Sen. Brady: Defined-contribution pension plan will save state money         

[May 19, 2007]  SPRINGFIELD -- As state budget negotiations fail to advance, state Sen. Bill Brady, R-Bloomington, is asking that his state pension reform plan be allowed a vote by Illinois lawmakers, as one way to reduce the state's fiscal pressures.

The 44th District senator introduced legislation in February that will save Illinois taxpayers money by giving public employees more control and responsibility over their pension plans. His legislation has been stalled, however, by Senate Democratic leaders.

"My legislation calls for a responsible new plan, similar to the 401(k) plans offered by some private businesses," Brady said. "The plans would be optional for current employees and teachers and required for newly hired employees. Unfortunately, the legislation is not being allowed a hearing. What are Senate Democrat leaders afraid of? Why won't they consider a plan that will save the state money, instead of continuing on their reckless course of ‘tax and spend'?"

Senate Bill 621 will require new employees covered by Illinois' five state-funded pension systems to participate in a defined-contribution, self-managed plan, similar to the pension systems more public and private sector employers are using. Current public employees would also be given the option to switch from the traditional defined-benefit plan.

Brady says the changes will give employees more control over their pensions, saving taxpayers money long-term, and protect the pension systems from fund raids and political influence.

The new plan would replace the existing defined-benefit plan that guarantees state retirees a lifelong annual benefit equal to a certain percentage of their final salaries. Under a defined-contribution plan, both employees and the state would contribute a set percentage of salary to the employee's account, and the account would be invested at the direction of the employee. Though not guaranteed any level of benefit, the employee would enjoy the final account balance upon retirement.

The 44th District senator said the new plan would force the governor to properly fund pensions each year, instead of ignoring the state's pension obligations and debt.

"There are benefits for employees as well. The accounts would be portable, in and out of the public and private-sector jobs, so no one would feel locked into a public job for life. Employees would direct their own investments," Brady said. "My idea is backed by the Civic Committee of the Commercial Club of Chicago and others. I know that taxpayers will support this idea as well."

[Text from news release sent on behalf of Sen. Bill Brady and received from Illinois Senate Republican staff]