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Illinois Pension Reform Efforts Intensify

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February 2013

Governor Quinn provided his annual State of the State address on February 6 and demanded comprehensive pension reform measures to find a solution to the State’s $97 billion unfunded pension liability. We expect that lawmakers in Springfield will continue to push forward with different pension reform bills until a favored vehicle is determined. One bill, Senate Bill 1 (SB1), provides a framework that involves two potential alternatives for several state plans (including plans covering public university employees, teachers outside the City of Chicago, members of the General Assembly, and State employees). Part A of SB1 provides various benefit changes, including cuts to annual cost-of-living adjustments. If Part A of the bill is found unconstitutional, then Part B would automatically become law. Part B provides employees and retirees with a choice – they may either elect modified cost-of-living adjustments and the availability of retiree health care benefits, or they may keep their current cost-of-living adjustment amounts but future compensation increases will not count as pensionable salary. Another bill filed on February 26, House Bill 3411, provides various types of adjustments to retirement benefits, including adjustments to cost-of-living increases, employee contribution increases, caps on pensionable salary, and extensions of the retirement age. Finally, House Bill 2375 proposes a permanent extension of the temporary individual income tax increase, increases employee pension contributions, increases the retirement age, and shifts funding obligations for teachers’ pension funds to local school districts.   

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