State Rep. Daniel Biss of Evanston says he'll hold a town hall meeing later this month to discuss two pension reform bills he's introduced in the state legislature.
One proposal, House Bill 6149, would set up a new type of plan, known as a cash balance plan, for future public employees.
Biss says that like current state pensions, a cash balance plan is a type of defined benefit plan. But its benefits are tied closely to contributions and investment returns, the risk is shared between the state and the employee, and costs are predictable. (More details about the proposal and questions frequently asked about it are available online.)
Biss says the state has demonstrated a clear inability to properly manage traditional defined benefit plans. "we consistently underfund them, we repeatedly fall victim to actuarial error, and we create loopholes that can be and frequently are abused in ways that are both offensive and expensive."
But, he adds, switching to a 401(k)-type defined contribution system would create a huge cash flow problem for the pension funds and would leave public employees, most of whom will not receive Social Security, without any guaranteed retirement security.
"A cash balance plan splits the difference in that it provides a guaranteed minimum benefit for every employee but has predictable and manageable cost and is not susceptible to abuse," Biss claims.
Current employees could choose to increase their retirement age, or choose to forgo future automatic increases in their pensions. Actuaries would then calculate the savings to the state and the employee would get an immediate check for one-third the savings.
The idea behind this plan is that research shows that some employees value immediate compensation more than they value deferred compensation. HB6150 would give them the option to take a portion of that compensation while saving the state an enormous amount of money.
"These bills do not by themselves solve our state's pension challenges — nor does it make sense to pretend that as a freshman legislator I'll be able to single-handedly close the book on one of the most substantively, politically, and legally challenging issues we face," Biss says.
But he said with many policy proposals on the table, he believes his bills "represent a genuine and valuable addition to the discussion."
The town hall meeting will be held at 7 p.m. on Monday, April 30, at the Glenview Police Station, 2500 East Lake Ave.