With a Republican headed to the governor’s office, the state could see shifts in several policies including state pensions. Governor-elect Bruce Rauner was very public against the current pension reform before the Illinois Supreme Court, calling it unconstitutional and, during the campaign, he laid out his own plan for state pensions.
“Freeze the current pension system, protect all the benefits that have been honestly accrued and paid into,” Rauner said in an interview with WCIA-3 before the election, “but create a second pension plan for future work that’s much more flexible and more affordable, more of a defined contribution plan, 401K style plan.”
The Illinois Policy Institute’s senior tax and budget analyst, Ben VanMetre, said Rauner’s plan has merit.
“This is good change for Illinois. This is exactly the direction we need to head into because it takes politicians out of the retirement business and it gives government workers control of their own retirements,” VanMetre said.
The conservative research group said switching plans could cut the pension debt liability in half. VanMetre said the state university system already allows professors to opt into a similar plan. He said the defined 401K-type plan would be easier on budget-making.
“Under a defined contribution plan, it’s a fixed,” VanMetre said. “Say it’s a seven percent match, it’s seven percent of payroll every year going forward and it’s a known cost for the state which makes it very easy to budget for retirement costs.”
Most private sector jobs already use defined plans and several states have adopted them as well.
“This is where states are headed, and this is where Illinois needs to head too,” VanMetre said.
AFSCME 31, the union for state workers, said on its website, 401K plans can be deceptive and risky since they depend on investments in the stock market. While several states have adopted 401K-style plans, at least one state, West Virginia, has reversed its course on defined benefit plans.