Summary of the problem Illinois
has the worst-funded pension systems in the nation. The unfunded
liability currently stands at more than $96 billion according to
official government numbers, and that number grows by $21 million every
day lawmakers fail to enact reform. The problem at the root of
Illinois’ pension crisis is the unmanageable, unsustainable defined
benefit system.
Summary of our solution The
only way to end Illinois’ pension crisis is to empower government
workers by transitioning benefits for all future work to a defined
contribution system. The Illinois Policy Institute’s solution cuts
unfunded pension debt in half and includes a defined contribution plan
as the main pillar of its reforms while protecting already-earned
benefits for government workers.
Summary of why this works This
is the only proposal that ultimately solves Illinois’ pension crisis.
This plan also modernizes the state’s retirement system by eliminating
political control and giving government workers the secure retirement
they deserve. Ultimately, these reforms restore fiscal order to the
state by eliminating unsustainable pensions and unfunded liabilities.
This paves the way for the economy to flourish, fostering an
environment where businesses can thrive and create the jobs Illinoisans
need.
Here are the plan’s major outcomes:
Reduces fiscal year 2014 unfunded liability by $46 billion. This 46
percent reduction brings the unfunded liability down to $55 billion
from $101 billion, the government’s fiscal year 2014 projection.
Reduces fiscal year 2014 state contributions to $4.7 billion, a nearly 30 percent drop from $6.7 billion under current law.
Protects constitutionally guaranteed benefits already earned by retirees and current workers.
Empowers current workers to control their retirement savings going
forward with 401(k)-style plans modeled after the existing State
Universities Retirement System’s 401(a) plan.
Reduces the state’s annual pension contribution by more than $2 billion
in the first year and eliminates the state’s unfunded liability by
2045. Ends the irresponsible repayment ramp and instead moves to level
annual payments.
Freezes cost-of-living adjustments until retirement systems return to healthy funding levels.
Aligns the retirement age with Social Security’s retirement age while
still protecting workers who are nearing retirement under current law.
Promotes accountability and fiscal responsibility by requiring local
governments to pay the employer share of their employees’ retirement
savings plans.
Makes government workers’ retirement savings plans portable, giving
workers more flexibility and freedom to move their plan from job to job.
Summary of the problem
