Let’s Play Pension Bill Legislator

Here is the first change in the pension law being featured by the Chicago Tribune Sunday on its front page and today on its editorial page.

You’ve perhaps heard about the former Mike Madigan and Shirley Madigan employee who worked less than the eight years required to vest who ended up getting an over $100,000 a year pension based on her final four years of salary as a lobbyist with the Illinois Federation of Teachers.

If you read the following, would you have seen red flags?

(c) An individual who represents or is employed as an
officer or employee of a statewide labor organization that
represents members of this System may participate in the System
and shall be deemed an employee, provided that

  • the individual has previously earned creditable service under this Article,
  • the individual files with the System an irrevocable election to become a participant within 6 months after the effective date of this amendatory Act of the 94th General Assembly, and
  • (3) the individual does not receive credit for that employment under any other provisions of thisCode. An employee under this subsection (c) is responsible for paying to the System both (i) employee contributions based on the actual compensation received for service with the labor organization and (ii) employer contributions based on the percentage of payroll certified by the board; all or any partof these contributions may be paid on the employee’s behalf orpicked up for tax purposes (if authorized under federal law) by the labor organization.

A person who is an employee as defined in this subsection
(c) may establish service credit for similar employment prior
to becoming an employee under this subsection by paying to the
System for that employment the contributions specified in this
subsection, plus interest at the effective rate from the date
of service to the date of payment. However, credit shall not be
granted under this subsection (c) for any such prior employment
for which the applicant received credit under any other
provision of this Code or during which the applicant was on a
leave of absence.
(Source: P.A. 92-14, eff. 6-28-01; 93-685, eff. 7-8-04; 93-839,
eff. 7-30-04; 93-1069, eff. 1-15-05.)

Or would it have sounded fair to you.

We’ll publish the roll calls later, but your could call you legislator and ask them before we do that.


Comments

Let’s Play Pension Bill Legislator — 13 Comments

  1. How come you left off the fact that she paid $600,000 in order to buy the credits?

  2. The Tribune says it will take her seven years to get it back.

    She retired at age 56.

  3. **The Tribune says it will take her seven years to get it back.**

    So the pension fund wouldn’t have made any interest on that money at all? Fascinating.

    And, of course, the Trib would never embellish or manipulate the facts to fit their agenda, right?

  4. Are you indicating that you think lobbyists should receive state pensions?

    In any event, as seniors with nest eggs would be happy to attest, interest rates are really, really low.

  5. The average life expectancy of a woman is about 81. So Dave you are saying that the pension fund can afford to pay out $2.5M for every $600k put in? That’s the reason why we are in trouble!

    I can only wish for that kind of a return on my 401k!!!

  6. **Are you indicating that you think lobbyists should receive state pensions?**

    I don’t necessarily think it is a problem, especially when the full contributions were made to the pension fund.

    **In any event, as seniors with nest eggs would be happy to attest, interest rates are really, really low.**

    Not necessarily… which gets me to the question below. $600,000, at 5% interest for 15 years, becomes 1.25M. I believe the pension fund has received a better than 5% return over the last 20 years, but am not positive. If you bump the return to 7% and the years to 20, it becomes $2.32M.

    **So Dave you are saying that the pension fund can afford to pay out $2.5M for every $600k put in?**

    As I just demonstrated, the math works depending on the assumptions.

    Some questions… because I can’t read the protected Trib article. What year did the bill pass, and when did Ms. Purkey buy her credits?

  7. With COLA, it will take less than 6 years for her to get that $600k back. Once you factor COLA, that pension will outpace inflation and market growth by a significant margin.

    It’s undefensible, period.

  8. Allen- I see you also understand interest as well as the Trib does. Awesome.

  9. What do FL legislators have to do with a date employee pension system in IL? There are different regs for the state employee pension an the legislator pension system.

    I did find out that the bill passed in 2007. That does imply that she is making out like a bandit. But if have to know more detail than the Trib chose to share.

  10. Dave, at 8% interest that $600k contribution will be exhausted in a little less than 10 years if the contribution was made just before she retired (which is probably the case).

    Not bad when the people paying for her to retire early will be working to 67 or older.

    Undefensible…

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