Pension Funding Legislation

December 27, 2012

A statement from President Robert Easter regarding pension funding legislation:

A new legislative proposal for addressing the state’s pension funding crisis was announced earlier this month and could be considered during the “lame duck” session of the 97th General Assembly in early January. I wish to draw your attention to the bill and to provide a brief summary and to assure you that the University is engaged in the legislative deliberations on this important issue.

The legislation, House Bill 6258, is posted at A summary of the bill prepared by SURS is available at

The bill, which would go into effect July 1, 2013, if it becomes law, has many features similar to Senate Bill 1673 that was introduced earlier this year. HB 6258 proposes a revised new plan for all employees who join the university after the effective date of this bill and shifts the responsibility for funding annual pension costs from the state to universities over time. It also requires the state to accelerate the payment of past underfunded liabilities and gives the pension system the right to force payment through the courts.

But the new House bill significantly differs from the previous Senate proposal in how it deals with benefits for Tier I defined benefit plan participants (employees who joined prior to January 1, 2011). Instead of requiring participants to choose between retirement and health care benefits, this bill proposes changes in benefits.

First, it proposes to increase the normal retirement age for those who are younger than 45 years old. Retirement age would increase from 60 to 65 years for those younger than 35 years; to 63 years for those who are between 35 and 39 years old; and to 61 years for those who are between the ages of 40 and 45.

Next, the bill caps pensionable earnings for participants at the Social Security wage base. For earnings in 2013, this base is $113,700, but increases each year. The pensionable earnings of those who are currently earning more than that limit will be frozen at their current salary level. The bill also changes automatic annual cost-of-living increases (COLA) provided to Tier 1 participants and existing Tier 1 retirees. Individuals receiving an annuity of less than $25,000 a year would receive a 3 percent compounded automatic annual increase; those receiving an annuity of $25,000 or more would receive a non-compounded automatic annual increase of $750.

Finally the bill increases the required employee contribution from 8 percent of pay to 10 percent, at the rate of 1 percent per year over the next two years.

I encourage members of the U of I community to learn more about developments on this topic, and the University will provide updates as additional information becomes available. Our desire is that the various conversations underway in Springfield result in a pension program for SURS that is sustainable, competitive with the programs offered by our peer public research universities, and which honors the commitments that have been made to our current employees and retirees.