CTU Beginning Tier Two Pension Fight that Divides Teachers Union

By George Milkowski

I was in Springfield yesterday, April 27, for a lobbying day organized by the CTU. The main thrust of our visit was to contact legislators and talk with them about pension reform.

For those who are not familiar with it, there are two categories of teachers when it comes down to benefits for retirement. A state law passed about 14 years ago puts anyone hired by the CPS after January 1, 2011 in the Tier 2 category. Those of us in Tier1 were able to retire after 35 years of service and our monthly retirement payment was based on the four highest income years of our last ten years of work. The Pension Board took the average of those four highest years and made payments equal to 75% of that to start with. We also started getting a 3% compounded increase on January 1 the year after we turned 60 and that continues every year until our death.

Tier 2 teachers are going to get much less. They have to work 45 years, generally to age 67, and their monthly retirement will be computed based on the average of their last ten years of service, not the last four highest. Once that average is computed, their monthly payment will be 66.667% of that. Someone who changed careers and entered teaching at a later age would have to have worked at least 38 years to be eligible. Can you imagine a 70 year kindergarten teacher?

This two-tier system is not only for Chicago teacher retirees. It applies to downstate teachers in the Teacher Retirement System, municipal employees across the state, generally any public employees who are not eligible to receive Social Security.

This two-tier system was enacted because of the problem of so many shortfalls in the various pension funds.

I think that that idea was to put less of a demand for pensions and smaller lengths of time that a teacher would be able to collect their payments. I also think that, although unstated, it was hoped that many teachers would retire before they would be eligible for maximum benefits, again putting less of a demand on pension coffers.

This two-tier system is bad for the teachers who are the eventual recipients of it AND it is bad for us.

We have to remember that a lot of the money that is going into our fund every year is coming from currently active teachers. The more salary they receive the more they contribute to our fund. However, teacher turnover in the first five years of teaching varies from 40-60%. Usually, when a teacher at a 4 or 5 year salary level quits, he/she is replaced by someone fresh out of college who has a lower salary and thus makes lower payments to the CTPF. Also, one who quits has the right to ask for a return of the contributions they made while working which depletes our Fund further.

Another problem is a federal law says that anyone who retires and is not eligible for Social Security must receive a pension at least equal to what one would have received if they were getting Social Security. Current formulas show that this cannot be done with the two tier system. Basically, it is illegal and can be expected to be declared as such when it is eventually challenged in court.

A few years ago a state law tried to limit our 3% annual increase to one half of that or equal to the rate of inflation, with a 3% cap. A court quickly overturned that law because Article XIII, Section 5 of the Illinois state constitution specifically says that pensions “...shall not be diminished or impaired.” But that does not mean we are safe.

In meeting with Sen. Napoleon Harris, Majority Caucus Whip, he was asked about what the General Assembly can do about getting rid of this two tier system. He said the big problem is money and implied that there are strong limits on what the State can do about that. He said the current state constitution is now over 50 years old and we may have to call for a constitutional convention. I think this is dangerous because if a convention is held everything would be on the table including the pension protection clause.

Currently, there is no legislation to reform the system although last year Sen. Robert Martwick introduce a bill to reform the system that was supported by the Illinois Federation of Teachers and the Illinois Education Association but it went nowhere.

The CTU is not pushing any particular legislation right now as they would like to team up with other affected groups and present a united front to the General Assembly.

I am bringing this information to you to make you aware of the situation. There is no need to take any action at the present time, but be prepared to call or visit your state legislators. This may not happen soon, but if the issue comes up, and I am sure that it will, be prepared to act.