May 3, 2013 (PLANSPONSOR.com) – A comprehensive pension reform bill narrowly passed the Illinois House of Representatives this week, according to an article in the State Journal-Register.
Sponsored by Illinois House Speaker Michael Madigan, the bill passed the House on May 2 by a bipartisan vote of 62 to 51. It has now been sent to the Illinois State Senate where, the article notes, similar reforms were voted against in March.
Highlights of the pension reform bill include:
- Calls for pension plans to be fully funded by 2044;
- A mechanism to force the state to make its pension contributions;
- Capping the salary on which a pension can be earned at $109,971. The cap will increase annually by one-half of the consumer price index;
- Capping the amount of pension benefit on which a cost of living adjustment (COLA) can be earned. The formula allows for $1,000 of pension benefit per year of service for those not covered by Social Security and $800 per year of service for those for those who get Social Security. A retiree with 30 years of service would qualify for a COLA on $30,000 of pension benefit;
- Retirees younger than age 67 would have COLAs halted till they reach age 67 or till they have been retired for five years;
- Employee contributions would increase by 1% on July 1, 2013 and another 1% on July 1, 2014;
- After 2019, $1 billion a year that is needed now to pay pension bonds will be used instead to pay down the pension debt. The bonds will have been retired by then;
- Prohibiting employers with participants in state-funded retirement systems from collectively bargaining pension benefits;
- The changes applying to state workers, university employees, downstate teachers and lawmakers but not to judges; and
- The plan not shifting the cost of downstate teacher pensions to local school districts.
Pat Quinn, governor of Illinois, who considered the vote as progress, said, “With the passage of this comprehensive pension reform solution, Illinois is closer than ever to addressing a decades-long problem that is plaguing our economy, our bond rating and the future of our children.”