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SUPPORT THE

FAIR RETIREMENT AND RECRUITMENT ACT

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Legislation Introduced to Fix Broken Tier 2 Pension System

 

On November 13, state legislators and public service workers unveiled the Fair Retirement and Recruitment Act (HB5909/SB3988), legislation sponsored by State Rep. Stephanie Kifowit (D-Oswego) and State Sen. Robert Martwick (D-Chicago) that will make significant progress in fixing the broken Tier 2 pension system. Thousands of public service workers rallied at the State Capitol in Springfield in support of the legislation as they demand lawmakers take action.

 

The current broken system undercuts retirement security for public employees and makes it harder for schools, universities, cities, counties, and the state of Illinois to attract and retain needed workers.

 

The four key provisions of the Fair Retirement and Recruitment Act are designed to solve the current system’s major problems:

 

Problem: Compared to Tier 1 participants, Tier 2 participants pay the same amount toward their pension from every check, yet must work longer and retire later.

Solution: The Fair Retirement and Recruitment Act aligns the Tier 2 retirement age with Tier 1.

 

Problem: Tier 2 participants now receive a diminished cost-of-living adjustment (COLA) that fails to keep pace with inflation.

Solution: The Fair Retirement and Recruitment Act implements an across-the-board 3% simple-interest COLA for all Tier 2 participants.

 

Problem: Tier 2 participants’ pension benefit amount is reduced by a lesser final-average-salary calculation.

Solution: The Fair Retirement and Recruitment Act brings the final average salary calculation back in line with Tier 1.

 

Problem: Tier 2 participants are subject to a pensionable salary cap that runs afoul of federal law (the so-called “Safe Harbor” problem).

Solution: The Fair Retirement and Recruitment Act adjusts the pension salary cap to match the Social Security wage base.

 

In addition to the key elements above, the bill makes a number of minor but meaningful changes to the pension code to address issues specific to particular job titles or pension concerns.

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