The Illinois Supreme Court ruled today that Illinois State Pension Reform signed into law in 2013 is unconstitutional. This ruling does not come as a surprise. Previous rulings on healthcare indicated the court would interpret constitutional protection in favor of participants and strike the reform down. What does this mean to me?
Immediately, participants will not notice any major changes. With court challenges to the original reforms, implementation of reforms had already halted in 2014. This means none of the changes designed to reduce benefits or change contributions had been implemented. This applies to both those who are active participants and retirees.
Longer term, it is still unclear what will happen. Reforms were enacted to plug massive state budget deficits. The fiscal situation of the state is still dire. Current Governor, Bruce Rauner, has stated he intends to move forward with new reforms. It is unclear exactly what these changes look like, but proposals have included:
- Shifting future pension costs to local governments and universities
- Changing the way in which future pension benefits accrue
- Moving from defined benefit type (pension) plans to defined contribution (401k style) plans
Since a majority of Bluestem's clients are current participants or retirees of the State University Retirement System (SURS) or other Illinois Pension Systems, we will continue to monitor this situation. Planning during this time will continue to be a challenge as proposals will be a moving target until passed into law. As always, contact us if you would like an individual review of your retirement plan.