University of Illinois Chapter State Universities Annuitants Association

Legislative Affairs

One of the main missions of the State Universities Annuitant's Association (SUAA) is to keep state officials, members of the General Assembly, other governmental officials and their staffs informed about issues affecting the benefits earned by higher education employees and retirees. The document below has been prepared by the Legislative Affairs Committee of the Urbana-Champaign Chapter of SUAA to outline our position on a variety of key issues likely to arise in 2011 and to provide facts to support our positions. The document can be used by any SUAA-UIUC members who find opportunities to visit with state policy makers on these or other issues.

SUAA-UIUC SPRING 2013 Legislative Update

Pension Reform

Pension reform remains a priority issue before the Illinois State legislature. Down-grading of Illinois’ credit rating in mid-January due to continued inaction on a pension funding plan only served to heighten the visibility of Illinois’ last-in-the-nation pension funding status and the importance of reaching agreement to begin the long-term process of improving pension funding. It is likely that specific and comprehensive pension reform legislation will be acted upon in the very near future. Accordingly, it is imperative that you voice your concerns to state lawmakers and key public officials and impress upon them that most SUAA retirees do not receive Social Security. Several measures are being debated and acted upon by the Legislature.

Senate Bill 1 is a pension reform proposal from Senate President Cullerton. Senate Bill 1 is unusual in one respect: it is configured in two parts – the first is preferred actions on pension reform which would apply reform Cost-of -Living and Health Insurance options, while the second provides alternative actions intended to go into effect immediately if any portion of the first part were subsequently ruled unconstitutional after implementation. Including a remedy against Constitutional validity is unusual if not unique. An amended version of SB 1 (A#3), which covers only active teachers in the Teacher’s Retirement System (TRS), passed the Senate on March 20, 2013. SB 1544 as amended, (A#3) would apply to university employees, state employees, and legislators (SURS, SERS and GARS) and while it was not voted on by the Senate before the recess, it remains on the calendar for consideration and incorporates many of the features of bipartisan legislation introduced by Senator Biss (SB 35) as well as features in HB 98.

Three significant bills have passed the House to date including HB 1165, as amended (A#6) which was approved on March 21, 2013. This bill would cap annual cost of living increases at $750 or 3 percent, whichever is less. (This provision effectively limits cost of living raises to only the first $25,000 of annual pension income). The other two bills (HB1154 (A#10) and HB 1166 (A#6) were also amended) would raise the retirement age and cap pensionable incomes at $113,000. The bipartisan Nekritz-Cross bill (HB 3411) was not voted on before the recess but remains on the House calendar. The descriptions of the provisions of all pension related legislation can be found on the SURS web site (www.surs.org) by clicking the “legislation” button.

In summary, the following pension-change measures (in most instances the COLA changes would apply to retirees) are being considered or have been included in some form in the legislation referenced above:

• Cost-of-living increases delayed until age 67 (or 5 years after retirement)

• Cost-of-living freeze for the next five to six years

• Limit on cost-of-living increases to the first $25,000 - $20,000 if a person is a SERS (State Employees Retirement System) retiree who receives Social Security due to contributions made to Social Security through their State employment

• A 2% increase in contributions by employees phased in over two years with a guarantee that the State would make its required contribution

• Phased-in increase in retirement age for employees younger than 45 for those hired before January 1, 2011

• Cost shifting to local school districts and employers

• Basing an employee's pension on his or her salary or the wage base for Social Security, whichever is lower

• Requiring certain amounts to be transferred from the State's general revenue fund to the pension stabilization fund - if the State tries to skip payments, the retirement systems could go to court to enforce the law

• A cash balance plan would be created for employees who began work after January 1, 2011 or referred to as "Legacy Tier II participant" - a new cash balance plan participant is a person hired on or after July 1, 2013

• The deletion of tying the cost-of-living allocation to health insurance remains in place

SUAA Survey

Given the increasing likelihood that some element of pension reform will happen in this spring’s legislative session, the statewide SUAA organization briefly surveyed its members in late January to gain insight into members’ views. Results of the survey and any actions taken by the SUAA organization are available on the state web site (www.suaa.org).

Health Insurance Premium Changes

At the time of this writing no new information was available on cost changes for retiree health insurance. Public Act 97-0695 which became effective July 1, 2012 and applies to the rates public employees, including those in higher education, will pay for state provided health insurance coverage for both themselves and their dependents. The Director of Central Management Services is authorized to establish the rate schedule which then must be submitted to the State’s Joint Committee on Administrative Rules (JCAR) for approval before implementation can occur.

Much work remains to be done by lawmakers before a consensus pension reform bill can be agreed upon by the House and Senate. Accordingly this is a critical time for all to communicate our positions to key policymakers. As a reminder, most of our retirees (SUAA) do not receive any Social Security. For your benefit our position statement and fact sheet are included in our website which can be accessed at www.suaa-ui.org. We hope this information is helpful and we thank you for your commitment and support.

Note: The SUAA-UIUC Executive Committee is sending this update by mail to our members who have not shared an email address with us. As noted throughout this Update, the SUAA statewide association shares its information to the membership of all Chapters by email, which is both much faster and more cost effective. While SUAA-UIUC may make additional mailings to those members without an email address on file, we strongly encourage you to share an email address for you if at all possible by sending it to www.suaa-ui.org.

 

2011-2012 UIUC-SUAA Legislative Position Statement and Fact Sheet

Key Discussion Points

Achieving fiscal stability as soon as possible is the most critical step for Illinois state government.  No effective long-term planning or progress is possible without stability.

No single mechanism is sufficient to achieve fiscal stability.  A combination of budget cuts, budget reform and new revenue measures is required.

Higher Education is critically important to economic growth for Illinois, both in terms of delivering a technologically sophisticated work force and in generating new business growth via commercialization of university-based research and development.

Competitive benefit programs are essential to attract and retain faculty and support staff to sustain higher education’s role in economic development.

Current retirement programs for higher education are not overly generous.  

New retirement provisions enacted hastily last spring likely will significantly worsen competitiveness and will add cost pressures on institutions which must replace lost benefits to stay competitive.

University leaders and retirees must work together to address benefit issues.

Illinois worst-in-the-nation pension deficits are attributable to decades of under-funding by the state failing to make the employer share for the program.  Employees have paid every penny required of them, and SURS investment earnings have exceeded benchmarks.

Retirement Data:  What Do the Numbers Tell Us?

  • Between 1998 and 2008 SURS participants contributed $2.64 billion to SURS, as required by law.  During the same period the State contribution was $1.2 billion less than required by law.  (Source:  UIC Action)
  • SURS participants total just over 205,000 with 45,000 retirees and almost 160,000 not yet drawing retirement.  It is the state’s failure over many years to set aside funds for the future pension payments to these employees still in the “pipeline” that has created the severe funding crisis now requiring much larger allocations.
  • The typical SURS employee retires at age 62 with 20 years of service and a pension of $31,300.  (Source:  SURS presentation to SUAA-UIUC.) 
  • More than three-quarters (78%) of SURS retirees live in Illinois.  For the five Illinois public pension systems in total, more than 150,000 pension recipients live in Illinois and in total receive pensions of more than $4 billion.  With an economic multiplier of 1.5, this means that public pension recipients generate $6 billion in economic benefit for Illinois each year. 
  • SURS participants are prohibited from receiving Social Security coverage for their state employment, and those who qualify for Social Security due to other employment receive severely reduced benefits upon retirement.  SURS is the only or by far the major pension benefit for all SURS participants. 
  • The top 100 SURS pensions, which news media and others use to illustrate the “lavish” public pensions represent 2/10 of one percent of the total number of SURS pensions.
  • SURS has been forced to sell $1.2 billion more in assets than anticipated so far in FY2011 just to meet retiree payout requirements for the current year.  So now, the State’s failure to pay its share has directly damaged the good work accomplished by SURS investment management.
  • For at least four decades, peer institutions with which the UI competes for faculty and staff have spent more on pension benefits for their employees than has the state of Illinois.  The vast majority of peer institutions offer a “Social Security Plus” retirement program in which the employer share of Social Security is a mandatory annual payment and annual contributions to supplemental retirement programs are made regularly.

SUAA-UIUC Legislative Affairs Committee

November 2011



Last Updated on March 29, 2013
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