Sunday, September 30, 2012

While You Were Sleeping HB 6204 was filed by Representative Mike Fortner

Synopsis As Introduced
Amends the Budget Stabilization Act. Makes changes concerning transfers from the General Revenue Fund to the Pension Stabilization Fund. Amends the General Assembly, State Employees, State Universities, Downstate Teachers, and Judges Articles of the Illinois Pension Code. Requires each State-funded retirement system that does not already have a self-managed plan to establish and maintain one. Authorizes participants to irrevocably elect to participate in such a plan. Provides that, for the purpose of calculating traditional benefit package benefits and contributions, the annual salary of a participant may not, except under certain circumstances, exceed certain limits. Requires participation in the self-managed plan to the extent that a participant's salary exceeds the salary cap. Revises the schedule of contributions for participants. Shifts a portion of the employer contributions for downstate teachers and university employees from the State to the actual employer. Authorizes the boards of trustees of each of these retirement systems to triennially recalculate the normal cost of benefit plans that they offer. Defines "traditional benefit package" and "self-managed plan". Changes the formula for calculating the minimum required State contribution to these systems. Provides that the State is contractually obligated to pay the annual required State contribution to these retirement systems. Contains provisions requiring these retirement systems to bring a mandamus action to compel payment of the required State contribution. Amends the State Mandates Act to require implementation without reimbursement. Effective immediately.
July 19, 2012

The assumptions about defined-contribution plans (or self-managed plans) include the view that they were considered supplemental to an employee’s defined-benefit plan (or Social Security). They were not meant to replace a defined-benefit plan because of their lack of guaranteed, lifetime income for the retiree and the presumption that a retiree could make sound professional, investments choices that would sustain his or her longevity and inflationary risks. [Since their inception,] the private sector’s self-managed plans “have not produced encouraging outcomes... Reliance on a 401(k)-type defined-contribution plan as the sole employer pension will leave public sector workers with insufficient resources to ensure a secure retirement… [Furthermore,] a shift from defined-benefit to defined-contribution [or self-managed] plans is not a panacea for the sponsor. It will not eliminate the current unfunded liabilities associated with defined-benefit plans; it will not reduce costs, and it will not lead to higher returns” (Alicia H. Munnell, Director of the Center for Retirement Research at Boston College).

More Commentaries on Self-Managed Plans:
Reasons Why a Defined-Benefit Pension Plan Is Preferable to a Defined-Contribution Savings (or Self-Managed) Plan:
Information Regarding the Effects of a Defined-Contribution Plan on the Teachers’ Defined-Benefit Plan:
Information Regarding a Hybrid Pension Plan vs. a Defined-Benefit Plan:

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