25, No. 8, Oct. 20, 2005
looks out for current and future retirees’ benefits
Sharita Forrest, Assistant Editor
While new employees
or those who are years from retirement may not be giving much thought
to their pensions, the State Universities Annuitants Association thinks
they should be.
“We’re concerned about what’s happening with the state’s
retirement systems,” said Walter Tousey, a member of SUAA’s
membership committee. “The SUAA will be the voice for those who
are concerned about pension benefits for university personnel and those
who have retired.”
The State Universities Annuitants Association is a statewide, voluntary,
nonprofit organization that represents the interests of current –
as well as future – retirees and survivors of retirees of Illinois
public post-secondary educational institutions. Statewide, SUAA has
a membership of 12,500 people, including 2,400 members at the chapter
on the UI’s Urbana campus.
Although the association’s membership currently consists primarily
of retirees and survivors of retirees, current employees of state universities
and community colleges are eligible and are being urged to join to garner
support for addressing pension issues in the political arena. SUAA originated
on the UI’s Urbana campus in 1970 but is now a statewide organization
with 49 chapters on community college and state university campuses
As are all SUAA chapters, the Urbana-Champaign chapter is governed by
a 12-member, volunteer board of directors elected by the chapter’s
membership. Geneva Belford, a professor emeritus of computer science,
chairs the board of the Urbana chapter, which meets monthly.
The board sponsors semi-annual membership meetings that feature speakers
on retirement and benefit-related topics and publishes a semi-annual
newsletter with information of interest to current and future retirees.
The Urbana chapter also belongs to a Big Ten group of similar organizations
that meets annually to discuss mutual concerns.
More information on the Urbana
Chapter of the SUAA and the benefits of membership is available
on the Web. To request an application, submit name and home address
to SUAA-UIUC Chapter,
364 Henry Administration Building, 506 S. Wright St., Urbana, IL 61801;
Members can contact the chapter by phone at 333-5533.
The activities and expenses of SUAA’s central office in Springfield
and the chapters are funded by annual membership dues of $30. People
currently receiving annuity checks from SURS may pay the annual membership
dues in a single payment or by having installments of $2.50 deducted
from their monthly checks. People who do not receive annuities through
SURS must pay the $30 dues directly because monthly deductions are not
yet available through the university’s payroll system.
Illinois law affects SURS retirement benefits
Sharita Forrest, Assistant Editor
A law that aims to help the state of Illinois balance its budget and
reduce its long-term pension liability affects retirement benefits for
UI employees covered by the State Universities Retirement System.
A bill signed into law by Gov. Rod Blagojevich on June 1 will reduce
state contributions to SURS and the four other state retirement systems
by $1.2 billion per year during FY06, which began July 1, and during
FY07. Accordingly, state contributions to SURS will be reduced by about
$200 million this fiscal year, by approximately $180 million next year
and by an aggregate of $339 million from FY08 through FY10.
Blagojevich projected that the “pension holiday” will reap
a short-term savings of $717 million and savings of $30 billion over
the next 40 years. However, some critics believe it will end up costing
the state between $3 billion and $7 billion more than it will save because
of inflation, mounting interest and missed investment opportunities.
Illinois leads the nation in its amount of unfunded pension debt, estimated
at about $35 billion, including $19.1 billion for SURS, which James
Hacking, former SURS executive director, said influenced his decision
to leave Illinois for a similar position in another state this summer.
Since 1995, the state has been on an aggressive payment schedule of
increased contributions to the retirement plans through 2010 to cover
its unfunded liabilities, but the pension holiday will disrupt that
Under the new law, State Comptroller Daniel Hynes – instead of
SURS – determines the effective rate of interest credited to SURS
participants’ retirement accounts under the money-purchase formula.
SURS’ board established an 8.5 percent interest rate for its members’
accounts for FY06 and FY07. However, in August, Hynes announced that
he had set the money-purchase formula rate at 8.5 percent for this fiscal
year and reduced it to 8 percent for FY07.
The new law also eliminated the money-purchase formula as an option
for calculating pension benefits for people hired at higher education
institutions after June 30, 2005. The money-purchase formula, first
enacted in August
1969, accumulated employee contributions and interest at rates set annually
by the SURS Board of Trustees, now by the state comptroller, and then
matched the amount in the account at 140 percent. In the past, SURS
retirees received the higher of the benefits calculated by the money-purchase
formula or the general formula, but employees hired after June 30, 2005
will not have that option.
The law also shifts the burden of funding pension benefits resulting
from large end-of-career raises from the state to the employing organizations.
Previously, the state had been responsible for covering the employer
portion of pension costs, a provision that enabled employer organizations
to boost salaries up to 20 percent per year as employees neared retirement
to subsequently increase their pensions. The new law caps end-of-career
salary increases at 6 percent per year in the final years preceding
retirement, forcing the employer institutions to assume any additional
“It’s going to be a constraint on universities and community
colleges so they may not be as generous in terms of employees’
final years of salaries because they know they’re going to be
eating some of the costs in terms of the higher benefits,” said
J. Fred Giertz, a faculty member in the Institute of Government and
Public Affairs and member of the SURS Retirement Board.
The new law also constrains any future enhancements to benefits by imposing
an automatic five-year expiration date on new benefits, unless they
are renewed by the legislature. The law also requires that every benefit
enhancement have funding provisions in place to be enacted.