As was previously mentioned by Superintendent and CEO Kelly, leading up to and over the Memorial Day Holiday the General Assembly passed House Bill 417 that puts the Park Employees & Retirement Employees Annuity and Benefit Fund on a path to full funding. This legislation will provide the retirement security to all employees and existing retirees that has been earned through hard work and the commitment of making the Park District the best in the nation. Once the General Assembly sends the House Bill 417 to the Governor, he will have a period of 30 days to sign it. We do not anticipate the bill being vetoed by Governor Pritzker.
The bill has several components that impact employer funding, issuance of pension obligation bonds, and the creation of a third tier of employees. Unlike the previous bill that was passed in 2013 and found unconstitutional in 2018 by the Circuit Court, no benefits were changed for current employees or existing retirees.
The changes to the employer contributions are as follows:
• Over a four year period the Park District will increase contributions on a formula based on actuarial calculations (the Park District started the ramp up as part of the 2020 Annual Appropriation).
• After the four year ramp up, contributions will be based on actuarial calculations so the pension fund will be 100% funded within 35 years (the pension fund is currently 29% funded or assets of the pension fund are 29% of the liability for pension benefits earned).
• To help stabilize the fund, the Park District will contribute an additional $40 million by November 1, 2021.
• The Park District contributions can be made from any revenue source
The components related to the issuance of pension obligation bonds are as follows:
• The Park District can issue a total of $250 million in pension obligation bonds whose proceeds can only be used as a supplemental contribution to the pension fund and not reduce or replace the actuarial determined contribution for that year.
• A maximum of $75 million of the pension obligation bonds can be issued in any given year.
• The debt service on the pension obligation bonds will not be subject to the Debt Service Extension Base (DSEB) cap.
The components related to Tier 3 employees are as follows:
• Employees hired on or after January 1, 2022 will be deemed Tier 3 employees and their employee contribution to the pension fund will be a total of 11% of their salary.
• Tier 3 employees will be able to retire without penalty at 65 (versus the current age of 67 for Tier 2 employees) or at a reduced benefit at age 60 (versus the current age of 62 for Tier 2 employees)
• Existing Tier 2 employees will have a period of time starting on January 1, 2022 and ending on April 1, 2022 to make an irrevocable election to have the 11% withheld from their salary and be able to retire at age 65 (or at age 60 for a reduced pension benefit).