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updated: 6/27/2013 6:15 PM

Inflated pensions are not what was intended

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Regarding public pensions in Illinois we have incessantly heard those with a vested interest claim the state failed to pay enough into them. Yet those same individuals who complain about the state are surprisingly silent when their former co-workers, fellow pensioners or even they themselves have been party to the taking out of the pension funds far more than their actuaries intended. This was accomplished by employees being awarded exorbitant salary increases the final four years before retirement, until legislation was recently passed to limit those increases to 6 percent each year. Four years was all it took because pension rules only look at the salary of the highest four consecutive years.

To illustrate the practice I will provide the following examples from my local school district, Palatine Township Elementary Distict 15. In 2004, 82 educators retired with an average ending salary of $123,364, a 66 percent increase from their $74,116 average three years prior. In 2006, the last year before the cap took effect, 26 educators retired at an average of $130,753, a 71 percent increase from their $76,317 average four years prior. By 2010, with the caps in full effect, 41 retirees had an average ending salary of $104,276, only a 26 percent increase over their average of $83,055 four years prior. Needless to say, the average starting pension before the caps was more than $20,000 over the average after the caps, which would yield someone an additional $730,000 over a 25-year pension with its 3 percent cost-of-living increases.

Clearly this "gaming of the system" over many years significantly inflated the pensions' actuarial "unfunded liability." To limit the damage caused by these past abuses the pensioners should minimally forgo the automatic 3 percent COLA especially if the taxpayers are then to be required to pay the actuarial "required amount."

Mark Evenson


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