Moreover, even though teachers in Illinois want to teach, too many of them aren’t, because they’re leaving the profession. Illinois gains nothing when teachers re-think staying in a job that doesn’t offer them an adequate retirement for the essential job they do educating our children.

For the roughly 25% of Illinois teachers who retire after three decades of teaching, the Tier Two plan under which most of them will retire is insufficient to meet their retirement needs. For the roughly 25% of Illinois teachers who retire after three decades of teaching, the Tier Two plan under which most of them will retire is insufficient to meet their retirement needs. In fact, the Illinois state legislature has made improvements to Tier 2 benefits for public safety workers, so why haven’t they done the same for Tier 2 teachers? The promise of an adequate retirement after years of service to Illinois’ children is not being kept.The promise of an adequate retirement after years of service to Illinois’ children is not being kept. 

We need to re-work Illinois Teacher Pensions so they are fair, portable, sustainable, and we need to educate teachers about what they can expect when they retire.  Having an adequate pension for Illinois’ teachers matters. It matters to the children in the classrooms; it matters to the teachers who teach those children; and it matters to our future.

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Statement of Purpose 

Because the education of Illinois’ children is critical to Illinois’ future, making sure we have the most highly qualified teachers in our classrooms is a goal we all share. However, attracting and retaining high quality teachers is difficult when the pension system actively discourages teachers from staying in the classroom or coming to teaching as a second career. Unfortunately, half of all new teachers in Illinois won’t work long enough to earn a pension at all, while less than 1% will teach until the normal retirement age of 67.

Illinois Educators for Fair Retirement understands the importance of investing in our teachers’ futures to ensure the futures of our children. So many people, when they are at the beginning of their careers, start their jobs focused on doing the best they can at work, rather than contemplating what their lives will look like when they retire. The vast majority of teachers who are relegated to the Tier 2 retirement package in Illinois face a future that promises inadequate retirement benefits, no access to Social Security, and the very real prospect of needing low-income assistance in retirement. We want to educate our Tier 2 teachers so they know the unsustainable future that awaits them and alert Tier 1 teachers to the inequity of the Tier 2 program, so all teachers can help change a system badly in need of thoughtful revision.

Illinois Educators for Fair Retirement understands and appreciates the challenges of revising the teacher pension system in Illinois. There are financial issues, equity issues, political issues, and adequacy issues; but, underlying all of these is the issue of educational quality. We simply cannot expect teachers to make a career out of teaching our children then dismiss those teachers at the end of their careers with wholly inadequate resources for retirement.  

However, without a plan, it does not do much good to identify a problem, and that’s why Illinois Educators for Fair Retirement has identified potential solutions to the pension conundrum. We invite you to be part of this exciting and vital work as we strive to ensure high-quality education and sustainable retirement in Illinois schools.

Today’s Problems: How the Retirement Systems for Teachers Throughout Illinois and Chicago Fail to Meet the Four Principles

Tier 2 is Implicitly and Explicitly Unfair

• The very existence of Tier 2 indicates that teachers are being treated differently in terms of their retirement benefits. There may have been legitimate reasons for creating Tier 2, but the way Tier 2 benefits are designed creates an ‘us’ versus ‘them’ dynamic between teachers in the different tiers. 

  • The benefit provisions for Tier 2 are manifestly unfair on their own terms because they will not provide enough income to ensure retirement security for most Tier 2 teachers. 

  • The benefit provisions for Tier 2 are unfair relative to the value of benefits for Tier 1, particularly with respect to a later retirement age, more service years required for calculating final average salary, and caps on benefits (specifically, the pensionable income cap).

• The benefit differences between Tier 1 and Tier 2 result in less retirement income for Tier 2 teachers, which in turn means less overall compensation for Tier 2 teachers. The implication is that the work Tier 2 teachers do to serve children is valued less than service from Tier 1 teachers.

• The funding policy currently in place uses Tier 2 teacher contributions to pay down the unfunded liabilities of Tier 1. This is inappropriate, and it means that either Tier 2 member benefits could be higher and/or that their contribution rates could be lower. 

Portability is Lacking

• Pension plans can be designed to provide portability, but neither TRSIL or CTPF  benefit provisions don’t offer any such features. 

  • Teachers who leave before vesting will get their own contributions back, but without even the nominal interest they would have earned in a basic savings account. 

  • None of the employer contributions made on behalf of members are portable, depriving them of deferred compensation that has been earned.

• Teachers in Tier 2 have to wait ten years in order to vest and be qualified to receive a future benefit upon retirement. Fully half of Illinois teachers leave before this point. 

  • Any educator who moves away from Illinois or leaves public school teaching before vesting leaves behind their retirement plan and much of the retirement income they have accumulated.

  • Illinois teachers also do not participate in Social Security, meaning they lack the additional, portable safety net retirement plan that most other Americans have.

• There is currently no option for Illinois teachers to enroll in a retirement plan that would transfer with them should they go teach in other states or private schools. 

  • A Tier 3 hybrid retirement plan that would have some portability features was announced in 2017, but it has not since been implemented.

Financial Education is Not Prioritized

• Far too many Illinois teachers are unaware of how their retirement benefits work and do not understand the differences in structure and benefits between Tier 1 and Tier 2.

• For the most part, Illinois teachers are left to learn about their retirement system and its benefits on their own. There are resources available from the TRSIL and CTPF systems, but this information is not well organized and is hard to understand. Further, few teachers seek out these resources until they are approaching retirement.

• Many educators get information about their retirement savings from salespeople promoting supplemental plans who cannot be relied upon as objective or deeply knowledgeable resources. 

Sustainability is Questionable

• Illinois’ teacher retirement systems have a nearly $90 billion shortfall, even after accounting for strong investment returns in 2021. This unfunded liability is money that the state owes to the retirement systems for future retirement benefits to be fully paid out. 

• TRSIL and CTPF are both using unrealistic assumptions about future investment returns. 

• The actuary advisors for TRSIL and CTPF have warned the respective retirement boards that the funding policy adopted in the Illinois Pension Code may not be sufficient because it does not target having 100% funded teacher retirement benefits in the future. 

  • Current state law determines contributions based on the goal of being only 90% funded in the next few decades.

  • Historically, the state has not been good about honoring its promises and ensuring it pays an adequate amount into TRSIL and CTPF.

• Tier 2 was created to be a low cost retirement benefit as a way to help the state have more money to pay down these shortfalls. Devaluing new teachers and asking them to take less compensation as a means to supplement the costs of paying down Tier 1 unfunded liabilities is not a sustainable long-term strategy. Budget costs in the near-term may be lower for the state, but the lack of investment in educators and students may cost far more in the longer term.

Suggested Recommendations to Fix Today’s Problems

We recognize that many policy ideas related to educator compensation and retirement benefits come with trade-offs, both to members and budgets. But there are costs to ignoring the status quo, too. The following ideas have unanimous support from the teacher members of our working group:

Improve Tier 2 benefits by ensuring that ALL Illinois teachers have access to a fair and adequate retirement plan.

• Idea 1: Improve Tier 2 by effectively eliminating it and changing the benefits to match Tier 1.

• Idea 2: If matching Tier 1 values is not feasible, then retool Tier 2 to have benefits that will more adequately provide retirement income, such as a higher cap on pensionable compensation when calculating the final average salary, a lower vesting period (5 years or less), a COLA that at a minimum keeps up with the cost of actual inflation, and/or interest on any refunded member contributions.  

• Idea 3: If Tier 3 is implemented, ensure that the benefits offered under the plan would be adequate to support retirement income security. This could be accomplished by increasing the pension multiplier, increasing the contributions into the “DC” portion of the benefit, and/or offering a COLA that at a minimum keeps up with the cost of actual inflation.

Improve the portability of teachers’ retirement income.

• Idea 1: Create a new version of Tier 2 that has “portability” elements, including interest on refunded contributions, a 50% match of employer normal cost contributions if a member leaves with 10 years or less, a 75% match of employer normal cost contributions if a member leaves with more than 10 years of service. 

• Idea 2: Implement a choice of retirement benefits for new educators. This could be a choice of pension plans (such as the State University Retirement System option between a “traditional pension” or “portable pension”), a choice between a pension plan and hybrid retirement plan (such as the proposed “Tier 3” hybrid), or other options. Any option offer needs to provide an adequate retirement benefit.

• Idea 3: Work with the federal government to give Illinois teachers access to Social Security. Alternatively, work with the federal government to reduce the effects of the “Windfall Elimination Provision” and “Government Pension Offset” that can reduce Social Security benefits teachers earn during working years in private sector jobs.

Provide teachers with comprehensive and objective educational materials and training so that they fully understand and can make informed decisions about their retirement plans. 

• Idea 1: All teachers should have access to objective and consistent materials and training provided by trusted and deeply knowledgeable sources. This could be provided by third-party organizations that contract with the state and get measured based on the quality of their work, teacher satisfaction, and effectiveness of the training materials they deploy. 

• Idea 2: ISBE shall mandate training, provided by an independent institution, about retirement system benefits and functions as a condition of initial licensure for new teachers and certification renewal.
  Idea 3: Any financial advisors that are allowed to work with teachers, either providing education services or selling supplemental retirement products, should have a fiduciary responsibility to those individuals, or at a minimum the advisor needs to disclose that they have no fiduciary responsibility.

Address the system design and stakeholder actions that threaten the financial sustainability of the state’s retirement systems for teachers.

• Idea 1: The state and all other stakeholders must make all required contributions each year. These contributions should be based on a target of TRSIL and CTPF reaching 100% funding. 

• Idea 2: Overly optimistic rates of return should be reduced by the trustees of TRSIL and CTPF. 

• Idea 3: Teachers’ contributions should only fund the cost of their future benefits, not the systems’ accrued unfunded liabilities.

As our working group discussed various recommendations, we recognized that there were certain ideas worth considering but that weren’t supported by every member. The following ideas were suggested by at least a majority of the members in our group, though without unanimous support:

Fairness Idea

There should be a uniform practice regarding employee contributions. The current situation wherein some districts pay some or all of teachers’ contributions and others do not creates significant inequities.