Ted Dabrowski and John Klingner
For decades Illinois lawmakers have made a mess of the state’s public pension plans. Now they’re about to do so again.
Several proposals to increase the pension benefits of Tier 2 workers – government workers hired after 2010 – are being floated in Illinois, some already in bill form. The purported reason for the increases is that some worker benefits may not be compliant with a federal requirement that requires a worker’s pension benefits be “at least equal” to what he or she would have received under Social Security.
The total cost to taxpayers for those potential changes – ranging from a few billion dollars to as much as $80 billion through 2045 – would make Illinois’ already untenable pension debts even more untenable. A recent Fitch report shows Illinoisans are already burdened with $172 billion in state-level pension debts – the largest in the country (see Appendix).
Unsurprisingly, these “solutions” are being promoted and pushed despite no formal evidence presented that anyone is out of compliance with the IRS’ “safe harbor” test – a test (Revenue Procedure 91-40) that determines if benefits meet the Social Security minimums. There’s been nothing from the IRS nor the state’s actuaries nor any of the various government employers that quantifies which workers – if any – are not in compliance, and what the costs of that noncompliance might be. Until lawmakers know the facts, they should do nothing to enhance the benefits of Tier 2.