Tag: State Universities Retirement System

Illinois Pension Contributions To Rise By $700 Million in 2015

Illinois flag

Illinois’ payments to its pension systems will jump by almost $700 million in 2015 after three of its state-level systems lowered their assumed rates of return.

From the Journal-Standard:

The total state contribution to the five state-funded pension systems next year is $7.537 billion. That’s an increase of more than $680 million over the amount the state had to contribute to the systems in the current fiscal year.

The numbers are compiled by the pension systems, but were reviewed and contained in a report by the state actuary issued Wednesday by Auditor General William Holland’s office.

The increase for next year’s budget is sharply higher than the increase in the current state budget. This year, lawmakers only needed to find an additional $100 million to meet the pension obligations. It was the smallest increase in years after a series of $1 billion hikes.

No reason was identified for the increase, although the report did note that three of the five systems lowered the estimated rate of return they expect to receive on their investments. Pension systems get their money through employee contributions, state contributions and investment income. When the systems expect to make less on their investments, the difference is usually made up with higher state contributions.

Cheiron, the state’s actuary, said last year it thought the three biggest pension systems were being overly optimistic about how much investment income they could earn. Since then, the Teachers Retirement System, State Universities Retirement System and State Employees Retirement system, all cut their expected rate of return on investments.

The Judges Retirement System and General Assembly Retirement System had previously cut their estimates.

Illinois shoulders approximately $111 billion in pension debt.

Illinois Workers Opt Into 401(k)-Style Plans In Record Numbers

SURS members chart
CREDIT: Illinois Policy

All around the country, employers are funneling new hires into 401(k)-type retirement plans instead of traditional pension schemes.

But the members of one Illinois fund are given the choice of participating in a defined-benefit or defined-contribution plan–and more than ever, they’re choosing 401(k)s. From Illinois Policy:

Today, more than 13 percent of all active employees in the State Universities Retirement System, or SURS, participate in a 401(k)-style plan instead of a traditional pension plan run by the state. These state-university workers control their own retirement accounts and aren’t part of Illinois’ increasingly insolvent pension system.

And recent data from SURS obtained through a Freedom of Information Act request shows the popularity of 401(k)-style plans is growing.

Nearly 20 percent of all SURS employees eligible for a retirement plan in 2014 have chosen a self-managed plan over the traditional pension scheme. Just a few years after the Great Recession, the number of SURS members choosing self-managed plans has reached an all-time high.

In 1998, SURS began allowing its new workers to opt into self-managed retirement plans. In these plans, an employee contributes 8 percent of his or her salary toward retirement savings and the employer puts in a matching 7 percent. That means the employee has the equivalent of 15 percent of each paycheck put into an account that’s entirely theirs.

As for why employees are opting into 401(k)s over traditional pensions? The growing concern over the health of Illinois’ pension funds probably plays a big role. Strong stock market gains over the last few years likely play a part, as well.