Monday, June 25, 2012

It’s about Keeping a Promise by Roger Sanders


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.

• SB1673 applies to both active and retired members

• The bill requires active and retired members to choose between two options (1) accept a change in annual COLA that is capped at 3% or one-half of the CPI, whichever is less in order to retain “access” to state-supported health insurance through the Teacher Retirement Insurance Program (TRIP), and active teachers could then use future salary increases in calculating their retirement benefit, or (2) reject the COLA change, keeping it at 3% and lose “access” to TRIP. Active teachers would not be able to use future salary increases in calculating their retirement benefit.

• The bill also establishes a new COLA start date where TRS members agreeing to Option 1 would first see the new COLA on January 1 in the year after turning 67, or in the year after the fifth anniversary of the member’s retirement, whichever is earlier. If a retired Tier I member now eligible for the current COLA accepts Option 1, the current COLA would be suspended until eligibility for the new COLA (See http://trs.illinois.gov/).

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

(2) 2% of the originally granted annuity multiplied by the number of years elapsed, if any, from the date of retirement or January 1, 1972, whichever is later, until January 1, 1978, plus

(3) 3% of the originally granted annuity multiplied by the number of years elapsed from the date of retirement or January 1, 1978, whichever is later, until the effective date of the initial increase…


For more Information, read http://rogersanders.tumblr.com/

Also read COLA: Is It Guaranteed in Illinois? http://teacherpoetmusicianglenbrown.blogspot.com/2012/03/cola-cost-of-living-adjustment-is-it.html


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