SPRINGFIELD — It could be months before state pension plans are ready to accept people who want to be part of one of the buyout programs lawmakers approved as part of the budget agreement.
The state's largest retirement system, the Teachers Retirement System, has posted some information about the pension revisions on its website.
"Implementation of these new laws will take time," the site says near the top. No date for implementation is given.
"We're working on it. We have to put it in place as practically as possible," said TRS spokesman Dave Urbanek. "It involves a lot of IT work. It involves a lot of legal study to make sure that the law as written can be implemented. We're not alone in this. The IRS gets involved, the comptroller's office, the governor's office. There are a lot of people who need to do things to make this work."
The State Retirement Systems handles pensions for state workers, lawmakers and judges. Executive Director Tim Blair said he hopes the program can be operating "well before" the end of the year, which is when most people make a decision about retirement. He said he hopes a timeline for implementation can be developed in the next couple of weeks.
"We have a lot of work to do and a lot of the details are being hammered out," Blair said. "Ideally, I'd like to have it (implemented) yesterday because it's good for the system. For everybody who does this we're losing a little bit of liability and we're getting reimbursed on the payment side. There's an incentive to do this as quickly as we can."
There were three major components to the pension changes approved as part of the state budget deal, which Gov. Bruce Rauner signed into law this week. One limits late career salary spiking to 3 percent. The other two components provide for buyouts from the pension plans.
One is directed at people are vested in one of the pension plans, but are no longer active members. An example would be a state employee who worked for the state long enough to be vested in the State Employee Retirement System, but has since moved to a job out of government. The state would give those people who are eligible 60 percent of the present value of their vested pension benefit in exchange for them dropping out of the system. SRS estimates 4,000 people would be eligible while TRS said about 20,000 people vested in its system would be eligible. The state expects to save $41 million.
The other buyout plan would ask people as they plan to retire if they'd be willing to give up the 3 percent compounded annual increase in pension benefits that go to members of the Tier 1 system. The people who accept would see annual increases in their retirement benefit of 1.5 percent, not compounded.
The state would calculate the difference in benefits a person would receive with the 3 percent annual increase and the 1.5 percent increase and a person could get 70 percent of that amount placed in an alternative retirement vehicle.
In both cases, the state will issue bonds to cover the cost of the buyouts.
The budget assumes the state will save about $382 million from the second buyout program. The unfunded liability of the five pension plans is about $130 billion.
Some have said the savings estimate is overly optimistic. However, Rep. Mark Batinick, R-Plainfield, who has promoted the buyout plans, thinks people will see advantages to the buyout.
For example, he said, because the annual raises compound, the greatest benefit happens to a retiree the older they get when they may be suffering from health problems.
"The idea of pulling that money forward while you can still enjoy it and do something with it, that alone is a pretty good reason (to take the buyout)," Batinick said.
Pensions also cannot be willed, he said, which gives people another reason to take a lump sum now.
"Once it is up and running, I feel the (estimated participation) numbers are conservative," he said.
Blair also said the buyout plan is a positive.
"To me, this is a payment option that provides some flexibility to members," he said. "Flexibility is generally good. Folks are not all the same."
Both TRS and SRS said they are working to provide information about the buyout plans to members of the pension systems. For active members, that would include information about differences in benefits between staying in the current plan or taking a buyout.