Tier 3 Membership

On July 6, 2017, the Illinois governor signed Senate Bill 42 (Public Act 100-0023). The legislation created a “Third Tier” of pension benefits applicable to public employees who first participated in LABF or a designated (see listing below) Illinois reciprocal retirement system1 on or after July 6, 2017.

Please be advised that if a member participated in LABF or in certain designated Illinois reciprocal retirement systems1 before July 6, 2017, and participates in LABF after July 6, 2017, then the member may be eligible for the benefit plan of Tier 1 or Tier 2.

The following details are highlights of the “Tier 3” pension benefits:


Eligibility for Employee Annuity

  • Member is eligible for unreduced minimum formula annuity at age 65 with 10 years of service; or
  • Member is eligible for reduced minimum formula annuity at age 60 with 10 years of service; reduction for early retirement equal to ½ of 1% per month for each full month (equivalent to 6% for each full year) below age 65


Employee Annuity Amount:

  • Minimum formula annuity benefit is 2.4% for each year of service multiplied by highest final average salary
  • Minimum formula annuity benefit is subject to a maximum of 80% of the highest final average salary for any 8 consecutive years within the last 10 years of service, cap starts at $106,800 in 2011, increased annually at the lesser of 3% or 50% of the percentage increase in CPI-U for the 12 months ending with the September preceding each November 1 (As of January 1, 2018, capped at $113,644.91)
  • Annual increase in annuity (commonly referred to as the “COLA”) is the lesser of 3% or 50% of the percentage change in CPI-U for the 12 months ending each preceding September; applied to original employee annuity amount (not compounded)


Eligibility for Annual Increase in Employee Annuity

  • Annual increase in employee annuity starts on the January 1 occurring on or after the latter of:
    • attainment of age 65, or
    • the first anniversary of the annuity start date


Survivor Annuity Amounts (subject to eligibility)

  • Spouse annuity:
    • Benefit is equal to 66⅔% of participant’s annuity at date of death or earned annuity
    • Annual increase in spouse annuity (commonly referred to as the “COLA”) is the lesser of 3% or 50% of the percentage change in CPI-U for the 12 months ending each preceding September; applied to original spouse annuity amount (not compounded)
  • ·   Child Annuity:
    • Benefit is $220 per month if a spouse survives or $250 per month if no spouse; child annuity is payable until attainment of age 18


Eligibility for Annual Increase in Spouse Annuity

  • Annual increase in spouse annuity starts on the January 1 occurring on or after:
    • the start date of the spouse annuity if the deceased member was in receipt of annuity at death, or
    • the first anniversary of the spouse annuity start date

 


Employee Contributions

  • Required Tier 3 Member:
    • 11.5% beginning immediately
    • 11.5% or normal cost (subject to 8.5% floor), whichever is less, beginning January 1, 2019
  • Elective Tier 3 Member:
    • 9.5% beginning July 6, 2017;
    • 10.5% beginning January 1, 2018;  and
    • 11.5% or normal cost (subject to 8.5% floor), whichever is less, beginning January 1, 2019

Note: When 90% funded status is reached, employee contributions drop from 11.5% to 7.5% and remain at 7.5% unless the funded ratio falls below 75%


[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 
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