On July 6, 2017, Senate Bill 42 was enacted into law, becoming Public Act 100-0023 (“Act”). The Act provides additional funding to the Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago (“LABF”) and creates a new “tier” of pension benefits. Furthermore, the Act allows any person who first became a member of the LABF or another Designated Reciprocal Fund on or after January 1, 2011, but prior to July 6, 2017 (commonly referred to a “Tier 2 Member”), to irrevocably elect to either:
remain subject to their current retirement benefit eligibility and employee contribution requirements (hereinafter, “Tier 2 Benefits”), or
be subject to certain new alternative retirement benefit eligibility and employee contribution requirements as provided in the Act (hereinafter, “Tier 3 Benefits”).
Summary Comparison of “Tier 2” and “Tier 3” Benefits
Tier 2 Members who irrevocably elect Tier 3 Benefits will be required to contribute more of their salary toward their pension in exchange for being eligible to retire at an earlier age (with at least 10 years of service).
Upon electing the Tier 3 Benefits, current Tier 2 members, who currently contribute 8.5% of pensionable salary toward their annuity, will be required to make increased employee contributions according the following schedule:
9.5% of pensionable salary beginning July 6, 2017;
10.5% of pensionable salary beginning January 1, 2018; and
11.5% of pensionable salary or normal cost (subject to 8.5% floor), whichever is less, beginning January 1, 2019
Reduced Retirement Age:
Upon electing the Tier 3 Benefits, current Tier 2 members will be eligible for the following:
Member is eligible for unreduced minimum formula annuity at age 65 (versus 67 under the Tier 2 Benefits structure) with 10 years of service
Member is eligible for reduced minimum formula annuity at age 60 (versus 62 under the Tier 2 Benefits structure) with 10 years of service; reduction for early retirement equal to ½ of 1% per month for each full month below age 65 (versus 67 under the Tier 2 Benefits structure)
For more information regarding the difference between Tier 2 and Tier 3 Benefits, please click here: Summary Comparison Table.
MAKING THE IRREVOCABLE ELECTION
Election forms were mailed to all Tier 2 Members and included instructions regarding the election. Eligible current and former City of Chicago (“City”) employees received the mailing from the City and their responses must be returned to the City by mail in the return envelope provided. Eligible current and former retirement board employees received the mailing directly from the LABF and their responses must be returned to LABF by mail in the return envelope provided. By law, the irrevocable election must be made between October 1, 2017 and November 15, 2017. Any election postmarked after November 15, 2017 will be deemed invalid. If the election is not made, or is not made during the specified election period, the Tier 2 member will be deemed to have chosen to remain subject to Tier 2 Benefits.
1. Designated Reciprocal Fund shall refer to any of the following pension funds or retirement systems: (1) Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago, (2) Municipal Employees’, Officers’ and Officials’ Annuity and Benefit Fund of Chicago, (3) Illinois Municipal Retirement Fund, (4) County Employees’ and Officers’ Annuity and Benefit Fund, (5) Forest Preserve District Employees’ Annuity and Benefit Fund, (6) Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund, (7) Metropolitan Water Reclamation District Retirement Fund, (8) State Employees’ Retirement System of Illinois, (9) State Universities Retirement System, (10) Teachers Retirement System of the State of Illinois, and (11) Public School Teachers’ Pension and Retirement Fund of Chicago
2. Treatment of Employee Contribution Receivables: Any receivable that accrues in a member's account as a direct result of insufficient pension deductions being withheld from the member's salary during the initial implementation of PA 100-0023 shall be payable to LABF by June 30, 2018. No interest will be charged so long as the payment is made by the deadline.