The Civic Committee of The Commercial Club of Chicago analyzed the values of pension benefits of firemen and policemen in Chicago who recently retired after full careers, many in their early 50's. The analysis found that these retirement benefits average above $1 million - well above benefit levels available to taxpayers in the private sector. We believe this analysis supports the need for prospective reform of these pension plans - not only with respect to "new" employees but also "current" employees. Such reforms would necessarily protect the rights of those who are already retired as well as the rights of current employees earned for past service.
The pension plans for firemen and policemen in Chicago are badly underfunded. Without reform, current firemen and policemen will continue for the next three decades to generate retirement benefits of the magnitude summarized in the report. However, such benefits are not affordable; and the retirement plans do not have the assets to pay for them. Funding levels are diminishing each year. Without reform and improved funding, these plans are expected to run out of money within a few years - a fact which underscores the need for reforms as to "current" employees now. If bankruptcy of the pension funds were to occur, it would be a disaster - not just for the retirees and current employees who participate in the funds, but for all citizens and taxpayers in Chicago.
To prevent such a disaster, and to ameliorate Chicago's budget deficit, we recommend that the City be permitted to offer its current employees - prospectively protecting all benefits previously earned - a choice among three different programs. First, they can continue to participate in their current costly plans, but with significantly increased employee contributions. Second, they can switch to the reformed plan that was created last spring for new employees. Third, they can switch to a defined contribution plan. The City would make the same contribution for each of the three options - and current employees could choose the option they prefer, but pay any additional costs associated with the more costly option. By offering these choices, the City would fully satisfy the requirements of both law and fairness, and bring City employee benefits more into line - going forward - with retirement programs generally available in the private sector.
To view the entire report by the Civic Committee of The Commercial Club of Chicago, please click here.
R. Eden Martin
President, Civic Committee of the Commercial Club of Chicago