How Illinois pension deal could affect retirees
CHICAGO – Public employees could see significant reductions in long-term retirement income under a proposed bill that Illinois legislative leaders are pushing as a way to solve the worst-in-the-nation pension crisis. One of the biggest cuts would come from a change in annual cost-of-living adjustments. The proposal would change the COLA increase from the current rate of 3 percent compounded annually on the full annuity benefit. Retirees instead would receive increases at that rate only up to a certain amount of annuity benefit.
The Center for Tax and Budget Accountability has developed a formula to calculate estimated changes in retirement income over the years if the bill passes, based on the best information available right now, pension specialist Amanda Kass said.
Here are three scenarios:
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Employee 1: Retired teacher, 30 years of service
Initial annual benefit: $67,000
Annual pension benefit after 20 years of retirement: $121,009 a year under the current pension system; $91,183 under the proposed changes
Cumulative 20-year decrease: $284,030
• • •
Employee 2: Retired Department of Children and Family Services caseworker, 25 years of service
Initial annual benefit: $30,000
Annual pension benefit after 20 years of retirement: $54,183 under current system; $46,122 under proposed changes
Cumulative 20-year decrease: $76,765
• • •
Employee 3: Retired teacher, age 75, with 30 years of service
Initial annual benefit: $25,000
Retiree's COLA increase would remain unchanged until benefit reaches $30,000, which is years of service multiplied by $1,000. After that, the annual benefit would drop below what it would be under the current system.
Annual pension benefit after 10 years: $33,598 under current system; $33,529 under proposed changes
Cumulative 10-year decrease: $137
Source: Center for Tax and Budget Accountability