The Tier-One Pension Benefit Plan
The current TRS Tier-One teacher would pay a pension contribution of 13.77 % of his or her annual salary. The current contribution rate is 9.4 %. His or her contributions would also increase every three years.
The current SURS Tier-One instructor would pay a pension contribution of 15.31 % of his or her annual salary. The current contribution rate is 8.0 %. His or her contributions would also increase every three years. (SURS offered a defined-contribution plan for its membership in 1998-99. Fifteen percent of its members chose a defined-contribution plan. Thus, the SURS defined-benefit plan lost a portion of its membership contributions, and the plan’s sustainability has abated).
A Tier-One teacher will have a choice every three years as to whether or not he or she will remain in his or her current plan.
As stated, the teacher’s pension contribution will increase from one election period to the next; thus, the cost for remaining in the Tier-One plan will become increasingly expensive.
Note a teacher cannot rejoin the Tier-One pension benefit plan once he or she has chosen to leave it.
The Tier-Two Pension Benefit Plan
Any teacher that fails to elect a pension benefit plan will default into the Tier-Two pension benefit plan.
Participation in the Tier-Two pension benefit plan that was signed into law in April of 2010 (SB 1946) includes a teacher’s retirement age of 67 for eligibility of full benefits (the highest in the country), a reduction of the Cost of Living Allowance, and a reduced final-average salary. The teacher pays a pension contribution of 6 % of his or her annual salary.
A current Tier-Two teacher can elect to participate in the Tier-Three pension benefit plan (a defined-contribution plan or 401-K).
The Tier-Three "Retirement Savings Plan"
Participation in the proposed Tier-Three pension benefit plan or a defined-contribution plan (401-K) shifts all the responsibilities and all of the risk from the State to the teacher; henceforth, the benefit is not guaranteed for life. The individual teacher assumes all funding, investment, inflationary and longevity risks.
The Tier-Three pension benefit plan does not have the pooled investments, professional asset management and shared administrative costs that a Tier-One defined-benefit plan provides. Moreover, there are no survivor or disability benefits and guarantees with the Tier-Three plan.
The teacher would pay a pension contribution of 6 % of his or her annual salary (and the State of Illinois would assumedly pay 6 %).
Sources: the 97th General Assembly Legislation (2011-2012), the Teachers Retirement System, the Illinois Education Association, the State University Retirement System, and the National Institute on Retirement Security
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Thursday, October 20, 2011
SB 512 (a Review of the May 2011 version written by the Civic Committee of the Commercial Club of Chicago/Illinois Is Broke)
Labels:
IL politics,
pensions
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