The Way of Liars and Thieves: “Diminish and Impair” the Retirees’ Cost-of-Living Adjustment

“A 10-member bipartisan panel of state lawmakers has been concentrating on changes to the current 3 percent compounded cost-of-living adjustments for retirees, including limiting the adjustments to half the inflation rate” –Reuters

Half-CPI COLA: This cut replaces the 3% compounded cost-of-living adjustment (COLA) with a COLA that only keeps pace with half the inflation rate. This “Half-CPI” COLA means pensions will always lose value to inflation by design, and senior citizens won’t be able to keep up with rising living expenses. The Half-CPI COLA cuts pensions essentially as deeply as SB 1.

COLA holidays – up to five years: On top of the Half-CPI COLA cut, the plan mandates COLA holidays of up to five years – again, similar to SB 1. These long COLA holidays further erode pension values and harm retirement security.

“The purpose of a COLA is to offset, or reduce, the effects of inflation on retirement income… Most state and local governments provide a COLA for the purpose of offsetting or reducing the effects of inflation, which erodes the value of retirement income... This depreciation can affect the sufficiency of retirement benefits, particularly for those who have no means to supplement their income due to disability or advanced age” (National Association of State Retirement Administrators).

“The post-retirement increase, commonly known as a COLA, became effective July 1, 1969. The COLA was a set 1.5 percent of the member’s original annuity. At the same time, active member contributions were increased 0.5 percent to help defray the cost of the COLA.  The following improvements were made to the program: January 1, 1972 – 2 percent COLA (with no increase in contributions); January 1, 1978 – 3 percent COLA (with no increase in contributions); and January 1, 1990 – post retirement increase, compounded (with no increase in contributions)” (Rich Frankenfeld, TRS Director of Outreach).

According to Frankenfeld, “the attorneys of the IEA, IFT and school management have said for years that pension benefits for current and retired teachers cannot be changed. For them, this includes the 3% post-retirement increase (what most members call the COLA). The chief legal counsel [Eric Madiar] to the Illinois Senate Democrats issued a comprehensive analysis of these issues, basically supporting their position.”

To reduce the teachers’ COLA will undeniably diminish the teachers’ constitutionally-guaranteed, benefits. Creating and passing any bill that diminishes any constitutionally-guaranteed benefits, such as the compounded COLA that is already in place for retired and current teachers (because they have acquired a “vested” right when they enter the pension system and are guaranteed this benefit by Illinois statute) is illegal and unethical, especially considering legislators' egregious negligence: the state’s unfunded liability increased $90 billion since 1983.  Forty-six percent of that figure ($41.4 billion) is the result of collusion. To respect contractual promises as legitimate rights and moral concerns is at stake for EVERY citizen in Illinois because Cheating ANY citizen’s guaranteed rights and benefits violates moral, ethical and legal principles explicitly avowed in the State and U.S. Constitutions.


Illinois Pension Code: 40 ILCS 5/16-133.1) (from Ch. 108 1/2, par. 16-133.1) Sec. 16-133. (Automatic annual increase in annuity):

(a) Each member with creditable service and retiring on or after August 26, 1969 is entitled to the automatic annual increases in annuity provided under this Section while receiving a retirement annuity or disability retirement annuity from the system. An annuitant shall first be entitled to an initial increase under this Section on the January 1 next following the first anniversary of retirement, or January 1 of the year next following attainment of age 61, whichever is later. At such time, the system shall pay an initial increase determined as follows:

(1) 1.5% of the originally granted retirement annuity or disability retirement annuity multiplied by the number of years elapsed, if any, from the date of retirement until January 1, 1972, plus

(2) 2% of the originally granted annuity multiplied by the number of years elapsed, if any, from the date of retirement or January 1, 1972, whichever is later, until January 1, 1978, plus

(3) 3% of the originally granted annuity multiplied by the number of years elapsed from the date of retirement or January 1, 1978, whichever is later, until the effective date of the initial increase. However, the initial annual increase calculated under this Section for the recipient of a disability retirement annuity granted under Section 16-149.2 shall be reduced by an amount equal to the total of all increases in that annuity received under Section 16-149.5 (but not exceeding 100% of the amount of the initial increase otherwise provided under this Section).

Following the initial increase, automatic annual increases in annuity shall be payable on each January 1 thereafter during the lifetime of the annuitant, determined as a percentage of the originally-granted retirement annuity or disability retirement annuity for increases granted prior to January 1, 1990, and calculated as a percentage of the total amount of annuity, including previous increases under this Section, for increases granted on or after January 1, 1990, as follows: 1.5% for periods prior to January 1, 1972, 2% for periods after December31, 1971 and prior to January 1, 1978, and 3% for periods after December 31, 1977.

(b) The automatic annual increases in annuity provided under this Section shall not be applicable unless a member has made contributions toward such increases for a period equivalent to one full year of creditable service. If a member contributes for service performed after August 26, 1969 but the member becomes an annuitant before such contributions amount to one full year's contributions based on the salary at the date of retirement, he or she may pay the necessary balance of the contributions to the system and be eligible for the automatic annual increases in annuity provided under this Section.

c) Each member shall make contributions toward the cost of the automatic annual increases in annuity as provided under Section 16-152.

(d) An annuitant receiving a retirement annuity or disability retirement annuity on July 1, 1969, who subsequently reenters service as a teacher is eligible for the automatic annual increases in annuity provided under this Section if he or she renders at least one year of creditable service following the latest re-entry.

(e) In addition to the automatic annual increases in annuity provided under this Section, an annuitant who meets the service requirements of this Section and whose retirement annuity or disability retirement annuity began on or before January 1, 1971 shall receive, on January 1, 1981, an increase in the annuity then being paid of one dollar per month for each year of creditable service. On January 1, 1982, an annuitant whose retirement annuity or disability retirement annuity began on or before January 1, 1977 shall receive an increase in the annuity then being paid of one dollar per month for each year of creditable service. On January 1, 1987, any annuitant whose retirement annuity began on or before January 1, 1977, shall receive an increase in the monthly retirement annuity equal to 8¢ per year of creditable service times the number of years that have elapsed since the annuity began. 

for Illinois Pension Code: Illinois Pension Code