(December 2, 2013) — A group of lawmakers in Illinois’ state legislature has called for increased state contributions as part of a pension reform plan proposed last Friday. The five public pension plans are currently underfunded by over $100 billion.
The new proposal—written by Senate President John Cullerton, House Speaker Mike Madigan, Senate Minority Leader Christine Radogno and House Minority Leader Jim Durkin—is a development from an initial deal debated in August. The previous plan had recommended an end to the automatic 3% cost-of-living adjustment (COLA) increases for retirees and changes in benefits to depend on career-average salary base.
This time, the state legislators said the plan will save the pension system over $160 billion over 30 years.
Governor Pat Quinn said he is in full support of this plan for reform: “When I proposed the creation of a conference committee in June, I asked members to draft that eliminated the unfunded pension debt and fully stabilized the systems, and this plan meets that standard.”
The plan recommended that the state would make “supplemental contributions” until the pension system is fully funded. Specifically, the state would pay $364 million in fiscal year 2019 and “$1 billion annually thereafter through 2045 or until the system reaches 100% funding and 10% of the annual savings resulting from pension reform beginning in fiscal year 2016 until the system reaches 100% funding.”
And if the state is unable to make said promised payments, the pension plan may file an action in the Illinois Supreme Court.
In an effort to transfer burden from participants to providers, current employees would contribute 1% less of their salary under the new proposal. Future COLAs would be in line with retirees’ years of service.
The state legislature also proposed a later retirement age for employees under the age of 45—they could work up to five more years. Certain employees will also be provided an option of switching to a defined contribution plan beginning July of 2015.
The Illinois House and Senate will consider the proposal on December 3, 2013.
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