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DougWhitleyPhotoBWPension Reform Update: No Action Expected until August

   Despite Gov. Pat Quinn carrying out his threat to punish lawmakers for failing to deliver a pension reform proposal to him by line-item vetoing their pay, members of a pension conference committee are not expected to issue any recommendations on what pension reform should look like until mid-August. The conference committee, which continues to meet to analyze the various proposals on the table, has maintained that it wants to see numbers behind any proposal so the state has a clear idea of what it will save both in the way of funded and unfunded liabilities.
   The issue of legislative pay and whether the governor overstepped his authority is also viewed as an issue that must get resolved - either in the courts or by some other avenue - before the General Assembly returns to act on any pension reform proposal. In other words, putting pension reform before resolution over the legislative pay issue would give the appearance that the Governor got his way.
   Even as the battle between the branches continues, however, the pension conference committee is taking a careful look at parts of a state university pension reform proposal; specifically a provision that would split cost-of-living increases between compounded interest and simple interest, which might satisfy those legislators that a bill that provides “consideration” for retirees. In such a proposal, retirees could see years in which their increases rise above 3 percent.
   This, of course, is just one part of a very large puzzle that has yet to be fully completed and vetted, both by the actuaries and the legislators themselves, who will ultimately have to vote on any bill that comes out of the conference committee process - whether that happens in August or later. In other words, stay tuned.

City of Chicago’s Credit Rating Downgraded

   On July 17, Moody’s downgraded the city of Chicago’s credit rating by three notches from Aa3 to A3, which places Chicago just four notches above “junk status.” Moody’s stated that the current city administration has slightly improved the city’s finances by reducing costs and achieving operational efficiencies; however, “the magnitude of the city’s pension obligations has precluded any meaningful financial improvements.”
   Chicago currently has $19 billion in unfunded pension liability and its annual contribution is expected to jump to $1.2 billion by 2015 from $467 million in 2014 as required by current law. These increased contribution requirements moving forward will place great strain on the city’s operating budget and squeeze out core services such as education, health care and public safety.
   Moody’s also stated that due to the protections of pension benefits highlighted in the Illinois Constitution, the City of Chicago will not see meaningful public pension relief until the Illinois General Assembly passes its own reform solution that withstands litigation.

US House Votes to Delay ACA Individual and Employer Mandate; Quinn to Sign Medicaid Expansion Bill on Monday

   The US House of Representatives voted in mid-July  to officially delay both the individual mandate, which requires all individuals to obtain health insurance in 2014, and the employer mandate that requires employers with 50 or more full-time equivalent employees to provide affordable coverage to their full-time employees in 2014 by one year. The vote came two weeks after the U.S. Treasury announced it would not impose any penalties on employers with 50 or more full-time equivalents until 2015, effectively delaying the mandate on employers for one year. The Administration did not, however, delay the individual mandate.
   While the Illinois Chamber, larger employers and other business groups alike welcomed the temporary relief, the announcement also called into question the Administration’s legal authority to delay a provision that is set by law under the Affordable Care Act to take effect on Jan. 1, 2014. House and Senate Republicans also questioned why the Administration is not granting the same relief to individuals (including small employers with less than 50 employees who are not beholden to the employer mandate).
   The House’s vote to approve the delay for both individuals and employers also did not include a delay for the health insurance market rule changes that also take effect on January 1st, namely the prohibition on insurers to deny coverage on the basis of pre-existing condition and application of new community rating rules. Without a similar delay in the market rules, the law would be even more problematic in 2014 in the absence of the individual mandate, which was inexorably linked to the underwriting changes.
   The legislation delaying the individual and employers mandates by law until 2015, however, is not expected to advance in the U.S. Senate, which maintains a Democrat majority. President Obama has also said he would veto the legislation if it should make it to his desk.