Deal Reached To Stem Retirement Rush

May 13, 2014

Gov. Pat Quinn signs the pension overhaul, also known as Senate Bill 1, into law in December 2013.
Credit Harvey Tillis / Illinois Information Service

Even as the broad “We Are One” coalition of unions seeks to prevent any of the pension law from taking effect next month … a new agreement would prevent parts of it from being implemented.

It mostly affects university and community college employees nearing the end of their careers.

The deal, between the State University Annuitants' Association and the attorney general, could put a stop to a surge of retirements at Illinois' public universities.

While public workers widely dislike (and question the legality of)  the benefit cuts in the pension law, university retirees’ attorney Aaron Maduff says their situation is more difficult because of differences in the university pension fund .

Maduff says some of the changes in the 2013 pension overhaul would effectively force retirement this summer or risk of losing a lot of money -- in some cases, nearly $200,000.

Maduff says the agreement should alleviate that concern.

“What this should do is resolve any need for anybody to retire before June 1 of 2015,” he said, “which is to say that the rush of retirements that is going on right now because of people's fears, this should obviate.

"The core message is that if you were worried about retiring before the first of July -- or for many people right now it's May 15 -- you don't need to worry that hanging around is going to leave you without certainty. You know, you can stay and you will get, at a minimum, what you would have gotten if you retired before July first of this year."
                                                                                        -- Attorney Aaron Madoff

That’s contingent on a Sangamon County judge accepting the deal, which could happen this week.

Unions say the entire law is unconstitutional. Monday they submitted a separate legal filing that seeks to put the entire pension law on hold until the Illinois Supreme Court decides whether it's constitutional.

Workers are being "forced to make life-altering decisions that can't be reversed," AFSCME spokesman Anders Lindall says, "despite all the uncertainty of not knowing whether this bill will be upheld or struck down."

The SUAA request also had asked for a stay of the entire pension law but, instead of holding out for that or going through a protracted court battle, negotiated the deal with the attorney general. Those involved say time is of the essence in hopes of holding off a retirement wave they argue will harm the state's schools through a loss of institutional memory. 

They say the State Universities Retirement System has been overburdened with members trying to understand how the pension law would affect their benefits and, without enough time for each member to meet with SURS staff, people have been forced to make retirement decisions without the full scope of information.

The tentative agreement between the SUAA and the attorney general resolves problems stemming from what can be described as a “typo” in the pension law affecting university workers' so-called "money purchase plans." The SURS board recently voted to interpret the law as if the typo were fixed to avoid further inadvertent cuts to some university workers' pensions.

But the SUAA deal goes beyond that: It eliminates issues involving so-called "refunds" that would have meant some university employees would take big hits were they to stay on the school payroll. The original request for an injunction, filed May 2, cited a man who would lose $190,000 if he kept working rather than retire by July. 

The deal also would allow retirement systems to temporarily ignore a key provision of the pension law which reduces by one percentage point the amount employees must contribute toward their retirement. Under the terms of the deal, workers will continue paying what they do now to avoid additional harm if the law is found to be unconstitutional.  There are additional changes that affect individuals under systems other than SURS.

Any injunction on the pension law is expected to have a negligible effect on Illinois finances this year, since lawmakers are not counting on its eventual projected savings as they plan a budget for the 2015 Fiscal Year.

The General Assembly voted to reduce benefits for university employees, state workers and public-school teachers outside of Chicago in order to begin to climb out of Illinois' worst-in-the-nation pension debt.