Wednesday, November 2, 2011

The University Perspective:
November, 2011 Letter from
Illinois Public University Chancellors
and Presidents to Governor Pat Quinn

Author: Illinois Public University Chancellors and Presidents
Date: November 2, 2011

November 2, 2011

The Honorable Pat Quinn
Governor of Illinois
Office of the Governor
James R. Thompson Center
100 W. Randolph, 16-100
Chicago, IL 60601

Dear Governor Quinn:

We recognize the State of Illinois is faced with an unprecedented fiscal deficit that results in not only billions of dollars of unpaid obligations to state agencies and vendors, but leaves state leaders with few options to address the estimated $85 billion underfunded pension liabilities shared by the five state pension funds.

The SURS defined benefit program for University and Community College employees was established in 1941. Had all three required funding components been fulfilled over the years, the SURS program would now be stable, affordable and solvent. Two of the three necessary components of full funding have been steadfast and consistent: employee contributions and the return on assets from pension fund investments.

As chief executives of the state’s public universities, we understand all too well that the present situation facing the state’s five pension funds is not sustainable. Notwithstanding the state funding history, successfully resolving this financial obligation requires all parties (university employers, employees, employee organizations, and the State of Illinois) to participate together in crafting a fair and equitable solution.

Within the context of the state’s fiscal crisis, examples of excessive individual pension benefits have often been emphasized in the call for reform. But these exceptional situations do not represent the reality of the vast majority of pension system participants. Among its nearly 200,000 members, the average SURS retiree has 20 years of service and receives a monthly pension of $2,760 per month, or about $33,000 per year. Teachers and university employees do not participate in Social Security. With decades of service already invested, employees and retirees cannot turn back and recalculate their career choices and retirement planning measures in response to unpredictable state funding.

Senate Bill 512, backed by the Civic Committee of the Commercial Club of Chicago is but one approach. As leaders of the state’s public universities, we share grave concerns over Senate Bill 512 in its current form. However, we agree that SB512 also has favorable aspects:

• The state would amortize the unfunded accrued liability through an enhanced funding stabilization methodology (30-year straight line).
• The state would maintain responsibility to fund benefits accrued to date.
• There is an assumption of adequate revenue sources (e.g., a continuation of the tax surcharge). It is very evident that the under-funding of pension obligations enabled Illinois to fund alternative legislative priorities while maintaining an artificially low income tax rate for many years.

Unfortunately, our concerns over other problematic areas of SB 512 overshadow the positive aspects of the legislation. Chief among them, state pension funding would be limited to approximately 6% of payroll as the level of state contribution for continuing benefits, leaving a significant funding shortfall to cover the normal cost of current benefits. SB512 proposes to shift those costs to employees. Employees are the least prepared to shoulder new unplanned obligations for the normal costs of their pensions. Furthermore, the actuarial experts participating in the Working Group discussions have confirmed that enactment of SB512 would lead to a wide range of unintended funding consequences leading to significant new obligations for the state, with real cost reductions not realized for decades. It is difficult to consider such outcomes to be in the best interests of the state, its colleges and universities, or its employees.

Pension system participants have relied upon the state’s representation and the Pension Protection Clause to expect a predictable and secure set of core pension benefits that also serve as a replacement for Social Security. SB512 would undercut these assumptions.

Universities compete in a national, and sometimes a global marketplace, to recruit and retain the talented faculty and staff who teach our students, provide services to them and conduct ground breaking research. They have career opportunities that are not limited by the boundaries of this state. Reducing their benefits or forcing them to pay significantly more for benefits that were promised to them is likely to cause a significant migration of talented people out of this state. This is one of our greatest concerns.

There is no denying the critical nature of our current fiscal situation. We are certain that higher education employees and institutions are prepared to contribute to a long-term solution. The public higher education community is prepared to participate in the design of options and alternatives that help solve this critical issue. We believe it is possible to complete such work in time for the Spring 2012 session of the General Assembly and we look forward to taking this opportunity to develop a durable, equitable and long-term solution, especially in the SURS sector.

Illinois Public University Chancellors and Presidents

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Sunday, June 12, 2011

Changes to the Money Purchase Factors
to Become Effective July 2, 2012

Author: SURS News Features
Title: Changes to the Money Purchase factors to become effective July 2, 2012
Publication: SURS Website
Date: June 13, 2011

At its meeting on June 10, 2011, the Board of Trustees of the State Universities Retirement System set the effective date of the Money Purchase factor changes as July 2, 2012.
The changes to the Money Purchase factors are a result of a recent actuarial experience study which recommended a reduction of the assumed rate of investment return and updated the mortality tables due to increased life expectancy. State statute requires SURS to conduct an experience study at least every five years to test the economic and demographic assumptions used to prepare the annual actuarial valuation report. The results of this process are then evaluated to determine which, if any, of the assumptions need modification to provide better estimates of future liability and asset growth for the System.

The last experience study was conducted in 2006. Based on changing market conditions and the current economic environment, the SURS actuary recommended that the latest experience study be conducted one year early.

For individuals retiring after July 2, 2012, the change in Money Purchase factors will result in an approximately 8% downward adjustment in the member’s annuity if their Money Purchase calculation was higher than the General Formula calculation. Members can offset the adjustment by delaying retirement by approximately 10 to 11 months for active participants and 12 to 14 months for inactive participants.

The changes to the Money Purchase factors will not affect:
  • Current annuitants
  • Members in the Self-Managed Plan
  • Members who began participation on or after July 1, 2005
  • The General Formula calculation

The monthly annuity calculation using Money Purchase Formula is unique to each individual. For this reason, SURS encourages all participants to log on to their account on the SURS Member Website. The online Benefit Estimator now reflects these new factors.

For additional details, please refer to the May 2011 edition of the Advocate or contact the SURS office.

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Wednesday, June 1, 2011

UIC SUAA President's Perspective

Author: Merill Gassman
Title: President’s Perspective
Publication: UIC UNITED Newsletter

“It has been said that democracy is the worst form of government except all the others that have been tried.” This famous quote, attributed to Winston Churchill, comes to mind as I consider the political situation in Illinois. As citizens of our various governmental democracies, we exercise our right to petition our elected representatives by writing or calling to persuade, demand, cajole, etc. as we attempt to influence their votes on legislative matters of concern to us.

Does it work? Well, thanks to the petition drive organized by Michael Moss and our colleagues in the UIC Academic Professional Advisory Committee (APAC), as well as the efforts of the member organizations of the Illinois Higher Education Legislative Coalition (HELC), we were able to forestall the passage of two bills that would have been deleterious to the interests of state annuitants.

SB512,which would have diminished the retirement benefits of current state employees, and SB175,which would have imposed health insurance premiums on state annuitants, did not reach the floor of the Illinois House of Representatives for a vote in the regular spring session that ended on May 31st. UIC UNITED and SUAA called upon its members to make their feelings on these bills known to their legislators, and this lobbying effort paid off.

SB512 passed out of the Personnel and Pensions Committee of the House with two Democratic members and one Republican member voting “No” and one Democratic member voting “Present.” I take pride in the fact that Rep. Dan Biss (D-17), a freshman legislator from my own district, was the Democrat voting “Present.”Despite the fact that this bill was being championed by the two party leaders in the House, Michael Madigan (D) and Tom Cross (R), it was not called for a vote. Similarly, SB175, led by Sen. Jeff Schoenberg (D-9), did not make it to the Senate floor for action. Yet, we should not be complacent: there are strong indications that these bills will be resurrected during the fall veto session in late October. Comments by legislative experts—lobbyists and journalists—at the recent annual SUAA meeting in Springfield suggest that these bills will not go away, and that state employees and annuitants might have to come up with alternative approaches to satisfy the main thrust of the bills

Should SB512 or a similar bill become law, there is a strong likelihood that its constitutionality will be challenged in the courts. SUAA is already anticipating the need to make this challenge in concert with its partners in the HELC and will be forming a legal defense fund to provide the necessary resources. You should have received a request from SUAA for contributions to this fund.

Remember that the SUAA staff in Springfield is working in your interests. Our contract lobbyist, Richard Lockhart, the dean of Springfield lobbyists, is highly respected among the legislators as well as his peers.UIC UNITED and SUAA will contact you should your intervention be needed once again. SUAAction, our political action division, has been effective in raising the visibility of SUAA in the state capitol and in establishing lines of communication with the members of the General Assembly. Please consider making a donation to SUAAction at P.O. Box 1770, Springfield, Illinois 62705.

On a different note, I am pleased to inform you that, thanks to the efforts of SUAA Executive Director Linda Brookhart, U. of I. employees will soon be able to deduct SUAA dues from paychecks. The officers of the UIUC chapter collaborated with those of our chapter to move this issue forward through negotiations with the university’s central administration. Watch your e-mail
inbox and the UIC UNITED website for more information.

Finally, if you have a specific question or wish to express your feelings about an issue of concern, feel free to send an email to the office at And I would be happy to respond as best I can to any inquiry or comment. In the meantime, do visit our webpages often: UICUNITED, at, and SUAA, at And, if you haven’t been receiving the periodic email messages that I send, please give me your current email address.

With best wishes,

Merrill L. Gassman, PhD, President and Webmaster
Professor Emeritus of Biological Sciences, UIC

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Monday, May 2, 2011

Who Is At Fault?
A History of SURS Contributions
(in Millions)

Author: The State Universities Retirement System of Illinois
Title: All About SURS (Page 4)
Publication: SURS Website

Standard pension funding as established by the Governmental Accounting Standards Board Statements No. 25 and 27, called the “annual required contribution” or “ARC,” requires payment by the employer of the total normal cost for the fiscal year, plus an amount sufficient to amortize the Unfunded Actuarial Accrued Liability (UAAL) over a prescribed period of time (currently 30 years). The chart below provides an interesting comparison of the State contribution over the years.

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Sunday, May 1, 2011

Join UIC United

The UIC chapter of the State Universities Annuitants Association (SUAA), with over 1,600 members, exists to promote the individual and collective interests and welfare of its members and of all UIC retirees. It endeavors, in association with 52 other chapters in Illinois, to achieve legislation favorable to retirees and to keep members informed of pending legislation that can be of importance to them. In addition, the Chapter disseminates current information on issues of general concern to senior citizens, provides a liaison between retirees and the campus administration, provides opportunities for socializing among members, and works to assure adequate funding of the Illinois State Universities Retirement System (SURS).

The Chapter seeks ways in which retirees can help further the goals of the campus through volunteering, re-employment, financial support, or other activities. Membership is open to all SURS members, including current faculty-staff, annuitants, their spouses and survivors. Annual dues can be paid once a year or by deduction from monthly U. of I. payroll or SURS benefit checks.

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