Join Chalkbeat Chicago’s free day by day e-newsletter to maintain up with the most recent information on Chicago Public Faculties.
Courtney Billittier comes from a protracted line of educators, together with her father who lately retired after 35 years of educating. However Billittier, who has been educating for the previous 14 years, must work longer than her father to earn a smaller pension.
That’s as a result of state lawmakers handed pension reform laws to take care of a funds disaster in 2010 that created new requirements for public sector staff employed firstly of 2011. The result’s a two tiered pension system: Workers employed earlier than 2011 have been in a position to retire as early as age 55 and with extra monetary perks, whereas staff employed after that yr have been eligible to retire at age 67. That is also known as Tier 1 and Tier 2 advantages.
Billittier mentioned her father has at all times inspired her to have a separate retirement financial savings account due to the change in state legislation.
“I believe it actually ingrained in me instantly that I shouldn’t be banking on the pension on the finish of this profession being one thing that I can dwell off of completely, and that there needs to be some actions that I’m taking by myself,” mentioned Billittier.
Lecturers unions, together with the Illinois Federation of Lecturers and Illinois Training Affiliation, alongside different public sector worker unions are advocating for state lawmakers to make a change to retirement advantages for newer educators. They are saying it’s unfair to present educators who pay the identical quantity into the pension system however don’t obtain the identical advantages and should work longer. Additionally they worry that the present system will deter new educators from coming into the occupation at a time when the state is battling a instructor scarcity.
However there’s an excellent larger subject: The decrease tier retirement advantages may quickly fall beneath what’s supplied by Social Safety.
In Illinois, public faculty educators and different public sector staff don’t pay into Social Safety and are additionally not eligible to obtain these federal advantages after they retire. Nonetheless, Illinois should be certain that advantages are at the very least equal to Social Safety.
The Civic Federation, a nonpartisan analysis group, mentioned state lawmakers must make a change to the tiered retirement advantages quickly or the state will danger falling out of compliance with federal legal guidelines, generally known as Secure Harbor — an ordinary set by the Inside Income Service assessing a number of elements to see if state pension advantages are equal to Social Safety advantages — which may very well be pricey for Illinois.
Illinois Sen. Robert Martwick, who has proposed laws prior to now and this yr to alter the instructor retirement advantages system, mentioned it may get costly for the state, native municipalities, and even faculty districts if the state’s pension methods don’t adjust to federal legislation. Martwick mentioned the decrease tier pension advantages may open faculty districts as much as pricey lawsuits — if academics prevailed, settlements may eat into districts’ working budgets.
“That may sink Illinois in a single day,” mentioned Martwick, including that failing to appropriate the state of affairs just isn’t an possibility for the state.
Lecturers unions, state legislators, and finance specialists all agree that the decrease tier pension advantages must be addressed. Nevertheless, they differ in the way to repair the issue. Listed here are 5 issues you need to find out about Illinois’ two tier pension advantages and what they imply for educators and lecture rooms.
Why did Illinois create a second tier pension profit?
State pension funds have been hit laborious by the 2008 monetary disaster, usually referred to as the Nice Recession, since pension methods have investments within the inventory market. Public pensions throughout the nation noticed their investments fall in worth by $889 billion between 2007 and 2008, based on numbers by the Federal Reserve.
Amanda Kass, assistant professor at DePaul College, mentioned the well being of the pension system determines how a lot cash the state and staff should contribute to the system to ensure that it to have cash to pay retirees. When the market crashed, the quantity Illinois lawmakers wanted to contribute went up considerably. To assist offset ballooning pension funds, state lawmakers handed a invoice in 2010 that modified retirement advantages for all public sector staff who began engaged on or after Jan. 1, 2011. They believed the plan would save the state cash over time.
Annie Rojas, lead coverage analyst on the Heart for Tax and Price range Accountability, mentioned the state’s pension issues began earlier than 2010. She pointed to coverage adjustments in 1995 below Republican Gov. Jim Edgar when the state created a pension ramp, generally known as the Edgar Ramp, that will require the state to get pension funds to 90% funded by 2045. This ramp set the state’s pension contributions very low on the starting of the 50-year plan, resulting in increased pension prices afterward. In line with Crain’s Chicago Enterprise in 2010, the state was not contributing sufficient funding to the pension system even earlier than Edgar’s Ramp was created. For the reason that Nineteen Eighties, lawmakers have minimize funding to pensions to take care of funds shortfalls.
Pension funds make up nearly 20% of the state’s proposed funds for fiscal yr 2026. The Lecturers Retirement System’s funded ratio is at 45.8% as of fiscal yr 2024.
What do Tier 2 pension advantages imply for educators?
All pension funds in Illinois have two tiers now. This consists of the Trainer Retirement System, which covers all academics within the 800-plus faculty districts exterior of Chicago, and the Chicago Lecturers Pension Fund.
Al Llorens, president of the Illinois Training Affiliation, mentioned a key distinction between the 2 tiers is that academics within the second tier should work till age 67. For educators who may need began as a instructor proper out of school on the age of twenty-two, they must work about 45 years. Nevertheless, academics within the first tier may obtain retirement advantages at age 55, having labored for roughly 33 years.
As soon as academics in Tier 2 retire, their pensionable wage is capped and calculated otherwise than Tier 1 academics. That calculation takes their highest wage of eight years within the 10 years earlier than retiring, quite than 4 of the final 10 years, which ends up in a decrease closing common wage, based on the Civic Federation.
Whatever the distinction in advantages between the 2 tiers, all academics pay the identical quantity into the pension system, which Llorens mentioned is main academics to go away the occupation.
“In the event you’re paying much more than what your pension is returning, that’s not an incentive to remain both,” mentioned Llorens. “We do should take care of one thing that not solely permits us to draw however to retain academics, as a result of we’re in the midst of a scarcity that doesn’t appear to be going away anytime quickly.“
May smaller retirement advantages steer folks away from the occupation?
It’s unclear whether or not smaller retirement advantages are steering folks away from the educating occupation in Illinois. Nevertheless, finance specialists, educators, and academics union leaders imagine it may very well be a difficulty for hiring and retaining educators.
Tom Moore, a science instructor at Hoffman Property Excessive College at Township College District 211, who’s in Tier 2, mentioned he thinks it may very well be laborious to retain some educators who may not have realized they have been going to should work longer than a few of their colleagues.
“I’m 13 years in now, and I nonetheless have 35 extra years to go,” mentioned Moore. “At this level, if I used to be Tier 1, I’d already be a 3rd away or nearly half the way in which by my skilled profession.”
Hiring and retaining academics are a serious concern for native faculty districts, particularly for the reason that state is coping with a instructor scarcity. A joint report from the Illinois Affiliation of Regional Superintendents of Faculties and the Illinois State Board of Training discovered that the scarcity of academics is easing throughout the state, however it has been troublesome for districts to fill sure instructor positions, resembling roles in particular training and bilingual training.
When training leaders have been requested concerning the high three points resulting in instructor shortages, 143 of the 694 leaders who responded mentioned it was resulting from issue hiring and retaining academics, based on the report.
“Whereas the pay throughout their profession will not be nice there was at all times a very good retirement to work in direction of,” mentioned a quote within the report. “Now they don’t have both.”
Can the state undo its two tiered pension system?
The quick reply might be not. It might be costly for the state to place all of its academics and different public sector staff into Tier 1.
Pension prices for the state are already excessive: In fiscal yr 2025, pensions accounted for roughly 19% of the state’s general working funds. In line with a report by the College of Illinois’ Institute of Authorities and Public Affairs, it could value the state nearly $30 billion by fiscal yr 2045 to match Tier 2 retirement advantages to Tier 1. This might require the state so as to add $1.3 billion {dollars} to pensions by the tip of 2027.
Annie McGowan from Civic Federation mentioned the state doesn’t “have the income stream” to make bigger funds to the pension system. Particularly at a time when there are different pressures on state funding.
Illinois’ pension system additionally may very well be affected by the dramatic decline within the inventory market that has adopted President Donald Trump saying tariffs, or taxes on items from different nations, final week. The final time the market took such a success was on the starting of the COVID pandemic in 2020.
What are the proposals to alter Tier 2?
State lawmakers, academics unions, finance and funds officers, and even Gov. J.B. Pritzker have totally different concepts for the way to enhance the instructor pension system. However all of them agree that the principle constraint is value.
The Civic Federation referred to as on the state in a report from 2023 to adjust to federal legal guidelines and make sure the second tier stays equal to or higher than Social Safety advantages. Rojas, from the Heart for Tax and Price range Accountability, mentioned compliance with federal legislation isn’t sufficient when the distinction in pension advantages between tiers is inequitable for employees.
The Illinois Educators Affiliation want to see the retirement age for Tier 2 employees decreased from 67 to 60 years outdated — nonetheless greater than employees within the first tier — and a rise in retirement advantages, mentioned Llorens.
State lawmakers filed Home Invoice 2711 and Senate Invoice 2 to alter a part of Tier 2 on this spring’s legislative session. Martwick mentioned his proposal within the Senate will be certain that the state is in compliance with federal legislation and can make some adjustments requested by state worker unions. Nevertheless, he mentioned the invoice is more likely to change earlier than being voted on since there are ongoing negotiations round the way to handle the lesser tier pension advantages.
Final yr, Pritzker introduced proposals to repair the state’s pension disaster. Amongst his plans have been to extend the funding aim to 100%, greater than the 90% accredited within the Nineties, to make sure pensions are totally funded. Since shifting the funding goal would improve state pension contributions, Pritzker proposed shifting the goal yr to 2048, as a substitute of 2045.
Additionally, Pritzker desires to alter the state’s pensionable wage cap to match Social Safety to adjust to federal legislation. To realize this a part of the plan, Pritzker proposed a further $78 million within the fiscal yr 2026 funds on high of the state’s required contributions.
Samantha Smylie is the state training reporter for Chalkbeat Chicago overlaying faculty districts throughout the state, laws, particular training and the state board of training. Contact Samantha at ssmylie@chalkbeat.org.