Guest Post: Fix Tier 2 To Secure Fairness and a Future for Illinois Workers

Public employees rally to change the state’s “Tier 2” pension system at a rally outside of the statehouse in November. (Photo: Chicago Tribune)

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OPINION

By Pat Devaney, Illinois AFL-CIO

For over a decade, workers in Illinois have been bearing the brunt of an unjust retirement system. The creation of the Tier 2 pension system in 2011 may have been intended as a cost-saving measure during a time of fiscal crisis, but it has created a system that is not only unfair to workers but also unsustainable for the state’s long-term interests. Today, we face an urgent need to address the inequities and failures of Tier 2 before it does lasting damage to both our workforce and our state.

The Tier 2 pension system, which applies to public employees hired after January 1, 2011, forces workers to pay a substantial percentage of their income into a retirement system that offers drastically reduced benefits compared to Tier 1. These employees are expected to contribute a significant amount from their salaries, yet the value of their pension is smaller than what they contribute, often falling short of what is needed to maintain a basic standard of living in retirement. This disparity is not just unfair—it’s unsustainable.

For many Tier 2 workers, the situation is even more dire because they do not qualify for Social Security. While Tier 1 pensions were designed to function as a standalone retirement system, Tier 2 pensions provide benefits so scant that they risk falling below the federal minimum required by Social Security guidelines. If this happens, Illinois could face severe penalties and be forced to increase contributions—a scenario that would compound the fiscal pressures Tier 2 was supposed to alleviate.

This broken system has created a workforce crisis. Illinois relies on public employees to teach our children, protect our communities, and provide essential services that keep our state running. Yet the inequities of Tier 2 have made it increasingly difficult to recruit and retain skilled workers. Why would a young teacher, police officer, or firefighter choose to work in Illinois when they know their retirement security will be far less than what their counterparts in neighboring states receive? The Tier 2 system not only undermines the financial futures of individual workers but also threatens the quality and stability of public services across the state.

The consequences of this system are already evident. Schools are struggling to fill teaching positions, municipalities face shortages of first responders, and state agencies are unable to attract the talent they need. Morale among many public employees is at an all-time low, as Tier 2 workers feel undervalued and exploited. This is a crisis not just for our workforce but for every Illinoisan who depends on public services.

Fixing Tier 2 is not just a moral imperative; it’s an economic necessity. When workers feel secure in their futures, they are more likely to stay in their jobs, build careers, and contribute to their communities. Conversely, high turnover and staffing shortages cost taxpayers money and reduce the quality of public services. Addressing the inequities of Tier 2 will strengthen our workforce and enhance public services, benefitting residents in every corner of our state.

So, what can be done? First and foremost, the state must increase Tier 2 benefits to align more closely with those of Tier 1. This could include raising the pensionable salary cap, adjusting the retirement age, and ensuring that benefits keep pace with inflation. Additionally, Illinois has no choice but to address the Social Security “safe harbor” issue, even though it only applies to a small sliver of retirees. While these changes will require investments, the long-term benefits for Illinoisans far outweigh the costs.

It’s also essential to engage with unions and workers in crafting these reforms. Public employees know better than anyone the challenges they face, and their input is invaluable in creating a system that is both fair and functional. By working together, we can develop solutions that address the needs of workers while maintaining fiscal responsibility.

The good news is that momentum for change is growing. Labor leaders, policymakers, and community advocates are increasingly recognizing the need to fix Tier 2. The We Are One Illinois coalition worked with lawmakers to introduce the Fair Retirement and Retention Act, a proposal that will address the main shortcomings of Tier 2, and thousands of our members have engaged their lawmakers to educate them on this important issue.

We cannot afford to wait any longer. Every year that passes without action deepens the inequities and weakens our state’s ability to attract and retain the workforce it needs.

I have seen firsthand the dedication and sacrifices of Illinois’ public employees. These are the people who teach our children, protect our streets, and care for our most vulnerable residents.

They deserve better than a retirement system that shortchanges them and devalues their contributions.

Fixing Tier 2 is about more than pensions; it’s about fairness, dignity, and the future of our state.

Illinois’ public employees give their all to serve our communities. It’s time for us to stand up and ensure they have the retirement security they deserve. Let’s fix Tier 2—for our workers, for our state, and for the generations to come.

Pat Devaney is the Secretary-Treasurer of the Illinois AFL-CIO and a leader of the We Are One Illinois coalition.