Legislative Activities & Updates
Pension Changes Senate Bill 1 Passes, Governor Signs Into Law
Pension Changes will affect more than 2,000 members
NOTE: Local 916 will continue to update members on the status of this legislation and legal challenges to it, as well as provide information important to members and their retirement planning. Barring a successful court challenge, the legislation takes effect July 1, 2014.
SUMMARY: The provisions of the bill affect active members, inactive members and retirees of SERS as outlined below. The bill does not reduce the current monthly benefit amounts of retirees and it does not eliminate or reduce COLAs that have already been received. It reduces COLAS prospectively beginning in January 2015.
Defined Benefit (DB) Changes
Maximum Annual Adjustments (COLAs)
Beginning January 2015, the 3% COLAs will be applied to the lesser of the actual annuity, or the number of years of a retiree's service credit multiplied by $1,000 for service not covered by Social Security or $800 for service covered by Social Security (maximum COLA amount). The maximum COLA ($1,000 or $800 per year of service) will be indexed each year by the growth in the Consumer Price Index (CPI). Those with an annuity that is less than their years of service multiplied by the applicable $1,000 or $800, or what these amounts have grown to at the time of retirement, will receive a 3% COLA compounded each year until the annuity reaches the maximum COLA amount.
There is no limit on the number of years of service credit that can be used in the maximum COLA calculation. Survivor annuities and disability annuities will continue to receive 3% compounded COLAs on the entire annuity amount.
Skipped COLAs
Employees who retire on or after July 1, 2014 will have annual adjustments skipped depending on age at the effective date: employees age 50 or over, 1 COLA skipped (year 2); employees age 47 to 49 will have 3 COLAs skipped (years 2, 4, and 6); employees age 44 to 46 will have 4 COLAs skipped (years 2, 4, 6, and 8); employees age 43 and under, 5 COLAs skipped (years 2, 4, 6, 8, 10). Please refer to Table 1.
Pensionable Salary Cap
Applies the Tier II salary cap ($110,631 for 2014) to all Tier 1 members. This cap is adjusted annually by the lesser of 3% or one half of the annual CPI. Salaries that currently exceed the cap or that will exceed the cap based on raises in a collective bargaining agreement are grandfathered in.
Retirement Age
For employees age 45 or younger on June 1, 2014, the retirement age is increased on a graduated scale. For each year a member is under 46, the retirement age will be increased by 4 months (up to a 5 year increase for members under age 32 on June 1, 2014). The incremental increase in retirement age applies to all formulas and the Rule of 85. Please refer to Table 1.
Employee Contributions
Beginning July 1, 2014, all SERS employee contribution rates will decrease by 1%.
Optional Definded Contribution (DC) Plan
Defined Contribution Plan
Beginning July 1, 2015, up to 5% of Tier 1 active members can make an irrevocable election to switch from the DB plan to a DC plan. Employee contributions to the DC plan will be equal to those of the DB plan. Employer contributions to the DC plan will change annually and must be at least 3% but not higher than the employer's cost of the DB benefits. The employee must participate in the DC plan for at least 5 years to become vested in the employer contributions made to their DC account. When a member opts into the DC plan, benefits previously accrued in the DB plan will be frozen.
Funding Changes
Funding Schedule
A funding schedule is established that will achieve 100% funding no later than the end of FY 2044. Contributions will be certified using entry age normal (EAN) actuarial cost method, which spreads costs evenly over an employee's career and results in level employer contributions.
Supplemental Contributions
The State will contribute (i) $364 million in FY 2019, (ii) $1 billion annually thereafter through 2045 or until the system reaches 100% funding, and (iii) 10% of the annual savings resulting from pension reform beginning FY 2016 until the system reaches 100% funding. The supplemental contributions will be divided among the State-funded retirement systems.
Funding Guarantee
If the State fails to make a required annual or supplemental contribution, SERS may file an action in the Illinois Supreme Court to compel the State to make the required annual or supplemental contribution.
Table 1.
NEWS RELEASE FROM JOINT COUNCIL 25
The Teamsters Will Not Give Up
Under the direction of President John T. Coli, Joint Council 25 worked to mobilize member volunteers and local representatives to lobby against these cuts on behalf of all Teamster-represented public employees. Coli and the Joint Council’s political directors spoke with Senate President John Cullerton and Speaker of the House Michael J. Madigan to discuss the potentially negative and long-term effects that SB1 could have on current and future retirees.
The Teamsters also spoke at length with elected officials in November during the Joint Council’s annual legislative reception in Springfield, held during the General Assembly’s Veto Session.
Teamster leaders continued to rally against the bill in Springfield and members and officers from Local 26, Local 50, Local 347, Local 525, Local 627 and Local 916 all spoke out at the Capitol in defense of members’ rights and earned benefits.
Since November, J.C. 25 encouraged Teamster members to call and email their elected officials to oppose any damaging pension legislation. Together with the We Are One labor coalition, more than 25,000 phone calls and messages were sent to the State Capitol, urging the legislature to vote against SB 1.
In the end, Illinois lawmakers voted against the livelihood of thousands of active and retired public employees, who have honorably paid their pension benefits every month for decades. In overhauling the pension system, legislators chose to jeopardize the ability of workers to retire with dignity and respect, while failing to establish any strict funding guarantees from the state to protect pensions in the future.
According to the We Are One labor coalition, the legality and constitutionality of SB 1 may soon be challenged in court.
SB 1910
Local 916 Scores Victory With Passage of SB 1910
Effort to take member jobs out of union thwarted
Nearly 200 IDOT technical professionals targeted for reclassification that would remove them from the union are safe, thanks to a relentless effort by Local 916 and state Senator Andy Manar (D-Bunker Hill).
Senator Manar, along with Local 916 governmental affairs director Trevor Clatfelter, drove support of Senate Bill 1910, which removed targeted IDOT positions from Public Act 098-0100, the “Management Act” legislation passed last Spring. The Management Act removes all positions considered management from union representation. It’s in response to the massive rate of unionization that has taken place in Illinois – nearly 98% of public workers are now in unions, driven by the lack of salary increases for those not covered by a union contract.
“There were 17 job classifications targeted at IDOT that affected our members. We maintained from the beginning that they were not upper level management positions as described by the new law,” said Trevor Clatfelter. “In the end, the Senate (passed 47–8) and the House (passed 89–29) agreed with us.”
Clatfelter said the reclassification was to take effect at the end of January, 2014, so the members were not actually taken out of the union, thanks to quick action by Local 916 and Senator Manar. Also assisting were other affected unions – Laborers, and Operating Engineers.
"Responsible Bidder" Amendment Would Maintain Quality
The initiative being pushed by Clatfelter and lobbyists from other unions amends the Prevailing Wage Act by requiring the successful bidders on public works projects to maintain accredited apprenticeship training programs.
“Those contractors that already do this know how important it is to both the quality of the work and the safety of the workers,” said Clatfelter. “This amendment would eliminate from consideration the contractors who hire temporary workers they know little about, at low wages, to make sure they have the low bid.”
Not surprisingly, said Clatfelter, opposition to the change is coming from business groups, who claim it would stifle competition and steer jobs to union contractors.
Between now and Spring Session 2014, a committee of labor and business will explore possible solutions that could avoid the need for new legislation.