At about the 37 minute point of our talk on Hitting Left with the Klonsky Brothers with Alderman and Democratic candidate for governor of Illinois, Ameya Pawar, and following an extended conversation about public employee pensions, I asked, “If the legislature passed a bill changing the benefit structure of the pension system, diminishing benefits, would you sign it?”
“No, I wouldn’t,” Alderman Pawar said. “Because they keep playing the same game over and over again.”
I was prescient.
Only a few hours earlier, the legislature overrode a veto by Governor Rauner, of a budget agreement.
That was good.
But part of the budget agreement was a change to the pension system that few of us knew was in the agreement.
This is bad news.
Late yesterday I received this notice from the Illinois Teachers Retirement System:
In conjunction with this week’s passage of a state budget for fiscal year 2018, the Illinois General Assembly approved a new law that significantly changes the Illinois Pension Code by creating an optional “Tier III” benefit structure and changing the way state government funds TRS.
A Tier III?
Let me explain that in 2010, Speaker Madigan pushed through the legislature in 12 hours a Tier II to public pensions that meant that for those hired after January 1, 2011 workers would need to work longer, pay less into the system and receive 60% of the pension that Tier I employees receive.
The law gives current Tier II members and future Tier II members – all new teachers – the option of joining a new “Tier III” retirement plan.
The optional Tier III “hybrid” retirement plan has two parts – a small life-long “defined benefit” (DB) pension and a “defined contribution” (DC) plan similar to a 401(k).
The change does not impact current retirees or Tier I members.
How is it a diminishment?
Because a defined contribution system is a stock market gamble compared to our current defined benefit system, which like Social Security, guarantees a planned financial retirement.
For the time being it is a choice option for Tier II and the new Tier III employee.
But don’t miss the game plan. This is another slow chipping away at the defined benefit system and further undermines the financial stability of TRS by drawing member contributions out of the system.
By the way, none of the legislators I am in touch with notified us that this was in the bill.
Did they know? Did they read what they were voting on?
Could those of us who have been in the pension fight for years have mobilized folks to oppose including this Rauner agenda item while still supporting passage of the budget, a tax incease and an override if we knew about this?
I did read that the budget agreement included $1.5 billion in savings from pension reform and wondered where these “savings” were coming from.
Savings without added revenue means a cost to the retirement system. A cost to future retirees.
Now we know.
What else is in the budget bill that we don’t know about yet?