Tier 2 Alternative Formula

The Alternative Formula applies to members in certain positions with 20 years of alternative service. Certain Members vested with police powers as identified below may retire at age 55 with at least 20 years of alternative formula service.

Positions vested with Police Powers eligible to retire at age 55 with 20 years of Alternative Formula service:

State Policemen, Commerce Commission Police Officers, Conservation Police Officers, Attorney General Investigators, Revenue Investigators, Gaming Board Investigators, Secretary of State Investigators, and Arson Investigators.

Alternative Formula Members who are coordinated with Social Security and employed as security employees for the Department of Corrections, Department of Juvenile Justice, or were transferred by specific Executive Orders from such departments to the Department of Innovation & Technology of Central Management Services may retire at age 60 with 20 years of alternative formula service.

This information applies to individuals who became a member of SERS or a reciprocal system after December 31, 2010. If you terminate employment with the State, your benefits will be determined by the law in effect on your last day of employment.

This information is intended to serve as a supplement to the Annual Benefit Statement, which includes your personal benefit information.

In order to receive any benefit, you must apply for it and provide proof of age. All benefit claims should be made to the Claims Division. Your agency’s Retirement Coordinator can assist you in filing a benefit claim. After you begin receiving benefits, you should notify SERS if you change your name, address, or if you wish to change your beneficiary(ies) for the lump sum death benefit.

For an alternative formula employee, final average compensation is figured one of three ways:

• The average of the highest 48 consecutive months over the last 120 months of service (for members in service prior to January 1, 1998).
• Average of last 48 months of service.
• Final rate of pay: Cannot exceed the average of the last 24 months of pay by 115%.

Coordinated: 2.5% for each year of service.

Non-Coordinated: 3.0% for each year of service

Alternative Formula Example #1: The employee is not coordinated with Social Security, is 50 years old, has 26 years, 8 months (320 months) of service credit, and a final average compensation of $5,000 per month.

26 Years, 8 months (320 months) x 3% = 80%

80% x $5,000 = $4,000 per month, or $48,000 annually

Example #2: The employee is coordinated with Social Security, is 50 years old, has 32 years (384 months) of credited service, and a final average compensation of $4,000 per month.

32 Years x 2.5% = 80%

80% x $4,000 = $3,200 per month, or $38,400 annually

For an alternative formula employee, pension increase of 3% or one-half of the Consumer Price Index for the preceding year, whichever is less, beginning with the January either following your first full year of retirement, or your 67th birthday, whichever is later. These increases are not limited by the 80% maximum.

Unused and sick leave can be used to meet service eligibility requirements and increase your retirement benefit. This additional service credit does not affect final average compensation (11-21 days sick & vacation leave equals one month of service credit). Unused sick leave chart

If you receive a lump-sum payment for vacation, or personal days when you retire, you may establish credit for this time to meet service eligibility requirements and increase your retirement benefit by making the required contributions on a pre- or post-tax basis (11-21 days of sick, vacation and personal leave equals one month of service credit). Unused sick leave chart

• State Policeman
• Conservation Police Officer
• Secretary of State Investigator
• Attorney General Investigator
• Commerce Commission Police Officer
• Gaming Board Investigator
• Department of Revenue Investigator
• Arson Investigators
• DOIT transfers from CMS to IDOC/IDJJ
• Firefighter
• Security Employee with DOC or Juvenile Justice
• State Fire Marshal Arson Investigator

Your retirement benefit is paid monthly for your lifetime, but you can choose one of two optional forms of payment.

Level Income: This option allows members who have paid into SERS and Social Security to receive their benefits at a level amount throughout their retirement years by combining their Social Security and SERS benefits. The Level Income option can be helpful when a member retires years before the age when (s)he qualifies for a Social Security benefit.

A member retires at age 60 with a monthly pension of $1,800 from SERS. The member is also eligible for a monthly Social Security benefit of $1,000 at age 66.

At Age 60: The member’s $1,000 monthly Social Security benefit is discounted to $523.50. Therefore, the SERS benefit would be $2,323.50, increasing 3% each year to $2,774.38 per month by age 66.

At Age 66: The member’s monthly SERS benefit would be reduced to $1,774.38, because the Social Security benefit of $1,000 per month would begin. The member’s combined monthly benefit would still total $2,774.38.

Under Level Income, SERS pays an amount (based on your estimated Social Security benefit) in addition to your regular retirement benefit until you qualify for Social Security benefits. At this time, your pension is reduced regardless of when you actually begin receiving Social Security and regardless of how much this benefit actually is. This reduced amount will be paid for your lifetime. If you choose Level Income, it is your responsibility to apply for Social Security benefits.

Reversionary Annuity: This option reduces your monthly retirement benefit to provide a lifetime income for your designated dependent after your death. The monthly amount paid to your dependent after your death may not be less than $10, and may not exceed the amount of your reduced benefit. This benefit is in addition to the survivors’ benefit. The reversionary annuity is useful for providing income to a surviving spouse or other dependent who doesn’t work, or worked very little, and won’t receive much retirement or Social Security income. If you choose the reversionary annuity, it cannot be rescinded. If the designated dependent dies before you, the reversionary annuity is void and your retirement benefit is not recalculated. The reversionary annuity does not have an annual cost of living increase.

A QILDRO allows for the division of a retirement benefit or a refund of contributions due to divorce. It does not establish a new benefit, nor does it create a new member or beneficiary. Generally, the QILDRO orders the payment of a benefit to the spouse as the alternate payee. It may also be payable to a child or other dependent as the alternate payee. The QILDRO does not apply to survivor annuities, or disability benefits.

If you return to state employment after retirement, you must notify the SERS Claims Division immediately. If you return to state employment on a contractual basis or to the private sector, your SERS benefit is not affected.

If your employment with the state lasts less than 75 working days during a calendar year (any part of a day is counted as a full day), you will continue to receive your pension payment. During your employment, you make no contributions to SERS but you must contribute to Social Security. If you work more than 75 working days, your pension benefit will end on the 76th day, and you will resume contributing to SERS.

If you are reemployed by the state on a permanent basis, you will not be eligible for pension benefits while working. You will make contributions to both SERS and Social Security during your employment, and earn additional credited service. After you again retire from state employment, you must reapply for a pension. Your new pension amount will be the total amount before reemployment, plus the amount earned during your reemployment.

If you reenter state service within three years after the date you retired, you may qualify to have your new retirement benefit computed as though you never retired. To qualify, you must repay all of the money you received, plus interest. This repayment may be made in a lump sum, by installments paid within five years after your reemployment, or before your next retirement date, whichever is first. If you choose not to complete installment payments before retirement or the end of the five-year period, your installment payments will be refunded and your pension will not be recomputed.

In accordance with state law, the Department of Insurance (DOI) is to annually determine certain annuity limitations for use in benefit determinations by the Retirement Systems and Pension Funds operating under the Illinois Pension Code. The calculations include:

The retirement Cost of Living Adjustment ("COLA") applicable to Tier 2 participants:

• The annual salary maximum applicable to Tier 2 participants.
• The annual increase to be used in determining the COLA for Tier 2 is derived from the change in the Consumer Price Index-Urban ("CPI-U") for the 12 months ending with the September proceeding each November 1. State statute requires that the DOI provide these calculations to impacted Retirement Systems and pension Funds by November 1 of each year.

For the State Employees' Retirement System (SERS) the annuity COLA and the increase in the annual salary maximum equals the lesser of 3% or half the CPI-U. The following table outlines the COLA to be applied and the maximum salary for Tier 2 annuity purposes by calendar year.