded in the nation, and its bond rating is barely above junk status. Illinois Senate passes firefighter pension bill over mayor’s strenuous objections . comeback With its publication, we recognize the work of UIS staff, the authors and collaborators, our staff and so … Here’s what our revamped pension database can do: Shows how well Illinois, Cook County, Chicago, the suburbs and some Downstate pensions are collectively funded, as well as … This bill would increase the retirement benefit of an eligible teacher by adding 5 years to the teacher’s age and 5 years to the teacher’s service, or by some combination of each up to a total of 10 years. It has the third-largest unfunded liabilities as a percentage of pension obligations in the nation. By collecting data from the largest public pension systems in the state and centralizing it into our new Illinois Public Pensions Database, the Better Government Association aims to bring greater clarity to this important topic. Throwing more money at them and asking the public to underwrite the pensions any more than they do is a nonstarter.” Durkin said the state needs to address the pension protection clause of the Illinois Constitution. House Speaker Welch backs off graduated tax move, talks pension reform https://ift.tt/3r36obg He toned down talk that Illinois voters soon again may be asked to allow a graduated-income tax, but notably waded into another hot issue, declining to reject out of hand the possibility of amending the Illinois Constitution to limit government worker pension benefits. Deadline March 15, 2021. The new Illinois House speaker makes some news at an event co-sponsored by Crain's and the Lincoln Forum. However, unlike Florida, teachers do not participate in Social Security in Kentucky, so much more is at stake. These boards and commissions also play a vital role in promoting efficient, effective, and honest government. Pension costs already make up 25 percent of Illinois’ budget – a massive amount considering the average for other states is only 4 percent. In principle, participating teachers would be required to “purchase” these credits based on a calculation of the costs; however, these calculations tend to understate the true cost, for instance, by the way assumptions are selected, or by using flat costs without regard to age, even if employees who “win” from this cost-setting are more likely to take the benefit. Spending on pension benefits and government worker health insurance is crowding out other priorities. Print. Its growth rate has been pegged at 45th lowest of the 50 states. Koehler said pension reform is a "huge lift." Learn More about Covid 19 Vaccination Plan . Illinois’ Our municipalities are dealing … June 7-9, 2021 Normal, IL. You may opt-out by. Today, nearly 85 percent of private-sector employees are enrolled in some form of DC plan. When measured that way, the average annual pension for a retired Chicago Public Schools career teacher is $71,717 – four times the average annual Social Security benefit that private-sector retirees receive ($16,000). Police and firefighter salaries grew 50 to 70 percentage points faster than inflation over the past 30 years. Cities are forced to raise taxes and cut spending for road repair, libraries and police and firefighter pensions to make their mandated IMRF payments, crippling cities’ ability to deliver core services. March 4, 2021. It is, of course, an indicator of a broken salary schedule system at any particular school district if long-service teachers earn pay that’s double their new hire counterparts without adding double the value in terms of their experience, ability to mentor younger teachers, and the like. “To be eligible, a worker would have to be in a position that can be eliminated. That means their annual pension benefits will double in 25 years. "This is a huge bill. Illinois’ pension systems have been on a steady downward trajectory since 2000, the result of the state’s underfunding on one end and excessive benefits on the other. Illinois’ pension debt, already the nation’s biggest, grew to $317 billion in 2020 according to a new report from Moody’s Investors Service. “A bill that would allow teachers who are eligible to retire to purchase up to five years of service, age or a combination of the two in order to make room for new teachers has been backed by state Sen. John Velis, D-Westfield, and state Rep. Carol Doherty, D-Taunton. They’ve benefited from labor negotiations that have led to lucrative compensation packages. Major credit agencies, such as Moody’s Investors Service and Fitch Ratings, have taken note and have given Illinois the lowest credit rating in the nation – just three notches above junk status. And this sort of incentive, even ignoring the question of whether the buy-in cost is fairly set, boosts the costs of pensions, which assume, in terms of such assumptions as retirement age, that even though teachers generally have very young retirement eligibility, a significant number of teachers will continue teaching to an older age, with the side benefit of less cost in pensions. The Illinois General Assembly Retirement System, or GARS, is only 16 percent funded. All of the above reforms are related to improving the states finances. Instead, state officials and politicians control the pool of funds, allowing them to use workers’ retirement dollars as a political slush fund. 1. The bottom line: we have 50 states and 50 different pension systems, and significant differences in the reform-mindedness of those states’ legislators. 2. However, the Illinois Policy Institute believes that it should be possible to reform the benefits that workers have yet to earn. Check out the Illinois Plan. Illinois pensions were underfunded because they were overpromised. Without real reforms, many pension systems across the state may become insolvent despite taxpayer bailouts, ruining the retirement security of hundreds of thousands of retired government workers. By contrast, private-sector workers with average Social Security benefits will only receive approximately $400,000 in lifetime benefits. Our full-time staff, headquartered in Springfield, includes a lobbyist and an attorney who are joined by other professionals in serving your needs for information and representation. Covid 19 Vaccination Plan. However, over the last two decades, the financial conditions of many public pension systems have deteriorated. Politicians’ failure to contribute to pensions is often blamed as the key reason Illinois pensions are so underfunded. Monday, Feb 22, 2021 * Yes, I know that he hasn’t even signed the bill as this is published, but my inbox is filling up. Pension Reforms Top City's 2021 Wishlist for State Lawmakers. Armed with an M.A. story Of course, the pension boosts won’t be free — but it will be Illinois taxpayers who will bear the cost, and quite substantially so. March 07, 2021 06:00 AM ... Pension reform is a favorite campaign refrain of candidates across party lines. Linkedin. However, that is not the case. Taxpayers now contribute more than three times what state workers contribute to their own retirements. And at only 16 percent funded, the General Assembly’s own retirement system is the worst-off of all state funds, relying on a taxpayer bailout every year just to stay afloat. By contrast, 60 percent of state workers retire in their 50s, many of them with full benefits. Pension reform, not more liabilities Updated 2/27/2021 1:03 PM As our state's residents and business community contend with the worst public health … A more appropriate way to measure the full value of a pension plan is to look at the annual pensions of career (30-year) workers who recently retired. The Teachers’ Retirement System, the largest pension fund in the state, has less than half the money it needs. “Massey, R-Hebron, said the proposal would keep future hires from joining an already burdened and overtaxed’ defined-benefit pension system at KTRS, which actuaries expect will have unfunded pension liabilities totaling $14.8 billion and have 58.4% of the money needed to cover pension costs for current retirees and workers by fiscal year 2023.”. The court ruled that the Illinois Constitution’s pension-protection clause protects both earned and unearned benefits of current state workers – ending any chance for significant pension reform involving current workers. Up to 3 years of additional service credit, based on current years of service, plus, for employers in “an optional retirement program,” additional retirement account contributions of as much as 45% of pay. Illinois’ massive, growing, government-worker pension debt is a direct result of three major factors: overgenerous pension benefits, political manipulation and inherent flaws of pension plans. By: Ted Dabrowski and John Klingner . Growing public pension costs are affecting municipalities across America. Chicago Office | Illinois Policy That said, more and more states, most recently Oklahoma, have moved their workers onto some form of a DC plan in an attempt to get their budgets under control and give workers more ownership over their retirements. A government-worker pension in Illinois is a defined-benefit, or DB, retirement plan under which employees are supposed to receive annual benefits during retirement. Real, structural reforms to government-worker pension plans will need to wait until the Illinois Constitution can be amended to allow them – or until the state’s government-worker unions agree to pension changes at the bargaining table. (Of course, this doesn’t take into account any additional contributions needed to remedy funded status.) Illinois, for instance, requested $10 billion in federal aid to bail out its pension system, citing the coronavirus pandemic despite the system having been neglected for years, according to The New York Times (NYT). Ultimately, the Illinois Constitution will have to be amended so the state can enact real reforms that realign the retirement benefits of government workers with what Illinois taxpayers can afford. And since COLA benefits are not means-tested, Heffez will continue to receive COLA increases annually – which contributes mightily to his expected $18 million in lifetime pension benefits. The state’s top pensioner, Leslie Heffez, earned a COLA of more than $16,000 in 2015, equal to the average annual Social Security payout for an average private-sector retiree. I will talk to the Senate president about the possiblity of getting that started," said Koehler, the Senate's assistant majority leader. House Speaker Welch backs off graduated tax move, talks pension reform … Illinois' new speaker of the House, Chris Welch, seems to realize government won't gain public confidence without addressing the pension funding crisis devouring state finances. February 2, 2021 . However, the problem is not insurmountable. Multiemployer Pension Reform Ruled Eligible For The COVID Relief Act (Seyfarth Shaw LLP / JD Supra) March 3, 2021 . Illinois Police Benevolent and Protective Association is Illinois' top police association. January 19, 2021 - Treasurer Frerichs Encourages Non-Profits to Apply for $250,000 Available Through Charitable Trust Program Read More. Pension Reform Advocates on Eviction Moratorium. Pension plans in Wisconsin and South Dakota are in the best shape, with funded ratios of 103 and 100 percent, respectively. Koehler said pension reform is a "huge lift." BASIC ASSESSOR CERTIFICATION COURSE. To generate similar benefits, a worker in the private sector would need to have more than $1.5 million in her bank account when she retires.