Ending state government subsidies for retired public employee health insurance

(Senate Bill 1313, Sen. Jeffrey Schoenberg, D-Evanston; House Speaker Michael Madigan, D-Chicago)

This legislation ends the automatic 5 percent annual subsidy for state-run retiree health insurance costs that state employees accumulate during their careers in state government. Under the current law, a state employee who retires with a minimum of 20 years of service will have 100 percent of their state-run retiree health insurance costs paid by the state. The legislation requires all retired state employees to begin paying premiums for the state-run health insurance program beginning on July 1, 2012.

The legislation does not repeal any current laws governing the Teachers’ Retirement Insurance Program so it will not affect any retired teachers. The legislation does affect selected members of TRS who are employed by state agencies and are eligible for the annual 5 percent subsidy.

Status:
SB 1313: Passed the Senate 31-23 on April 13, 2011
Amended in the House with the bill’s current language on May 2, 2012
Pending on the Order of 2nd Reading (final amendment stage) in the House

Amendment to the Illinois Constitution Regarding Pension Benefit Increases
(House Joint Resolution Constitutional Amendment 49, House Speaker Michael Madigan, D-Chicago; senate President John Cullerton, D-Chicago)

This proposed amendment to the Illinois Constitution would require all legislation, ordinances, rules and resolutions that increase public employee pension benefits to receive a three-fifths majority vote of the governing body considering the proposal before it takes affect. The amendment would govern the actions of the General Assembly, county, township and city governments, school districts and special districts throughout the state.

To become part of the Illinois Constitution, amendments proposed in the General Assembly must receive a three-fifths majority vote in both chambers and receive approval from voters in the next general election, which is in November of 2012. Acceptance of the amendment by Illinois voters requires a three-fifths majority vote of those voting on the question or a majority of those voting in the election.

Status:
HJRCA 49: Passed the House 113-0 on April 18, 2012,
Passed the Senate 51-2 on May 3, 2012
The proposed amendment will be  on the November 6, 2012 general election  ballot

Creation of a Three-tier Retirement System for All Active Members
(Senate Bill 512, Rep. Tom Cross, R-Oswego; Senate President John Cullerton, D-Chicago)

This bill would change the benefit structure for active TRS members. The bill would end the current benefit structure for active teachers. The legislation allows teachers to accumulate and collect benefits from the existing benefit structure up through June 30, 2013. All TRS members would be required before July 1, 2013 to choose from three options for benefits that would begin on that date. Once a choice is made, the decision would be “irrevocable,” except if a member chooses to retain Tier I benefits. The options are:

• Tier I teachers could keep their current TRS benefit package, but in return the annual contribution by teachers to TRS would increase initially to 13.77 percent until 2015. Teachers electing to remain in Tier I would have to stay in Tier I until 2016. In 2016, the teacher’s contribution rate would be recalculated with any increase in the annual contribution capped at 2 percent. Tier I teachers would be allowed, if they choose, to switch to Tier II or Tier III. This “escape clause” will be offered every three years.
• Tier I teachers could switch to the Tier II structure and existing Tier II teachers can elect to stay in Tier II. In each case, a teacher would not be eligible for full retirement benefits until age 67. It is estimated that Tier II benefits will be 30 percent less than benefits for a Tier I teacher if final average salary and creditable service time for both are equal. The teacher contribution rate for all Tier II members would be at least 6 percent.
• Tier I and Tier II teachers could switch to a new Tier III option – a 401(k)-style defined contribution benefit plan. Teachers would pay 6 percent of their salaries or more, if they choose, under this plan and the state would contribute 6 percent.

Two financial analyses of Senate Bill 512 have been conducted indicating that the legislation will not save the state money during the next decade in order to realize long-term savings. Also, the analyses concluded that the only way to generate long-term savings would be to eliminate an existing pension benefit for current teachers. The cost increases are the result of Senate Bill 512 interacting with and affecting existing pension laws.

An initial cost-benefit analysis conducted by TRS during the summer of 2011 revealed that Senate Bill 512 would raise state costs by $62.3 billion over 34 years; due mainly to higher pension benefits owed to TRS members that remain in Tier I. The bill was revised by sponsors to eliminate the existing pension law that led to the higher Tier I benefits, and a subsequent financial analysis calculated a savings to the state of $47.9 billion over 34 years. However, this analysis said in order to realize these long-term savings, the bill would force state contributions to rise by an extra $1.97 billion over the next seven years. This increase over seven years is caused by an existing state law that requires the state to fund TRS sufficiently so that the System’s unfunded liability is eliminated by 2045.

Status:
SB 512: Passed the Senate as a “shell bill” on March 30, 2011. The original bill was approved by the House Personnel and Pension Committee on May 26, 2011. The revised bill was approved by the same committee on November 8, 2011. Held on the House Floor; Order of 3rd Reading.

Changes to Post-Retirement Work Rules
(Senate Bill 3168, Sen. Terry Link, D-Lincolnshire)

This bill does two things: It prevents school districts from hiring multiple people who are retired and receiving a TRS pension to fill a single teaching or administrative position that otherwise would have been filled by one person, unless the district receives an exemption from the Illinois State Board of Education. The exemption can be granted if the ISBE finds there is a shortage of teachers or administrators for a specific position.

The bill also allows retired TRS members to accept full-time employment in any school district and keep their pension if the salary for that job is less than $30,000. The retired member would not have to follow the current working limits of 100 days or 500 hours in order to keep a TRS pension.

Status:
SB 3168: Passed the Senate on March 28, 2012. Pending in the House Rules Committee.

Limitations on TRS Membership for Employees of Statewide Teacher Organizations
(House Bill 3813, Rep. Tom Cross, R-Oswego; Sen. Kwame Raoul, D-Chicago)
(House Bill 3815, Rep. Karen May, D-Highland Park, Sen. Kwame Raoul, D- Chicago)
(House Bill 3865, Rep. Jack Franks, D-Woodstock; Sen. Susan Garrett, D-Lake Forest)

Under House Bill 3813, any officer or employee of a statewide or national teacher organization who is a TRS member can only claim service time toward his/her pension from the day he/she became a TRS member. The bill voids a previous state law that allowed some TRS members employed by statewide teacher organizations to claim service time with the organization built up prior to becoming a TRS member.

Under House Bill 3815, an employee of a statewide or national teacher organization who becomes a TRS member after the effective date of the act and is granted a leave of absence without pay from that organization cannot use that leave of absence in computing a pension.

Under House Bill 3815, the employees of statewide or national teacher organizations must be TRS members prior to the effective date of this act in order to have their employment service in that teachers organization count toward their TRS pensions. The bill also makes any TRS member whose membership is based only upon substitute teaching and employment service in a teacher organization ineligible for a TRS pension.

Status:
HB 3813: Passed the House on October 27, 2011. Amended and passed the Senate on November 10, 2011. House concurs with the Senate amendment on November 29, 2011. Signed into law by the Governor on January 5, 2012; Public Act 97-0651.
HB 3815: Passed the House on October 27, 2011. Amended and passed the Senate on November 10, 2011. Pending in the House Rules Committee.
HB 3865: Passed the House on November 9, 2011. Pending in the Senate Committee on Pensions & Investments.

A Cap on the Amount of a Member’s Salary Used in Calculating a Pension
(House Bill 146, Rep. Jack D. Franks, D-Woodstock)

This bill places a cap on the amount of a TRS member’s salary that can be used annually in the final calculation of a TRS pension. For 2011, the cap is $106,800. In 2012, the cap is $110,100. The cap will be increased annually by the lesser of 3 percent or one-half of the annual percentage increase in the Consumer Price Index for the preceding year. Example: For a TRS member earning $120,000 annually, the employing school district would report only $110,100 to TRS for that year and that amount would be the one used in the final pension calculation, if applicable. The TRS member would only pay contributions to the System for $110,100.

Status:
HB 146: Held in the House Rules Committee.

Pension Funding and Fairness Act
(Senate Bill 36, Sen. Matt Murphy, R-Palatine)

This bill requires state government every year to pay a contribution to the state’s public pension funds that is determined to fulfill current and future obligations before any other government program is funded. The bill also places a cap on the annual increase in state spending that is tied to inflation and requires an extraordinary majority of the General Assembly to pass and a voter referendum to become law each time legislators to exceed the cap.

Status:
SB 36: Held in the Senate Committee on Assignments

Creating an Optional 401(k)-style Supplemental Retirement Plan
(House Bill 1325, Rep. Greg Harris, D-Chicago)

This bill gives TRS and the other state pension funds the authority to establish optional “alternative” pension plans, such as defined contribution plans similar to 401(k) plans. Teachers and other public employees would decide whether to participate in the plan. Any alternative pension plan would exist side-by-side with the current TRS defined benefit pension plan in addition to the current retirement plan. The State Universities Retirement System already operates an “alternative” plan alongside its defined benefit pension plan.

Status:
HB 1325: Held in the House Rules Committee

Requiring School Districts to Pay a Greater Share of Teacher Pensions
(State Senate President John Cullerton, D-Chicago)

This proposal would require all school districts outside of the city of Chicago to pay a greater share of the cost of pensions for TRS members. Currently active teachers, school districts and state government split the cost of what is owed this year to retired TRS members, as well as the cost of benefits for future retirees. These contributions are supplemented by TRS investment income. The proposal would not affect teacher contributions, but would require school districts to pay a greater share of the pension cost due this year, alleviating the state from paying current costs. The state would be responsible only for the future future cost of TRS pensions. Early estimates indicate that annual school district contributions would rise from a total of $171 million per year to more that $700 million per year, while the state’s annual contribution would drop from $2 billion to $1.3 billion.

Status:
Proposal: No legislation has been filed in the General Assembly.

Post-Retirement Employment Limitations on “Team Teaching”
(Senate Bill 3375; Rep. Kevin McCarthy, D-Orland Park; Sen. Terry Link, D-Lincolnshire)

The bill requires all school districts to seek an exemption from TRS if it wishes to hire multiple retired TRS members to serve part-time in a “team teaching” position in lieu of one full-time teacher who would be an active TRS member. In order to receive an exemption, the school district would have to prove that there is a shortage of teachers or administrators available to fill the position with one full-time person.

Status:
HB 3375: Passed the House on April 12, 2011. Passed the Senate on November 29, 2011. Pending in the House Rules Committee.

Post-Retirement Employment Limitations
(Senate Bill 2279, Sen. Kwame Raoul, D-Chicago; House Bill 1072, Rep. Sandra Pihos, R-Glen Ellyn)

This bill would have extended longer post-retirement employment limits for retired Tier I TRS members until 2021. The longer limits expired on June 30, 2011. Under those rules, retired Tier I members could work in a TRS-covered position for 120 days or 600 hours per year and not lose TRS benefits. The new limits are 100 days or 500 hours. In any case, a retired member’s benefits are suspended if the cap is exceeded.

Status:
SB 2279: Passed the Senate on April 15, 2011. Held in the House Rules Committee.
HB 1072: Tabled in the House.

Extending the 6 Percent Salary Increase Threshold
(Senate Bill 2187, Sen. James Clayborne, Jr., D-East St. Louis)

This bill would have extended the current exemptions authorized for the 6 percent threshold on TRS member salary increases until 2016. The exemptions were not extended by the General Assembly and expired on July 1, 2011. Under the law, for any salary increase granted to a TRS member that is greater than 6 percent, the employing school district must reimburse TRS for the added cost of future pension payments calculated for the salary amount above the 6 percent threshold. The exemptions to the threshold included salary increases for summer school duty, promotions to different certifications, class overload and salary payments that a school district has no control over, such as a federal or private award.

Status:
SB 2187: Held in the Senate Committee on Assignments.

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