New Proposals

HB3411

• Reduces unfunded liability by an estimated $30B as a result of changes to Tier 1 benefits: 

• capping COLA for everyone (including retirees) at lesser of $750 ($600 for those in SS) or 3% of annuity;
• delaying COLA for everyone (including retirees) until age 67 or 5 years after retirement;
• increasing retirement age by 1, 3 or 5 years depending on current age of member;
• capping pensionable pay at greater of SS wage base, previous year's salary or contract provision. 

• Increases Tier 1 employee contributions

• 1% in FY2014
• 2% in FY2015, going forward

• Creates a Tier 3 hybrid DB/DC plan for SURS and TRS only.  This addresses a number of issues.

• Fixes Tier 2 for TRS and SURS by allowing Tier 2 members to switch to Tier 3.  (Tier 2 members in GARS and SERS are not "fixed.")
• Includes a local cost shift for TRS and SURS.  Tier 3 employer costs fall ONLY on the local employer - both normal cost and any unfunded liability that develops in the future.  Allows for a gradual shift of employer costs as new employees are hired, as well as for any Tier 2 employees that choose to switch to Tier 3.

• Changes funding goal to 100% by 2043, although still using level % of pay.
• Includes language for intercept of state revenues if local employer contributions are not made.
• Includes state funding guarantee

• Explicitly includes normal cost plus a portion of unfunded amortization.
• Creates contractual right.
• Remedy is mandamus action in circuit court (usually Sangamon County). 
• Explicitly recognizes police powers.
• Explicitly recognizes priority of payments for bonded debt.

• Provides an additional $1B in revenue into pension funds starting in 2020, and continuing until funds reach funding goal.  These additional funds cannot count against annual state contribution.
• Provisions are inseverable.
• Act takes effect upon becoming law.