New pension law may be delayed until court decision
Employees thinking about retiring before the new pension law takes effect June 1 now have more to consider.
An unexpected glitch in the money purchase option of the pension law has been corrected, and a tentative agreement reached Monday between the State Universities Annuitants Association and Illinois Attorney General Lisa Madigan could delay the implementation of the new pension law.
The pending agreement, which requires judicial approval before it takes effect, would allow members of the State Universities Retirement System to delay their retirement decisions until the courts have determined whether the new pension legislation is constitutional. The agreement asks the court to approve a new effective date of July 2015.
A coalition of labor unions, called We Are One Illinois, filed a similar motion in Sangamon County Circuit Court Monday to delay the pension bill until its constitutionality has been determined.
“The agreement ensures that our members will have all of the facts before they have to make a decision on whether to retire or not,” State Universities Annuitants Association executive director Linda Brookhart said in a statement.
Meanwhile, an emergency ruling Thursday by the board of the State Universities Retirement System will preserve the benefits employees earned under the money purchase option, available to employees hired before Jan. 1, 2011.
The pension law reduces the interest rate used to calculate the annuity from 7.75 percent to 4.5 percent. A clause would guarantee that employees eligible to retire June 30 would be locked in under the old formula, but the language of the bill incorrectly states “June 30, 2013.”
The SURS executive board voted to impose an emergency ruling to fix the error.
“The SURS board’s emergency ruling guarantees that the retirement benefits employees have earned as of June 30, 2014, will not be reduced — even if they retire months or years later,” U of I President Robert Easter wrote in a campus email Friday.
“I hope that the SURS ruling provides assurance to employees who were considering retirement before June 30, 2014, to avoid losing benefits they had already earned. And I hope they will now stay with us — sharing the talents that are the heart of our excellence and our standing as a world leader in education and innovation.”
Still, the money purchase glitch isn’t the only point of contention in the pension legislation, Easter said. The new law reduces cost-of-living adjustments, increases the retirement age for some employees and puts a cap on pensionable earnings.
More than 1,400 SURS members across the state have filed applications stating their intent to retire in May or June, according to SURS. At the same time last year, 657 state university employees turned in retirement applications.
The university has received notification from SURS that 123 employees from all three U of I campuses have filed retirement applications for May and 286 have turned in applications for June.
“There are other provisions of the state’s new pension law that will negatively impact employees when it takes effect,” Easter wrote. “Whether those provisions hold will ultimately be decided as legal challenges to the new law make their way through the courts.”