Yesterday, State Representative Elaine Nekrtiz introduced H.B. 6258. A summary of the bill is below. To read the full text of the bill, click here.
Tier 1 Members (state employees in the current state pension systems)
• Cost-of-living adjustments would apply only to the first $25,000 of the employees’ pension.
• COLAs will take effect as of the effective date of the bill when the employee turns 67 or five years after they retire, whichever comes first.
• Retirement age increases as of the effective date of the bill by:
• Employees would be required to contribute more toward their pensions by:
• Pensionable salary – the amount of salary that counts toward a pension – is limited to the higher of the Social Security wage base or the participant’s salary when the legislation becomes law
Tier 2 Members (state employees in the alternative system created in 2010)
• All new employees in the Teachers Retirement System and State University Retirement System would be in a cash balance plan
• TRS and SURS employees hired before the effective date this bill would become law can choose to remain in Tier 2 or join the cash balance plan
• COLAs for General Assembly Retirement System members will match those of Tier 2 members in the other pension systems
• Schools and colleges/universities will assume employer costs for benefits in the TRS and SURS systems now paid for by the state, with that responsibility shifting to them at a rate of 0.5 percent of payroll each year
• TRS and SURS employers will pay the specific pension cost of any employee’s salary they increase, to prevent a school from increasing a superintendent’s salary and then having other schools share in the cost of paying that increase once they have the responsibility of paying the pension costs for their employees
• Employer contributions will be on a 30-year level-funding plan to achieve 100 percent funding
• Employer contributions will be enforced through court action or intercept of other state funds if payments are not made as required under the new funding plan
• Revenue now being used to pay pension obligation debt will annually go to pay the broader pension deficit down once the pension obligation bonds are paid off
This would mean $693.5 million per year going to pay off pension debt starting in Fiscal Year 2016, and $900 million per year starting FY 2020.