A writer must “know and have an ever-present consciousness that this world is a world of fools and rogues… tormented with envy, consumed with vanity; selfish, false, cruel, cursed with illusions… He should free himself of all doctrines, theories, etiquettes, politics…” –Ambrose Bierce (1842-1914?)
TRS: One Tier + Two Other Optional "Tears" = Disaster
Tier-One Pension System, a Defined-Benefit Plan
The TRS: Investments – 50%, Membership Contributions – 25%, State – 25% (These are approximations).
·TRS Diversified Investments:U.S. & international equities, bonds, fixed income, real estate…(Since 1982, an average return of 9.8%)
·Membership contributions: 9.4% of salary (teachers have contributed 100% since 1940; approximately $900 million contributed this year to the pension system);
·School District contributions: .58%
·State Contributions: Illinois has not fully funded the pension system since 1953.
This year the State contributed $2.2 billion; however, approximately 2/3 of that total was for debt service (past interest due).During the last fiscal year, TRS paid out $3.9 billion in benefits but collected $6.8 billion in revenue.
Our Total liabilities: approximately $84 billion; unfunded liabilities: approximately $40 billion
Tier-Two Pension System: Began January 2011
SB 1946 passed on March 24, 2010 in approximately 10 hours (There was no public policy for this legislature); it was signed into law on April 14, 2010.
--Minimum eligibility to draw a retirement benefit: age 67 with 10 years of service (age 67 will probably be reduced to 62 (pending HB 3075);
--Salary cap is at $106,800, which will be increased at a rate of less than 3% or ½ of the annual increase in the CPI (Consumer Price Index).It is not compounded;
--Survivor benefit increased to 66.7%;
Special note: teachers do not receive Social Security; the State of Illinois saves billions of dollars by not having to pay into Social Security.
WEP (Windfall Elimination Provision)
--Reduces any earned Social Security in other jobs because of the state pension benefit.
Current Legislative Proposals:
SB 105/ HB 149 did not get out of committee, though this legislation will most likely emerge in another bill (SB 512):
--Keep the current TRS benefit package, either Tier I or Tier II, but in return the annual payroll contribution by teachers in both tiers would increase, originally proposed at 28% of salary (probably will be 12-14% according to Representative and sponsor Tom Cross);
--Tier I teachers could elect to convert their benefit package to the Tier II structure: a teacher would not be eligible for full retirement benefits until age 67 (or 62?);
--It is estimated that Tier II benefits will be 30 percent less than benefits for a Tier I teacher if final average salary and creditable service time for both are equal. New Teachers in the Tier II system will not make as much as Social Security recipients.Their income will be worth 4 – 4.5% and not the 9.4% that they will have contributed during their career (IEA).Teachers should consider this fact before choosing a Tier II option, if it comes to pass.
--Teachers would pay 6% of their salaries under this plan. If school districts decide to participate in this option, they would match teacher contributions;
--A Defined-Contribution Plan is not a guaranteed pension plan;
--Benefits are based on investment earnings; there are no survivor or disability benefits; investment fees are paid by member.
Another Sample Letter:
Please vote against any pension reform that will ultimately “diminish or impair” our constitutional rights and benefits. The proposed changes for current teachers will weaken our pension system.As you are aware, teachers have consistently paid 9.4% of their salary into the pension system, even though the State of Illinois has often failed to fully fund the State’s pensions and honor its financial obligations for the last 58 years.Our pension is all that we have for retirement. We do not receive Social Security like you do or have a private-sector pension.Thank you,