Illinois House and Senate Pass Competing State Pension Bills

State employees in Chicago and all over Illinois with retirement plan benefits will most likely experience some sort of change to the State pension system. The Illinois House passed S.B. 1, which is estimated to completely shore up the various pension funds’ $150 billion shortfall over the next 30 years. The competing Senate bill, S.B. 2404, is estimated to reduce the funds’ deficit by $50 billion, of the $150 billion, over the next 30 years. The less aggressive S.B. 2404 has union support and a vow by the unions not to challenge the bill, if enacted, as unconstitutional. The competing S.B. 1, on the other hand, may draw constitutional challenges if enacted.

Under bill 2404, current employees must select one of three retirement options:

• A 3% simple cost-of-living adjustment, have future salary increases accrue towards pensions, and receive continued access to retirement health care;
• A 3% compounded cost-of-living adjustment, have future salary increases accrue towards pensions, but sacrifice continued access to retirement health care; or
• A 3% compounded cost-of-living adjustment with a three-year delay, have future salary increases accrue towards pensions, and receive continued access to retirement health care, and pay an additional 2% of salary towards their benefits.

Under bill 1, there is no option to employees. The bill would require:

• An increase in employee contributions by 2% of salary;
• An increase in the retirement age, on a sliding scale based on the current employee’s age;
• Cost-of-living adjustments would be limited to 3% compounded, or $30 times the number of years of service, whichever is less; and
• Delay benefit increases until age 67 or 5 years after retirement

Whether the Illinois House and Senate will pass one of these bills, or compromise and reconcile the two, will likely unfold later this year. The question remains if there is a compromise bill, whether it would be challenged as unconstitutional. The Illinois Constitution prohibits any diminution in retirement benefits. Where under federal ERISA law, there is only a rule prohibiting a cutback on the actual accrued benefits, Illinois courts have construed this constitutional provision more broadly, making it apply to even unaccrued benefits for current employees.

If you have questions regarding your state pension, contact a reputable pension lawyer.