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Pension fix spurs wave of retirements at NIU

DeKALB – Rosita Lopez planned to leave Northern Illinois University in 2015, but an error in the state’s pension overhaul bill is pushing her and up to 800 NIU employees to retire earlier than they anticipated or risk losing some retirement benefits.

The landmark pension reform bill passed by state legislators in December calculates university retirees’ benefits as of last year instead of this year, which could reduce retirement benefits for some more than anticipated.

The glitch has caused university employees throughout the state to retire before the law goes into effect, and leaves universities to plan for a flood of retirements.

“We’re still trying to determine how many will retire,” NIU President Doug Baker said. “We’re losing a lot of wisdom and expertise.”

Wave of retirements

Illinois lawmakers passed the pension reform bill in December to address the $100 billion shortfall in retirement benefits. The bill cuts cost-of-living increases and caps the amount of earnings that can be used toward retirement benefits.

The changes take effect in June and July, but the constitutionality of the bill is being challenged in court; on Friday, the State Universities Annuitants Association, which represents university employees and retirees, filed a motion in Sangamon County court asking for the bill to be set aside until the constitutionality is decided.

But many public university employees have already decided to retire because of the changes in how benefits are calculated. After public university officials in April found the mistake that would further reduce pension payouts, many more have decided to leave.

The bill was supposed to calculate university retirees’ benefits based on June 30, 2014, even if they retire after that date. However the way the bill was written, benefits are calculated as of June 30, 2013. The mistake would cost retirees under the money purchase option a year’s worth of contributions and interest.

As many as 800 Northern Illinois University employees, or up to 20 percent, could retire this year, NIU president Doug Baker said. Spokesman Paul Palian added 10 percent, or 400 employees, would be affected by the glitch in the pension bill if they wait to retire.

Baker said the university has seen more retirements than usual this year, although he said a more definitive number wouldn’t be known until the end of May.

While officials with the State University Retirement System (SURS) did not have NIU-specific numbers, but said that across the state there have been 1,400 retirement applications for May and June, compared with 657 from the same time in 2013. More than 223,000 employees from state universities, community colleges and state agencies are covered by SURS.

Lopez, the program coordinator at NIU’s department of leadership, educational psychology and foundations, wanted to retire with at least 20 years of full-time service. However, she decided last month to leave by June 30, after 19 years. Because of the mistake in the bill, waiting an extra year would have cost her thousands of dollars a year in retirement benefits, she said.

“It feels like such an ugly way to end,” Lopez said. “It leaves you with a bad taste in your mouth.”

Lopez predicted the wave of retirements would result in a “brain drain” from the university, meaning students would be taught by fewer tenured professors and new professors would have less mentorship ability.

Lopez also questioned how the university would fill so many open positions, if at all.

Baker said the university is currently looking at its structure and hiring process, but that also hinges on whether the state decides to keep the tax rate increase in place.

The University of Illinois said it is working on a plan to prevent mass retirements by offsetting some of the pension reductions, but Palian said he does not know of a plan to offer the same kind of benefit to NIU employees.

Fixing the mistake

State legislators have proposed revisiting the bill to change the mistake.

State Rep. Bob Pritchard, a Hinckley Republican who voted against the legislation in December, believes a change will be made in the next couple of weeks because “it needs to be fixed.”

There also is some talk about calculating retiree benefits based on legislative intent rather than what the bill actually says.

But it might be too late, he said.

“It won’t be resolved in time,” Pritchard said. “For people affected, this isn’t going to help.”

Baker also doubted changing the date a little more than a month before employees have to make a retirement decision would help.

“I think a lot of people faced with this decision have already come over the decision hurdle,” Baker said.

The end of summer school was supposed to be the time to retire for Lynette Chandler, a professor and program coordinator for the special education department who has been with NIU for 22 years.

Instead, she’s leaving before June 30, a decision she made in the past month because she also stood to lose thousands of dollars a year.

“The timing of this is very unfortunate,” Chandler said. “I think it hit everyone in the last month and it’s thrown people into a panic.”

• The Associated Press contributed to this report.

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