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PUBLIC ACT 98-0599
Summary of Lawsuit As Filed January 2, 2014
The following is a summary of the lawsuit filed by the Retired State
Employees Association (RSEA) in Sangamon County in the Circuit Court
of the Seventh Judicial Circuit on January 2, 2014.
To see the full text of the lawsuit (20 pages; exhibits not
Because the lawsuit was submitted as a class action, all those who
are entitled to receive an annuity from SERS as of May 31, 2014 or
earlier are covered by the lawsuit.
The lawsuit, also referred to as the complaint, identifies RSEA and
four retirees as plaintiffs. These four named retirees represent the
class of all retirees, survivors, and others who will be entitled to
receive benefits from the State Employees Retirement System (SERS).
The four retirees named as class plaintiffs in the lawsuit are RSEA
members Larry Wort, Gladys Hajek, Linda Gueldener, and Maurine
Richter. Larry and Linda represent all retirees in general. Gladys
and Maurine represent retirees who retired as part of a State early
retirement incentive (ERI) program.
The primary complaint is that PA98-0599 violates the Illinois
Article XII, Section 5 “Membership in a
pension or retirement system of the State… shall be an enforceable
contractual relationship, the benefits of which shall not be
diminished or impaired.”
Article I, Section 16 “No…law impairing
the obligation of contracts…shall be passed.”
Article I, Section 2 “No person shall
be…denied the equal protection of the laws.”
The complaint contends that the drafters of the 1970 Constitution
intended for the General Assembly to properly fund the pension
systems. Unfortunately, the General Assembly leadership and its
members as well as the Governors have consistently failed to
properly fund SERS and the other pension systems. Instead, they used
SERS and the other retirement systems as lenders of last resort to
pay for services provided to the citizens/taxpayers of Illinois and
for projects of interest to their constituents and political
While the General Assembly and Governors failed to uphold its own
obligation to fund the State’s retirement systems, it required State
retirees to contribute their share of the funding from each paycheck
they received during their years of employment.
3% Automatic Annual Increase
The lawsuit makes it clear that the 3% automatic annual increase
(AAI) in the retirement annuity is not and never has been defined as
a cost of living adjustment (COLA). The AAI was first created by
State law in 1969. Amendments to the formula for determining the
amount of the AAI retirement benefit were also passed by the General
Assembly and Governors in 1971, 1978, and 1989.
None of the four laws that created and revised the AAI identified it
as a COLA. In fact, the Consumer Price Index (CPI) which measures
the increase in the national cost of living was significantly higher
than the AAI in each of the four years the four laws were passed.
Automatic Annual Increase Funding
Funding for the AAI was planned for in the 1969 legislation that
created the AAI. The legislation included a provision which required
employees to contribute .5% of their salary for this retirement
benefit. The State was also supposed to contribute a matching .5% to
fund this benefit. Retirees had the funding payment deducted from
their paychecks starting in 1970 through the date of their
retirement in exchange for their entitlement to the AAI.
During this time, benefit handbooks were published repeatedly that
described the AAI retirement benefit. Examples of these include the
handbooks issued in 1982, 1992, 2001, and 2011 which is the current
SERS Benefits Handbook. Copies of each of these handbooks are
provided as exhibits in the lawsuit.
The AAI retirement benefit is also described in the current SERS
Annual Report as a benefit for Tier I employees and in the last ten
years’ SERS annual Reports in printed form and on the SERS website.
Early Retirement Incentive Programs
The ERI programs established a contract between the State and the
retirees who retired as part of them. The ERI programs were intended
to benefit the State by reducing the number employees, particularly
those with longer tenure whose salaries may have been at the higher
end of their respective positions. For example, under the 2002 ERI
program, retirees who left State employment paid in excess of $128
million to purchase service credits. The State benefited by reducing
its payroll costs over $2.9 billion during the period 2003-2012.
Although smaller in scope, the State also had ERI incentive programs
in 1991 and 2005.
The lawsuit also contends that PA98-0599 violates the Illinois
Constitution by depriving the plaintiffs of the equal protection of
the laws because the law does not include retired judges.
With the passage of PA98-0599, the State has defined a variety of
changes in the following five retirement systems: State Employees
Retirement System (SERS), State Universities Retirement System
(SURS), Teachers Retirement System (TRS), Public School Teachers’
Pension and Retirement Fund (PSTPRF), General Assembly Retirement
System (GARS). It does not include changes for the Judges’
Retirement System (JRS).
The lawsuit asks the court to order the State to establish an escrow
account to hold the money for the difference between the annuity
that retirees would be entitled to if PA98-0599 were not enacted
versus the amount they would receive if it is enacted. The money in
the escrow account would be available for distribution to either the
plaintiff class or to the State, depending on which one prevails in