TRS of Illinois

Legislation and Issues

Requiring Retired State Employees to Pay Health Insurance Premiums

Issue: On June 21, 2012, Governor Pat Quinn signed legislation that requires all current and future retired state employees to pay health insurance premiums, just as retired teachers have for decades. The new law is Public Act 97-0695.

Discussion: This law will not have a dramatic effect on the vast majority of TRS members who are in the Teachers Retirement Insurance Program because retired TRIP members already pay insurance premiums. Only about 1,200 TRS members will be affected by the bill, mostly certified teachers who work for state agencies and the Illinois State Board of Education.

The law will set up a “sliding scale” for premiums based on several factors, including retirement income and years of service. The Department of Central Management Services will determine premium levels.

TRIP members already pay health insurance premiums in retirement, depending on where they live and what coverage they select. The average premium for a TRIP member in FY 2014 is $296 per month and the average premium for dependent coverage is $857 per month. Sixty-one percent of TRIP funding now comes from active and retired members – 42.7 percent from retired members and 18.5 percent from active teachers. The remaining 38.8 percent of the cost is paid by the state (18.8 percent), school districts (13.9 percent), Medicare (5.3 percent) and other sources (3.7 percent).

This law makes the other state retiree health insurance plans more like TRIP in the way it’s funded. Under a law enacted in 1997, state employees who have 20 years of service did not pay premiums in retirement for health insurance. Retiree health insurance costs the state $880 million a year and 90 percent of retired state employees do not pay any premium.

An Illinois circuit court ruled in 2012 that health insurance plans for retirees are not protected by the Illinois Constitution’s pension protection clause because health insurance benefits are not a retirement benefit and are negotiated by state officials and organized labor.