Saturday, March 23, 2013

A Review of Pension Bills and Other Activity Last Week in Springfield

The following information is from Alliance Legislative Report

Several pension reform bills were acted upon last week. This week, more movement occurred as the momentum for final passage of a pension reform measure continues to build. The House of Representatives approved HB 1165 (Madigan, D-Chicago) Thursday which would limit the Cost of Living Adjustment (COLA) for the Teachers’ Retirement System (TRS). The COLA would be frozen until five years after the employee’s retirement or age 67. The COLA would be a flat 3% of the first $25,000 of the pension or $750 per year. The House has already approved other bills that would cap the pensionable salary amount and increase the retirement age on a graduated scale. The Senate has not acted on any of the bills the House has sent over.

The Senate this week approved an amended SB 1 (Cullerton, D-Chicago). The bill now only affects active Tier I members of TRS and would not force any changes to current annuitants of TRS. The bill would:

·         Require active TRS members to choose between keeping the compounding 3% COLA, or accepting a lesser COLA and remain eligible for health insurance upon retirement. This “election” would have to be made between January 1, 2014 and May 31, 2014. The changes would take effect on June 1, 2014

·         Exempt from the election TRS members who have signed an agreement with their school district on or before January 1, 2013 making an irrevocable decision to retire in the future

·          Freeze the salary, for pensionable purposes, of active TRS members who do not choose the lesser COLA

·         Offer TRS members who choose the lesser COLA participation in a new “cash balance” retirement plan operated by TRS that would supplement their Tier I annuity

·         Offer the Early Retirement Option (ERO) to those TRS members who choose the lesser COLA

·         Give TRS the right to sue if the State does not make its pension contributions on time. The bill, as currently drafted, does not contain provisions to shift pension costs onto local school districts.

Latest Action Synopsis

SB 1 Passed the Senate 3/20: only effects current TRS participants and no other systems or TRS retirees, includes choice system between health care and Cost of Living Adjustments (COLA).

SB 35 Failed in Senate 3/20: changes retirement age and only applies COLA to first $25k of pensionable salary (Nekritz/Biss bill).

SB 2404 Held in Senate committee 3/21: increases employee pension contributions 2% phased in over a 2-year period; guarantees funding from State of Illinois (A union proposal).

HB 1154 Passed the House 3/14: caps pensionable salary at Social Security Index ($113,700 in 2013).

HB 1165 Passed the House 3/21: freezes COLA until five years after retirement or age 67. After reaching a pensionable salary, a flat annual increase of $750 would be granted to annuitants.

HB 1166 Passed the House 3/14: raises retirement age for pension system participants under the age of 45.

HB 3411 Passed House committee 3/14: limits COLA to the first $25k; creates a Tier III retirement system with a hybrid plan similar to 401(k); shifts cost of hybrid plan to local school district.
 

The following pension-related bills also were discussed last week:

HB 1277 (Senger, R-Naperville), for the pension systems, changes the actuarial cost method from “projected unit credit” to “entry age normal.” The bill was approved by the House Personnel and Pensions Committee and was sent to the House floor for further consideration.

HB 1296 (Mitchell, C., D-Chicago) requires the State’s pension funds to divest from firearm manufacturing companies. The bill was approved by the House Personnel and Pensions Committee and was sent to the House floor for further consideration.

HB 2900 (Nekritz, D-Northbrook) provides that after July 1, 2013, TRS members are ineligible to participate in the Early Retirement Option (ERO), unless prior to July 1, the employee has notified their employer of their intent to retire under that program before that date. It otherwise terminates ERO after July 1, 2013. The bill was approved by the House Personnel and Pensions Committee and was sent to the House floor for further consideration.

HB 3372 (Senger), for the Illinois Municipal Retirement Fund (IMRF), the State University Retirement System (SURS), and TRS, prohibits “compensation” to include payments or reimbursements for travel vouchers, and service credit no longer available for unused sick leave. The bill was approved by the House Personnel and Pensions Committee and was sent to the House floor.

 

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