Illinois teacher contribution to TRS reduced to %9 from %9.4 as Early Retirement Option expires.

From Illinois Teacher Retirement System.

The TRS Early Retirement Option expired automatically on July 1, 2016 because the General Assembly did not extend the law. The last day a member could retire using the ERO was June 30, 2016.

Contribution reduced to 9.0 percent for all members.

With the expiration of the ERO, the member retirement contribution for both Tier I and Tier II members was reduced from 9.4 percent to 9.0 percent for all creditable earnings earned on or after July 1, 2016. Active TRS members have contributed 0.4 percent of their creditable earnings to help fund the ERO since 2005.

Please review all procedures necessary to eliminate the 0.4 percent ERO contribution from your district’s payroll system on all salaries earned beginning July 1, 2016. When an employer pays any portion of a member’s retirement contribution, in addition to salary, the employer-paid retirement contributions are reportable as creditable earnings for the member. When the employer agrees to pay the entire 9 percent TRS contribution, creditable earnings are computed by multiplying the salary paid to the member by 1.098901 or by dividing the member’s gross salary by 0.910.

For additional information regarding employer-paid retirement contribution, refer to pages 15 through 17 in the TRS Employer Guide.

ERO Sunset Refunds to members.

Most active and inactive members will be eligible to receive a refund of their 0.4 percent ERO contributions accumulated between 2005 and 2016 because ERO was not extended. This refund is called an ERO Sunset Refund. TRS will not be able to estimate each member’s potential ERO Sunset Refund until fall of 2016 after all employer Annual Reports are processed. TRS will notify eligible members about their ERO Sunset Refunds in December 2016. Retired TRS members who did not participate in the ERO program had their accumulated ERO contributions refunded at retirement. All members who retired before the ERO law expired will be able to apply for an ERO Sunset Refund at retirement, unless they are participating in the ERO program.

Retirement eligibility without ERO.

Employers may receive questions about what age a member can retire now that ERO has expired. The earliest a member can receive a retirement benefit is at age 55 with 20 years of service. The maximum benefit is 75 percent of the average salary with at least 34 years of service credit if the member is eligible for a nondiscounted annuity. If the member retires between the ages of 55 and 60 with at least 20 but fewer than 35 years of service, his/her retirement annuity is reduced by 6 percent for every year that he/she is under age 60.

TRS was rightly quick to calm fears. But this still stinks.


When State Comptroller Leslie Munger announced earlier this week that the state could not afford to pay it’s share of public employee pension contributions, the folks at TRS were rightly quick to point out to members that this would not impact us receiving our monthly pension check.

Since the beginning of Governor Rauner’s holding hostage the state budget to advance his union-busting turnaround agenda, this has always been a fear.

Yet, simply saying that we get our checks doesn’t mean that we, along with thousands of other citizens of the state, are not being hurt by the hi-jacking of state government by the Governor’s political agenda.

Munger says state pensions won’t receive a state payment in November. There will probably be no state payment in December. She has previously said that it is possible that there may not be a payment for six months.

My friend John Dillon asked TRA Communications Director Dave Urbanek if the state has to pay an interest penalty for missed payments.

Mr. Dillon:

There will be no interest rate applied to the delayed state payment for November. State government appropriations to all agencies that are part of that government do not fall under the Illinois Late Payment Act.


Dave Urbanek

And then there is the loss that nobody I know can calculate for me. How much are we losing by not having the money owed to us to invest?

The missing payment is nearly $600 million a month.

If the worst case scenario comes to pass and we are not paid until June, we are talking over $6 billion. $3 billion*

Uninvested. Money lost that we will never get back.

Amanda Kass of the Center for Tax and Budget Accountability explained it to me this way:

“Delay in payments undoubtedly has an impact on investment returns–think of a personal savings account as an example, interest earned from $100 being in the account for 12 months is more than $100 being in the account for only 9 months. Quantifying the impact of the delayed payments in terms of investments (and in-turn future state payments) is quite difficult.”

So, how much?

Too much.

*When I first posted I made a typo when I wrote $6 billion.

The inbox. Ralph Martire in Crain’s. A pension fix.

By: Ralph Martire
January 16, 2013

There was much wailing and gnashing of teeth when the recent lame-duck session in Springfield ended.

Why? No action was taken to address the $95 billion in debt owed to the state’s five pension systems.

This leaves the systems with just 40 percent of the funding they should have currently, which is well below the 80 percent generally deemed healthy for public systems. Good government groups and editorial boards alikelamented the Legislature’s failure to pass yet another proposal to reduce that ginormous obligation — this time by cutting almost $30 billion in benefits earned by current workers and retirees.

But rather than being dismayed, folks should be relieved. Here’s why.

A problem really can’t be solved unless the proposed solution addresses its true cause. And the proposal that failed to pass during the lame-duck session — like every other proposal introduced to date on this subject — focused its solution on benefit cuts and thereby failed to deal with this particular problem’s true cause.

See, three factors have contributed to the creation of this unfunded liability. The first two are items inherent to the pension systems themselves, like benefit levels, salary increases and actuarial assumptions; and investment losses suffered during the Great Recession. But if those were the only factors creating the unfunded liability, the systems would be around 70 percent funded today, meaning no crisis.

The vast majority of the unfunded liability is made up of the third contributing factor: debt. Indeed, for more than 40 years. the state used the pension systems like a credit card, borrowing against what it owed them to cover the cost of providing current services, which effectively allowed constituents to consume public services without having to pay the full cost thereof in taxes.

This irresponsible fiscal practice became such a crutch that it was codified into law in 1994 (P.A. 88-0593). That act implemented such aggressive borrowing against pension contributions to fund services that it grew the unfunded liability by more than 350 percent from 1995 to 2010 — by design. Worse, the repayment schedule it created was so back-loaded that it resembles a ski slope, with payments jumping at annual rates no fiscal system could accommodate. Want proof? This year the total pension payment under the ramp is $5.1 billion — more than $3.5 billion of which is debt service. By 2045, that annual payment is scheduled to exceed $17 billion, with all growth being debt service.

It is this unattainable, unaffordable repayment schedule that is straining the state’s fiscal system — not pension benefits and not losses from the Great Recession. And no matter how much benefits are cut, that debt service will grow at unaffordable rates. Which means decision-makers can’t solve this problem without re-amortizing the debt.

Given that the current repayment schedule is a complete legal fiction — a creature of statute that doesn’t have any actuarial basis — making this change is relatively easy. Simply re-amortizing $85 billion of the unfunded liability into flat, annual debt payments of around $6.9 billion each through 2057 does the trick. After inflation, this new, flat, annual payment structure creates a financial obligation for the state that decreases in real terms over time, in place of the dramatically increasing structure under current law. Moreover, because some principal would be front- rather than back-loaded, this re-amortization would cost taxpayers $35 billion less than current law.

One last thing — it actually solves the problem by dealing with its cause.



Tuesday is Virtual Lobby Day. The Illinois General Assembly is back. The Civic Committee is back. So are we.

TRS Trustee Bob Lyons’ report, published here yesterday, pretty much lays out what is going to happen this year.

Another assault on teacher pensions in Illinois.

The IEA leadership has decided not to have teachers go to Springfield this May for Lobby Day. It’s not a decision is think is smart. But it’s not the first time.

So it is Pension Call Tuesday once again.

Here is the IEA direct email site for contacting your legislators.

Here is the IEA direct email site for contacting the state’s political leadership.

Start today and make a contact every Tuesday.

“Don’t mess with our TRS.” 

Boss Madigan eyeing public employee pensions. A disaster.

Do I really need to go into why there is a problem with Illinois public employee pensions again?

Is it something the employees did? Is the average teacher pension of roughly $40,000 a year too greedy? Do teachers also get to draw on their social security and their pension like those in the private sector? Did we fail to meet our payment obligations as TRS members?

No, no, no and no.

Did the state’s leaders fail to meet their obligations over the past decades ending up with a debt to the system now in excess of $85 billion?

Oh, yes.

There are now several bills in the Illinois legislature all aimed at punishing state employees, including teachers, with radical changes to the our retirement systems.

I’m constantly stopped by colleagues who are literally terrified of what will happen to them in retirement. What will happen to the retirement dollars they were promised when they chose a teaching career over something that would have paid them more in the private sector.

Illinois Democratic Speaker of the House Mike Madigan hinted at what the answer to that question was yesterday.

“I think we will take some action on the benefit level for state workers midstream,” Madigan said during an impromptu meeting with reporters on the House floor after his legislative chamber adjourned.

The Illinois Education Association’s Capitol Report describes the legislation that Madigan is looking to enact.

Two pieces of legislation have been introduced.

Identical pieces of legislation, HB 149, sponsored by Rep. Tom Cross (R-Oswego) and SB 105, sponsored by Sen. Chris Lauzen (R-Aurora), allow current TRS and SURS members to make an irrevocable election to do one of the following:

To remain in the current pension plan an active TRS member must pay a minimum of 19.5% of their salary.  Currently, active TRS members pay 9.4% of their salary and the total cost of the current TRS benefit equals an estimated 18.4% of salary.  The legislation also requires an additional percentage of salary that is currently undeterminable.

To choose participation in the 2-tier pension benefit plan that passed last year (retirement at age 67, reduced COLA, reduced final average salary). The member would be required to pay 6% of salary (currently, 9.4% of salary in TRS). TRS has determined that the actual cost of the 2-tier benefit is an estimated 5-6% of salary. In essence, there is no employer contribution required and the members fund their own pension.

The option to participate in a defined contribution plan (401-K style plan).  The member would pay 6% of salary and so would the state.  Members would be required to direct their own investments.

For current teachers hired before the two tier system was enacted January 1st, these bills would be a disaster to themselves and their families.

Emails must be sent.

Teacher pensions under attack. Torturer Burge get his, no problem.

As of January 1st, anyone becoming a teacher in Illinois will have a different pension plan than previously hired teachers thanks to Governor Quinn and the state legislature. It will take a decade longer to max out and the benefits will be sharply reduced.

But there are those, like leaders of the Chicago Civic Committee, for whom this is not enough. They want to move public employee pensions from a defined benefit system, making it look more like a private annuity.

Then there is GOP Illinois Senator Mark Kirk, who wants the state to declare bankruptcy so that it can renege on its pension obligations altogether.

But the CPD Commander John Burge, convicted of perjury and torture, gets to keep his pension. No problem.

Despite his federal conviction, former Chicago Police Cmdr. Jon Burge will be able to keep his pension, according to a vote by a police pension board Thursday. 

Board member Mike Shields said the board voted 4 to 4 on a motion to terminate Burge’s pension.

A tie vote means the motion failed and Burge will continue receiving the $3,039 monthly pension.

What did Obama say?

“Become a teacher. Your country needs you.

Is a new IEA sell-out in the works? What stand will the leadership take on pension taxation?

Rumors are circulating in the IEA that the state leadership is willing to support a bill that would tax teacher retiree pensions.

From those I have talked to, this is another Swanson/Soglin “at least we’re sitting at the table” strategy, justified by the argument that at least we would be keeping a defined benefit plan.

But if the rumors are true, this will be a very hard sell to the membership which is seeing large numbers of teachers entering the TRS system. It would amount to a huge reduction in their retirement benefits.

I’ll try and find out more.

And if you hear something, let me know.

Has Illinois committed securities fraud with teacher pensions?

The Security and Exchange Commission has accused the state of New Jersey of committing securities fraud in the way it funds state pensions, including teacher pensions.

Today’s NY Times reports:

The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund.

But it may not be the last. The Times reports that the SEC is now looking at the way Illinois funds (or doesn’t fund) its pension system. The report suggests Illinois may face the same fraud charges as New Jersey.

NY and Illinois are being accused of running a pension ponzi scheme.

The S.E.C. said its action was meant to dissuade other governments and their advisers from hiding bad fiscal news in a fog of pension numbers. Actuaries, for instance, have been raising questions about the framework Illinois has laid out for bolstering its pension funds. In New York, California and other places, financial advisers have told lawmakers that benefits could be sweetened at virtually no cost, only to be proved wrong once those benefits were adopted.

Of course, there are those who are on a crusade against fair and promised pension plans who will use this news to call for doing away with the pensions that teachers have dutifully contributed to, some for 35 years.

But the real news from the SEC is what we have said all along. While teachers have paid their share, states have played fast and loose with our pensions, promising to fund them, telling bond holders that they have funded them, and lying all the while.

IL General Assembly is still in session. Hide your children. Lock your doors. Call 1 800 719 3020.

It is 5:30 in Chicago. If you live in Illinois, stop what you are doing right now. Dinner can wait.

The General Assembly is still in session and at any moment can do some really stupid stuff.

For example:

Call 1-800-719-3020 and follow the prompts and tell them to vote no on the Emergency Budget Act, House Amendment 3 to Senate Bill 3660. The amendment would give Gov. Quinn the power to skip payment obligations to the state teacher and university retirement systems and stop any state appropriation—in effect forcing cuts to the School Fund, funding for state universities, or any state agency or program. No shit. This is serious. Call now.