Tier II Employees –
Ingram’s Got Your Back?
I received my TRS flyer by e-mail the other day, and in it
was the Executive Director’s Report from Dick Ingram.
Ingram describes that he is now part of an Illinois Task
Force convened by order of House Joint Resolution 27, which asks for a final
report regarding that status and impact of the added Tier Two system for new
hires after January of 2010.
The Task Force is called the “Teacher Recruitment and Retirement Task Force,” and the final
report was to be delivered by January 1st of this year, but they’re
running behind.
In his “message,” Ingram reminds us, “Tier II is designed to
help solve the financial problems faced by TRS and other systems by reducing
pension benefits for these new members (hired after Jan. 1, 2010). Lower pensions means reduced long-term costs
for the state.”
In fact, while interviewing the 20 legislators who supported
and then passed Tier II (SB1946), it was clear for Glen Brown and me that
little thought to savings in terms of real numbers was utmost in their
minds. In truth, according to one very
intelligent Republican Representative, they were desperately trying to raise the bond
ratings in Illinois before once again borrowing, and the Speaker had targeted
an unthought-of fiscal host: future workers in the state system. Very convenient, really.
When Ingram states “that if left alone, Tier II will
accomplish its mission…”; in fact, the ultimate outcome – like many pieces of
legislation in Illinois – was not primary in any of the General Assembly’s
collective mind.
Case in point: SB1.
But I digress.
And yet, in sum, the Director is spot-on correct: the benefit
structure is not only punitive and confounding, it is likely unable to meet
federal standards as required by the Social Security Administration in very
short order. By the way, a quick review
of blogs by Klonsky or Brown shortly after the passage of SB1946 predicts this
very issue.
But what became worrisome to me was one passage by Ingram
that offered this derisive tease to retirees and current workers: “Like other Tier II members, I’m happy to
help out, but I’m not really too thrilled with paying for my pension and paying
extra to subsidize somebody who is paying less than half the cost of their
pension. I like all of you very much,
but this is a matter of equity for Tier II members.”
If I remember, we in Tier I – retired and current –had
little to do with the legislation.
Indeed, most of us fought against it desperately.
But Speaker Madigan has always excelled in finding a way to
generate a divide-and-then-conquer strategy for his victims.
While initially stating that he would remain neutral when he
assumed his position as TRS Executive Director, Ingram has been recurrently
vocal about his victimization as a Tier II employee, and he has never shrunk
from opportunities to point out various benefits in Tier I as dangers,
time-bombs, or negatives that make his own personal position in Tier II “unfair.”
In October of 2012, Ingram responded in a Crain’s Chicago
Business interview, “’Look at every
other state that’s done pension reform – what have they done? They’ve changed
the COLA because that’s where the cost is,’ Mr. Ingram said, noting that 25
percent of TRS payments are for cost-of-living increases on pension benefits. ‘Changes
in cost-of-living adjustments could be targeted so they have the least impact
on the oldest retirees and those with the lowest incomes,’ he said.”
In an article
with Reboot, Editor Madeline Doubek
reports, “Dick Ingram, the head of the Teachers Retirement System, has said
that the system will be insolvent in 16 years…”
After explaining
once again how he was fiscally punished for being a Tier II employee at a 2013 gathering
of retired and current actives at Richards High School in Oak Lawn, Illinois,
Ingram suggested that something like a Cash-Balance plan might look pretty
enticing for someone like him (Tier II employee). Cash Balance Plans were developed by
accountants and actuaries at Kwasha Lipton in 1985 for Bank of America as a way
to disguise a 401K-style program in a wrapper that looked more like a promise
than a gamble on the market. Bank of
America was looking for a way to shed its pension responsibilities.
In fact, more
than one retiree and teacher in the audience that evening asked Ingram why he
continued to make such reckless assertions because it made meetings with
legislators regarding appropriate solutions to the pension debt issue more than
difficult. “Whenever I go to talk with
my Representative, he just parrots what you have said, as if the systems will
never be fixed without a complete destruction.”
Case in point:
SB1. But I digress again.
There’s much to
learn in Ingram’s Report in the current TRS Newsletter, please don’t get me
wrong. Read it and understand what havoc a non-thinking legislature can accomplish quickly. Tier II employees’ SSA situation
will be a serious problem for Illinois very soon. Money extracted from Tier II employees will
create an ultimate backwash in fiscal surplus in the somewhat distant
future. Yes, it is unfair - extremely unfair for those who work as hard as we in Tier I know they do.
And I’m not
saying that Ingram is going off the reservation again, but I’m wary.
Ingram ends with,
“The goal of this effort is to fix Tier II so it does not hurt TRS members and
Illinois, and with billions of dollars and the future retirements of Illinois
teachers at stake, the earlier we get started, the better.”
I recall when Bob
Dylan gave a try at creating a Christmas Album after the age of 60. One of the critics said of his faltering
voice, “I’ll Be Home for Christmas
sounds more like a threat than a promise.”
Ralph Martire of
the CTBA would tell us the answer is simple:
1.
Re-amortize
the debt, and begin a level payment that can be coped with as we move forward.
2.
Change
the antiquated tax structure in Illinois to a progressive rate that changes
appropriately with the economy.
3.
Make
the payments to the normal costs of the pension funds moving forward instead of
avoiding that responsibility and ending up with a +$100 billion shortfall.
Sadly, it’s not
likely that the Task Force will be looking in Martire’s direction at all.
And what about
the Task Force? Can we count on them to
promote a return of some sort for those caught in the bolgia of Tier II to a
real and secure retirement – or will it be some different modification to a more
business-like prototype suiting the new Governor? 401K? Cash Balance Plan? Hybrid defined benefit or defined
contribution?
Here are the
players. What do you think?
Teacher Recruiting and Retention Task
Force members:
Senator John Sullivan, co-chair: Voted against SB1 because he preferred
SB2404, and cooperative between unions and GA.
Received a lion’s share of campaign donations from Democratic Party of
Illinois, controlled by Speaker Madigan.
Representative Chapa LaVia, co-chair: Told
the Fox Valley News that she was voting yes to SB1 after telling Associated
Press that she hadn’t looked at it yet.
Told AP she was “awaiting enough evidence to review it.”
Senator Michael Frerichs: Voted Nay on SB1; instead, was proud “to
stand in support of legislation (SB2404) done the right way…”
Representative Frances Hurley:
In letter to constituent Jerry Mulvihill explained she was voting yes on
SB1 to save the solvency of the pension system.
(search Frances Hurley in Fred Klonsky blogs)
Representative John Anthony: One of 26 lawmakers to opt out of his
pension as a some show of his willingness to forgo the promise of Article XIII,
Section 5. A recent lawmaker, one of his
only Yes votes is on SB1. All others are
NAY – on limiting smoking in public areas, on prevention of bullying in schools,
on requiring accommodations for pregnant women in the workplace…
Representative Barb Wheeler: Also opted out of pension plan (unclear). According to Northwest Herald, she was made
aware of her ability to recuse herself from pension in 2013 as she assumed
office and was preparing her paperwork to do so. Voted yes on SB1. Also according to Northwest Herald, she
prefers public employees have absolute option for a 401K.
Senator Jim Oberweis: Dairy
millionaire opted out of pension plans.
After voting yes to SB1, Oberweis apologized to Tea Party hardliners,
stating that “the bill wasn’t true reform – but it was the best Illinois was
going to get right now (Chicago Tribune).
Also, co-sponsor to HB3303 with Morrison and Ives to convert entire
pension system to a 401K program (IPI Newsltter).
Senator Chapin Rose: Voted Nay to SB1 and supported a
negotiated bill like SB2404 (Sun Times).
Dr. David Schuler, Supt.
Dist. 214: Advocate and
member of Advance Illinois. Very much
involved in Common Core and Race to the Top.
(Google “Advance Illinois Policy Breakfast David Schuler” for video for
program).
Frank Mott, Board President Forest Park
Dist. 91:
Brittany Archibald, Educator, Westville
CUSD 2:
Steve Grossman, President, North
Suburban Teachers Union:
IFT leader with association to Dan Montgomery and picketing against SB1, but
nothing re: SB2404.
Vinni Hall, Secretary, State Board of
Education: “Hall
was critical in seeing Illinois adopt and implement Common Core State Standards
and Response to Intervention, as well as improving state Supplemental Education
Services, and new principal and teacher evaluations in the state.”
Dick Ingram, Executive Director, Teacher
Retirement System:
Of course, the
Task Force is waiting, even holding its breath to see what the outcome of the
ILSC’s decision on SB1 will be, but given the characters and previous
backgrounds of those making up the Task Force (including Ingram), I wouldn’t be
astonished to see an option of some kind or another for an opt out to something
more like a defined contribution.
Once, not so
long ago, a retiree objected during a conversation, “Why should we concern
ourselves with what happens to these incoming people after January of
2010. After all, we’re protected, aren’t
we? We’re retired and they shouldn’t be able
to touch us.”
We tried to
explain that our consistent payments to TRS were one leg on the three-legged
stool (w/ TRS investment returns and state government payments) that we could
not avoid or we would destroy the system.
We tried to explain that those remaining would
never have the promise of a secure retirement in their later years if the
defined benefit system was replaced with what was originally a savings program.
We warned of the divide-and-conquer
machinations of someone like the Speaker.
Looking at the
members of this Task Force, I cannot feel secure that their recommendation will
be anything but a move away from a defined benefit.
