U of I Professor Jim Barrett is in his 30th year in the departments of history and African-American Studies. He planned to work through the next school year, and retire in 2015. That was until the pension overhaul. Now, Barrett says he may need to retire by the end of June or lose thousands of dollars.
“My recollection is that it reduced by monthly retirement income by something like 20-percent.”
So instead, Barrett’s weighing whether to retire with a slim window of time to decide.
“I’ve got graduate students, I’ve got courses I’m scheduled for our life, in other words our calendar for next year was planned around teaching for an additional year. Everybody’s different, but I’m someone invested in teaching on a day to day basis, it was aside from family, probably the center of my life,” says Barrett.
At issue is a benefit calculation called the ‘money purchase’ option. When eligible employees retire, they receive a monthly benefit through either the money purchase option, or a formula based on years of employment, whichever is greater.
“Now in recent years, more than half of all employees have gotten a higher benefit under the money purchase option, and that’s the one that’s changing for people that retire before or after this academic year.”
U of I Finance Professor Jeffrey Brown says the pension law reduces the effective rate of interest when calculating a key factor in the money purchase formula.
A group advocating for state university workers suggests as many as 10-thousand could see a cut in benefits, large enough to consider retirement before July. That figure comes from Linda Brookhart… Executive Director of the State Universities Annuitants Association
Brown adds a word of caution. He says each person’s situation varies, depending on when they were hired, and how much they earned over the years:
“The most important thing to urge people here, is not to make any decisions based on simply illustrations and examples, because there are going to be some people not affected at all, and others that could be affected,” says Brown.
The State Universities Retirement System is lining up consultations with employees like Professor Barrett. He can’t get in for an appointment until May. SURS spokeswoman Beth Spencer says they’re swamped.
“We have increased our one-on-one counseling sessions here at the office to the max, really. We’ve just increased by as many as we can – and we are now offering group counseling sessions, which we’re going to be able to reach about 420 additional people. And we have revamped our online benefit estimator,” says Spencer.
The State Universities Annuitants Association has filed one of five lawsuits against state officials, seeking to block the pension measure from taking effect. Executive Director Linda Brookhart…
“ I don’t want to say it could damage higher education, but it’s going to take a significant bite out of the ability – how fast can you hire people to take the place who have retired, if there’s a significant number that leave?” says Brookhart.
Brookhart also says it’s possible a judge could issue a stay to temporarily block the law until the case is heard in court. She calls much of the plan ‘very ambiguous’ and says parts will have to be changed either in court, or in the state legislature.
One of the architects of the pension plan, Democratic Representative Elaine Netritz of Northbrook, calls the possibility of mass retirements from universities an unintended side effect of the measure. She says she understands people’s anxiety, but Nekrtiz says she doubts lawmakers will revisit the issue:
“We changed the bottom line number about the savings. And you know, that’s always a very delicate balance of how we were impacting workers, retirees, versus getting to something that would be significant enough to help taxpayers,” says Nekritz.
In a mass e-mail this week, University of Illinois President Robert Easter urged those considering retirement soon to take advantage of information offered by SURS. He says administrators continue to work on a supplementary program for employees, to ensure the U of I’s retirement system is ‘competitive with those of our peers.’
Brown says that any supplemental plan from the U of I will likely have minimal effect on employees who are close to retirement.