04/9/2014
Caitlin Wilson
After a lengthy back-and-forth about specifics in Chicago’s MEABF and LABF pension reform bill, SB 1922, some updates to the bill have become available, according to a summary of the Chicago pension bill by House Speaker Michael Madigan’s spokesman Steve Brown.
The summary says:
The General Assembly finds the financial condition of all of the city pension funds, including MEABF and LABF, requires a combination of benefit modification and additional City funding to insure solvency. The General Assembly finds that, unless reforms are enacted, benefits currently promised are at risk.
Major adjustments to the pension fund plan include a lower retirement age for municipal employees and city laborers hired before and after the Jan. 1, 2011 Tier 1 and Tier 2 demarcation and an adjustment to Cost of Living Adjustment, or COLA, additions to regular pension payments.
Retirement Age
Retirement age will move from 67 to 65 for city employees hired after Jan. 1, 2011 (Tier 2). Retirement age for employees hired before 2011 (Tier 1) will not change.
COLA
COLA, or Cost of Living Adjustment, will no longer be a three percent compounded addition to payments every year. Instead, the COLA added to yearly payments will be one-half of the Consumer Price Index-Urban, or a simple three percent increase, whichever is lower. This change applies to current and future retirees.
(b-5) Beginning on January 1, 2011, for all purposes under this Code (including without limitation the calculation of benefits and employee contributions), the annual earnings, salary, or wages (based on the plan year) of a member or participant to whom this Section applies shall not exceed $106,800; however, that amount shall annually thereafter be increased by the lesser of (i) 3% of that amount, including all previous adjustments, or (ii) one-half the annual unadjusted percentage increase (but not less than zero) in the consumer price index-u for the 12 months ending with the September preceding each November 1, including all previous adjustments.
Also:
Each annual increase shall be calculated at 3% or one-half the annual unadjusted percentage increase (but not less than zero) in the consumer price index-u for the 12 months ending with the September preceding each November 1, whichever is less, of the originally granted retirement annuity. If the annual unadjusted percentage change in the consumer price index-u for the 12 months ending with the September preceding each November 1 is zero or there is a decrease, then the annuity shall not be increased.
In addition, Tier 1 employees will not receive a COLA addition to their yearly payments in 2017, 2019 and 2025, except for retirees who receive less than $22,000 yearly. They will get a one percent COLA during the skip years. Tier 2 employees’ COLA additions will skip 2025. All COLAs will have a one-year delay.
Contribution
By 2019, all employees will be contributing 11 percent of their annual salary to their pension fund, instead of the current 8.5 percent. The percentage of salary contributed will increase by 0.5 percent every year from 2015 to 2019. The extra funds collected will be applied to employees’ retirement annuity.
From 2016 to 2020, the city will contribute to employees’ pension funds based on a multiplier schedule. In 2016, the city will pay 1.85 times the total contribution of municipal employees toward the fund and 1.6 times the contribution by laborers. By 2020, the city will contribute 3.05 and 2.8 times the total contribution of municipal employees and laborers, respectively. After 2021, they will contribute an amount based on an approved actuarial schedule with the goal of reaching 90 percent funding by 2055.
Other Provisions
Using pension funds to pay healthcare costs is prohibited until 2017.
If the city fails to pay
If the city fails to pay the required amount into the pension fund, the State Comptroller will contribute to the fund and deduct the contributing amount from state grants to the city (or 1/3 of state grants in 2016 and 2/3 of state grants in 2017). The fund may also bring legal action in the Circuit Court of Cook County, which can set a pension fund payment schedule for the city, if the city does not pay by Dec. 31 of a payment year.
These updates come after contentions about language outlining a property tax increase for Chicago homeowners, mostly backed by Mayor Rahm Emanuel. State legislators were wary to move the bill forward with such language included and Gov. Pat Quinn also expressed concern at its inclusion. The provisions have been removed from the most updated version of the bill.
Chicago Mayor Rahm Emanuel removes property tax language from pension reform bill
Tempers flaring over Emanuel’s pension reform bill
Chicago’s pension reform bill goes to Springfield
How did the pension crisis get here? A history of retirement in the U.S.
Want to tell your elected officials what you think about pension reform? Use our Sound Off tool.