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SPRINGFIELD, Ill.—Illinois Gov. Pat Quinn last week announced a reform proposal for the state's five retirement systems that includes increases in employee contributions and the retirement age.
The Public Pension Stabilization Plan, which maintains the existing defined benefit plans, would replace the current statutory funding schedule, with a 30-year “closed” actuarially required contribution.
The five pension plans have a combined unfunded liability of $83 billion, according to the governor's office.
Other parts of the proposal include a 3-percentage-point increase in employee contributions and an increase in the retirement age to 67, to be phased in over several years. Current employee contributions for state employees range from 4% to 12.5%, with an average of 5%; university employees range from 8% to 9.5%; and teachers' contributions are 9.4%, according to a spokeswoman for Gov. Quinn.
“Unsustainable pension costs are squeezing core programs in education, public safety and human services, in addition to limiting our ability to pay our bills,” Gov. Quinn said in a statement. “This plan rescues our pension system and allows public employees who have faithfully contributed to the system to continue to receive pension benefits. I urge the General Assembly to move forward with this plan, which will bring a new era of fiscal responsibility and stability to Illinois.”
The plan also would phase out the state's responsibility for pensions paid to retirees from local school districts, community colleges and public universities, which the governor's office says now accounts for 78% of the state's pension costs.
Gov. Quinn on Feb. 22 committed to making the statutory $5.2 billion contribution to the five state retirement systems for fiscal 2013, beginning July 1, which makes up 15% of the state's general revenue fund spending for that year, according to a news release.
The five pension plans are the $36 billion Illinois Teachers' Retirement System; the $13 billion Illinois State Universities Retirement System; and the three retirement systems whose combined $10.3 billion in assets are overseen by the Chicago-based Illinois State Board of Investment — Illinois State Employees' Retirement System, Illinois Judges' Retirement System, and Illinois General Assembly Retirement System.
Gov. Quinn said he wants the General Assembly to consider his proposal before it adjourns on May 31.
Rob Kozlowski is a reporter for Pensions & Investments, a sister publication of Business Insurance.