Illinois Tier 2 teacher pension time-bomb remains ticking, Senator Martwick.

State Senator Robert Martwick chairs the Senate pension committee.

The Illinois General Assembly will finish business when the House returns to vote on Senate actions taken after House members went home a few days ago.

No action was taken in this session on pension debt or the Tier 2 time-bomb.

Tier 2 is a pension measure that was passed in 2010. It is unfair and likely illegal.

The Tier 2 pension structure will soon fall out of compliance with federal regulations, something that could cost taxpayers billions of dollars in the future.

Under that plan, starting in 2011, new employees pay 9 percent of their salary into the pension system, the same as Tier 1 employees. Of that amount, however, only 7 percent is actually used to fund those employees’ pensions. The other 2 percent goes to pay down the unfunded liability of the Tier 1 employees.

Tier 2 employees also get smaller benefits. They don’t vest in the system until they’ve worked for 10 years, instead of five. Their annual cost-of-living raises after retirement are capped at either half the previous year’s rate of inflation or 3 percent, whichever is less.

With more than 160,000 active members, including more than 41,000 in the Tier 2 system, TRS is the largest of the state’s five pension systems and the one that accounts for more than half of the state’s estimated $140 billion in unfunded pension obligations.

The concern, however, is that Illinois teachers do not participate in Social Security. Federal law allows state and municipal governments to do that, as long as the benefits they pay out are at least equal to what Social Security pays, a law known as the “safe harbor” provision.

Because of the small cost-of-living increases built into Tier 2, those pensions soon are likely to fail to meet the safe harbor test.

That means once the Tier 2 teachers are retiring, each and every school district will have to perform a test on that member to see if they get a benefit at least as good as Social Security. If they don’t, the school districts will have to enroll in Social Security. They will owe all the back payments to Social Security.

School districts would have to make as much as 10 years’ worth of back payments.

The coming teacher pension crisis of Tier 2 has been known for a decade. Chair of the House pension committee for most of that time has been Robert Martwick. Now Martwick is a state senator and head of the senate’s pension committee.

Nothing has been done.

Tick tick tick.

One thought on “Illinois Tier 2 teacher pension time-bomb remains ticking, Senator Martwick.

  1. Have you ever noticed that aside from earthquakes and stuff, the worst crises are created by politicians?
    Anarchism seems better and better because of them.
    I wish that sounded funny.

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