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.
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
Commentary:
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: http://teacherpoetmusicianglenbrown.blogspot.com/2011/09/defined-benefit-plan-v-defined.html
Information Regarding the Effects of a Defined-Contribution
Plan on the Teachers’ Defined-Benefit Plan: http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/effects-of-hb-5754-and-hb-1325-on.html
Information Regarding a Hybrid Pension Plan vs. a Defined-Benefit
Plan: http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/hybrid-pension-plan-as-alternative-to.html
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