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Andrew Szakmary
I do not see what purpose this serves. In each of the state pension systems, a specific, dedicated portion of the employee’s own contribution is for the 3% automatic annual increase in retirement, much like in a long term care insurance product a part of the premium paid in many cases provides an inflation rider for the benefits. For this reason, the AAI is a contractual obligation that the state cannot possibly renege on short of bankruptcy, as the Illinois Supreme Court recently affirmed in a bipartisan, unanimous ruling. Can we finally accept the obvious legal facts and move on, or must we keep rehashing this over… Read more »
This is a half-truth. There is indeed a portion of an employee’s contribution – a whopping 0.5% – that goes towards automatic annual increases in retirement. However, when this was first enacted and negotiated for decades ago, the AAI was 1.5% simple interest. Since then, the Legislature upped it to 2% then 3% then changed the interest formula from simple to compounded. None of those increases were bargained for in good faith, if at all. Are taxpayers to believe that the cost of 3% compounded COLA is equal to 1.5% simple COLA? Interesting that you use “long term care insurance” as an example of an inflation rider.… Read more »
James Gordon
Andrew, I think you’ve stated my thoughts just about perfectly. We can all agree that the accrued pension liabilities are truly huge and seemingly insurmountable, but its a series of purposeful acts by repeated legislatures and governors that made it that way. The author of the article to which you’ve responded claims that its the contractually agreed-upon fixed AAI (which he incorrectly states as a COLA) which is the primary driver of that huge stated pension debt to its public employee. Yet, I’ve read repeatedly from TRS and others that if the amounts actuarially due each year had been paid rather than short-changed the resulting annual payments… Read more »