The Governor is proposing a new pension plan that will include the following:

• Extend the retirement age to 67
• Delay the start of the COLA
• Reduce the COLA to the lesser of ½ the increase in CPI or 3%
• No pensionable salary cap
• Increase your contribution from 9.4% to 12.4%

You can find the full list of the items in the Public Pension Stabilization Plan by clicking here.

The benefit formula will remain the same as it exists today. If you choose not to move into the new plan, your plan will remain the same with the exception that no future raises will be considered in your pensionable salary calculation.

This plan does not apply to tier 2 teachers, those hired on or after January 1, 2011. The plan would also shift more of the funding obligation from the state to the school districts.

The Governor reiterated his resolve to complete pension reform before the end of the general assembly. The Governors’ urgency is driven by the fact that the Wall Street bond rating agencies have told the governor that if the public pension plans are not reformed this spring, the state’s bond rating will be dropped 2 notches, making the states’ debt below investment grade.

The ranking house and senate members from both parties support the governor’s proposal, with the exception that the republicans do not favor shifting more of the funding obligation to the districts, a move they view as an inevitable property tax hike. The governor says his plan will work with or without the school districts participation.

We will continue to update you on pension reform as it unfolds. In the meantime, take a look to see what pieces of your retirement plan you can start working on today. A good place to start is what your expected income and expenses will be in retirement. Even without any changes to TRS, it is likely you may not have enough income in retirement to meet your expenses.

We have resources available to help you in that process and can design a plan to get your retirement back to what you were expecting.

Hopefully you found this update helpful. If you have any questions, feel free to call us at 847-387-8711 or send us an email us at twedell@securapartners.com.

Senate President John Cullerton has done an about-face on pension reform – in the past he has stated that pension reform is unconstitutional where as now he states that pension reform can be done constitutionally. His idea is to first shift some of the liability from the state to the school districts. Second, he says the teachers would have to elect to reduce their benefit or increase their contribution – in particular he mentioned the cost of living adjustment as one area to consider. Then the state would guarantee is annual funding.

It is also noteworthy to take a look at what TRS is saying. The executive director Dick Ingram and the board of trustees put out a memo recently saying:

“The fiscal situation of the State has deteriorated to the point that the Board no longer has confidence that the State will be able to meet its existing funding obligations to TRS. As a result, the Board believes that action must be taken now to ensure the continued solvency and viability of the plan.”

There is a lot of pressure being put on by the Politian’s to get something passed by the end of this general assembly before the state’s $5 Billion dollar contribution is due in June. The bulk of the negotiations are focused on the funding issue and how the annual contribution will be split between the state and the school districts. We believe the benefit provisions will look very similar to SB512.

We will continue to update you on pension reform as it unfolds. In the meantime, you can take a look at one of our resources designed to help teachers put money back in their pocket.

This resource is our no cost tax review that identifies if you are missing deductions uniquely available to educators. In the 20 years we have been serving teachers, we have found that over 90% of teachers overpay the IRS by $2-$5,000 per year.

Call us for a no-cost review. It’s free, and there’s a 90% chance that we can recover a substantial amount of money for you.

I hope you found this update to be helpful. Thank you for visiting the SeCura partners teacher resource center.

Governor Quinn as asked both parties to form a panel to agree to the resolution of the “pension problem.”  The governor said it is time to resolve the pension issue “once and for all.”

The governors’ pledge comes just as the state’s credit rating has been lowered once again by Moody’s, a bond rating agency.  The primary reasons cited for the downgrade are the unfunded pension liability and the increasing annual pension funding required by the state along with the inaction of the Illinois legislature in reforming the states’ pension plans.  The state’s low credit rating (the lowest of all states) makes it difficult and expensive for the state to issue bonds for financing projects and managing the state budget.

Also noteworthy, Senate President John Cullerton has decided to take an active role in pension reform.  Previously Cullerton’s position has been that any pension reform would violate the Illinois Constitution.  Cullerton said recently that the current proposal (SB512) would be a workable solution with union agreement.

Finally, The Illinois Education Association has recently formed a task force to formulate a pension reform alternative to bring to the negotiating table.

There has been a noticeable movement by stakeholders resolving that there will be pension reform soon.

For more information about pension reform and what you can do to minimize any impact it will have on your retirement, visit the Teacher Resource Center.

Also, be sure to view our “SB512 Impact Calculator” to see exactly how pension reform will impact your retirement.

You need to take action now whether you plan to retire in 2 years or 25 years.  If you don’t, you will be letting the politicians and state government make your retirement plan for you.

SeCura Partners has designed a retirement plan specifically for teachers.  Our plan makes sure you get the retirement you thought you were getting, regardless of pension reform.  Contact us today so we can help you.

•Increase the amount you set aside for next year in your employer’s health flexible spending account (FSA).

•Review your investments to optimize capital losses and long-term capital gain tax rates. It may be advisable for us to meet to discuss year-end trades you should consider making.

•Consider converting traditional-IRA money invested in beaten-down stocks into a Roth IRA if eligible.

• If you converted assets in a traditional IRA to a Roth IRA earlier in the year, the assets in the Roth IRA account may have declined in value, you will end up paying a higher tax than is necessary. You can back out of the transaction by transferring the Roth IRA back to a traditional IRA.

•Consider using a credit card to prepay expenses that can generate deductions for this year.

•If you expect to owe state and local income taxes when you file your return next year, consider asking your employer to increase withholding of state taxes (or pay estimated tax payments) before year-end.

•Estimate the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2011.

•If you are a homeowner, make energy saving improvements to the residence, such as putting in extra insulation or installing energy saving windows, or an energy efficient heater or air conditioner. You may qualify for a tax credit if the assets are installed in your home before 2012.

•Unless Congress extends it, the up-to-$4,000 above-the-line deduction for qualified higher education expenses will not be available after 2011. Thus, consider prepaying eligible expenses if doing so will increase your deduction for qualified higher education expenses.

We can narrow down the specific actions that you can take after assessing your particular situation. You can contact us to set up a time to lay out which tax-saving moves make the most sense for you.

House minority leader Tom Cross introduced amendments to SB 512 on November 7, 2011. The amendments largely correct some technical issues in the original proposed legislation. The amendments were, in part, designed with the help of TRS, in order to address concerns and unintended consequences identified by TRS. Below is a summary of the provisions that specifically impact teacher pension benefits.

• The effective date of the legislation will be July 1, 2013.

• The due date of your irrevocable election is January 1, 2013.

• The Tier I pension contribution will increase to 13.77% on July 1, 2013 and remain at that level thru June 30, 2016.

• The Tier I pension contribution will increase by a maximum of 2 percentage points to 15.77% on July 1, 2016. The maximum Tier I pension contribution is capped at 15.77%.

• The maximum salary for purposes of pension calculations will be set at $110,100 as of July 1, 2013. This salary cap will be indexed for inflation annually.

• Teacher contracts that require a school district to pay teacher pension contributions will be required to be re-negotiated on the issue of who will pay increased teacher pension contributions.

What does this all mean to you? It means you need to take action now whether you plan to retire in 2 years or 25 years. If you don’t, you will be letting the politicians and state government make your retirement plan for you.