ILLINOIS LEGISLATURE AND GOVERNOR CONTINUE TO SHIFT PENSION LIABILITY TO SCHOOL DISTRICTS

By James Petrungaro

 

June 1, 2018

 

            The 2018 budget passed by the Legislature on May 31st includes a new piece of pension liability cost-shift buried some 700 pages within that is sure to have a significant impact on school districts. Once House Bill 3342, which passed both chambers, is signed by Governor Rauner, the 6% soft cap on end-of-career salary increases for teachers will sharply decrease to 3%.

             Under the current Pension Code, school districts have been able to give teachers (and administrators) end-of-career creditable earning increases of up to 6% over the prior year’s earnings. Any increases beyond 6% given in the years used to determine the teacher’s pension (typically the final four years) would result in the school district paying a penalty to TRS. That penalty was equal to the actuarial value of the increase beyond 6% upon in the teacher’s annuity. Unless Governor Rauner vetoes House Bill 3342 (which he is not expected to do), that 6% limit drops to 3% for any contracts and collective bargaining agreements authorized after Governor Rauner signs the bill. Any contracts authorized before the Governor’s signing are grandfathered in – and the 6% cap would apply. For those contracts authorized after the Governor signs the budget legislation, school districts will pay contributions to TRS for end-of-career creditable earnings increases exceeding 3% per year.  

            This new form of pension cost-shift joins last year’s legislation, which shifted some TRS contributions from the State to school districts for employees earning more than the Governor (typically limited to administrators). This latest legislative effort, however, will no doubt have a large impact at the bargaining table, as school districts must be careful to understand the added financial exposure. We stand ready to assist you in through that process.

 

TRS Pension Cap – Start Date for Contracts

By John E. Fester

TRS has recently cast doubt on whether an employment contract starting on May 31, 2014 will be considered “effective on or before June 1, 2014” for purposes of pension cap grandfathering.  Because May 31 is a Saturday, and TRS generally does not recognize weekends as days on which service credit can be earned, it could be argued that the contract is not truly effective until Monday, June 2 (the first day of creditable service), which is after the June 1 deadline.  In order to protect against this argument, employees seeking to have a multi-year contract in place for purposes of pension cap grandfathering should make sure the effective date of the contract (i.e. the first day of creditable service under the contract) is earlier than May 31, 2014.  If you have any questions regarding this matter, please contact your attorney at Scariano, Himes and Petrarca.

 

Employing IMRF Retirees

 October 19, 2010

By Adam Dauksas

A recent interpretation of pension rules by the Illinois Municipal Retirement Fund (“IMRF”) should have your District exercising caution when hiring an IMRF annuitant to work in an IMRF-qualified position.

Retirees receiving an IMRF pension who return to work in an IMRF qualifying position, without being re- enrolled in the retirement system, could be held responsible for paying back to IMRF the entire amount of all annuity payments that were improperly received while working in that qualifying position during retirement.  Moreover, these repayment amounts would be in addition to any member contributions owed by the retiree.

School districts, and other IMRF employers should also be aware that in the event a retiree is unable to repay to IMRF the entire past annuity amounts improperly received by them, and all or a part of the fault for failing to re- enroll the retiree lies with the district, IMRF may seek to recover the annuity payments directly from the district.  In fact, IMRF has recovered such improperly paid annuity amounts directly from at least one school district in the past.

If you have any questions regarding the employment of IMRF retirees, please do not hesitate to contact Scariano, Himes and Petrarca.