Pension reform: Institute’s work on 401(k)s
Illinois’ pensions are among the worst-funded in the nation. The state has just 40 cents for every $1 that has been promised in benefits, and many government workers are concerned that they do not have choice and control over their own retirement. Illinois should not be forced to leave their retirement to the whims of...
Illinois’ pensions are among the worst-funded in the nation. The state has just 40 cents for every $1 that has been promised in benefits, and many government workers are concerned that they do not have choice and control over their own retirement.
Illinois should not be forced to leave their retirement to the whims of politicians. And taxpayers deserve a system that is affordable and comparable to what is offered in the private sector.
To reform its government retirement system, Illinois needs to follow the lead of the private sector and of other reform states such as Rhode Island and Alaska. That means moving away from pensions, and toward the defined contribution model.
The Illinois Policy Institute has long been an advocate of moving government to a 401(k)-style system similar to what is used in the private sector. The Institute was the very first organization to propose a detailed 401(k) pension solution for Illinois. In February 2013, the Illinois Policy Institute proposed a landmark bill that would pay government workers everything they’ve earned so far in the pension system, and start a 401(k) system for all benefits going forward. It would immediately cut the unfunded liability in half, by $46 billion, and would save the state more than $221 billion over the next 30 years. The benefits would be so generous that it also would not require the state to participate in Social Security.
But the state isn’t the only government in Illinois with a looming pension crisis. Without real reform, the city of Chicago is looking at a pension collapse of its own. Chicago residents are officially on the hook for $63.2 billion in government pensions, health insurance and other debt. This staggering figure totals more than $23,000 per Chicago resident, or more than $61,000 per household. The Illinois Policy Institute is working on a pension reform plan that would modernize Chicago pensions and protect taxpayers from bailing out the city’s broken system. Like the plan we crafted for the state, this reform proposal will protect workers’ already-earned benefits, but would move benefits for all future work to a 401(k)-style plan with a generous employer match.
Below is some of the Institute’s research on this issue.
1/6/2012 – Pensions vs. Schools
8/16/2012 – Pension debt more than doubles under new rules
10/16/2013 – Illinois Pension system lacks transparency