Monday, January 12, 2015

Tier II Employees - Ingram's Got Your Back?

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.

1 comment:

  1. I remember sitting at a TRS meeting in Naperville several years ago as Ingram was basically telling us what would happen....despite our objections. Seems it's coming back now to bite him in the butt.