Pension Buyout Participation Rate Higher Than Expected, Early Numbers Show
A program designed to curb Illinois’ pension debt is now underway. Early numbers show more Illinois state employees than expected are choosing to take a pension buyout from the state.
Public employees hired before 2011--and who have worked for at least eight years--get an annual three percent boost when they collect their pensions. That adds to what the retirees bring in, but also the cost of Illinois’ pension debt.
So, state lawmakers introduced the option as part of last year’s budget. State retirees can now choose to swap the three percent annual adjustment on their pensions for a lump sum payment--70 percent of what they would have gotten.
They also get to keep their base pension and 1.5 percent adjustment each year.
Tim Blair is the Executive Secretary for Illinois’ State Employees Retirement System. He says the deal isn’t a panacea.
“I don’t think that any type of program is going to be a quick fix for what we’re dealing with," he said. "But I think it is a nice step in the right direction.”
Since it launched in December, at least 200 new retirees took the deal, more than expected. Blair says their buyouts have ranged between $80 and $100,000.
The program is designed to save the state about $380 million per year.
Neighboring Missouri introduced a similar program for their state employees in 2017. Blair says about 22 percent of retirees there took the buyout, which formed the basis of savings estimates for buyouts in Illinois, which are more generous by comparison. Missouri offers a 60 percent match while Illinois is offering 70 percent.
Blair himself says the ground on which Illinois pensions stands is shaky.
“I’m very optimistic that we’ll always have what we need to pay our retirees, but just from my standpoint, the future is uncertain. We’re all day to day.”
Illinois has among the largest unfunded pension liability in the country.