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State Representative Daniel Biss (D-Evanston) announced today, April 16, several initiatives aimed at addressing the state’s pension crisis. Among his proposals are two pieces of legislation: one that puts in place a new type of pension system for future employees and one that offers new options for current employees. Biss will convene a town hall meeting to discuss these proposals and other pension solutions onApril 30, 2012, at the Glenview Police Station starting at7:00 p.m.
House Bill 6149, filed by Rep. Biss this month, would establish a cash balance plan for future public employees. A cash balance plan is a type of defined benefit plan in which benefits are tied closely to contributions and investment returns, the risk is shared between the state and the employee, and costs are predictable.
“The state has demonstrated a clear inability to properly manage traditional defined benefit plans,” said Rep. Biss. “Some have therefore suggested we switch to a 401(k)-type system, but the transition would threaten the solvency of our current pension fund. Furthermore, it would eliminate any guaranteed benefit for the majority of public employees who will not receive Social Security. A cash balance plan, however, provides that minimum benefit for everyone, but in a much more manageable and cost-effective way for the state.”
House Bill 6150, also filed by Rep. Biss this month, creates a Benefit Buyout program for current employees, giving them an option to forgo future benefits for an immediate cash payout. Current employees could choose to increase their retirement age either two or seven years, or choose to forgo their cost of living adjustment (COLA). Actuaries would then calculate the savings to the state and the employee would get an immediate check for one-third the savings.
“Research shows that some employees value immediate compensation more than they value deferred compensation,” Rep. Biss said. “We’re saddled with a huge unfunded liability and there are people who would rather receive some of that compensation now. This plan would give them the option to take that compensation while saving the state money, making it a tremendous win-win cost-saving opportunity.”
HB6149 and HB6150 do not constitute a comprehensive pension reform package that would entirely resolve our state’s problems, but they offer substantial and innovative ideas designed to supplement other proposals under discussion in order to fully address the pension issue.
“These two bills do not by themselves wipe out our enormous pension debt,” said Rep. Biss. “But an optional buyout program could provide significant savings for the state and a cash balance plan for future employees is the best way to modernize and stabilize our system moving forward. I am anxious to see what comes from other pension working groups and discussions, and I hope that these two pieces of legislation will find their way into a comprehensive reform package we enact to ensure fiscal stability for our state.”
Rep. Biss will be discussing these proposals at a Town Hall Meeting at 7:00pmon April 30th at the Glenview Police Station, located at2500 E Lake Ave. inGlenview.