Share Tweet Share Email

State Senate committee approves changes in retiree health care benefits

May 30, 2011

Legislation that could dramatically increase the cost of health insurance for current and future state of Illinois annuitants, including erasing the benefit of free health care for those who retire with 20 or more years of service, has moved to the floor for debate.

The legislation, Senate Bill 175 (Amendment 3), was endorsed by the Senate Executive Committee early Sunday evening on a vote of 9-6-0 and sent to the Senate.

Interior of the Illinois State Capitol Buildling in Springfield
Interior of the Illinois State Capitol Buildling in Springfield

The hearing featured testimony from a number of individuals stating their opposition to the bill on numerous grounds. NIU’s Lori Clark from the Office of Government Relations submitted written testimony from Vice President of Human Resources Steve Cunningham that outlined the university’s opposition to the bill. Cunningham’s full remarks can be found here.

“Financial planning toward retirement is a lifetime and career-long endeavor,” Cunningham said in submitted remarks. “It is our recommendation that the Committee carefully consider the likely affects that this legislation, if enacted, would have on careers and human resource investments at Northern Illinois University, the Illinois system of public higher education, and related interests in economic development throughout the State of Illinois.”

The current version of the bill closely resembles a proposal put forth by Mercer Health and Benefits, a consulting group hired by the state to advise them on this issue. (See Scenario 4 in this report submitted by Mercer.)

The plan is based on two factors:

  • Benefits Points – Under the proposal employees would earn one “point” for each year of service to the state, and points equal to their age upon retirement. Their point total would be the sum of those two numbers. For example, an employee who retires at age 65 with 30 years of service would have 95 points.
  • Ability to pay – This plan also would take into account the size of the pension that the individual collects. It would be based upon the assumption that those who collect larger pensions can afford to pay more toward the cost of their health care.

Under the proposed plan, the greatest costs would be based on a person’s pension income, length of time with the state and age at retirement. Those with higher pension incomes would pay more. People who work longer for the state before retiring would experience reduced costs under the theory that those individuals would be closer to qualifying for Medicare.

For instance, according to the bill, a non-Medicare eligible participant with 22 years of service making an average salary of $40,000 seeking to retire at age 55, would need to work an additional eight years of service to make up for the current differential in retirement compensation established under the proposed QCHP (Quality Care Health Plan) member contribution (not including a dependent). A longer-term employee or an individual already retired, who has relied on the existing statute, has no opportunity to adjust their time-to-retirement calculations.

In his written testimony to the Senate committee Cunningham urged legislators to evaluate the long-term systemic impact of the proposed amendment and consider alternative options.

“SURS participants do not participate in Social Security during their time in university service,” stated Cunningham. “The possibility of a severe disruption to the continuity of financial security in retirement for existing long-term employees and retirees who have dedicated their careers to the State of Illinois and have already earned, on a deferred or currently retired basis, a key aspect of their retirement compensation under the existing State Employees Group Insurance Act.”

The bill is likely to be debated over the next two days as proponents are expected to push for approval prior to the May 31 end of this legislative session.