By: Ted Dabrowski and John Klingner
It’s rare for common sense to win out when talking about Illinois state budgets, but here’s the story of one lawmaker’s idea that came out on top. It’s the simplicity of the idea that makes it special. Not only has it helped Illinoisans avoid billions in unnecessary pension increases, it also preempts a potential issue with the IRS.
By now you may have heard about the push by some Democratic lawmakers to increase pension benefits for Tier 2 government workers – those hired after January 2011 with less generous pensions than their Tier 1 peers (those hired before 2011).
The push arose because it’s believed that the pension benefits of some Tier 2 workers might fall short of minimums required by Social Security rules. If that’s true, the IRS could force Illinois to raise those workers’ benefits or make them pay into Social Security. Acting now, those lawmakers argued, would make sure we don’t run into any issues with the IRS.
That said, lawmakers have provided no proof that any Tier 2 workers are being shortchanged. Wirepoints spoke to lawmakers, pension regulators, DC lawyers, even the IRS itself, and no one could produce any evidence of which worker pensions, if any, were too low.
That’s why Wirepoints’ position regarding Tier 2 pensions has been for lawmakers to do nothing without proof. Anything more would be political malpractice. (If you want the full details of this Tier 2 discussion, read this. We also provide some oped links at the end of this piece.)
Nevertheless, lawmakers still proposed a fix to ensure compliance with the IRS rules. That fix – effectively raising the maximum salary on which Tier 2 pensions get calculated – would have cost Illinoisans several billion dollars.*
Other lawmakers and the public unions used the issue as an excuse to demand new benefits far bigger than necessary. A lower retirement age, bigger pensions and bigger colas for all Tier 2 workers – that’s what they wanted. Those would have cost taxpayers as much as a whopping $80 billion.
State Rep. Blaine Wilhour (Bleecher City) had a far better idea to avoid any unnecessary pension increases: simply increase a worker’s benefit by what’s needed only if and when his or her pension is proved to fall below Social Security minimums. Wilhour’s bill, HB 5798, “Provides that if an eligible Tier 2 member would receive a pension benefit that is less than the eligible Tier 2 member’s hypothetical Social Security benefit, then the eligible Tier 2 member’s pension benefit shall be increased to the amount of the hypothetical Social Security benefit plus $1.”
The good news for taxpayers is that Rep. Wilhour’s idea is the one that made it into the 2026 budget. Last week lawmakers created a $75 million reserve fund in case it’s proven some workers are being shorted.
From pages 53-54 of Amendment 4 of HB 1075 (the 2026 budget BIMP):
“If, after the effective date of this amendatory Act of the 104th General Assembly, any enforceable determination concludes that the benefits for a Tier 2 member or participant under Section 1-160 or 15-111 of the Illinois Pension Code do not provide the minimum retirement benefits required under Internal Revenue Service regulations or other provisions of federal law such that the wages of such member or participant would be subject to tax under the Federal Insurance Contributions Act, then moneys in the Tier 2 SSWB Reserve Fund may be used by the State Employees’ Retirement System of Illinois, the Teachers’ Retirement System of the State of Illinois, or the State Universities Retirement System to pay the difference between benefits otherwise available and benefits that would constitute minimum retirement benefits under applicable federal law or regulation. This subsection shall constitute a continuing appropriation of all amounts necessary for such purposes.”
The reserve fund is smart for its simplicity – and its savings. Illinoisans avoided billions in new pension costs. If and when a Tier 2 problem is ever proven, then it can be addressed properly at that time.
Now we’re not naive. We don’t think lawmakers and the unions will give up on hiking Tier 2 benefits anyway. The unions are pushing hard and lawmakers will want to keep them happy. Count on it.
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As good as it might be that taxpayers were protected, the Tier 2 issue has been nothing more than a distraction from what really needs to happen: pension reform.
Illinoisans are burdened with $172 billion in pension debt, the nation’s most. Chicago is stuck with its own $53 billion shortfall. And many local governments are underwater, too.
That’s why lawmakers should pursue a constitutional amendment to reform pensions; grant our cities and villages the option of municipal bankruptcy; and move new workers onto 401k-style plans – not just avoid hitting taxpayers with new costs and new debts.
* If you’re worried about some Tier 2 workers getting shorted, you should know that it’s only the highest-paid government employees that are affected by the Social Security rules. Because Illinois effectively caps salaries, currently at $125,000, for determining Tier 2 pensions, only the highest Tier 2 earners may end up getting pensions that are less than what they would have gotten under Social Security. The fix, if it’s needed, will be to raise the salary caps, meaning even bigger pensions for Illinois’ highest-paid Tier 2 workers.
Wirepoints work on Tier 2 pensions:
- Illinois lawmakers shouldn’t burden taxpayers with Tier 2 pension “fixes” until they know what they’re doing
- Illinois taxpayers deserve answers before state pension costs rise – Chicago Tribune oped
- Do Illinois and Chicago really need to sweeten Tier 2 pension benefits? – Sun-Times oped
- Video: Here come more pension sweeteners…(aka tax hikes) – Wirepoints, AFP and IPI
- Illinois Pension Suicide Pact – WSJ Editorial Board oped
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
No news reporter has ever written an article showing the dollar amounts a government employe would get at full retirement age versus what Social Security would pay over the same time period. Until you see the numbers don’t believe anything the from the people who want to increase Tier 2 pensions.
Unfortunately our Illinois Constitution needs to change to REDUCE the current ridiculous high pensions! There should be some cap limit, such as $175,000!
This is why current Illinois taxpayers pray these large pension people die soon!
And NO stacking multiple pensions that so many Police, Fire and School leaders seem to always do! Illinois taxpayers are getting tipped off.
Another option is to TAX any Illinois paid pensions over $100,000!
And how about this: one must live in Illinois to get a Illinois pension! Leave Illinois and it’s cut in half!
You’re Welcome! 😊
Sounds like you are supporting a progressive tax amendment. I have a feeling you will get that opportunity again.
That would be illegal. It’s their money and you don’t get to decide where people live.
You’re Welcome!
I have two friends who are retired teachers from Naperville’s school district. They were just teachers, not supervisors of any type. For many years each of them has been earning over 100G in retirement. If you wonder why Illinois taxes are high, the pensions are the reason.
Just think—you coulda been a teacher! Oh, I guess not. After all, you didn’t want your relatives to think of you as just another lazy, worthless blood-sucking piece of scum, right? Besides, you knew you were smarter than every teacher you’ve encountered, too, I suppose.
Spot on accurate. And don’t forget not wanting your soul to burn in hell for your part in the grifting, criminality and thievery from being a public sector union member.
I must have missed that section of the Bible.
“Thou shalt not gather with thy fellow laborers to speak as one voice, lest ye disturb the peace of Pharaoh. For what harmony is there in fair wages and safe working conditions? Nay, let each worker toil alone, bargaining in solitude, that the overseers may rejoice and be exceedingly rich.”
Only in your sick distorted view of religion. In reality, you are the thief just unsuccessful.
James, you are missing an opportunity. Some of my teachers at my Northern suburb high school were life changers, worth their weight in gold. I was a poor single mother kid. The social mobility they conferred on me is difficult to describe. No one who came across these educators would begrudge what they obtained in terms of compensation. Of course, unions protect the poor teachers too, clearly harming the overall reputation of the profession. Being defensive, however is not the path forward.
You’ve given a wonderful tribute to some teachers here. Good for you for recognizing such people and their positive effect on your life. Every teacher won’t be that noteworthy just as every other person won’t be so noteworthy, but we all should give praise where it’s due.
But you don’t address your self pity by claiming most people think teachers are lazy scum. I don’t think it the case.
Those just cashing a paycheck are protected by unions and with the proper incentives might change their behavior. That observation cannot be conflated with an insult. You know the problem – including the declining quality of students – and the woe is me doesn’t add to the discussion.
My language was meant as generally how commenters on this website view public school teachers and other public employees. It’s not really my opinion at all, but my point of view swims against the tide here. I tend to think such people are way too inclined to think all teachers are like the ones they had or someone else had while living literally in Chicago, then conflating with public school teachers elsewhere. I have no political quarrel with the poor educational statistics Wirepoints has shown for IL public schools. I don’t know if it’s possible to look for such data… Read more »
Salute to you, your mom and those teachers.
Teaching PE and algebra is difficult esp. for a college education major!!
Thanks to Wirepoints for shedding light on this Tier 2 scam
The simplicity is beautiful. It perfectly crystalizes the issue and solution in such a way that will force those looking to fix a non existent problem to explain their reasons for increasing pensions for unjustified reasons. This won’t stop those folks from trying, but it will put them on the spot, which they won’t like.
Bankruptcy, Cities or just units within Chicago – CPS.
Make a note of this, it does not happen very often.
Ted, John I’m a little confused. Wilhour’s HB 5798 passed into law? Or just $75 mil reserve fund was created? and Tier 2 reform is a done deal?… Because just today you have Welch in Politico interview stating Tier 2 bill will be addressed in fall veto session along with transit bill, energy bill, etc. (https://www.politico.com/newsletters/illinois-playbook/2025/06/04/welch-on-transit-delays-00384589):
Thanks for asking. We’ve clarified it by adding the second paragraph below. For sure, the push for increases will stay alive because the unions and certain lawmakers want to close the gap between Tiers 1 and 2. And they’ll keep using the “safe harbor” argument to do it. So even though common sense prevailed for now, they’ll be back. “The reserve fund is smart for its simplicity – and its savings. Illinoisans avoided billions in new pension costs. If and when a Tier 2 problem is ever proven, then it can be addressed properly at that time. Now we’re not… Read more »
Just to clarify, Wilhour’s bill HB 5798 was not passed. What we’re saying is his idea — promising to increase a worker’s benefit only if and when we need to — is what made it into the 2026 budget in the form of the reserve fund language.
Yes, the ‘Tier 2 Shortfall’ was a ruse on a hustle. The hustle was so obscene, it even stunk up Springfield. That’s saying something.