"Illinois can be an economic leader, but billions of dollars in pension debt stands in its way. Many civic groups are calling for the legislature to do something – anything – on pension reform. Illinois can't afford another failed 'solution' that perpetuates the crisis, so the Illinois Policy Institute is calling on lawmakers to do the right thing: Adopt a defined contribution system that puts workers, not politicians, in control of their retirement.
Illinois' current defined benefit plan for government workers is supposed to provide guaranteed lifetime benefits to retirees, but many false promises were made and the retirement funds are at risk of running dry. Now that Illinois is considering reform, we must recognize that defined benefit plans largely are a thing of the past. Today, nearly 85 percent of all private sector workers participate in defined contribution plans such as 401(k)s. The chief reason is because defined benefit plans have proven too expensive and unpredictable for employers to maintain.
Many states are following the lead of the private sector, and have already transitioned to defined contribution plans. Michigan adopted a 401(k) system for new state workers in 1997. Democrat-controlled Rhode Island, which in 2011 had the nation’s second-worst-funded pensions, has converted to a hybrid system based on defined contribution.
If Illinois wants to regain its position as an economic leader, it must do the same.
Political leaders can start by expanding a program that already exists for workers at Illinois' community colleges and public universities. Today, approximately 10,000 government workers participate in a 401(k)-style plan that puts them – not politicians – in charge of their retirement.
It's time to get politicians out of the retirement business, and give government workers the secure retirement they need and deserve. A 401(k)-style plan is the only moral solution that delivers a secure retirement for government employees, and liberates taxpayers from funding a failed system."