The Illinois FOP Labor Council

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By Tamara Cummings, General Council - Thursday, January 2, 2014


SB 1 makes several changes to the Illinois Pension Code.  Specifically, SB 1 reduces benefits and increases funding requirements for members of the State Employees Retirement System, General Assembly Retirement System, State Universities Retirement System and the Teachers’ Retirement System.  The effective date of the legislation is June 1, 2014.   The legislation effects all active, inactive and retired members of the system by making the following changes:

  1.  Reduce Cost of Living Adjustment (COLA) calculation for retirees and active/inactive members:  Current law allows for a 3% compounded COLA on the entire annuity.  The reformed benefit allows for the lesser of a 3% COLA on the entire annuity or a 3% COLA on either $1,000 or $800 for each year worked.  Members who did not receive Social Security credit associated with the year used for the COLA will receive a calculation based on $1,000 and individuals who did receive Social Security Credit for the year in question will receive the COLA based on $800.  For instance, a year as a non-coordinated State Trooper would be at $1,000 while an employee of the regular formula or coordinated alternative formula would receive a calculation on $800.  An example of a State Trooper would be as follows if they worked 25 years and were currently retired, receiving an annuity of $50,000.

Current Law: annuity of $50,000 x 3% = $51,500

SB 1: Years of service of 25 x $1000 =$25,000 x 3%= $50,750

For a state employee who was coordinated with Social Security and otherwise had the same criteria, they would receive: 25 x $800 = $20,000 x 3%=$50,600

The $1000 or $800 would grow at CPI each year.  For instance, if CPI were 3% in 2 years, the amounts would be $1030 and $824, and the resulting annuity would be 25 x 1030 = $25,750 x 3% = $772.50 + $51,500 equaling a total benefit of $51,572.50 or $51,372.50 for a coordinated individual.

  1.  Retirement Age would increase by 4 months for each year under age 46.  For instance, an individual who is currently 40 who would otherwise be able to retire at age 60, would now have to work until they were 61 and 8 months of age.  A member who was age 50 would not be affected.  The maximum increase under this provision is 5 years, so a 30 year old would have to work until they were 65.  This provision does not affect retirees.
  2. A certain number of COLA’s would be skipped for members who are not retired.  All members will not receive their 2nd COLA.  Additionally the 4th, 6th, 8th and 10th COLA could be skipped depending on age.  Individuals age 50 and above would lose one COLA, aged 47-50 the 2nd, 4th and 6th, aged 44-47 would also loose the 8th and individuals less than aged 40 would lose their 10th COLA as well.  This provision does not affect retirees.
  3. Salary would be capped at the Tier II calculation, which is the Social Security wage base grown at only ½ of CPI going forward.  This amount is $109,971 for 2013.  For any individual who is currently over this amount, they would be frozen at their current amount.  Furthermore, for an individual under a collective bargaining agreement that is not renewed, extended, amended or expired, the bargained salary increases would also come under this cap.  This does not affect retirees.
  4. Active employees would receive a reduction of contributions by 1% of salary.  For instance, State employees who are now paying 4% of their salary in contributions would now pay 3%.  This does not affect inactive members or retirees.
  5. Active employees can choose a defined contribution, or “401k styled” option instead of their current plan, but this will not be available for years, and the details are not yet worked out.