Illinois Gov. Pat Quinn signed the SB1 bill on Thursday, December 5, according to a news report in The Washington Post. The bill, designed to make reforms to the state’s underfunded pension system, is scheduled to go into effect on June 1, 2014.
However, there is talk that this effective date may be delayed by a lawsuit from labor unions in the state, which have voiced concern about the impact of the new law on pension payments over the next five years, specifically in the area of cost-of-living increases.
The new law is expected to save the state roughly $160 billion over three decades and guarantees Illinois will make its full annual contribution to the pension funds, says the news report. The goal is to fully fund the state’s retirement system by 2044 (see “Proposal Would Repair Ailing Illinois Pension System”).
Under the new law, automatic, annually compounded 3% cost-of-living increases for retirees would be replaced with smaller annual adjustments for the highest earners. Some workers would have the option of freezing their pension and starting a 401(k)-style plan. Also, the retirement age will be pushed back for some.
More information about the SB1 bill can be found here.