Illinois Gov. Signs Sweeping and Controversial Pension Reform Bill
Yesterday Illinois Gov. Pat Quinn signed legislation that will make historic changes to the state's public employee pension program, which faces a $100 billion funding shortfall and has caused multiple downgrades to the state's credit rating.The law is designed to save the state $160 billion over the next thirty years and guarantees Illinois will make its full annual contribution to the pension funds. Legislative leaders have estimated the plan will reduce the current unfunded liability by about $21 billion and fully fund the retirement systems by 2044.
Under the new law, automatic, annually compounded 3 percent cost-of-living increases for retirees - considered to be the biggest driver of pension costs - would be replaced with smaller annual adjustments for the highest earners. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan. Also, the retirement age will be pushed back for those 45 and younger.
It is likely that public employee unions will challenge the law in court.