New Proposals

Over the course of the summer and fall of 2013, a bipartisan Conference Committee worked to draft a reform proposal that could be passed by the General Assembly. Based on the work of the Conference Committee, it appears that a comprehensive pension proposal may be close.

While the details and financial impact of the pension reforms have not been finalized, the proposal is expected to include a reduction in cost-of-living increases for current and future retirees. Such increases are the biggest single driver of the cost of the state’s pension plans. In addition, the proposal is expected to include increases in retirement age for current workers as well as limits on pensionable salaries.

In return for these adjustments to benefits, current employees are expected to receive a reduction in their required annual contributions to the pension plans. In addition, a revised funding schedule and statutory funding guarantee are intended to ensure that the state adequately funds the pension plans in future years.

Taken together, these benefit and funding reforms are expected to save upwards of $150 Billion in state contributions to the pension plans over the next 30 years, with both taxpayers and pension beneficiaries sharing the required sacrifices. If the final pension proposal includes the reforms and generates the savings that have been projected, it will go a long way toward putting the State of Illinois back on the path to fiscal stability.


  • Reduces unfunded liability by an estimated $30B as a result of changes to Tier 1 benefits: 
    • capping COLA for everyone (including retirees) at lesser of $750 ($600 for those in SS) or 3% of annuity;
    • delaying COLA for everyone (including retirees) until age 67 or 5 years after retirement;
    • increasing retirement age by 1, 3 or 5 years depending on current age of member;
    • capping pensionable pay at greater of SS wage base, previous year's salary or contract provision. 
  • Increases Tier 1 employee contributions
    • 1% in FY2014
    • 2% in FY2015, going forward
  • Creates a Tier 3 hybrid DB/DC plan for SURS and TRS only.  This addresses a number of issues.
    • Fixes Tier 2 for TRS and SURS by allowing Tier 2 members to switch to Tier 3.  (Tier 2 members in GARS and SERS are not "fixed.")
    • Includes a local cost shift for TRS and SURS.  Tier 3 employer costs fall ONLY on the local employer - both normal cost and any unfunded liability that develops in the future.  Allows for a gradual shift of employer costs as new employees are hired, as well as for any Tier 2 employees that choose to switch to Tier 3.
  • Changes funding goal to 100% by 2043, although still using level % of pay.
  • Includes language for intercept of state revenues if local employer contributions are not made.
  • Includes state funding guarantee
    • Explicitly includes normal cost plus a portion of unfunded amortization.
    • Creates contractual right.
    • Remedy is mandamus action in circuit court (usually Sangamon County). 
    • Explicitly recognizes police powers.
    • Explicitly recognizes priority of payments for bonded debt.
  • Provides an additional $1B in revenue into pension funds starting in 2020, and continuing until funds reach funding goal.  These additional funds cannot count against annual state contribution.
  • Provisions are inseverable.
  • Act takes effect upon becoming law.