I'm not taking the state's pension buyout, and this is why.
A defined benefit is what we earned.
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I’m not a financial advisor and I don’t play one on TV.
But I do watch out for our public pensions, especially here in Illinois where decades of bad decisions by both Democrats and Republicans in state government have led to a $130 billion dollar hole in our contractual and constitutional guaranteed retirement compensation account.
Pension rule 101 is that a defined benefit is best for the worker.
A defined contribution is best for the employer.
In traditional defined-benefit pension plans, the employer generally bears investment, inflation, and longevity risks.
In defined-contribution plans, such as 401(k)s, the employee bears nearly all these risks.
Guess which one the Springfield politicians who have shorted our pension system for years, want us to have?
Nearly every one of them, from so-called progressive Democrats to Trumper Republicans, voted to extend the the early buyout program they first passed in in 2019.
I think the early buyout plan is a test run to turn our entire pension system into a defined contribution system.
This early buyout program allows pensioners to withdraw their pension for what amounts to pennies on the dollar so they can put it in a defined contribution plan, like a 401(k), or spend it.
I suppose if I needed fast cash, I might consider it. But as a retirement plan? Not me, brothers and sisters.
Springfield legislators voted (with all but two state reps voting no) for a bill extending the pension buyout option for Illinois state employees to 2026.
JB signed the law in early May and authorizes $1 billion in additional general obligation bond funding to extend the program.
All of this reduces the unfunded liability by around $800 million.
Remember that the unfunded liability is around $130 billion.
That’s billion with a B.
The legislative sponsor of the extension, Democratic Representative Bob Morgan, defended his bill by saying that after years in which workers were told the cash-short state might have to cut their benefits, the new program “does exactly the opposite.”
But that is simply not true.
A cut in our pension benefit was unanimously ruled illegal by the Illinois Supreme Court several years ago.
No cuts are planned or legal.
Morgan said “There’s some people who would rather have cash in their hands now rather than 20 or 30 years down the road.”
Not me. I want my pension paid into my bank account every month, without worrying about the ups and downs on Wall Street. That was what I was promised. It was a contract.
That’s what a defined benefit means.
And the state still has $130 billion in total unfunded pension liability.