Governor Quinn has released his proposed outline for pension reform calling his plan the Public Pension Stabilization Act. There are no specific details of the plan available yet, just the basic concepts.
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 email@example.com.