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Answers to questions about pension overhaul
By John Patterson | Daily Herald Staff
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Published: 3/25/2010 9:16 PM | Updated: 3/25/2010 9:16 PM

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SPRINGFIELD - The sweeping overhaul of public pension systems approved by lawmakers is the single largest change to retirement plans in decades. The speed and sheer volume of changes are sparking questions from all ranks of public employees, as well as taxpayers across the suburbs and state.

Here are answers to some of the key questions based on information in the legislation, documents given to lawmakers, the House and Senate debates, and interviews:

Q. Who's covered by the changes?

A. A total of 13 public pension systems including all five state systems. They are:

Chicago Teachers' Pension Fund, Metropolitan Water Reclamation District, Cook County employees, Chicago municipal employees, Cook County Forest Preserve, Chicago Park District, Judges Retirement System, General Assembly Retirement System, State Employees Retirement System, Illinois Municipal Retirement Fund, Teachers Retirement System, Chicago laborers, State Universities Retirement System.

Q. Who's not covered?

A. Chicago and downstate police and firefighters and county sheriffs' pension funds across the state.

Q. Why aren't they covered?

A. House Speaker Michael Madigan, the Chicago Democrat who sponsored the changes, offered no specific explanation but noted if the other changes become law the police and fire pensions would be isolated, under added scrutiny and be the subject of separate discussions. Lawmakers are working on provisions that would address police and fire.

Q. What's the new retirement age?

A. A retiree is eligible to begin collecting a full pension at age 67 with 10 years of service. A reduced pension can be collected at age 62. The reduction would be roughly 30 percent. The new retirement age mirrors Social Security eligibility.

Q. What's the current retirement age?

A. There are circumstances in which people can retire at age 55.

Q. Is the pension percentage changed?

A. No. The maximum pension would still be 75 percent of the final average salary. However, the final average would be based on the highest consecutive eight years of the last decade of employment, rather than four.

Q. Does this limit pensions?

A. In part. For instance, a suburban superintendent after Jan. 1. 2011 and making $300,000 would have a pension based on $106,800. That amount - which is the maximum amount upon which Social Security taxes are applied - is the maximum pensionable income. The maximum would increase each year in an amount equal to half of the rate of inflation or 3 percent, which ever is less.

Q. What about cost of living pension increases?

A. Currently they are an automatic 3 percent and compounded. The new law limits adjustments to the lesser of half the rate of inflation or 3 percent and it is only applied to the original pension, not compounded each year.

Q. If someone maxes out the salary scale at 60 and has worked for decades, what is that employee supposed to do?

A. A Springfield lawmaker who has plenty of state workers in his district asked that question. The answer from a Madigan budget aide was the person is still free to retire, take another job and do whatever they want until age 67, at which point that employee could begin collecting a full pension.

Q. What about lawmakers?

A. Their pensions are changed too. The retirement age for lawmakers and judges would increase to 67 and pensions would be based on 60 percent of final average salary rather than the current 85 percent. Their pensions would be based on a maximum salary of $106,500. While most lawmakers don't make that, most judges make more.

Q. What about those in hazardous jobs like state police and prison workers?

A. They get a special pension system. But the law narrows who qualifies for the enhanced pension. After Jan. 1, only new prison guards, state police and state fighters will qualify. They'll be able to retire at 60 with 20 years of service. Currently, someone in this category can retire as early as 50 with 25 years experience.

Q. How much will this save taxpayers?

A. Early projections have pegged savings at more than $100 billion over the next 35 years. The state is 15 years into a 50-year plan to get the pension system up to 90 percent funding. That's why costs and savings are computed over 35 years.

Q. How much of that savings will be recognized now?

A. Gov. Pat Quinn's budget plan counts $300 million in pension reform savings.

Q. When does this take effect?

A. If signed into law, and Gov. Quinn says he will, it would apply to all employees hired after Jan. 1, 2011.

Q. If I work for the government or teach now, does that mean my I'll have to work longer in order to retire?

A. No. Those currently employed are not affected. They would continue on in the existing system. The changes likely won't show up in the workplace for decades. A 22-year-old college graduate hired to teach next year would be the first to face the prospect of having to work until age 67 to get a full pension in the year 2056. "None of it applies to anybody who works for a government today," Madigan said.

Q. What if someone leaves government employment for a few years and comes back after these changes are in place?

A. Supporters said those people would go back to the old system.

Q. Can retirees get another government job?

A. Yes, but they wouldn't be able to collect the pension and a salary. The initial pension would be suspended until the person retires from the second job. Then the person could collect both pensions.

Q. Would that apply to existing retirees or government workers?

A. No. All provisions begin with people hired after Jan. 1. Much of the impact of these changes will not become a reality for decades.

Q. Won't this hinder the ability to recruit quality teachers and government employees?

A. Supporters say it's still a guaranteed pension and still a pretty good deal in this economy.

Q. How does this compare to other states?

A. Union officials say it makes the state's retirement age among the highest in the nation and higher than neighboring states.

Q. Why didn't lawmakers change current employee pensions?

A. Some civic groups have claimed this can be done. But the Democratic leaders said their legal staffs concluded that would violate the state constitutional protections given to pension benefits. Regardless, such a change would immediately spark a lawsuit that, if successful, could send pension reform back to square one. A realigning of political planets, as witnessed this past week, could be difficult.

Keep in mind, the pension changes were pushed by Democratic leaders who have tended to be sympathetic to union issues.

"We're not interested in going through a tortuous legal situation," said Gov. Quinn. "We have to focus on what's doable."

Q. What does the Illinois Constitution say?

A. "Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."

Q. Why not change the constitution?

A. Doing so requires a 3/5ths vote in both the House and Senate and would then go before voters for ratification.

Q. When will the governor sign this into law?

A. Quinn wouldn't say at a Thursday news conference. He indicated his strong support but said he wanted to have the plan fully reviewed before putting his signature on it.

Q. Why did this happen so fast?

A. Sponsors and state budget officials pointed to the state's upcoming plans to borrow more than $1 billion to finance local construction projects. The state's credit rating was recently downgraded and they feared another downgrade, which would put Illinois in the same credit category as California and result in less favorable interest rates and possibly fewer projects getting funded.

Political observers also note that if this plan had been delayed, it's likely the unions that opposed it could have rallied opposition to block it.