SPRINGFIELD — Illinois' latest efforts to cut pension costs are getting underway, but it will be some time before the success of the effort can be measured.
The gist of the effort is to entice people to either withdraw from the pension systems entirely or to accept a lesser benefit in exchange for a cash payout.
Both the Teachers Retirement System — the state's largest — and the system that oversees pensions for state government workers are initially focusing on a measure aimed at cutting annual raises for retirees.
People enrolled in the Tier 1 pension plan are entitled to annual 3 percent compounded raises in their pensions when they retire, a costly benefit enacted by the General Assembly starting in 1990. Beginning in 2011, new hires are placed in a Tier 2 plan where raises are tied to the rate of inflation and do not compound.
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Lawmakers approved a plan last year that offers people in the Tier 1 plan who are about to retire a cash payment if they give up the annual 3 percent compounded raises. Those who take the offer will still get a raise in their pension benefits, but only 1.5 percent a year and not compounded.
"The member gets access to their cash sooner and they take it at less value so it is a positive to the fund as well," said Tim Blair, executive secretary of the State Retirement Systems.
Since Dec. 1 when the program was first offered, 239 Tier 1 members have opted to take a cash payment and accept the smaller raises. Another 877 have declined. Employees about to retire have to choose one option or the other.
"We really had no guidance on what the utilization rate would be," said Jeff Houch, assistant to the executive secretary. "It's fair to say 21 percent is higher than most of us would have assumed, but it is also fair to say we really didn't have a strong indication what it would be."
Of the roughly 3,000 state workers who retire each year, about half leave in December and January.
That is not the case for TRS, where the bulk of people retire closer to the end of the school year, said spokesman Dave Urbanek.
TRS has been providing information to potential retirees since late last year if they express interest in taking a payment in exchange for lower raises in their pensions.
"Right now, we have had no one who has signed on the dotted line yet," Urbanek said. "We do have them sign a form because the decision once they make it is irrevocable."
Roughly 4,000 members of the Teachers Retirement System retire each year.
A second program to cut pension costs won't get underway until late spring. That plan is aimed at people who are vested in one of the pension systems but are no longer active in it. The idea is to pay them a portion of their pension benefit to drop out of the system. People who choose to do that will no longer be eligible to collect that pension benefit.
TRS has about 20,000 people who are vested but are no longer active in the system. About 4,000 state employees are vested but no longer active.
When the legislature approved the programs last year, it also approved issuing $1 billion in bonds to make any payments to people who opted to participate in them. So far, those bonds have not been issued.
"Anybody who signs up now is going to have to wait for their money," Urbanek said. "What we're telling people is we don't know how long the wait will be."
Also last week, new numbers were released showing the unfunded liability of the five state-funded pension systems continued to climb.
The Auditor General's office reported the total pension debt for the systems climbed to nearly $133.5 billion at the end of the 2018 fiscal year on June 30. At the end of the 2017 fiscal year, the liability stood at $129 billion.
Those numbers are based on the market value of the systems' assets. Under state law, the systems can smooth gains and losses in assets over a five-year period. Using that system, the pension debt stood at $133.7 billion last June. A year earlier, it stood at $129 billion.
Under both valuations, the systems are about 40 percent funded.