US - The US$35.4bn Teachers' Retirement System of Illinois (TRS) is set to lose over $1bn in state contributions for fiscal years 2006 and 2007.
According to TRS, the Public Act 94-0004 reduced the state contribution for the fiscal years 2006/07 by approximately 50%.
In order to correct the funding shortfall, several pieces of legislation have been introduced to dedicate a revenue stream for pension system funding. Proposals include an increase in contributions for fiscal year 2007 and extension for the funding plan to 2056.
TRS emphasised that despite this funding reduction, it would be able to pay benefits on time without any reduction or loss of future 3% annual increases.
In addition, the TRS board also stated it was against federal government proposals to introduce the option of DC plans for scheme employers and members.
Senate Bill 2660 was introduced by Senator Bill Brady and would require the TRS to establish and adminster a DC plan. The TRS currently administers a DB scheme.
Under the legislation, each employer has the right to adopt the self-managed plan. If an employer chose to adopt the self-managed plan, each member would then get the opportunity to elect the traditional DB plan or the DC scheme.
TRS has stated the short-term impact of the transition costs would result in increased contributions and also claimed that subjecting all retirement planning sources to the performance of the financial market was “not sound”.
It said: “DB plans should work in coordination with defined contribution plans not eliminated for the exclusive use of plans that rely on investment returns.”
By Daniel Flatt
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