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HB6204 – A COMPREHENSIVE SOLUTION
|There has been much concern on the part of State
retirees and employees with the proposed pension changes contained
in HB1447 and SB1673 to solve the State’s financial problems. These
bills include provisions that would require retirees to “choose”
between continuing to receive the current annual 3% compounded cost
of living adjustment (COLA) and having access to the State’s health
insurance program. In making the “choice”, one or the other of these
two pension benefits would be taken away.
While the Legislature and the Governor have struggled with aspects
of this legislation and the timing for voting on it, they have thus
far seemed focused on the “choice” as a means for fixing the
unfunded pension liability. This will result in a diminishment of
retiree pension benefits for a problem that was not caused by
We have recently become aware of a legislative bill that offers a
good alternative to the damaging proposals contained in HB1447 and
SB1673. This legislation is contained in HB6204 which was submitted
during the special session of the General Assembly held on August
Like any piece of legislation, HB6204 is subject to change. The
following are some of the major features included in it:
1. The five State pension systems will be 100% funded by year 2045.
In contrast, the proposals in HB1447 and SB1673 would result in the
pensions being 90% funded by year 2045.
2. A Pension Stabilization Fund will be established to receive the
payments required to fund the pension systems. To assure that the
payments are made by the State as required, these payments will be
defined as a “pension benefit” to provide them the protection that
is afforded to pension benefits by the language in the Illinois
3. The State Comptroller and State Treasurer will be authorized and
required to make annual payments to the Pension Stabilization Fund
on behalf of the State based on a prescribed formula. The retirement
systems will be empowered to sue the State in the event that a
required payment is not made to the Pension Stabilization Fund.
4. Funds currently allocated in the State’s annual budget to pay off
three bonds issued for the purpose of funding the retirement systems
will continue to be used for pension funding after each bond is paid
off. Those three bond payments total approximately $2.8 billion
dollars per year.
5. Employees will be offered an option to transfer to a self-managed
defined contribution plan administered by their retirement system.
This may save $400 million per year and reduce the total unfunded
liability $10-20 billion dollars depending on how many employees
6. Employees who choose to remain in the traditional defined benefit
plan will be required to contribute the greater of: a) ½ the normal
cost of the defined benefit plan; b) 6% of their salary.
7. A salary cap will be established for a current employee’s
participation in the current pension program which is a defined
benefit plan. That salary amount will be adjusted over time but is
currently set at $109,000. Any amount of salary above that will be
used to determine the amount of pension contribution to be made to
the defined contribution plan portion of the employee’s pension
8. Current retirees will continue in the current defined benefit
plan without changes. A reduction in the current annual COLA will
not be needed.
Contact your elected officials to express support of HB6204 or
similar legislation that may be proposed. The combination of changes
proposed in it offer a reasonable and effective approach for
addressing the unfunded pension liability issues. The costs are
distributed in a balanced and fair manner between employees and the
State while making the five pension systems 100% funded.
To see the full text of HB6204, go to