The state’s largest public employee pension system, the Teachers’ Retirement System, is moving forward with a $1 billion buyout option for eligible pensioners.
Lawmakers included a $1 billion pension buyout plan in the state's budget, which was passed in May, to cut down on the future liability. Proponents of the buyback plans claim it will save taxpayers more than $440 million.
State Rep. Mark Batinick, R-Plainfield, helped usher the program through the statehouse.
“There will be real savings to taxpayers,” Batinick said. “I think the biggest thing we're really trying to do here – because of the pension ramp – is avert a tax increase.”
The governor's office said bonds will be offered to pay for the buyouts once the state has a better idea of how many employees, or eligible members, want to take part in the program.
Teachers’ Retirement System Executive Director Dick Ingram said TRS officials expect to offer the buyout to interested employees some time in the new year.
“But the big unknown right now is being able to tell our members who elect to pursue the buyouts, to be able to give them a sense of when they might actually see the money,” Ingram said.
Batinick said he’s hearing the number of employees interested in the buyout is exceeding expectations. Ingram said it’s possible that demand for buyouts will exceed what funds are ultimately available.
Regardless, Batinick said those who take the buyout will have more control over their retirement.
“It is done at a discount to the state and if the state saves money by giving the annuitants more flexibility, then it’s good for everybody,” Batinick said. “It’s a win-win.”
TRS is the best funded of the state’s five pension systems at 40 percent. TRS has about $73 billion of the state's $130 billion unfunded liability.
Ingram said the buyback plan will reduce the liability on the margins.
“When you look at the order of magnitude of what the overall problem is it really is not impactful at all,” Ingram said.