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Questions & Answers About the Chicago Teachers Pension Fund

What is Chicago Teachers Pension Fund (CTPF)?

The Chicago Teachers Pension Fund was established by the Illinois state legislature in 1895 as The Public School Teachers' Pension and Retirement Fund of Chicago (CTPF) is the administrator of a multi-employer defined benefit public employee retirement system providing retirement, survivor, and disability benefits for certain certified teachers and employees of the Chicago Public Schools.

Currently, CTPF is governed by a 12-member Board of Trustees; six are elected by the teacher contributors (current teachers), three are elected by the annuitants (retired teachers), one is elected by the principal contributors, and two are appointed by the employer (Chicago Board of Education).

Why is there a problem with pension funding?

The Chicago Board of Education has dodged payment.  In 1995 Illinois law placed the responsibility with the Chicago Public Schools to make sure that the CTPF was 90% funded by 2045. The pension fund was already close to 100% funded at the time. The only reason that the CTPF went from nearly 100% funded in 1995 to 58% funded now is because CPS took successive pension holidays and paid nothing for 10 years into the pension and asked for pension relief in April of 2010 in the amounts of $400 million per year until 2013.

The underfunding of the pension was not a result of excessive pension benefits or inadequate employee contributions — teachers and paraprofessionals have dutifully paid our fair share for over 100 years. Between 1995-2005 CPS collected more than $2 billion in pension tax revenue and contributed zero to the pension fund. However, within 40 years it is fully possible to increase the funding of the pension to the required 90% level without any change in the benefit structure.

The State of Illinois also has failed Chicago’s teachers. While the suburban and downstate pension system will receive over $2.5 billion in annual support for 2011, CTPF will receive no state funding.  The state has not provided CTPF with 20-30% of the funding it provides to the Teachers’ Retirement System (TRS).

Do teachers contribute to their pension?

Yes.  Teachers contribute 9 percent of their salary toward retirement.   A bill being considered in Springfield (SB512) would increase teacher contributions from 9 percent to 12.75 percent.

Do teachers get social security on top of their pensions? 

No.  Teachers do not contribute to or receive Social Security retirement benefits. Instead, teachers contribute 9 percent of their salary toward retirement. By comparison, Social Security benefits are based upon a 6 percent contribution. While many have complained that teachers’ pensions are too generous, these individuals should recognize that teachers contribute 50 percent more to their retirement than the average Social Security member.

Wouldn’t it be cheaper to put teachers into Social Security?

Under Social Security, a teacher would pay 6.2 percent of salary; the district would pay a matching 6.2 percent. Currently, a teacher pays more: 9.4 percent and the district pays less: .58 percent. A 2007 study showed that moving teachers into social security would cost the school districts an additional $3 billion in the first 10 years (2008-2018).  If Social Security had been implemented in 2004, the additional cost would have been more than $900 million a year.  This lack of Social Security coverage saves taxpayers billions of dollars in payroll costs each year.

What about moving teachers into a defined contribution plan (AKA 401k)?

This plan would not address the fact that our pension system is underfunded.  In addition, new teachers who were put into a defined contribution plan would bear all the risk.  For example, if you only had a defined contribution plan and retired in the middle of the financial crisis, you would have, through no fault of your own, been unable to afford retirement.

Aren’t pension benefits high?

The average Chicago Teachers’ Pension Fund (CTPF) retiree earns $42,000 per year. Of the 87,000 retired teachers in Illinois, almost 1 in 5 (17,269) receive a pension that’s less than $20,000.   Remember that people receiving a pension have spent up to 35 years educating students and are reliant on the pension promised to them many years ago by the state.  Yet teachers have wrongly become the scapegoat for the Chicago Board of Education and State of Illinois’ financial woes. 

Chicago Teachers Union