Illinois pensioners expected to pay for medical care in retirement
In a rare step for an Illinois pension system, Illinois will soon offer the first guaranteed annual payments to retirees, in a move that will provide more certainty for those working on a fixed income who are paying the bulk of their benefits for the foreseeable future.
Illinois, a former industrial powerhouse, has been trying to lure retirees back to its pension systems since it took the reins of the pension system from Gov.
Pat Quinn in 2011.
But the plan has been met with resistance from some unions and retirees who say it will hurt the pension systems already struggling to deal with the cost of the recession.
In a statement, Illinois State Retirement System Director Kevin Hahn said that the retirement system would begin issuing annual guaranteed annual contributions to current and future Illinois workers in July.
The payments, Hahn noted, will be based on average monthly compensation and will be calculated based on actuarial projections.
They will be made by the Illinois Department of Public Employees, he said.
The announcement comes as state officials prepare to announce plans to privatize more than 2,000 public pensions in 2018, including more than 4,500 public employee pension systems.
Under the new plan, workers would get a monthly payment based on their current salary and benefits that would be matched by a government pension.
It also would create a “state-managed retirement savings program,” where employers would offer retirement savings plans, and the government would manage the risk of their investments.
About two-thirds of workers are eligible for the state-managed plan, which is part of the government pension plan for public employees, according to the state.
The rest are eligible to choose from private companies, which are not subject to the same requirements.
“I have always been a supporter of the retirement security of our state workers,” Quinn said in a statement.
“It is my hope that this program will provide stability and protection for Illinoisans working in the private sector, who will benefit from the same benefits that all working citizens enjoy.”
The plan also includes changes to the public pensions that will take effect in 2020, including raising retirement age for women from 55 to 62, and lowering the age for men to 62.
The new payments would be made to workers regardless of how much they make, and would not be paid to people who had not reached retirement age, according a statement from the state of Illinois.
The new payments, however, would apply to current retirees, who would receive payments if they have not reached their defined benefit years.
The state’s plan is expected to provide a boost to the finances of the state’s roughly 22,000 private-sector pension systems, which account for more than half of the pensions of Illinois workers.
State officials have said the new payments will be a boost for the pension funds, since they would help to offset the cost that private-pension investors would have to absorb for investing in public pension systems that are still recovering from the financial meltdown.
The Illinois pension systems have been struggling to make ends meet amid a series of severe cuts that have hit their revenue streams and contributed to rising pension liabilities.
State officials estimate that the state has a $17 billion pension liability in 2019, with more than $6 billion in unfunded liabilities.
State and federal lawmakers have been trying for years to address the state pension problems, and last year signed into law a plan that would make private companies pay into a state-run pension fund to cover costs associated with the state plan.
Private-sector investors have been hesitant to invest in the state system, as they view it as a public trust.
But in an effort to attract private investments, the state is moving to privatise the pension plans, which would create an incentive for private investors to participate.
The plans are set to be up and running by 2021, but they have faced stiff opposition from some workers, unions and some lawmakers who say the changes could leave millions of Illinois retirees with lower pension payments.
State lawmakers are also expected to introduce a bill next year that would allow the Illinois pension fund and the state to negotiate with private investors in the future.