Read the legislative synopsis and find a link to the entire bill here.
Pension 101 -- Pension Coal In
our Holiday Stockings!
An E-Mail Newsletter for Retired and Active Teachers Concerned with the
Preservation of Our Pensions (Please forward)………
Representative Elaine Nekritz gave every
retired teacher and most definitely every active teacher -- pension
coal in our Holiday stockings!
Representative Nekritz working with Representative Daniel Biss -- came up with
House Bill 6258 supposedly "Pension Reform" -- unfortunately it is
"Non-Reform" masquerading as true pension reform. Because it was the
only pension bill in written public form ( Speaker Madigan's pension
bill and the Governor's "pension plan" are conceptual and not in bill
form yet) it did garner 20 house supporters (Co-Sponsors)! HB 6258 is
gaining ground, gaining steam, gaining momentum - among the "we must do
something, even if it is the wrong thing" crowd.
Below I lay out two straight forward synopsis of
HB6258. They are objective summaries. In the next Pension 101 I will
begin to outline why I think HB6258 is a "Pension Killer"!
Please write your (email, call, visit)
Please forward Pension 101 to every
teacher you know.
Please call your Regional IEA Office and
reserve a seat on the January 3rd and 4th for the "Rally for Our
Pensions" buses. Not sure where your IEA office is? Write haisman!
6258 from IEA Government Affairs :
The pension proposal introduced this week by a
number of rank-and-file legislators still needs to make its way through
the legislative process. The overview below explains the proposal and
how it would affect members of the Teachers' Retirement System (TRS)
and the State Universities Retirement System (SURS). The bill includes
teachers, state employees, higher education employees and members of
the legislature. IMRF was not included in this piece of legislation.
However, those that participate in IMRF must know that any benefit
reduction legislation that passes for the state pension systems will
certainly be applied to IMRF soon after it passes. The
constitutionality of many parts of this bill is in question.
HB 6258(Nekritz, D-Northbrook)
Adjustment (COLA) changes:
Changes would apply to
active and already retired members.
The COLA would be payable
only when a retiree has reached age 67 or after five years of
retirement, whichever comes first. This provision applies to current
retirees. Currently, members can receive their 3 percent compounded
COLA upon reaching age 61.
A new COLA equal to the
lesser of $750 or 3 percent of the annuity. The COLA for most members
in TRS and SURS would become an annual $750.
Current retirees would have
their annuities frozen to meet the criteria of the second dot point and
they would have their COLA reduced to the amount specified in dot point
The age for retirement
eligibility would change as follows:
Members older than 46 would
see no change.
Members between 40-45 would
have to work an additional year.
Members 35-39 would have to
work three additional years.
Members younger than 34
would have to work five more years.
age of a member on the day the legislation takes effect would be used
to determine how these new requirements would be applied.
Pension contribution increase: Members would pay 1 percent more of
their salary toward their pension the first year and 2 percent the
Pensionable salary cap: The legislation would cap pensionable salary to
the Social Security Wage Base ($113,700 for calendar year 2013) or the
member's salary on the day the legislation takes effect.
members in Tier Two:
There would be a Cash
Balance Plan implemented for future hires. Current Tier Two members
would have the option to participate in the cash balance plan.
cash balance plan applies interest to the retirement contributions by
and for members. The balance of the contributions grow at a variable
interest rate and a portion is annuitized when the member retires. The
retirement system is responsible for investing the contributions by and
for the member.
The proposal would shift the cost of downstate and
suburban teachers and higher education staff pensions from the state to
local schools, universities and community colleges. This proposal is
phased in over a number of years. However, many schools already face
severe budget cuts which limit educational opportunities for students.
This cost-shift would drain millions of dollars from these downstate
and suburban educational institutions.
The proposal creates a new
revenue to fund the pension systems by using money freed up from bond
payments to pay down the pension debt.
Pension funding would be
considered a constitutionally-protected benefit under this proposal.
HOUSE BILL 6258
TRS Summary -- DOT POINTS
December 5, 2012
· A new comprehensive pension reform
proposal, House Bill 6258, was introduced in the GeneralAssembly on
December 5 by Rep. Elaine Nektitz, D-Northbrook and Rep. Daniel Biss,
D-Evanston that seeks to stabilize TRS finances and eliminate the
System’s unfunded liability in 30 years.
- TRS will not take a position on House Bill
6258. It is the legislature’s job to dictate the lawsand rules that
govern TRS and other public pension systems. The job of TRS is
toadminister those laws and work to secure the System’s finances so
that the promises made to generations of teachers by the General
Assembly can be kept.
- Right now, HB6258 just the latest in a
catalogue of proposals. It has a long way to go before it becomes law.
It has not been debated in either chamber of the legislature.
- This bill does not eliminate or supersede the
legislation that is pending in the General Assemblythat would force TRS
members to make a choice between the current cost of living
adjustmentand no state health insurance in retirement; or a reduced
COLA and continued state health insurance in retirement. This is
another option for legislators to consider.
- If this new proposal is approved by legislators and
signed into law by the governor, it will face acourt challenge. The
main argument will be that the bill changes the pension benefits of
retired TRS members and therefore violates the pension protection
clause of the state constitution. That clause prevents existing pension
benefits from being “diminished or impaired.”
- For all members, in general the bill would reduce
the annual cost of living adjustment; raise the retirement age for all
members under age 46; increase active member contributions by
3percentage points over time; cap the amount of salary that can be used
to determine a final average salary; create a new law that prevents the
state from skipping its annual pension contribution; and shifts the
annual cost of TRS pensions from the state to local school districts.
Specifics for TRS members:
>> For all
active and retired Tier I members (service before January 1, 2011)
o The annual 3 percent COLA would apply only to the
first $25,000 of a pension. Currently, the average TRS pension is
$48,216. Under current law, with the COLA that pension grows to $49,662
in the second year and $51,152 in the third year. In this proposal,
with a capped COLA, the same pension would grow to $48,966 in the
second year and $49,716 in the third year.
o Members would not receive a COLA until age 67 or
five years after they retire, whichever comes first. This would apply
to all retired members already receiving a COLA under the old rules.
These members could see their COLA suspended for a period of time.
o The retirement age would be set on a sliding scale
based on the member’s age and the time the law takes effect:
46 and older: Retire at 55
with 20 years of service and receive a reduced benefit, or at 60 and
receive a full benefit
40 to 45 years old: Retire at 56 for
a reduced benefit and 61 for full benefits.
35 to 39 years old: Retire at 58 for
a reduced benefit and 63 for full benefits.
34 and younger: Retire at 60 for a
reduced benefit and 65 for full benefits.§
o The salary used to determine an active member’s
final average salary would be capped atthe maximum Social Security wage
base ($113,700 in 2013) or, for a union employee, at the member’s
salary at the time the law takes effect.
o Active member contributions would increase from
9.4 percent to 10.4 percent in 2014 and increase to 12.4 percent in
>> For all Tier II members
(service after January 1, 2011)
o Members would have the option of staying with the
existing Tier II benefit structure or switching to a “cash balance”
plan, which is a hybrid between a defined benefit plan and a defined
Here’s how a cash balance plan works: TRS members
and school districts would continue to pay an annual contribution and
TRS would annually credit investment earnings of between 4 percent and
10 percent to each member.
While the contributions and investment earnings of
all “cash balance members” would be co-mingled for investment purposes,
each “cash balance” member would have an individual notional account on
file with TRS that would be comprised of their individual
contributions, school district contributions and investment income.
Upon retirement, TRS would calculate a guaranteed
life-time annuity based solely on the money credited to each member’s
account and adjusted for estimated future investment earnings and the
member’s anticipated lifespan in retirement. The annuity continues even
after money in the member’s account is exhausted.
o All new TRS members that begin service after the
law takes effect will automatically been rolled in the cash balance
For all school districts:·
o School districts would be responsible, beginning
in 2014, for paying an increased share of the annual costs of TRS
pensions and the state would pay less toward these costs.
Eventually, school districts would be responsible
for paying the entire annual cost of benefits being earned every year.
In FY 2013, the annual cost of TRS pensions is approximately $900
o Starting in 2014, the share of the annual cost
paid by local school districts would increase by 0.5 percent each year
until the total annual pension cost is paid by the districts.
For state· government:
o If the state does not pay its annual contribution
to TRS within a set period of time, TRScould go to court to force the
state to pay the contribution in the same way that the Illinois
Municipal Retirement Fund can force local governments to pay their
o The law is designed to make TRS 100 percent funded
in 30 years.
o Once the outstanding pension obligation bonds are
paid off, the money being used to retire that debt will be dedicated to
paying off the TRS unfunded liability until that liability is retired,
instead of funding the annual cost of pensions. In fiscal year 2013,
the amount of TRS funds dedicated to paying off the bond debt is $347
TRS Director of Outreach
2815 W. Washington St .
PO Box 19253
Springfield, IL 62794-9253
write your (email, call, visit) legislator. TODAY!
Please forward Pension 101 to every teacher you know.
Please call your Regional IEA Office and reserve a
seat on the January 3rd and 4th for the "Rally for Our Pensions" buses.
Not sure where your IEA office is? Write haisman - his E-Mail is being
sent to you by Bob Haisman. Pension 101 is an occasional E-Mail
Newsletter concerning the crisis involving teacher pensions in
Illinois! Pension 101 is put out by Bob Haisman
(email@example.com). Much of the material concerns IEA's
fighting for our pensions BUT Pension 101 is NOT AN OFFICIAL newsletter
of the IEA! Bob Haisman is 100% responsible for what is in this E-Mail.
Bob does not speak for the IEA!
Questions? Concerns ? Bob Haisman - firstname.lastname@example.org --
Bob is a retired teacher from Hinsdale High School . Bob was IEA
President from 1993 to 1999. He retired from Hinsdale in 2001.
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