Open Letter to All Illinois State Representatives and Senators

State Representative Mark Batinick has written an open letter to all Illinois legislators on the merits of his constitutional pension proposal. The letter and an analysis by the Commission on Government Forecasting and Accountability can be seen below.

Letter to Legislators:

With the State strapped for cash and struggling to meet its obligations now and most likely in the near future, we need to turn our attention to pension reform that is clearly constitutional.

As you know, the Illinois Supreme Court recently made a ruling on pension alterations, declaring, “Nothing prohibits an employee from knowingly or voluntarily agreeing to modify pension benefits from an employer in exchange for valid consideration from the employer.” Therefore, changes to pension plans are allowed if both the state and employee agree to those changes. My House Bill 4427 not only meets this criterion, but can be expanded to save the state more money. Every employee can keep their plan as it stands now. Or they can take what my proposal offers, and this control given to the employee is what the Supreme Court appears to require.

House Bill 4427 offers employees the ability to take all or a portion of their pension in a lump sum with a small discount to the state, and this discount is where money could be saved. Why would a pensioner want an immediate lump sum payout? It provides more flexibility. Significant savings on federal taxes can be made with structured withdraws, while giving employees control over their own money. I’d also like to note that a lump sum would become a willable asset. You cannot will a pension the same way.

At this time, this legislation is written to only offer a buyout at retirement. We as a General Assembly could expand the bill by offering other types of buyouts to current employees. For example, we could buy out COLA’s. We can buy out a Tier 1 employee into Tier 2. Also, we can offer current employees an option to enter into a hybrid plan. Under this scenario they would stay on track for a portion of their pension but the rest would be put into a retirement account. That account would receive matching money moving forward.

Furthermore, one of the biggest opportunities for savings may come from the buyout of vested, inactive employees.  There are tens of thousands of these in the system.  They likely have other retirement vehicles like 401K's and social security.  Many may have moved out of state.  This is a group that should likely want and accept an accelerated benefit.

The Commission on Government Forecasting and Accountability has analyzed my initial proposal. They have stated that this could offer real savings. There is no reason to wait. Let’s give state employees more control over their future, and let’s do it in a way that can save the state money. This is a win-win.