How teachers' sick leave pension perk might save you money
Many Illinois educators are taking advantage of a pension-boosting perk that some critics want to see abolished.
But the benefit might actually save taxpayers money.
State law allows public school teachers and administrators to stockpile up to two years of sick leave and count it toward service time, letting them increase their starting pensions by as much as 4.4 percent without actually having to work.
The perk is popular, with more than 70 percent of the 103,000-plus retirees in 2015 using sick days to boost their pensions, reported the Illinois Policy Institute, a conservative research organization that tracks and analyzes government spending. That includes 7,883 retirees who carried over the full two years of sick leave.
"They're taking a benefit that is meant to cover them for being sick and they get to ultimately turn that into a pension spike," said Ted Dabrowski, the Institute's vice president of policy. "And that turns into a pensionable cost that is much higher to taxpayers."
It's true taxpayers ultimately have to pay more to cover the larger pension obligation created by adding two unworked years to an educator's retirement benefit.
But it's not as costly as it would be if that teacher instead worked two more years before reaching retirement.
The Illinois Teachers' Retirement System has two levels of benefits, but the report looked only at Tier 1 pensions because no one covered by Tier 2 -- enacted in 2011 -- was receiving a pension in 2015. After 35 years of employment, Tier 1 employees receive a starting pension equal to 75 percent of the average of the highest-paying four consecutive years within the last decade of work. Retirees can begin collecting pensions at age 60 with no penalty.
To see how it works, take a look at benefits for a 60-year-old educator with 32 years of experience and a $98,000 final average salary.
Without the sick leave boost, the retiree would receive $68,992 as a starting pension, or 70.4 percent of the final average salary, the institute calculated.
With two years of sick leave credit, the starting pension would be $73,304, or 74.8 percent of the final average salary.
However, if the sick leave perk was eliminated, the educator would likely continue to work two more years to maximize retirement benefits, teacher union officials believe.
Using the same 2 percent annual raise assumed in the report, that educator would now retire at 62 with a final average salary of $102,000 and a starting pension of $76,296. Because the salary is higher, the taxpayer-funded employer contribution also is higher.
Teacher representatives say there are other savings.
"If you get them to retire two years earlier, you can replace them with lower-costing new hires," said Larry Frank, director of research at the Illinois Education Association, one of the state's main teacher unions. "And if they can accrue the sick leave, (taxpayers) don't have to pay two years' worth of substitutes."
Most contracts give classroom teachers 10 to 15 days of sick leave each year. However, several suburban contracts also give more sick leave the longer an educator serves in the school district. Also, the "year" over which educators accrue sick leave is actually 170 days, which makes it significantly easier to accumulate sick leave.
While the accrual of sick leave is allowed in the state's pension law, Dabrowski argues the perk can be specifically removed from future teacher contracts.
He notes the benefit is something most taxpayers themselves don't receive.
"This is a benefit unavailable to the average Illinois taxpayer," he said. "You might be able to roll over a few days, but not accumulate them. And even if one did, he wouldn't get credit at retirement."
In the private sector, stockpiling sick time is much more limited as companies move away from specifically designating time off as vacation or sick leave, according to Gretchen Van Vlymen, vice president of account management at StratEx, a Chicago-based human resources services and software management firm. Accumulation of "paid time off" to enhance retirement benefits is almost unheard of, she said.
"It would be very rare," she said. "The standard for carrying over from one year to the next is probably about a week and there are a lot of employers who say use it or lose it."
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