Bill cutting university pensions defeated—for now

UPDATE: Senate Bill 11 failed on Feb. 8 with 18 yes votes, 29 no votes, 10 present votes and 2 senators not voting. Especially with Gov. Rauner pushing aggressively to cut pensions, we have to be vigilant for this or similar bills to pop up again at any time.

ORIGINAL POST:

New legislation introduced in the Illinois General Assembly could have a profound impact on the retirement security of university employees.

Democratic and Republican leaders in the state senate have come together to sponsor SB 11, legislation that would reduce the pensions of all state university employees in our state—despite the fact that the Illinois Constitution’s Pension Protection Clause prohibits diminishing retirement benefits.

Proponents claim this legislation is constitutional because it is based on the concept of “consideration”—the exchange of one thing of value for another. But in the opinion of union attorneys, this legislation does not qualify as “consideration.” Rather, it would result in a substantial diminishment of the pension a university employee would receive in retirement.

This proposal would require State University Retirement System (SURS) participants (except those hired after January 1, 2011) to select between two options:

• Option 1: Future pay increases do not count in calculating the member’s initial pension amount upon retirement; in exchange the member would receive the current 3% annual annuity adjustment, compounded; or

• Option 2: Future pay increases count in calculating the member’s initial pension amount upon retirement; in exchange the member would receive an annual annuity adjustment that is less than the current compounded adjustment.

Regardless of the option employees choose, they would receive a smaller pension benefit during the course of their retirement compared to what they would receive under the current Pension Code.

Put simply, if university employees want to ensure that their pension would increase over time to keep up with the cost of living, they would have to agree that their salary for purposes of calculating the pension benefit would never be any greater than it is today. Obviously, if someone is only a few years from retirement, this would not be a major problem. But if you are 10-15 years from retirement, the loss could be dramatic.