The proposal by Illinois legislators would reduce cost-of-living increases for retirees, raise the age of retirement for certain employees and set a cap on pensions for those with the highest salaries, according to a news report in The New York Times. The aim is to save $160 billion over the next 30 years.
The state of Illinois would be required to make additional payments into the pension system until it is fully funded, which is expected to be no later than the end of 2044, says the news report. Employees that are age 45 or younger would be required to work as many as five additional years before being eligible for retirement. Cost-of-living increases would be determined by a formula based on how long retirees had held their jobs.
The proposal would also exclude pension issues from collective bargaining, with certain employees able to switch from the pension system to a defined contribution plan.
According to the news report, the leaders of several Illinois unions believe that the changes relating to cost-of-living increases could dramatically impact employees, resulting in the loss of thousands of dollars in pension payments over the next five years.
The Illinois pension system is one of the most poorly funded in the nation. A report released in September, by State Budget Solutions, put the system’s funded ratio at only 24%, and says the system has one of the largest unfunded liabilities per person in the nation at $22,294 (see “State Pensions Underfunded by Trillions”). A survey released in August, by Standard & Poor’s Rating Service, found the Illinois pension system was among the five least funded state systems in the nation at 43.4% (see “Improvement Needed for State Pension Funding Levels”).