Illinois must address pension reform

By BenefitsPro

By Andy Stonehouse

Among the more contentious state pension battles currently waging across the nation, the challenges faced in Illinois were troublesome enough last week to create a stalemate - one that could further lower the state's financial ratings.

As Forbes blogger Jeffrey Brown notes, the battles over Illinois' attempts to neatly package a set of pension reform changes failed to meet the May 31 deadline, meaning legislators will have to return to solve the issue and will need to pass it with a larger majority of votes, as per the state constitution.

The final fights, Brown explains, came down to proposals to shift the costs of future pension accruals to schools, universities and community colleges, leading to higher property taxes to fund teacher pensions - while the state would continue to maintain legal control over the design of those benefits packages.

Brown instead offered a "radical" but modest proposal to solve the issue, suggesting that the state suck it up and pay out all pension benefits earned up to this point, but close those pension plans to future accruals and instead give each state employer the autonomy to create its own retirement benefits package - in all likelihood, a hybrid 401(k)-styled system. He also suggests the state agree to a grant to help pay for pensions but gradually phase these grants to zero, moving employees into a defined contribution mode.

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