December 13, 2014

Illinois takes over Private Pension Systems

By Mark Wachtler

December 13, 2014. Skokie, IL (ONN) The Illinois State Legislature quietly passed a new law a week ago that is reminiscent of a state take-over of private assets like in Venezuela or Russia. Under the new law, private workers at private companies and corporations will be auto-enrolled in Illinois’ soon-to-be-created, state-managed pension fund. Critics not only call it a power grab, but a money grab as well. The same bureaucrats and elected officials have already misplaced over $100 billion from Illinois’ public sector pensions. Now they’ll have total control of hundreds of billions of dollars in private pensions too.

Chief sponsor of the state take-over of private Illinois pensions - State Sen. Daniel Biss (D-Evanston).









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New Illinois law awaits Governor’s signature

For the record, Illinois residents who don’t work for the government can block the state from taking over their retirement savings. But they have to take the steps of opting out of the program. For those that don’t opt out, every employee of every Illinois company in business for 2 years or more and with 25 or more employees will be automatically enrolled in the state’s pension fund.



Currently employed workers at private companies and corporations have been promised an opportunity to opt out of the program and stop the state from taking 3% of their pay checks. All future workers will allegedly be able to opt out at the same time they fill out their typical ‘new employee’ tax forms. According to the law, a committee will be created to oversee the pension program made up of government-appointed officials. That committee will then choose a Wall Street investment firm to manage the fund.

None of the announcements or limited news reports mention how people can get their money out of the fund short of retiring, or what the penalty is for doing so. And if this new state-run pension fund is anything like Illinois’ current pension funds, or the state’s “guaranteed” Bright Start college savings program for parents, the money won’t be there anyway.

Illinois government pension funds have been looted of over $100 billion and the Bright Start college program collapsed after the State Treasurer’s office and Oppenheimer funds allegedly defrauded Illinois parents and stole most of the fund’s money. The state had to sue Oppenheimer to get back even a small portion of the money deposited by parents. When the state was finished managing the college funds of 65,000 Illinois parents and their no-longer-college-bound children in 2009, families were only given back .50 cents for each dollar they deposited over the years.

Critics of the law

Aside from ourselves at the Illinois Herald and a handful of Republican legislators, we haven’t found hardly a single organization, media outlet or spokesperson that publicly opposes the just-passed pension take-over law. Surprising entities like the Democratic Party and AARP are overwhelmingly in favor of the state mandated Wall Street take-over of private pensions in Illinois. And considering 2.5 million Illinoisans will be auto-enrolled into the program unless they opt out, it’s also surprising the legislation didn’t garner more attention from residents.

As detailed by Crain’s Chicago Business last week, the law passed in the State Senate by a vote of 30-25 and it passed the State House 67-45. ‘No American state now has anything quite like the program,’ the business publication writes, ‘That may explain some of the opposition, especially from the insurance industry and Springfield Republicans, who say the measure was rushed through and should have been left for Gov.-elect Bruce Rauner to consider.’



The Illinois Review took a somewhat skeptical and sarcastic tone in their news report about the law’s passage. ‘The experimental program has been pushed by Democrat state Senator Daniel Biss, who has a reputation for expanding the state's involvement in private lives and businesses,’ the conservative publication writes, ‘Presumably the firm will invest wisely and Secure Choice will be the first-ever, successful government-run retirement program.’

Supporters of the law

State Senator Daniel Biss (D-Evanston), the chief sponsor of the law, was quoted by Crain’s explaining, “For two-thirds of today's retirees, Social Security is their primary source of income. The opportunity to save using a Secure Choice account will prevent many seniors from facing appalling choices.” He went on to add, “Of all the economic questions affecting the middle class, retirement is the one most underdiscussed. We talk about jobs and so forth. But people are petrified when retirement comes up.”

AARP, the largest organization of senior citizens in the country, also energetically supported the public take-over of private sector pensions. ‘Social Security was never meant to be a worker's sole source of retirement income - it is simply not enough to live on,’ the organization said in a press release after the law’s passage last week, ‘Private savings is a huge piece of the retirement security puzzle. That's why AARP fully endorsed Senate Bill 2758 and we urge Gov. Quinn to sign the bill into law.’

Illinois workers who wish to opt out of the government pension program can do so, but they must fill out the appropriate form or they will be automatically enrolled and deductions from their paychecks will begin. For all new hires going forward, employers will be asked to provide that same opt-out form when they have new employees fill out other standard tax forms. The program isn’t slated to begin until January 2017 and employers themselves are not required to pay into the fund. The law still needs Governor Pat Quinn’s signature. But he is expected to sign the legislation before he leaves office next month.

 

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