1986 Federal Government institutes Thrift savings plan – a 401K style pension plan for Federal employees.
Private companies for the last 3 decades have largely transitioned to 401K plans for workers.
Why – Defined Benefit plans are unaffordable. In fact, companies have filed bankruptcy to get out from under their DB contracts.
In Illinois when pension guarantee was first written into constitution employees worked until 66 for 45 years for full retirement at 70% max of salary, received 1.5% non-compounded cola, had no early retirement option, and could only accumulate 6 months of sick leave credit.
In 2011 employees work until age 55 for 33 years for full retirement at 75% of max salary ( and the salaries have gotten more generous), receive a 3% compounded COLA, have an early retirement option and can accumulate 2 years of sick leave credit.
Why I like HB 3303 – the real solution to Illinois’ pension problem.
1. Real long-term solution because the Defined benefit goes away. All other pension reform plans that I know of include a DB component. We will be back in 5 years to tackle this problem again if we do not modernize our pension system.
2. This plan has guaranteed funding because the employee sees the retirement money go into his own personal retirement account every paycheck.
3. HB3303 does not force employees to contribute more to a failing DB system.
4. No salary cap. Positive for employees if schools are allowed to introduce real merit pay and do so fairly. Takes away current arguments that they can’t make enough to provide for retirement.
5. Comprehensive, synergistic plan that treats all employees fairly and gets away from a convoluted system with special rules that no one knows except the insiders that game the system. How did Daley get to increase his pension by $50k by going back into the state pension system? What about the union hacks who worked one day as substitute teachers?