University: Illinois pension law had costly typo

CHAMPAIGN, Ill. (AP) -- Illinois' public universities have worried for months that contentious state pension reforms will push many employees to retire early. But a small mistake, essentially a typo in the legislation, is providing even stronger incentive.

Fixing it has proven more complicated than university administrators expected.

Administrators from the University of Illinois told trustees Friday that the language in last year's pension law could take a year of benefits away from up to about 4,000 employees if they don't retire by June 30. The effect would be to sharply reduce their monthly payments in retirement.

Employees at every public university in the state are affected, and some who attended Friday's meeting said they're weighing whether to retire right away.

Illinois' five public-retirement systems had a $100 billion unfunded liability when the Legislature passed the pension reform measure in December. The law — challenged in court — saves an estimated $145 billion, largely by cutting benefits for employees and retirees.

The universities learned of the retirement date problem weeks ago, University of Illinois spokesman Tom Hardy said after the meeting.

"People became aware of it and thought there might be a relatively prompt correction, and now it's many weeks or months later and it hasn't happened," Hardy said after the meeting, which was held in Chicago, Champaign, Springfield and Rockford with the sites connected electronically. "People who are affected see an encroaching deadline that has a big impact on their lives."

The language in last year's reform law was indeed a mistake, state Sen. Daniel Biss, who co-sponsored the final legislation, said in a telephone interview. He wasn't at the meeting. But correcting it could create complications.

"I think there's a lot of anxiety around reopening this (legislation)," he said. "This is such a huge controversial, difficult negotiation. What would happen if it were reopened? If you start changing some aspects of the bill, where might it stop?"

The Evanston Democrat and former math professor, who said he learned about the problem in February, said he wants to fix the problem and was trying to persuade colleagues and legislative leaders to take action. "I'm not pessimistic, I'm just not certain of the outcome of that," he said.

Universities were already worried about large-scale departures of employees who would lose benefits under the change to Illinois' public pensions if they didn't leave by June 30. The language in the bill signed into law last December was intended to ease that concern by limiting how much public university employees who didn't retire would lose. But it made the effective date June 30, 2013, rather than 2014 — taking away a full year of benefits.

An employee eligible for a $2,540 monthly annuity in retirement would instead get $1,810, according to Avijit Ghosh, a senior adviser to University of Illinois President Robert Easter.

"They'd have to work another two to three years just to get back to the monthly benefit that they'll get if they retire on June 30," he said.

Northern Illinois University President Douglas Baker told those at the meeting that about 800 NIU employees are affected. And the school won't know how many faculty and other employees it will lose until well after the point when classes are being set up for the next school year.

"They're going to have to tell us at the very last minute, and then we're going to have to staff the classes this fall with a skeleton crew or a temporary crew," Baker said.

Christopher Kennedy, the chairman of the University of Illinois board of trustees, directed Easter and others at the school to put on "a full-court press" to convince lawmakers to act.

Biss said General Assembly's next and only chance to take action before the June 30 deadline will be during the next legislative session, from April 29 through May 31.

__

Follow David Mercer on Twitter: https://twitter.com/davidmercerap