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Next Steps in Pension Reform - TRS

Talking Points on SB 512


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The bill requires participants who earned service prior to January 1, 2011 (Tier 1 participants) to make an election to participate under one of the following:

  • Option 1:          The traditional or portable benefit package;
  • Option 2:          The revised benefit package (Tier 2);
  • Option 3:          The self-managed plan.

Persons who became or become participants on or after January 1, 2011 (Tier 2 participants) must make an election to participate under Option 2 or Option 3.

Participants who elect Option 1 may elect to participate under Option 2 or Option 3 every 3 years as employee contributions are adjusted during a 6 month period prescribed by the System.
(per State Universities Retirement System—October, 2011)

(comments)

  1. Option 1, to remain in the current pension plan members will pay more to keep
    their benefits:
    • SURS member contributions will increase 7.31% of salary to a total contribution of 15.31% of salary. This is an increase from the current pension contribution of 8% of salary.
    • These contributions will be reviewed every 3 years. If participation, contributions to this option decrease, participant contributions will have to increase2.
  2. Option 2, to choose participation in the 2-tier pension benefit plan that passed
    last year (Senate Bill 1946), changes from current benefits include--retirement at age 67, reduced COLA, reduced final average salary.
  3. Option 3. The option to participate in a defined contribution plan (401-K style plan). The member would pay 6% of salary and so would the state.
    Members would be required to direct their own investments. There is no guaranteed
    pension payment under this plan.

Additional information:

Members who fail to elect will default into Tier 2.
Current Tier 2 members can elect to participate in the defined contribution plan (option 3.)
Those who elect to leave option 1 may not reenroll in that plan.
The legislation impacts the Teachers’ Retirement System (TRS), the State
Universities Retirement System (SURS), the General Assembly Retirement
System (GARS), and the State Employees’ Retirement System (SERS), along
with numerous Chicago pension funds.

Steve Mansfield
College of DuPage Annuitants Association