RSD205 board should review REA contract with possible state teacher pension reform provisions

The Illinois pension reform plan – Senate Bill 512 – which was being considered by the General Assembly this session has stalled in the House of Representatives. The bill would have created retirement provisions for teachers, which could have significant financial implications on school districts, such as RSD205, that currently subsidizes its teacher’s contributions into the Teacher Retirement System.

Even though SB512 has stalled, legislative leaders have vowed to work this summer on a pension reform bill for consideration during the fall veto session. One provision of that bill will undoubtedly include higher contributions by or on behalf of teachers into the TRS, as this bill had required.

In a previous post, the Rockford Education Association contract, ARTICLE 30, Section K, discusses teacher compensation with the district, in particular, the contract provision that the district pays the teacher’s contribution to Illinois TRS.

Article 30; Section K of the REA contract – Compensation:

The Board shall pick up and pay 9.4%, of the staff member’s Illinois Teacher Retirement System (“ITRS”) contribution in a non-taxable manner pursuant to Section 414 (h) of the Internal Revenue Code of 1986, as amended. 

Effective beginning the 2007-2008 school year, staff members shall not be required to pay and shall be held harmless by the Board from any obligation to pay the .84% TRS health care contribution required to be paid pursuant to 5-ILCS-375/6.6.

These REA contract provisions currently costs the district approximately $14M – $16M annually.

Therefore, it is imperative that for those school districts that are currently engaged in, or will be entering into, collective bargaining negotiations prior to the fall veto session, that they cap the amount that is contributed to the teacher’s retirement pension, since one of the provisions of SB512 was to increase the teacher’s annual contribution from 9.4% to 13.77% for teachers hired before January 1, 2012.

The school district’s failure to limit their retirement contributions on behalf of their staff will leave the district (taxpayers) vulnerable to additional increases in the employees’ contribution rates for TRS in that any pension reform legislation will likely require these rates to be recalculated and increased on a periodic basis.