Governor Pat Quinn’s working group seeks to address the $85 billion in pension debt by lowering the pension benefits but increasing the contribution rate. In exchange, the state would guarantee that it will meet all its funding obligations.
According to the proposal submitted, the pension costs of teachers and university employees would shift from the state to the school districts and universities. With this, universities will be forced to find ways to increase the contribution rate of their immediate districts. However, the proposal is not in a formal legislation and would only act as a list of recommendations.
The proposal by the working group is in direct opposition to another proposal made last year by Congressmen who have indicated the need to hire more workers and to create a 401 (k)-style contribution system.
Although no confirmations have been made yet, the Labor sector continues to seek guarantees of the state making prompt payments into the system in order to meet all funding obligations. It has been known that skipping and/or underfunding pensions have been the main reason for the current bulk of pension debt. Therefore to resolve the issue of debt, legislators must consider its roots.
A 1995 law mandates the State to make pension payments based on a schedule outline in order to bring the funding up to 90 percent by 2045. However, lawmakers have adjusted the said law to allow the skipping of pension payments.
But Representative Elaine Nekritz of D-Northbrook is not convinced that a legislation following the proposal made by Governor Pat Quinn’s working group will ever pass. Nekritz says that voters may not be very supportive of any law that would require the state to make the contribution. This is because if the state fails to make the pension payments, state tax money for the local agencies would be garnished. And that would lead to poor government services in a specific state.
Governor Quinn says that it is urgent that the issue on pension funding be addressed within the year and hence, formed his own working group. The decision of the Senate will be released in a week or so but for now, there has been talk that legislation will be drafted based on the work done by the said working group. If it will be exactly as the proposal has, there is no clear answer yet.
What happens if the pension debt is not resolved soon?
If the pension debt is not resolved soon, it would lead to more and more retirees not getting what is due them after years of working. If workplace pension schemes are in place, this means that employees are given shares that would potentially have more returns than a savings account.
Ideally, the amount you get upon retirement must be based on how much is paid and how well the investments have performed. Upon retirement, you can take some of your pension as tax-free cash.
Your right to pension should never be taken for granted. It is as important as workers’ compensation while you are still employed.
For questions regarding the legal technicalities of workers’ compensation and pensions, call John Fox & Associates at (504) 891-3303.