-- Connecting the dots between our economy, government and business --
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
SIGN UP HERE FOR OUR FREE WIREPOINTS DAILY NEWSLETTER
Why is it we can take a vote to change the state’s constitution on taxes, but we can’t have a vote on changing the constitution to change the state’s pension in Illinois?
Our elected leaders either don’t want to or they don’t believe that it will change the amount owed by one penny. It’s a fantasy dangled by a few but no where near the 71 house and 36 senate members needed. Why don’t people run on this very issue. If voters really want to try this attempt at pension theft then they will need to vote for their favorite thief to do their bidding.
I don’t know if a constitutional amendment could be an impairment of contract, but I expect such an amendment would be challenged — probably in Illinois courts. Wirepoints may have already posted something on this, and you might also look at Could a Constitutional Amendment Be Unconstitutional? (luc.edu) published by the law review of Loyola Univ. of Chicago in 1991. That’s if you have the time and inclination and stamina.
JimBob, If the language of a constitutional amendment impaired pension contracts would The Illinois Supreme Court even allow it on the ballot? Would they force language changes so that only new employees would be subject to the changes? Who knows. This is an interesting read as well. Page 80 is a nice place to start https://commons.lib.niu.edu/bitstream/handle/10843/19331/39-1-48-Anderson-pdfA.pdf?sequence=1&isAllowed=y Further, even if the Illinois Pension Clause is repealed, it does not nec- essarily follow that the State’s pension obligations would lose their contrac- tual validity. Black letter law in Illinois requires that contracts be construed in accordance with the parties’ intentions at the… Read more »
The constitution is merely a piece of paper.
So is the money in your wallet. Now reach in that wallet and give the state of Illinois some more paper to pay its bills. It’s merely paper so you won’t mind.
That’s absolutely correct.
These are [at least for pension nerds] interesting and fascinating questions. California faced them in the 1940’s. Both federal and state constitutions are implicated. Once a principle gets settled by a state supreme court, it becomes very difficult to dislodge or even modify. The preface seems to say that “the state shall not impair” … so if there is a constitutional amendment initiated by “the people” is that “state action?” There is also a principle that one legislature shall not tie the hands of a subsequent legislature — laws may be amended or repealed. So, one has to look at… Read more »
Question and comment. What criteria must be met in order for any fund to be considered “Fully” funded? It seems there are at least 3 different sets of rules to withdraw funds to get your pension but one rule to fund them. By that I mean there are Tier 1 rules if you retire before 2010 (almost unlimited spiking with unused vacation/sick time/etc) without penalty. Tier 1 after 2010 with 6% spiking allowed and the start of Tier 2 if hired after 1/1/2011. All three have different rules. “Expected” returns for the fund was around 7.5% give or take regardless… Read more »
Freddy, A few things. Public employees can receive raises (spiking) above 6% regardless of their tier. The local government entity that grants that raise needs to pay for the increased cost to the pension fund. So actuarially there should be no difference to the fund. The year you retire has nothing to do with your tier status. There is no difference between tier 1 who retired prior to 2010 vs those that retired after. The only difference would be the local entity was not on the hook for the additional cost prior to the changes around increasing salary above 6%.… Read more »
Thanks. What about the fees which come off the top which reduces funding levels which in turn the fund loses the ability for compounding returns. Here is some info on Pennsylvania’s pension fees. This info is from a few years back. Will try to get info from Illinois fund fees. They are probably much higher than PA. https://www.bloombergquint.com/markets/pennsylvania-pension-fund-paid-1-billion-in-fees-to-managers https://www.nbcphiladelphia.com/news/local/858-million-wall-streets-cut-for-managing-pennsylvanias-state-pension-funds-in-last-five-years/28592/ https://whyy.org/articles/pennsylvania-pension-systems-say-theyve-cut-management-fees/ How much has Illinois spent on fees in the last 10 years-20 years? Billions upon billions. I believe this is just fees to manage the funds so administrative expenses to distribute the funds is a separate matter. The fees have… Read more »
In a prior life (within the last ten years) I witnessed investment managers spending a LOT of money providing so-called education benefits to trustees of the Detroit pension systems — a majority of whom were members of public unions. Those included week-long junkets to Hawaii in February where travel, food, accommodations and link fees were paid by the management company. This was temporarily a scandal reported by local press, but the union-elected judges dismissed legal challenges founded on conflict of interest. The “government” continued (and continues) to pay and pay while the trustees (paid city employees) rarely show[ed] up for… Read more »
Someone knows who those recipients are. The recipients should immediately have their pensions reduced by a court to the max. permitted amount — based on capped raises. They are recipients of stolen property. Then future pensions should be reduced so the pension funds can gradually recover what’s been overpaid thus far. The fiduciaries of the pension funds should also be charged personally with breach of duty. Fiduciaries are presumed to know the law and can’t just rely on some administrator’s corrupt instruction to waste plan assets. This sort of malfeasance in an underfunded trust jeopardizes the pensions of everybody else.… Read more »
“The recipients should immediately have their pensions reduced by a court to the max. permitted amount — based on capped raises. They are recipients of stolen property.” There is nothing illegal about public employees increasing their pay in the last years beyond the 6% increase. The only thing that changes is that the local school board pays instead of the state for the increased cost. “The fiduciaries of the pension funds should also be charged personally with breach of duty. Fiduciaries are presumed to know the law and can’t just rely on some administrator’s corrupt instruction to waste plan assets.”… Read more »
Maybe it’s time to move the discussion on pensions from “legally correct” to “morally correct”. Laws can be passed, doesn’t make it right. Russia just passed a law cracking down on dissent. Does the fact that it is legal to imprison dissidents mean it’s therefore OK and no one can argue otherwise?
So what would you like to outlaw? What is morally correct? If an individual decides to take on a coaching job and that new job provides them a raise are they now morally wrong simply for getting a pay raise. With inflation over 6% it’s not unlikely that some may receive a raise greater than 6%. Are these individuals morally wrong for receiving a raise that may not even keep up with inflation?
If you don’t like the laws then work on changing them. Not sure there is much you can do in this situation but have at it.
“Legality” and “majority vote” are the two most frequent points invoked in defense of the current pension setup. Both laws and majorities can be wrong, especially when the “majority” has an obvious self-interest. Maybe it’s time we examine that possibility.
I don’t pretend to have all the answers, and I certainly wasn’t addressing the narrow concern of the 6% ceiling.
AOC and other nut jobs think that the very existence of Billionaires is immoral. They think that that if an employer doesn’t pay a living (whatever that is) wage then they are immoral.
It’s ridiculous to attempt to live based on what various individuals find immoral. Only the law matters. Just like AOC, your definition of what is moral and what isn’t means absolutely nothing.
I believe that keeping a promise is moral and trying to steal from retirees is immoral. The law also matches my moral compass and that’s all that matters.
I presume the basis for AOC’s position is the inequitable distribution of wealth in American society. However one measures that, the inequity has been increasing although I don’t think Democratic Socialism or whatever she calls it would address the problem. I think a moral issue with greater traction would be the degree to which pension costs are forcing reductions of spending for other purposes — whether those be fixing potholes, maintaining hospitals or fighting addiction and crime. I think public employees and retirees collectively collect more than their fair share of public revenue and that that should be measured under… Read more »
“I think public employees and retirees collectively collect more than their fair share of public revenue and that that should be measured under the same scrutiny we apply to other scarce resources.” The money provided to pensioners was and is not a gift. They traded their labor for this compensation. Both parties agreed to this contract and the money is owed regardless of your thoughts. If the state doesn’t have enough money for other purposes then it will need to raise taxes. Maybe someday when the state can no longer increase tax revenue then pensioners will receive a slight reduction.… Read more »
The inequitable distribution of wealth in American society is directly related to the policy of the Federal Reserve. It has little to do with unions or public policy or anything is. Money is printed by the Fed or created by lending policies of member banks. The new money created flows directly to those at the top. The Fed has admitted this in their meeting minutes. They know the rich are getting richer with all those new dollars being created and the poor are getting poorer. But they themselves are getting richer too front running their own policy moves, and taking… Read more »
“I believe that keeping a promise is moral and trying to steal from retirees is immoral.” Robin Hood stole from the rich to give to the poor. But he did so not as a thief, but as a hero, who was returning the wealth to the poor that the rich stole from them in the first place. So when you say “steal” from the retirees, I see it in another way. Reducing benefits for retirees is really just clawing back the unearned and unjustifiable wealth they grifted from the poor tax payer as a result of the soft corruption that… Read more »
“So when you say “steal” from the retirees, I see it in another way.”
Thanks for reinforcing my point. What is moral to some is immoral to others. That’s why only the law matters.
So laws forcing the confiscation of j***ish property in Germany right before WWII were neither immoral or moral? Just the law?
Don’t give me that relative morality nonsense.
(had to **** to get around the filters)
Almost any premise can be stretched beyond what’s at least 95% reasonable. Thinking about those last few percentages of logic difficulty is why judges are paid the big bucks.
Paying pensioners who traded their labor for deferred compensation is the equivalent of germans taking property from J*ws? Wow. Just Wow.
You are performing mental gymnastics to justify stealing from retired teachers, police and firemen. You know that they are owed the money but you state they are “corrupt” because you don’t want to pay it. You and everyone who advocates that position are dead beats that don’t want to pay their bills. Laws matter. Your twisted morals mean absolutely nothing.
Fine, you don’t like WWII examples? Let’s do a more recent example. The Russian and Ukrainian Oligarchs. They ahem appropriated massive government owned enterprises for themselves. For very cheap. and that was the law. It was perfectly legal for a handful of Oligarchs to takeover most state owned industries. It’s not a grift, or theft, or anything like that. It’s perfectly legal. it’s the law. Just like Hunter Biden receiving $50,000 a month of Burisma money for sitting on the board of a Ukrainian gas company. The law allows it. Perfectly legal. The point here is that like Pat S.… Read more »
The “root of all evil” starts with at least three things: allowing politicians to make a career of it, allowing pensions to incentivize them for doing so and requiring elections which are funded by special interests groups who are dependent for their welfare on the votes of those same politicians. Get rid of all of that, and progress will be made. But, the reality is that none of it is likely to happen because the state politicians would have to approve all such matters before the public can have a vote on it.
Retirees never grifted a thing – the collusion between unions and government is the major problem. When Mr./Ms. Politician accepts campaign money from unions, and they and the unions ‘negotiate,’ there’s no one at the negotiating table representing taxpayers. Politicians are in bed with unions. Unions work to grab as much of the pot of gold as possible – in benefits, wages, pensions, and influence for themselves and their members. I don’t blame pensioners for taking advantage of the system; I blame the politician-union collusion for unfair-to-the-taxpayer contracts. Outlawing campaign contributions would go a long way to leveling the playing… Read more »
“I don’t blame pensioners for taking advantage of the system”
Do you blame Hunter Biden, and the children of Nancy Pelosi, Mitt Romney, and others, for taking no-show high paying jobs on the boards of various Ukrainian companies?
Perfectly legal right? Can’t blame them for seeing an opportunity to grift…
The prominent individuals you name are not subjects of this discourse. This is about a contractual agreement between workers and government. Contractual agreements tainted by union/government shenanigans, but contracts nonetheless. This whole topic would be moot if one party of the agreement, the government, held up their end of the bargain and funded adequately – but they didn’t. Kicked that can right down the road. Do I wish I had a government pension? Bet your boots I do, but I chose not to position myself that way. A contract is a contract and I wouldn’t look kindly if my mortgage… Read more »
The very definition of collusion implies that both parties carry blame: the politicians and the teachers as represented by their union.
And before somebody says the voters/taxpayers are also to blame, remember that a large proportion of those voters are the public sector workers.
I don’t know that the term “large proportion” applies all that appropriately to your argument. As I recall it somewhat vaguely something along the lines of 8-12% of all workers in IL are public sector employees. Even if you add spouses as sympathetic voters to that number the result is likely not that much different because the 88-92% who are private sector employees are equally likely to have spouses who might well vote sympathetically for their families’ welfare, also.
Current retirees are the past union members who actively promoted the collusion with politicians in the first place. “Actively promoted” is probably an understatement. The teachers, unions and politicians were in lockstep because they all stood to gain.
The teachers just entering the profession are the only ones without serious culpability, and they will probably be left holding the bag.
The teachers, unions and politicians were in lockstep because they all stood to gain.
That sums it up – the union-politicians relationship is the root cause. Spiking is the symptom.
Well, at least we agree that AOC is a nut job….
I don’t believe you’ll find a lot of debate about AOC’s competency in this forum. The poor dear believes everyone wants to sleep with her – that’s a bit delusional and narcissistic.
Always remember, she was re-elected by the fine folks of New York. Maybe it’s something in the water?
You are correct and I didn’t read the article with sufficient care. I think there may be other means of legal attack on the spiking practices including that these late career bonuses are in essence unlawful gifts or unlawful compensation for past service. You are also correct that it does upset me and virtually everyone who learns about it other than the public employees (notably teachers) who benefit from it. The ultimate recourse will perhaps await the inevitable bankruptcy of the districts and the consequent depletion of funds in the underfunded pension trusts. Luckily the spiking and double-dipping occur primarily… Read more »
“…legal attack on the spiking practices including that these late career bonuses are in essence unlawful gifts or unlawful compensation for past service.”
I see you are still having trouble with your reading comprehension. These are not unlawful gifts. School districts decided to pay these employees more and because it was greater than 6% they must pay the additional costs at the local level instead of passing it off to the state. Nothing unlawful about this compensation and nothing to “claw” back.
And while there are likely immoral and unjustifiable 6% increases for people here in IL, it’s the same as with Hunter Biden. He was legally paid $50,000 a month for his service as a board member of the Ukrainian gas conglomerate, Burisma. He was paid handsomely for his labor and no one disputes this. In fact, my understanding is that the government’s investigation of Hunter relates to his payment of the taxes on that earned income.
There is the statutory law which is a loophole engineered by unions. This is not taking anything away from the unions and their lawyers. It’s, rather, acknowledging their cleverness — if they really were that farsighted in the early 70’s with the “contract rights” gambit. Instead I am referring to provisions in the Illinois Constitution and the common law (and perhaps statutory law) that require disclosure, public meetings, etc. and discourage fraud and log-rolling. Your argument against the foregoing would be “there’s no evidence.” And that is the favorite argument of corrupt politicians everywhere. That’s because it’s difficult or impossible… Read more »
well said.
Pension members receiving raises greater than 6% is not illegal. You can try to compare it to other atrocities around the globe but that only makes you sound absolutely ridiculous. You talking about “there’s no evidence” doesn’t even make any sense. No need to try to find evidence where no crime is committed. What crime are you actually looking for? Stop writing about Ukraine or Hunter Biden and actually address the situation. Employees getting raises in their last few years is not a crime. It’s not immoral or illegal. This is why we decide things based on the law not… Read more »
Wirepoints provides a forum to debate not only what the statutory law is at the moment but what law and the rule of law mean generally. In the Old Testament, the Law is more than the Ten Commandments. And Jews, Christians and Muslims continue to debate it. At the nation’s oldest law school’s oldest building, a quote above the entrance states “Laws are those wise restraints that keep men free.” [19th century sexism may be forgiven to make a point.] The “law” in play here is not just a technical statute. There is also the ambiguous constitutional provision about “contract… Read more »
Keep making your points and I’ll keep making mine. Pensioners are owed their pensions and have constitutional protections to ensure they collect. I’ll keep pointing out how the desire for lower taxes doesn’t trump the need to honor our debts. It’s really that simple. I’ll continue to point out to new readers as well as experienced ones that our state highest court has made it clear that these debts must be paid. By all means, continue to advocate for changes in laws that you think will better our state. Work on that instead of suggesting that people should be arrested… Read more »
Not “that simple” in my view. I mostly see proposals to raise (not lower) taxes — either across the board or on a graduated basis. So, I’d transpose your clause to read “desire not to raise.” Further, the pension funds are falling further behind in terms of both “funded ratio” and increasing healthcare costs. Payment of improvident or unsustainable debts is frequently “trumped” in bankruptcy or simple insolvency. The fact that courts have said pensions are paid first does not expand the ability or inclination of people to pay taxes any more than the urgent need to provide drinking water… Read more »
JimBob, that’s a very smart take and well said. Makes us proud to host commenters like you.
“They are recipients of stolen property.”“The fiduciaries of the pension funds should also be charged personally with breach of duty.” Mark, I’m sure you are very proud of comments that JimBob makes. After all, he doesn’t seem to want to follow the current law of the land and just arbitrarily confiscate money from retirees. Of course he admits that he didn’t even read the article but that ignorance only solidifies his position. Truly one of many of your misinformed commenters. If he is really about advocating for changing the laws then I would think he would actually offer up a… Read more »
You mention that anything above 6% spike is not illegal then why is there a fine or penalty attached if it is exceeded? It would be like saying you can drive 100mph in a 30 zone without consequences. There is a very large penalty if you were to do it. You can legally drive 30 but it’s illegal to drive 100. I presented this idea to my local state rep a while back. If someone has more than 6% in sick days/vacation/etc accrued that excess should be rolled over to a 401K/Roth or cashed out. Example-$100K final salary-$20K in vacation… Read more »
It’s not a “penalty” or a “fine” Freddy. When employees receive a raise the overall pension cost increase. In order to minimize large increases in salary the 6% cap is designed to cost shift the expense back to the local district. It’s not a fine or penalty at all. It’s simply saying if you want to increase pay above 6% you need to pay for all the costs including increased pension expenses. From the article: “Also, the media’s mistaken, but widespread, identification of the 6% threshold as a ‘penalty’ creates a headline risk that school districts shy away from when… Read more »
Thanks again. As you are aware from the article Rockford school district has paid $3M so far. A reporter a long while back asked the then new superintendent Dr. Ehren Jarrett about that and he said he did not know anything about that and said he would look into it and was never mentioned again. My concern is where does the money come from to pay it. Is it from the retiree or the district itself. If it is the district that is mostly taxpayer money and it’s possible it could be paid for by thru the states contribution. Curious… Read more »
It comes from the district not the employee. The employee has a right to their pension based on the average of the last 4 years. If their pay was raised 6% or 100% it is included in the calculation. If Rockford is paying 3M for these excess raises that is completely at their discretion. They do not need to give out larger raises and are fully aware of the implications. I’m not sure I fully understand your idea about moving excess 6% into an IRA. There isn’t an option to pay out less so not sure how the trade off… Read more »
I think this is a good example. https://news.bloomberglaw.com/employee-benefits/public-pensions-may-rethink-vacation-payouts-after-court-ruling In Phoenix you could take up to two and a half years worth of unused vacation time and increase your final salary to increase pension. I have read that this happens in Illinois. I meant if your final salary is increased by more than 6% by using the unused vacation time it should be rolled over to an 401K or Roth. This way it’s good for the municipality/taxpayer and retiree. I read a while back that people here were increasing their final salary by double thus increasing the 4 year highest average.… Read more »
I’ve never encountered this idea, but it seems maybe legal to me IF any such extra compensation were to be paid after one’s last date of employment in that the retiree’s pension benefit wouldn’t be increased. But, how is it legal considering the retiree would no longer be considered an employee nor an independent contractor? That side of it seems an unwinnable argument to make.
So awesome getting paid not to work, eh?
Like sinking your teeth into a pork belly sandwich.
Still not gonna say “thank you”?
Why would anyone say thank you for exchanging their labor for compensation? I don’t see you or anyone else on this site thanking pensioners for all of their labor throughout their entire career. This was a business transaction and nothing more. They did the work and now the Illinois taxpayers will pay them their money.
Also, it is awesome to have a plan for a comfortable retirement. People do it all the time with their 401k withdrawals and pension payments. You should try it. Don’t be jealous, just create your own plan to make it happen.
Those of us who don’t have public pensions ARE trying to plan for a comfortable retirement. Unfortunately, we are first obligated to make sure that you have your comfortable retirement. Sucks to be us I guess, right?
Considering the early retirement age and the corresponding duration of retirement, the length of vacations while working, the number of sick-days and the ability to exchange them for pension credit, most teachers are paid as much for not-working as they are paid for working. Additionally, with pick-up plans covering individuals’ supposed contributions to their own retirements, this combination of work and leisure is paid for by others. “Negotiation” is not even a thing when the people across the table are like-minded public employees whose pensions generally track or exceed those provided via “bargaining.” Health care — virtually unfunded — will… Read more »
There’s nothing new from you or anyone else here re this general topic. All I have ever seen here is endless repeating of the same battle engagements on both sides. So, what do we get from it? Venting and always more venting only interrupted by the occasional, simple, yet ultimately stupid junior-high level “solution.” Let me get to the bottom line we all intuitively recognize: “Aound and around she goes. Where she stops nobody knows.” Keep tilting at those windmills meantime as I’m sure will be the case.
Given the perpetual gripe about too few teachers and not enough pay, maybe the good people are winning the battle. Defund the teachers! has a nice ring to it.
Sure, but what are the negatives of doing so? I see many of them. Basically, you’re proposal will make things even worse.
James,
You need to let them vent. They know that complaining won’t do anything to solve the problem but their jealousy of public employees is too strong to let it go.
Just in the last few days we’ve seen these people compare teachers, police and firefighters to international war criminals. What did these horrendous individuals do? Accepted a pay raise above 6%. Oh the humanity.
As I suspect you understand perfectly well, nobody is comparing teachers to war criminals. The point is that a justification of “legality” clearly loses force when the same justification can be and has been used for almost anything. The only thing required is to pass the necessary laws.
Under that line of thinking there is no purpose or need for any laws. We just need ProzacPlease from the internet to let us know what is right or wrong. I prefer to utilize our constitution and laws but you’ve made your point clear that if something doesn’t match with your sense of morals then the law doesn’t matter. We will just have to agree to disagree.
I’ve never said nor implied that my views should be the deciding point of what is right or wrong with pensions. Nor have I ever said that we don’t need laws, just that because something is currently the law does not mean it is right, and neither does a majority vote.
Yes, we will just have to agree to disagree.
PPF – you have been correct all along in explicating this is not a matter of legality. Sure, you can make the case that the game is rigged in the unions’ favor but that is an argument which can be made about any number of pieces of legislation. The issue is how all of this can be paid for. The problems with the increase taxes crowd is two-fold: 1) Good luck increasing taxes in any appreciable way to put a dent in the pension debts – the recent regressive tax increases do not relieve pension debt, as is the case… Read more »
The game is to get Democrats elected at the federal level – continuously
The Democrat party is only one or two elections away from becoming a regional party with limited geographic and demographic reach….it’s going to take a color revolution in 2024 for them to hold onto any power.
debtsor – it looks like you are right. But the Democrats strategy has to be that elections are the only way to save states like Illinois, New Jersey and Connecticut, to name a few. Raising taxes won’t work, and there is zero chances their economies can grow to cover the pension debts. As I said, a risky strategy, and we can see some fairly desperate behavior coming down the road.
It took about 60 years to overrule Plessy v Ferguson. Less than 20 to repeal prohibition. 50 years to bankrupt Detroit with financial and urban recovery still unlikely in our lifetimes. When dealing with things as entrenched as political corruption and union greed, one expects it to take a bit longer. Just the Illinois Way. We are used to it.
This is just a question. I have read the back and forth on this thread but I remember at least 4 or 5 years back someone provided details on a contract that the words “in lieu of” in reference to pension/retirement were used. By that I mean instead of getting more compensation now that money can be deferred to increase the pension later. Every contract I’m aware of is larger than the previous one with raises across the board usually 2-4% per year so nothing is really “deferred” to retirement. I thought the total dollar value of the deferments are… Read more »
I agree with your take on the meaning of “in lieu of.” But, there’s at least one more thing to consider for some person to agree to that. After all, ones life span isn’t all that predictable when thinking decades into the future. So, its the rare person who will agree to to a lesser benefit only to have his later retirement benefit increased by that same amount and no more. My point there is that surely the one receiving an “in lieu of” benefit wants some degree of assurance that the ultimate benefit in retirement will be a bit… Read more »
If I’m not mistaken by having someone defer a few dollars per hour today that should at the very least increase the total contribution on which the pension is based. If they are not vested any contributions may be paid back in a lump sum. It’s like an exec who get stock options at a set price. They hope the value will be hire and the company does not go bankrupt. Question? Seems like the pension is based on the 4 highest earning years out of the last 10 but how does the total contributions factor in? Example. The person… Read more »
Its generally the case that public employees have slow-but-steadily progressive salary growth histories due to the COLA and salary step increases each year, meaning there is an overall sense of some fairness to the salaries in those highest last four years of employment. It would be a true rarity for a person in such employment to have a much lower-than-average earnings history for most of his career, then an explosively high salary average in those consecutive highest four years (out of the last ten) from which his pension is calculated. If you take the far more common salary-history experience I… Read more »
Thanks. The explanation is appreciated.
Example. The person works part time for most of their career because of family commitments and the spouse dies or they get divorced so the person then has to work full time. Contributions would be low due to part time status but much higher during full time years. How is the pension then calculated? The pension systems do not care how much you contributed or whether you worked full time or part time. Only those last 4 highest salary years and total years of service. Example: You work 30 years as a part-time art teacher. The school finally makes the… Read more »
That’s correct, I think. Two things are important to emphasize again: its the number of years of service spent in having contributed to the pension system through salary deductions and the highest-four-year-average salary of the last ten worked. Those who work, say, four-hour days for many-many years likely count as “full time” if the legally required number of work days has been met to count as a full-year of employment. If such a person works even a day less, then he/she likely loses any pension benefit accrual for that year. Both the salary and the corresponding pension system paycheck deductions… Read more »
If I’m not mistaken the 3% compounding starts even if you have not yet retired if the following criteria have been met. 20 years of service and age 55 if in tier 1and still working. If memory serves me correct this was in the transcript for the Omnibus Pension Bill 1989-Senate Bill 95 pages 326-333 with then Senator Shuneman speaking. I cannot seem to find the link with the back and forth but he was saying this will cost billions more down the road. He did not vote for this bill but it was an interesting exchange. Here is the… Read more »
“If I’m not mistaken the 3% compounding starts even if you have not yet retired if the following criteria have been met.” How would one receive a 3% increase to an annuity before they retire? This is from TRS. Nearly all annuitants receive a 3 percent annual increase in their annuities. You will receive the increase on the later of:Jan. 1 following your first anniversary in retirement orJan. 1 following the date you reach age 61. Sounds like after age 61 at the earliest. Also, the general public doesn’t decide these types of bills instead they elect the politicians that do. It… Read more »
I think I found the transcript. Click on #4 June 30,1989 starts on page 326 about the 3% compounding. Hope this works.
https://www.ilga.gov/Search/iga_results.asp?target=senate+bill+95&submit1=Go&scope=sentran86
If your first few sentences are true its news to me. It may apply to some IL public pension systems but not all as a guess on my part. Since legislators have to survive several elections for a lengthy career that may be a perk only for them, perhaps. PPF has just given essentially my concept of how it works.
Check out the above link. It seems that if the pensioner dies the spouse/survivor continues with getting the 3%among other things.It’s possible I misread the exchange. Sorry if I’m mistaken but there are a lot of details in that dialog. It is very interesting back and forth.
Our postings here were only a minute apart, so mine dealt with your immediately prior posting rather than the 3% compounded survivor’s annuity issue, and, yes, I know that to be the case.
This may pertain to the General Assembly only but who knows if it was expanded to others.
There is little constraint on what a legislature can’t do if pressured by teacher unions. Michigan provided lifetime health coverage for both teacher and spouse if the teacher accumulated 5 years of service and retired after age 60. I know of some families who have been getting teacher pensions of <$200 per month who have been getting free health coverage for 15-20 years. Just the thing that’s needed in Illinois to increase plan under-funding, assuming it hasn’t already been enacted. Please do not suggest this to Pritzker.
Rockford school district was #1 on the list with $3M in penalties so far. There was an article in the Chicago Tribune entitled Taxpayers socked twice-Pensions and Penalties a few years ago but I can’t seem to find that article. There was almost 2 pages on the top school districts and penalties they paid. The law clearly states that spiking is 6%/year legally if retiring after 2010 but many in Rockford and other districts were getting 15-20%. Where did the $3M in penalties come from? Taxpayers of course probably hidden in misc expenses. Here is another article from a while… Read more »