Under defined benefit pension plans, an employer can minimize costs by estimating future benefits for current employees and retirees and setting aside enough money to cover those obligations. For years, local governments in Chicago, including the City of Chicago, Cook County, and Chicago Public Schools, have failed to do so for hundreds of thousands of workers. As a result, city residents face a collective unfunded liability that exceeds $30 billion.
To partially address the problem, Mayor Rahm Emanuel proposed, and the state legislature passed, a set of reforms to pension benefits for municipal employees and laborers in the City of Chicago. Governor Quinn has yet to sign the bill. In the long run, employers have only two ways to resolve an unfunded liability, and the recently-passed reforms include both. They reduce future benefits for active employees and current retirees. They also considerably increase the contribution by employees and the City government into the fund each year.