By: Mark Glennon*
Public union leaders forever pound their chests about wealth inequality and how our pension system protects the middle class. In fact, Illinois public pensions may be the worst tale of two cities. The gluttony bankrupting us is at the top, which includes union leadership, but it’s very a very different story for the rest.
A great new research piece on Teacherspensions.org, a project of Bellweather Education Partners, looks at it for Illinois teachers. Remember from earlier stories that the average member of the state’s teacher retirement system retiring now after working 33 years for 3/4 of a year gets a pension of $67,000 per year, and that about 3,400 in that system get pensions over $100,000 per year. Also remember that Tier 2 teachers — those hired after 2010 — are forced to pay extra to subsidize older, Tier 1 members who get far more generous benefits. (They’ll pay $6.75 billion towards the Tier 1 unfunded liability over the coming three decades. 21% of what they pay in will go to those older workers’ pensions, as detailed here.)
But the study goes further and shows just how rigged the whole system is. Among its other findings:
- A teacher hired after 2010 (in Tier 2) must serve at least 26 years in order to “break even” and earn a pension worth more than her own contributions.
- Over three-quarters of those new Tier 2 teachers are expected to leave with negative net benefits. Moreover, Illinois teachers do not receive Social Security, and a stingy refund policy results in a penalty for teachers.
- Illinois teachers would fare better under an alternative retirement plan such as a smooth accrual cash balance plan, which would allow all teachers to receive a positive return no matter how long they stayed.
Similar inequity runs through all Illinois pensions. Our pension system is a farce. Public union leaders defending it are hypocritical gluttons.
UPDATED: in the bullet points, to emphasize and clarify that they relate to Tier 2 teachers.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.
A set of state lawmakers want to extend CPS’ current school closing moratorium to February 1, 2027 – the same year CPS is set to transition to a fully-elected school board. That means schools like Manley High School, with capacity for more than 1,000 students but enrollment of just 78, can’t be closed for anther three years. The school spends $45,000 per student, but just 2.4% of students read at grade level.
Hopefully, all media will get the message, in Illinois, too.
Ted joined Tom Miller of WJPF to talk about Illinois’ highest-in-the-nation property taxes, why lawmakers don’t want to touch the tax’s cost drivers, just how much Illinoisans’ tax burden has grown over the decades, why Gov. Pritzker failed to meet his promise to reform property taxes, and more.
I agree with you 100% Mark. We need to get everyone back to the tier 1 system.
Nice try.
Nice to see the Tier 1 folks are back on their high horses again. Bravo, old chaps! The sad truth is that Tier 2 (or some derivative thereof) arrived 30 years late to the party. The core of Tier 1 benefits, the very foundation of every single pension up to 2010, is based on rules and assumptions made in the 1940’s. That’s a little known fact most Tier 1 folks will never fess up to. I’m not sure how folks expect assumptions from the WWII days to be effective today, but whatever. Our pension systems should have a tune-up every… Read more »
It seems to me you want to have it both ways! I’ve seen postings where you vehemently rail against the oft-cited average-pension statistics quoted for TRS and other IL public employee pension plans, stating quite emphatically that what should be cited instead are the pensions pertaining only to those who have devoted an entire (30-year?) career to teacher other such public employment. Now, you trying a different attack on that topic and essentially defending the “little guy,” the ones who’ve not devoted an entire career to public employment while simultaneously suggesting that the full-career pensioners gorge at their expense rather… Read more »
No contradiction.
You can’t average everybody together and make a generalization about all categories. Fully vested Tier 1 pensions are unaffordably high, I think, and that’s where the problem is. Those who leave before vesting and Tier 2s are a different story, and I think they are treated unfairly. You seem to want to disregard the numbers for vested Tier 1s by focusing instead on one average pulled down by those who aren’t vested Tier 1s. I’ve been writing for years that there are haves and have nots in this system, and that any cuts should be means-tested or progressive.
What is sad is when tier 2 is used as a foil to create dissension in the union ranks by pitting younger union members vrs older union members when James adeptly points out the hypocrisy required to maintain such a viewpoint. It is true that tier 2 benifits are vastly inferior to tier 1. Tier 2 retirement benifits are much much less than tier 1, the retierment age is increased to a flat 67, and the cola is neutered. Everyone hired after 2010 is a tier 2; thus by enacting the tier 2 reform, Illinois turned off the tier 1… Read more »
Don’t make stuff up about what I have advocated for. I never pushed for the Tier 2 reforms. I want the whole system replaced. If you believe the Tier 2 reforms were smart you may be the last such person. Even the proponents and sponsors, Dems included, in the General Assembly now see that Tier 2 reforms are broken and they have a task force addressing it. The plain fact is that people hired after 2010 had the ladder sawed off on them. Deal with it. Fix it.
There’s no denying that the Tier 2 public employees will pay more towards their pension, pay something toward the pension of the Tier 2 employees and retirees as well, work longer for their greatly reduced benefits and generally get far less of them. So, yes, I do feel they are paying more than what would seem fair in comparison to those who work under Tier 2 pension benefits, but there’s also no denying that they have joined, or will join, the public payrolls either knowing full well in advance what the new Tier 2 rules are or ought to have… Read more »
I hate auto-correct spelling features on a computer! Here’s how that first paragraph from my posting of a few minutes ago should have read in terms of Tier 1 vs. Tier 2: There’s no denying that the Tier 2 public employees will pay more towards their pension, pay something toward the pension of the Tier 1 employees and retirees as well, work longer for their greatly reduced benefits and generally get far less of them. So, yes, I do feel they are paying more than what would seem fair in comparison to those who work under Tier 1 pension benefits,… Read more »
I will change to a new comment system that allows editing as soon as I have time. I’ve gotten other complaints about that.
You’re point is a fair one, as far as it goes. But that fact remains that, for the reasons explained in the study, most Tier 2s just won’t often be getting what they ought to for retirement. It’s also very harmful for recruiting new, good people.
Mark, we talked about this before. Tier 2 needs to comply with safe harbor; and that means a minor amendment to up the benefit level slightly. How other than the safe harbor issue is tier 2 reform now broken? Its not broken. I take your word that you were against tier 2 Mark, though, I dont ever remember reading that you were opposed to the tier 2 pension reform during enactment. (your not one to keep your opinions hidden so clearly I must have missed your opposition to it. It is very interesting now to see your opposed to the… Read more »
Advocate, WirePoints didn’t exist when Tier 2 reforms passed and I never wrote anything about it then. I had no opinion at the time because I didn’t understand it and had seen no serious analysis of how it worked. It has turned out that nobody did. If you think that’s an exaggeration, read the link below. Madigan bulldozed it through in less than 12 hours, according to a Dem strategist! Read what Zalewski says about it now. https://wirepoints.org/illinois-tier-2-pension-reforms-a-particularly-interesting-comment-by-a-state-rep-wp-original/ If you really want to argue that Tier 2 is fair to them, a reasonable argument would go like this: Even though… Read more »
The next mathematical equation the folks at teacherspensions.org need to solve is what happens when Tier 2 pensions fail the Safe Harbor test. I suspect that will result in a brand new unfunded social security liability or an alarmingly higher unfunded pension liability.