Two judges are suing to potentially take down the state’s so-called Tier 2 pension law, a key pension reform measure they say was passed unconstitutionally and which they claim has unconstitutionally denied them a larger retirement pension than they believe they are owed. The case was summarized nicely by the Cook County Record on Thursday and the complaint is here.
While it’s possible that the lawsuit could take down the entire Tier 2 law, Illinois courts are likely to decide the case on narrower grounds because the financial consequences of full invalidation would be disastrous. Tier 2, which is for public sector workers hired after 2010, provides far lower benefits than Tier 1.
Still, it should come as no surprise that the entire law is being challenged based on how it was passed.
The law was bulldozed through in 2010 by House Speaker Michael Madigan and Senate President John Cullerton in less than 12 hours with no analysis, debate or actuarial assessment, as we wrote at the time and often since. It was the Illinois General Assembly at its worst. Full details on that process are described in this Forbes column.
In 2010, lawmakers approved the law using what’s called “gut and replace.” Under this process, as the Cook County Record describes, lawmakers take a so-called “shell bill” – an existing bill already pending in committee – and amend that “shell” legislation to delete the existing text entirely and replace it with potentially sweeping new legislation, even if the new legislation has nothing to do with the previous text of the bill. The judges now suing claim, among other things, that the process violated the “three readings” requirement for making a bill law.
The law has multiple other problems beyond what’s alleged in the new lawsuit. It is likely to be running afoul of federal rules requiring benefits no less generous than Social Security. The cost of fixing that may be enormous. And Tier 2 benefits are indeed inadequate. Most importantly, Tier 2 hires must work ten years to vest, which is too long. Changing jobs before ten years and thereby losing benefits would cripple chances for adequate retirement savings.
Don’t blame Madigan and Cullerton alone for the Tier 2 law. Then-Senate Minority Leader Christine Radogno was among a number of Republicans voting for the law, and she often made false claims about how it would save the pension system, which we criticized here.
-Mark Glennon
At $1.5 million per job, the new incentive package from the state is at least 15 times the norm. For this much money, the state could have just handed out a million bucks to 827 people, instead of creating 550 jobs.
Ted joined Jeff Daly to discuss the university student protests erupting across the nation on the Israel/Palestine conflict, why it’s so dangerous for society if the media abandons facts in favor of narratives, why that allows government to spin away the problems like crime and financial crises, why it causes the voting public to become apathetic, and more.
When you hear the complaints from Illinois politicians, remember the hypocrisy: 40,000 bused to Chicago, but 161,562 allowed to fly directly to Florida.
Nearly one year ago, Chicagoans cheered Mayor Lori Lightfoot’s removal from office. In her place was Brandon Johnson, who promised a more inclusive approach to building a “better, stronger, safer Chicago.” It hasn’t turned out that way. Today, there’s little disagreement that Mayor Johnson has disappointed on most key issues. On crime. On policing. On migrants. On education. On governance. Even on foreign affairs.
Ted joined Dan and Amy to talk about the problems and costs of the Chicago Bears’ proposed new stadium, why its unlikely to happen in its current form, why the ongoing wave of violent crimes makes residents scared of the city, and why the funeral of slain police officer Luis Huesca matters to Mayor Johnson’s reputation.
The real suit is that Tier 2 “pensions” violate the IRS Safe Harbor provision and is an invalid structure.
NY pols, dem or rep it doesn’t matter, are trying to sweated the pension $$trough$$ for themselves and overturn their TIER system as well….look out chump taxpayers NOBODIES looking out for you!!!:
https://nypost.com/2024/03/28/opinion/ny-republicans-betray-taxpayers-in-favor-of-pricey-union-pensions/
Just end all govt pensions. SS for everyone
Especially the double dippers
Tier 2 is the byproduct of the constitutional clause that does not allow for any pension adjustments in the negative direction. If you over-correct, you can always enhance later. If you under-correct, you’re stuck. Madigan over-corrected. The main reason we’re in this mess is because the state fails to recalibrate the pension systems every decade or so. We should have 4-5 tiers by now, each with increased benefit costs incurred by the employees, like a slightly later retirement age. If you strip away the dozen of enhancements over the years, the base pension system is built on assumptions made generations… Read more »
These two guys will shortly be offered high paying no show jobs to drop their lawsuit.
We all know that Illinois government is totally corrupt at all levels. So this is no surprise. It just further solidifies the corruption label. Pathetic!!!
I find it very ironic that what Madigan did over and over and over is now being called out by some Democrats who want a bigger cut of the taxpayer grift.
I would laugh so hard if the courts rule the tier 2 law never existed (was invalid), hence the former pension rules are still in effect. Following Illinois politics from a distant red state is very amusing. It’s similar to watching a comedy sitcom.
Tragi-comedy. I’d laugh too but I’m still here to pay for all this fun.
and who knows whats being planned for Tier 2 fix HB 4098 bill that Kifowit in charge of? nothing in press? Are the working groups meetings even open to public or press?
Good question. No coverage. My guess is that at the end of the day they will do only the minimum needed to bring it into compliance with the federal rule, which is to say making the benefits no worse than Social Security.
Mark-Is it true that the Tier 2 contributions are being shifted to pay for Tier 1. Tier 2 has different retirement dates and higher yearly contributions and I’m not sure but there is no 3% compounding. With the markets still going higher what are the returns for for the funds. It would be good to know what the last 12 month returns are for the various funds.
Also there cannot be many Tier 2 retirees yet due to later retirement dates for them. Could you clarify?
Yes, Tier 2s actually have to pay in more than the actuarial cost of their benefits, and that excess goes to subsidizing the Tier 1s. It all goes into the same post for any particular pension system, and none even has enough to pay for the Tier 1s. The unfunded pension liabilities are entirely attributable to obligations created for work already performed by Tier 1s. I don’t have the most recent return numbers handy but they generally have been pretty good because the markets have been good. Nor do I have the number of Tier 2s who have actually vested… Read more »
The Tier I liabilities are attributable to the voters and the Constitution, not to work already performed.
Hey, I’m just quoting PPF, who seems to have gone missing of late.
PPF is likely being censored by wire points.
Wrong. But idiots who make stuff or plaster the site with repetitive comments up sometimes do get deleted.
Name callers should be censored.
Touche. See, you can post good comments.
Our legislature relies on public union donations to retain their seats, and thus their own salaries and pensions, thus they will do nothing to disrupt their gravy train and status as a permanent political class. A shame they have shielded true pension reform in the state constitution. Workers hired after 2010 should’ve gone into a 401k with matching feature as has been the norm in this country for people in the real world since the 80’s.
Christine Radogno was never a Republican. She was one of the worst frauds in Springfield.
And dumb as a rock. A useful tool for Cullerton, who played her like crazy.
Everyone knows that corruption is out of
Control in this communist state. The courts will find against the tier 2 pensions
And they must be corrected.
Guess who will be asked to pay for it,
Bend over Illinois here it comes