The “automatic annual increase in annuity” prescribed by Illinois statute (see below) for retirees in the Teacher Retirement System is intended to ensure that the purchasing power of retirement benefits is not eroded by inflation. The federal government uses the Consumer Price Index for Urban Wage Earners (CPI-W) as the index for calculating Social Security Cost-of-Living Adjustments (COLA).
Illinois teachers do not earn Social Security credits while teaching and, thus, are not eligible for Social Security benefits from their teaching. Starting in 1969, the Illinois General Assembly established the TRS COLA at 1.5%. It increased to 2% in 1972 and was established at 3% in 1978. The TRS COLA has remained at 3% and is calculated upon the prior year’s retirement benefit, i.e. compounding. This is the same compounding process used by Social Security.
SB1673 proposed major changes for both active and retired TRS members. The legislature adjourned without acting upon SB1673; however, it continues to be a real threat to TRS member benefits.
Illinois Pension Code: 40 ILCS 5/16-133.1) (from Ch. 108 1/2, par. 16-133.1) Sec. 16-133.1. Automatic annual increase in annuity.
Each member with creditable service and retiring on or after August 26, 1969 is entitled to the automatic annual increases in annuity provided under this Section while receiving a retirement annuity or disability retirement annuity from the system. An annuitant shall first be entitled to an initial increase under this Section on the January 1 next following the first anniversary of retirement, or January 1 of the year next following attainment of age 61, whichever is later. At such time, the system shall pay an initial increase determined as follows:
(1) 1.5% of the originally granted retirement annuity or disability retirement annuity multiplied by the number of years elapsed, if any, from the date of retirement until January 1, 1972, plus
Also read COLA: Is It Guaranteed in Illinois? http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/cola-cost-of-living-adjustment-is-it.html