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GOVERNMENT RELATIONS


Alliance Legislative Report 97-54

Distributed via Email: May 29, 2012

HOUSE COMMITTEE MOVES PENSION BILL

The House Personnel and Pensions Committee today (Tuesday) approved a bill that would significantly change the State’s pension systems. House Speaker Michael Madigan presented House Amendment #3 to SB 1673 ; the amended bill was approved by the Committee and was sent to the House floor for consideration. The bill will shift the “normal costs” of the Teachers’ Retirement System (TRS) from the State of Illinois to local school districts and require active TRS participants and all current TRS annuitants to choose between receiving a compounded 3% Cost of Living Adjustment (COLA) or being able to participate in the TRS retiree health insurance program. Similar changes are made for the State Employees Retirement System and the State Universities Retirement System.

The cost shift would require school districts to contribute 1% of their TRS payroll starting in Fiscal Year 2014, then one additional percent per year in each of fiscal years 2015-2019. In Fiscal Years 2020 and beyond, ½ % per year would be added until entire the entire amount of normal costs are shifted from the State to local school districts. Once the reduction in retirement benefits begins to take place – no one knows exactly how long this will take – the “normal costs” are expected to settle in the range of 3% of a school district’s TRS payroll.

The Alliance testified in opposition to the bill in committee.

The bill could be called for a vote on the House floor at any time. The legislature is scheduled to adjourn for the spring on Thursday.

COLA for Active Employees

Each school district employee who is an active member of TRS would have to make an election, between Jan. 1 and May 31, 2013. The choice is: keep the 3% compounding COLA but the eventual pension calculation for the employee would be based on the salary at the time of the election – no new increases in salary between the election and retirement would be used in the calculation of the person’s TRS pension annuity; and forfeit all eligibility to participate in the TRS retiree health care program.

Or, the employee can choose to move to a non-compounding COLA calculated at 3% or ½ of the Consumer Price Index (CPI) – whichever is less. If the employee opts for this choice, salary increases will be included in that person’s pension calculation, the employee would be eligible to participate in the retiree health insurance program, and the Early Retirement Option (ERO) would be available. The COLA would not be implemented until the retiree reaches age 67 or five years after the person retires.

TRS Annuitants

Even those who have already retired from TRS and have been receiving a pension annuity would have to make the election. The annuitants would choose to either keep the compounding COLA and be removed from the health insurance program; or move to the non-compounding COLA and maintain the retiree health coverage.

A list of the provisions of the bill:

  • Either elect new COLA or freeze salary for pensionable purposes
  • Election between Jan. 1, 2013 and May 31, 2013
  • Election is irrevocable; if do not elect it is presumed the new COLA applies
  • May choose to move into Cash Balance Plan if elect new COLA
  • New COLA is 3% or ½ of CPI, whichever is less
  • COLA begins at age 67 or 5 years after retirement date
  • ERO only an option for employees who choose new COLA
  • Employer and employee would split cost of ERO
  • Employer could limit participation of ERO to 10% of eligible employees
  • New State Actuary certifies pension amount by Nov. 1 of each year
  • Pension boards certify pension amount to General Assembly by Jan. 15 of each year
  • State pension amortization over 30 years to reach 100% funding
  • Two school board members must be elected to TRS Board of Trustees

WHAT’S NEXT?

Even though there is now an official pension proposal as part of legislation on the House floor, the issue is still very fluid. Two additional amendments have been filed to the bill, one by House Republican Leader Tom Cross and another by House Speaker Madigan. The provisions could very well be amended. The Alliance will continue to issue updates on the proposal as warranted.

This legislative report is written and edited by the lobbyists of the Illinois Association of School Boards to provide information to the members of the organizations that comprise the Statewide School Management Alliance.

Bill Text/Status: Illinois General Assembly www.ilga.gov


Alliance Legislative Reports are Cosponsored by IASB and:
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