Six Simple Steps: Reforming the Illinois State Universities Retirement System

Source: Jeffrey Brown, Steven Cunningham, Avijit Ghosh, David Merriman, Scott Weisbenner, Institute of Government and Public Affairs at the University of Illinois, March 12, 2013

From the summary:
As Illinois’ public-employee pension liability soars toward $100 billion, a group of scholars has developed a six-step proposal to stabilize pensions for employees of the state’s public colleges and universities. The experts, from the University of Illinois and Northern Illinois University, said the six steps can help the State Universities Retirement System (SURS) achieve financial stability while ensuring retirement security and honoring the constitutional guarantee against reducing employees’ already earned benefits….

…The six steps are divided into three broader categories – reducing the normal cost and liabilities of the current defined benefit plan; how SURS pensions should be funded going forward; and reforming the so-called “Tier II” program instituted for employees hired after January 1, 2011.

The individual steps are outlined in detail in the paper, which is part of IGPA’s ongoing contribution to the dialogue on pension reform in Illinois. Generally, they would do the following:
– change the annual cost of living adjustment (COLA),
– change the value of the Effective Rate of Interest to eliminate what the authors say is a “hidden subsidy,”
– shift contributions to colleges and universities,
– increase employee contributions by an additional 2 percent,
– require the state to amortize the current SURS unfunded liability, and
– provide a new “hybrid” defined benefit/defined contribution plan for new employees.