Chicago unions and public employees filed a lawsuit Tuesday to block pension changes coming in 2015 that would reduce future COLA increases and require workers to pay more toward their retirement.
The changes are part of Public Act 98-0641, which mandates the following benefit changes to workers in Chicago’s Municipal Employees Annuity and Benefit Fund:
Retirement Age: Decreases the retirement age for Tier 2 employees from 67 to 65, and from 62 to 60 for early retirement. No change for Tier 1 employees (currently, age 50 with 30 years of service, 55 with 25 years, and 60 with 10 years).
Annual Adjustment Calculation: Changes the annual annuity increase (AAI) for Tier 1 members (including current retirees) to ½ of the annual unadjusted percentage increase in the Consumer Price Index-Urban (CPI) or 3%, whichever is less, utilizing simple interest. Currently the AAI is equal to 3% compounded interest (set in 1999). The Tier 1 AAI will now be equal to the Tier 2 AAI.
Skipped Annual Adjustments: All Tier 1 retirees (current and future) will skip AAIs in 2017, 2019, and 2025. A Tier 1 retiree with an annual annuity of less than $22,000 will receive an adjustment of 1% in these years. Tier 2 retirees will skip an AAI in 2025. Further, all members will have a 1 year AAI delay after the date the member would otherwise receive his or her first AAI.
Exception for Annuities Under $22,000: Retirees with an annual annuity of less than $22,000 will receive at least 1% AAI every year, including the skip years.
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Employee Contribution Increase: Currently, employee contributions are equal to 8.5% of salary. Under the bill, all employee contributions would increase by 0.5% each year from 2015 to 2019. Contributions would increase to 9% in 2015, 9.5% in 2016, 10% in 2017, 10.5% in 2018 and finally 11% in 2019 and going forward. When the fund reaches 90% funded, employee contributions would decrease to 9.75% and remain 9.75% as long as the fund is 90% funded.
More on the lawsuit from the International Business Times:
The law in question is scheduled to take effect in the new year and will slash pension benefits for workers and retirees in Chicago’s Municipal Employees Annuity and Benefit Fund and Board of Trustees of the Municipal Employee’s Annuity and Benefit Fund, according to the lawsuit.
The lawsuit, filed in Cook County Circuit Court, argued Public Act 98-0641 violates a provision and “straightforward promise” in the Illinois Constitution that forbids the diminishment or impairment of public employee retirement benefits. The lawsuit stated that the pension reform law, which was enacted in June, unlawfully reduces pension benefits for the plaintiffs and all others who chose a public-service career.
“Unless this court strikes down and enjoins implementation of the Act, Plaintiffs and thousands of other current and retired City of Chicago and Chicago Board of Education employees will be harmed and the trust that all Illinois citizens place in the inviolability of their Constitution will be breached,” the lawsuit stated.
The plaintiffs, comprised of 12 current and former workers and four unions, requested the court declare Public Act 98-0641 entirely “unconstitutional, void and unenforceable.” Current retirees will suffer immediately, while the same “injustice” awaits current public workers when they retire, according to the lawsuit.
Chicago Mayor Rahm Emanuel said the law was created with the support of many unions and is both constitutional and necessary to ensure 61,000 city workers and retirees receive pensions. “Without this reform, these two funds will run out of money in just a matter of years, which is why we must defend this law to protect the future of our workers, retirees, and taxpayers,” Emanuel said in a statement.
At the end of 2012, the city’s six pension funds were collectively 50 percent funded.
Photo by bitsorf via Flickr CC License
