I. Highlights of Public Act 94-0004
1. If a TRS member's salary that is
used to determine his or her pension amount is increased by more than
6% from the previous year with the same employer, the school district
must pay TRS the increased cost to the pension system that resulted
from the portion of the increase in salary that is in excess of 6%
2. For sick days granted in excess of the member's normal annual sick
leave allotment the school district is required to pay the normal cost
of benefits based upon such service credit.
3. The employee will pay a rate of 11.5% of annual salary for each year
that the member is less than age 60 (current rate is 7%). The employer
will pay a rate of 23.5% of the employee's annual salary for each year
that member is less than age 60 (current rate is 20%).
4. All TRS employees' general pension contribution rate will increase
by .4%
5. The school board is authorized to implement a “hard cap” to limit
the number of eligible employees who can take ERO in one year.
6. The required employer contributions beyond the expiration date of
the contract/CBA cannot be bargained or negotiated as member
contributions.
7. The exemption from employer contributions beyond the expiration date
of the contract/CBA cannot be longer than three years after expiration
date of the contract or after June 30, 2011, whichever occurs first.
II. Ramifications of Legislation
1. Potential large employer
contributions.
2. Increased employee contributions.
3. Reduced retirement incentives.
4. Trend towards depressed overall contract settlement percentages.
5. Potential age/sex discrimination issues.
III. Considerations
1. Union will want to shift historical
district payments into non-creditable earning, such as:
a. Post retirement bonuses.
b. Fringe benefits.
c. Employee ERO payments.
2. “Bumps” more than four years out are not covered by the statue.
a. Reimbursement problems if employees
terminate prematurely.
3. Union may want to increase sick leave.
a. Bumps in payment at regular
intervals.
b. More days per year.
4. Districts should evaluate TRS history of employees hired later in
their career.
a. Especially employees who are
separated from the system for several years.
5. Districts may ask for return of the additional .4% contribution if
employee does not retire with an ERO penalty.
6. District may wish to consider the 10% cap on ERO participants.
7. District must carefully review its language for unintended
consequences.
8. District may wish to make agreements subject to review by TRS for
potential ramifications.