April 24 -- Pension update re money purchase
I write today out of concern over an unintended glitch in the wording of the state’s public pension funding law that would significantly reduce pension benefits under the “money purchase” option if retirement-eligible employees continue working beyond June 30, 2014.
The wording was actually meant to preserve (or “hold harmless”) employee benefits when the new pension law lowers the interest rate used to calculate monthly annuities under “money purchase,” effective July 1, 2014. It sought to lock in annuities for retirement-eligible employees to the level they would receive on June 30, 2014, even if they retired months or years later.
But through an apparent drafting error, the clause set the guarantee date as June 30, 2013, rather than June 30, 2014. That eliminates a year of pension contributions and interest, and reduces benefits. For eligible employees it may be an incentive to retire even if they had not intended or wished to do so.
We have been in contact with the legislature to address this problem and I am hopeful a remedy will be approved in time to protect the benefits that our retirement-eligible faculty and staff have earned. But it needs to happen sooner rather than later; every day that passes, we face the very real threat of losing more of the faculty and staff who are the foundation of our standing as one of the world’s premier universities.
At a special meeting of the Board of Trustees last week in which trustees were briefed on the “money purchase” predicament, they urged us to redouble our push for a swift and immediate correction in the law. The meeting helped draw public attention to the threat posed by the drafting error, through extensive media coverage and editorials on the topic.
Trustees also encouraged faculty, staff, students, alumni and friends of the University to join us in voicing support for correction in the law. Alumni can communicate through the Illinois Connection program, the legislative advocacy unit of the Alumni Association.
Advocating for support of the University and its employees with respect to a correction of the law regarding the “money purchase” benefit option, either directly or through Illinois Connection, is not prohibited by university or campus policies or the State Officials and Employees Ethics Act. Employees should exercise care to ensure these activities do not negatively impact fulfillment of employment responsibilities.
We will continue our efforts to ensure that our benefits enable us to attract the best-in-class faculty and staff who have made the University of Illinois a world leader in education and innovation. Thank you for your patience, your support and your service to this great University.
Robert A. Easter