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PUBLICATIONS Inside Illinois Vol. 25, No. 8, Oct. 20, 2005

SUAA looks out for current and future retirees’ benefits

By Sharita Forrest, Assistant Editor
217-244-1072; slforres@illinois.edu

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 throughout Illinois.

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; MC-346.

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.

New Illinois law affects SURS retirement benefits
By Sharita Forrest, Assistant Editor
217-244-1072; slforres@illinois.edu

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 payment plan.

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 costs.

“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.

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