The fight to change the Tier 2 Pension Law that was enacted to destroy new teacher and all state worker pensions has taken form in proposed state legislation known as House Bill 4098.
In 2011 Illinois established a second-class pension for newer employees who have to wait until age 67 to retire. The Tier 2 Law was made during the intense attack on public education and teachers unions under the Education Reform movement that culminated in Race to the Top. This steady drumbeat of anti-teacher and anti-pension rhetoric built up nationally and in Illinois.
“The attacks on teachers and public employees had been going on for years with much too little challenge from unions and our allies,” the CTU stated. “In this climate, IL passed bills establishing second-tier pensions for future employees. Because they were not changing benefits for already-existing employees and pensioners, they were allowed to make changes.”
The goal of Tier 2 was to drive a wedge between those already paying into the pension and those who would pay later.
“I don’t feel the solidarity of our union when I have to work a really long time as a Tier Two teacher,” stated one teacher who was hired in 2011 right after the new law was adopted. “I feel there is an invisible line between the Tier 1 and Tier 2 teachers.”
Plus, the law is criminal because it does not guarantee the minimum retirement benefits that the federal Social Security Act mandates. A Tier 1 teacher can earn a pension after five years, while a Tier 2 teacher can earn a pension only after 10 years of service.
“The Bellweather research findings are distressing: 50% of newly hired teachers leave with no pension at all. And one-third qualify for a pension, but it’s worth less than their own contributions,” The Street reported.
To add insult to injury - Tier 2 does nothing to alleviate the huge pension funding crisis that resulted when the City of Chicago stopped paying into the Chicago Teachers Pension Fund for 10 years. When House Speaker Mike Madigan who is awaiting trial on corruption charges got the Tier 2 law passed, he had no actuarial numbers to back up the law’s financial validity. In other words, they just passed the law to screw future people out of their pensions and not solve their immediate pension funding crisis!
Thus the fight back today. The proposed House Bill 4098 was discussed at the September 21 Chicago Teachers Pension Fund Board Meeting.
It is a start, but a weak start.
State Rep Stephanie Kifowit (D-Oswego) who filed HB 4098 told Capital Fax it is the beginning point to fixing the Tier 2 problem. The bill changes the age of retirement from 67 to 62 with 34 years of service, or 64 if they have 20 years of service. Currently Tier 1 teachers can retire without penalty at age 55 with 34 years experience or 60 after 20 years of teaching, and 62 with five years.
CTPF Ex. Dir. Carlton Lenoir told trustees that HB 4098 creates a Deferred Retirement Option Program (DROP) and expands the Pension Buy-Out program to more participants, while meeting the Safe Harbor provision and creating an average COLA (Cost of Living Adjustment) percentage over three years rather than a year-to-year calculation. It also addresses additional revenue to achieve 100 percent funding by 2050 or 90 percent by 2045 rather than the current 2059.
This is important for municipal and state employers to pay up earlier so that the pension funding levels will increase sooner and not totally overwhelm taxpayers in the future. The CTPF is about 47% funded, but this woeful funding level and escalating debt will continue because the state currently has until 2059 to make it fully funded.
A big problem for the state is attracting workers. There are teacher, firefighter, police and other state worker shortages. The meager Tier 2 pension is one of the reasons why.
The Illinois police and firefighter union leaders have been very vocal on the issue and are demanding that lawmakers eliminate the Tier 2 system entirely. They say they are having big problems recruiting and retaining workers.
“We’re about 12 years into this two-tiered system - a system quite frankly that our members find not fair, immoral and wrong,” said Chuck Sullivan, President for the Associated Fire Fighters of Illinois.
Police and firefighters said that everyone should be part of the Tier 1 pension rather than continuing the two tier system and that they should not pass any plan that picks winners and losers in terms of benefits.
A separate bipartisan bill could eliminate Tier 2 pensions and ensure first responders receive the best health insurance, which includes anyone serving 25 years in public safety roles who could receive free insurance coverage when they retire.
However, this bill to eliminate Tier 2 called HB 4065 includes only the Downstate Police, Downstate Firefighter, Chicago Police, Chicago Firefighter, Illinois Municipal Retirement Fund, State Employees, and State Universities, but not teachers.
Politics as always appears to be playing a big role in the continued attacks on workers pensions. The CTPF lobbyist noted that a certain number of democrats are forgoing their state pension in solidarity with people who have no pensions. But this act is silly considering that all workers earn a retirement - either social security or state pension.
Corporate America has worked hard to eliminate employee pensions and force their workers to pay for their own retirement via the highly controversial 401(k) plans, many of which are predatory and charge high fees.
The Chicago Teachers Union has a Tier 2 Committee (I am a member) that is working to address these issues. Those interested should feel free to contact the CTU to join up!
Good stuff, Jim! It’s really fascinating to me the lack of research done on the creation of these bills. Not only is tier 2 illegal and a poor benefit, but it doesn’t even solve the funding issue.
I would be curious if we see collaboration among fire, police, teacher and state worker entities to make something happen regardless of their differing ideologies at a high level.
Something else you mentioned which stuck out to me is the illegality of the not collecting social security while also not vesting in the pension. It’s time for the state to start getting worried because when a lawsuit hits, who is going to back pay these workers to make them whole? The district? Uh oh.
Pension reform makes sense for all parties. It’s too bad that anti education detractors have made pension funding a nuclear football to toxify the issue.