New pension laws causing retirements, uncertainly at junior colleges

  • Written by Kevin M. Coyne

During the April board meeting at Moraine Valley Community College last Wednesday, the board approved retirements of a handful of employees, which was predicted by the college’s administrators due to the new pension reform laws.
In early December 2013, Gov. Pat Quinn signed into law the new pension reform bill, which is expected to save the state of Illinois $160 billion over the course of 30 years by cutting automatic annual increases, limit pensionable earning and raise the retirement age by five years as of June 1.
“After meeting with other college administrators I think it’s safe to say that we’re going to see a wave of retirements due to the new pension reform laws,” Moraine Valley trustee Tom Cunningham said. “There are a lot of questions that still need to be answered and it’s causing a wave of retirements across the board, not just at Moraine Valley.”
Overall, across public colleges and universities in the state, 3,356 employees retired in the first six months of 2012. Two years ago, 2,171 employees retired in the same time period, according to Moraine’s retirement source, the State Universities Retirement System.
Moraine Valley approved 12 retirements in the past year.
The teacher’s unions have already filed lawsuits challenging the law’s constitutionality, stating that the law goes against the Illinois Constitution due to “diminished or impaired” causes of the law on employees’ pensions.
“The problem is that we don’t know what’s going to happen with the new pension reform law,” said Mark Horstmeyer, director of college and community relations at Moraine Valley Community College. “What would help is if we were able to put the pension reform on hold until the issue is heard by the Illinois Supreme Court and the United States Supreme Court.”
For employees under the State Universities Retirement System, the new law limits pensionable earnings as of June 1. Tier I employees – those who entered the system prior to Jan. 1, 2011– will not be able to earn more than tier II employees, which for fiscal year 2015, pensionable earning are capped at $110,631. Some provisions allow for longstanding employees to be grandfathered into the system.
As part of the new law, SURS will begin skipping automatic annual increases, which some legislators have deemed a cost-of-living loophole, where administrators earn a three percent automatic annual increase each year. Automatic annual increases or cost-of-living adjustments are not based on the consumer price index and for some of the highest paid employees the AAI only leads to additional compounded debt put on the shoulders of the taxpayers.
Due to the skipping of automatic annual increases most college professors would have to work an additional three years to earn the same amount prior to retiring on or before June 1.
For a 50-year-old retiree the second automatic annual increase will be skipped. In the lowest age group, 44 years old and younger, the second, fourth, sixth, eighth and tenth automatic annual increase is skipped to further entice employees to work longer.
SURS will use a new system to measure automatic annual increase, the $1,000 multiplier. Each employee will multiply $1,000 by years of service multiplied by 3 percent. Legislators feel the new automatic annual increase multiplier will not impact those who earn under $42,000 and this system will help reduce increases for those with the highest pensions.
As of July 1, retirees under 46 years old will face a delay in retirement eligibility. The retirement age is determined by the employee’s age as of June 1. If a 45-year-old retires on or after July 1, a four month hold will be placed on the retiree’s retirement benefits. For anyone 31 years old or younger, there is a 60 month delay in retirement eligibility.
Most college administrators would agree that public institutions such as Moraine offset lower salaries that are seen at four-year colleges or private college by offering generous pensions and benefits as an incentive to recruit top-notch college leadership.
“There are a lot of vice presidents and qualified administrators who just don’t want to become the president of a community college and there is a growing need, nationally, for college leadership,” Horstmeyer said. “Serving as the president of a community college comes with the same responsibilities as a four-year college and a lot of administrators would rather stay in their VP position or avoid