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How proposed pension deal could affect retirees

CHICAGO (AP) - Public employees could see significant reductions in long-term retirement income under a proposed bill that Illinois legislative leaders are pushing as a way to solve the worst-in-the-nation pension crisis. One of the biggest cuts would come from a change in annual cost-of-living adjustments. The proposal would change the COLA increase from the current rate of 3 percent compounded annually on the full annuity benefit. Retirees instead would receive increases at that rate only up to a certain amount of annuity benefit.

The Center for Tax and Budget Accountability has developed a formula to calculate estimated changes in retirement income over the years if the bill passes, based on the best information available right now, pension specialist Amanda Kass said.

Here are three scenarios:

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Employee 1: Retired teacher, 30 years of service

Initial annual benefit: $67,000

Annual pension benefit after 20 years of retirement: $120,680 a year under the current pension system; $91,000 under the proposed changes

Cumulative 20-year decrease: $282,632

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Employee 2: Retired Department of Children and Family Services caseworker, 20 years of service

Initial annual benefit: $50,000

Annual pension benefit after 20 years of retirement: $90,306 under current system; $63,000 under proposed changes

Cumulative 20-year decrease: $261,215

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Employee 3: Central Management Services data processor, age 43, planning to retire in 15 years with 30 years of service

Initial annual benefit: $72,000

Annual pension benefit after 20 years of retirement: $130,000 under current system; $85,400 under proposed changes

Cumulative 20-year decrease: $441,700

Last modified on Tuesday, 03 December 2013 16:38

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