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New Pension Plan Would Shift Costs to School Districts, Increase Employee Contribution

Proposal would phase in additional costs to local districts over a period of years, increase retirement age for younger workers.

A new pension reform plan introduced Wednesday would alleviate the state’s $95 billion liability by requiring local school districts to pay more for teachers’ retirement benefits while increasing employee contributions.

Rep. Elaine Nekritz (D-Northbrook) unveiled the proposal on Wednesday, saying the plan would pay for the state’s entire unfunded liability.

But in Plainfield, at least one local official doesn’t think the proposal will find enough support to become a reality.

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“We have to have a pension that we can afford,” District 202 school board member Mike Kelly said. “Some of this has to happen.”

But, he said, “This would be just another … unfunded mandate,” noting that while local school districts would be responsible for footing the bill, the state would still have control over determining what benefits teachers receive.

Under the proposal, Kelly said, the cost of teachers’ pensions would shift over a period of 16 years, with local school districts taking on an additional .5 percent each year.

Meanwhile, employee contributions to the Teachers' Retirement System (TRS) would increase by 2 percent to 11.4 percent annually, and cost of living raises would decrease for retired teachers.

“[Cost of living adjustments] would only apply to the first $25,000 of the pension,” Kelly said.

The retirement age would also increase for younger workers, going up five years for employees under age 35, four years for employees ages 35-40 and one year for staffers ages 40-45. There would be no increase for employees over age 45.

Currently, teachers are eligible for full retirement benefits after 34 years, Kelly said.

It’s unknown how unions would respond to changes to workers’ retirement plans, although they have previously been vocal in their opposition to pension reform.

READ: TEACHERS RALLY IN PLAINFIELD TO OPPOSE PENSION REFORMS

The plan would also put employees hired since 2011 into a cash balance plan, which would give employees a minimum defined benefit but allow school districts to negotiate the costs with local unions.

“Thirty years from now, all that will be available to school districts in terms of offering in a pension would be a cash balance plan,” Kelly said.

Currently, he said, the TRS replaces Social Security for teachers.

“If we put a cash balance plan in place, we also have to shift these employees back over to Social Security,” he said.

Kelly said he thinks it’s unlikely the proposal will find significant support before a lame-duck session ends and the new General Assembly is sworn in on Jan. 9, 2013.

“They’re not going to get support for this,” he said. “At the end of the day, I don’t want to see them shift to something that is not going to be a really good benefit.”

Related:

  • Pension Foes Allied Against Constitutional Amendment
  • Madigan Puts Brakes on Pension Plan: School Board Members React

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