CHICAGO – A group of suburban legislators led by State Rep. Mark Batinick (R-Plainfield) unveiled a new initiative to address the state’s mounting unfunded pension liability on Thursday, calling for a series of hearings on offering a lump sum buyout option to current and future annuitants nearing retirement; potentially netting the state billions in long-term savings.
The proposal, House Resolution 752, urges the Speaker of the House and the Chairperson of the House Personnel and Pensions Committee to hold a series of hearings on how the State could potentially approach a lump sum exchange option. Interested parties and stakeholders would be invited to participate in the hearings in hopes of better understanding the outcomes of an exchange proposal as well as any potential barriers that would prevent an exchange option from becoming a common practice within the five State-funded retirement systems.
“Many of those nearing retirement may be attracted to having more control over their retirement assets,” Rep. Batinick said, “but unfortunately the State does not provide a versatile and competitive alternative to the current pension arrangement. Providing a lump sum payment in exchange for all or a portion of an annuity would provide a voluntary, constitutional approach to addressing the State’s pension obligations, while simultaneously providing participants the options and flexibility needed when planning for retirement.” In their May ruling declaring the pension reform bill signed into law by then-Governor Pat Quinn in December 2013 unconstitutional, the Illinois Supreme Court laid a framework for the adjustment of benefits through a legal approach called “consideration”, which allows for the adjustment of benefits if both parties agree to the changes.
Rep. Batinick’s proposal to offer annuitants a lump sum option would meet this requirement by making any proposed buyout program voluntary. Underscoring the need for bipartisan action on pension reform, the Commission on Government Forecasting and Accountability (COGFA), has calculated the total unfunded pension liabilities of the State retirement systems at $111.2 billion as of June 30, 2014, based upon the actuarial value of assets. HR 752 has been filed with the House Clerk and awaits assignment to committee for consideration.