Looks Like Politicians Will Extend Illinois’ Pension Buyout Program

In 2019, the state of Illinois introduced a pension buyout system that allowed pension plan holders to receive a lump sum of cash now as opposed to keeping their money invested in the pension system. The payments are funded by a state bond issue of $1 billion.

Now, however, politicians are concerned the funding for this program will run out of money. Illinois state Representative Bob Morgan introduced a fast-tracked bill that is currently pending in the state House to renew this program for another two years and authorize another $1 billion in funding.

With over $130 billion in unfunded liabilities statewide, the state of Illinois has been actively searching for ways to help alleviate its financial burdens.

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Over $500 million has been paid out so far across the state’s different pension plans, reducing unfunded liabilities by approximately $800 million total. For specific plans within the state, such as the Illinois State Employees Retirement System, the gains have been significant, as well. Illinois State ERS saw its unfunded liability decrease by approximately $325 million.

The program is popular because it reduces liabilities while not backtracking on promises made to retirees.

“There are some people who would rather have cash in their hands (now) … rather than 20 or 30 years down the road,” said Representative Morgan at the House Committee on Personnel and Pensions.

The bill was unanimously cleared for action and seems likely to pass.

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Tags: Bob Morgan, buyout, Illinois, local politics, Pension, Unfunded Liability

The Pension Benefit Guaranty Corporation (PBGC) has approved a $100.5 million bail out of the Local 408 International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America Pension Plan. It is the fifth plan approved by the PBGC under the Special Financial Assistance (SFA) program, which was enacted under the American Rescue Plan Act of 2021 (ARP).

The Union, New Jersey-based plan, which covers over 1,000 participants in the transportation industry, was certified to be in critical and declining status in the plan year that began in 2020 and became insolvent last September. The plan was required by law to reduce its participants’ benefits to the PBGC guarantee level, which was approximately 60% below the benefits payable under the terms of the pension.

However, the PBGC’s approval of the application will allow the pension plan to restore all benefit reductions that were triggered by its insolvency and make payments to retirees to cover prior benefit reductions.

“Without this Special Financial Assistance, these 1,058 transportation workers would not receive the retirement benefits they have earned through years of hard work,” U.S. Secretary of Labor Marty Walsh, who is also chair of the PBGC’s board of directors, said in a statement. “With funding from President Biden’s American Rescue Plan, these workers now have the assurance of the secure retirement they deserve.”

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The PBGC also said its Multiemployer Insurance Program will be repaid more than $520,000 to cover the amount of the plan’s outstanding loans for the financial assistance the agency has provided since last September.

Under the SFA program, the PBGC has established six priority groups that are ranked by various criteria, with preference given to the plans in the direst financial situation. The agency is currently accepting applications only from plans in the first two groups. The first group includes plans that are already insolvent or that are projected to become insolvent before March 11. And the second group includes plans that are expected to be insolvent within one year of the date they file their applications or that implemented MPRA benefit suspensions before March 11, 2021. The third group, which includes plans that are in critical and declining status with more than 350,000 participants, will be allowed to apply for financial assistance beginning in April.

Struggling pension plans are required under the SFA program to demonstrate eligibility and to calculate the amount of assistance per ARP and PBGC guidelines. Funds provided under the program may be used only to pay plan benefits and administrative expenses, and plans receiving aid are also subject to certain terms, conditions, and reporting requirements.