Tuesday, June 21, 2016

Important and Interesting Events of the Teachers' Retirement System of Illinois Since 1915

2015       The Illinois Supreme Court ruled unanimously [on May 8] that the 2013 state law overhauling Teachers’ Retirement System benefits was unconstitutional. The high court decided that changes in retirement benefits enacted by the law violated the Pension Protection Clause of the Illinois Constitution. This decision upheld a 2014 ruling by a Sangamon County Circuit Court and was the final chapter in a 15-month-long legal challenge to the law. With this decision, TRS members in Tier I and Tier II saw no changes in the administration of their retirement benefits. The retirement benefit calculation, cost-of-living-adjustment calculation, active member contribution rate, eligibility standards for retire­ment and all other current laws governing teacher pensions were not changed.

2014       In early 2014, five lawsuits were filed challenging the constitutionality of Public Act 98-0599. These cases were consolidated in Sangamon County Circuit Court. As part of this legal challenge, a court injunction issued on May 14 delayed Public Act 98-0599’s implementation. Public Act 98-0599 was declared unconstitutional by a Sangamon County Circuit Court as a violation of the Illinois Constitutions Pension Protection Clause – Article XIII Sec. 5 [November 21, 2014]. The decision was appealed to the Illinois Supreme Court, which [was] expected to rule on the case in 2015.

2011       A retired Tier I member may work in a TRS-covered position for 100-paid days or 500-paid hours each year and not lose benefits. The previ­ous limit, which expired June 30, 2011 was 120-paid days or 600-paid hours per year. Only work that requires teacher certification, including summer-school and substitute teaching, is subject to the 100 days/500 hours post-retirement employment limitation.

2010       Tier II [was] created: Public Act 96-0889, which was signed into law in the spring of 2010, adds a new section to the Pension Code that applies differ­ent benefits to anyone who first contributes to TRS on or after Jan. 1, 2011 and does not have any previous service credit with a pension system that has reciprocal rights with TRS. These members are referred to as “Tier II” members. Changes from the “Tier I” pension law include raising the minimum eligibility to draw a retire­ment benefit to age 67 with 10 years of service, initiating a cap on the salaries used to calculate retirement benefits, and limiting cost-of-living annuity adjustments to the lesser of 3 percent or 1/2 of the annual increase in the Consumer Price Index, not compounded. The retirement formula is unchanged. The new pension law does not apply to anyone who has TRS service prior to Jan. 1, 2011. These members remain participants of Tier I and not Tier II.

2004       The largest Medicare referendum ever con­ducted in the United States concluded on this date. Over 28,000 Illinois teachers decided whether or not to begin contributing to Medicare after July 1, 2004. This one­time opportunity was necessary because individuals who had been continuously employed with the same school district since March 31, 1986 were not accumu­lating Medicare credits through their employment as teachers.

2003       Credit became permitted for members with up to two years of unused and unpaid sick leave for 340 or more days. Purchase of service and credit became per­mitted for members with up to two years of service for teaching in private schools recog­nized by the State Board of Education.

2001       The TRS board consisted of 11 members (one addi­tional elected annuitant). (PA 91-0941).

1998       The 2.2 percent per year flat rate for­mula became used for service credit after July 1, 1998 and for service before July 1, 1998, if it was upgraded.

1995       An additional 0.5 of one percent was deducted from the gross creditable earnings to help fund the Teachers' Health Insurance Security Fund (THIS) for the Teachers' Retirement Insurance Program (TRIP). TRS only acts as an agent to CMS for TRIP. No TRS monies are used to fund TRIP.

1994         [The flawed "Pension Ramp" (Public Act 88-0593) became operative in the 1996 Fiscal year].

1993       Early Retirement Incentive (ERI) (5 & 5) was enacted for teachers with a two-year win­dow for retirement between June 1 and September 1 in 1993 and 1994. A third window in 1995 allowed for retire­ments that were delayed by an employer. Those taking ERI were not eligible for Early Retirement Option (ERO).

1991       The purchase of optional service for two years of military service prior to teaching became permitted. ERO contributions were based on capped salary; 170 days became used as a denominator for determining service credit. TRS retirees were allowed to teach without restrictions in colleges and universities.

1990       Post-retirement annual increases [COLA] compounded annually at 3%.

1987       A special health insurance coverage option was offered (non-Medicare plan).

1986       New teachers contributed 1.45 percent to Social Security for Medicare.

1984       A maximum of one year of service for 170 (or more days) sick leave credit was granted to members retiring after June 1, 1984.

1982       Salary for ERO was redefined to calculate the contributions based on the greater of the last full-time salary rate or the highest full-time salary rate used in the determination of average salary.

1979       An Early Retirement Option (ERO) was established for retirements on and after June 1 of 1980. A member between the ages of 55 and 60 with 20 or more years of service credit could retire without an early retirement reduction. Additional contributions were required from the member and employer.

1978        Post-retirement annual increases [COLA] set at 3%.

1973       Monthly survival benefits became payable to a dependent at age 50, instead of 55, if there were no surviving dependent children. The TRS board consisted of nine members [at this time].

1972       Credit for one-half year or 85 days of sick leave was granted. The member had to retire within 120 days of teaching to receive the credit. The purchase of five years of military service was permitted even though a member received a military allotment. Post-retirement annual increases [COLA] set at 2%. 

1971       Average salary [was] determined based on the highest four consecutive years within the last 10 years. Post-employment limitations in Illinois public schools became limited to teaching.

1969       Retirement became permitted at age 60 with 10 years; age 62 with 5 years; and age 55 with 20 years of service. The maximum retirement allowance increased from 60 percent of average salary at age 60 to 61-2/3 percent at age 61; 63-1/3 percent at age 62; 65 percent at age 63; 66-2/3 percent at age 64; 68-1/3 percent at age 65; and 70 percent at age 66 and thereafter. Post-retirement annual increases or Cost of Living Adjustment [COLA] set at 1.5%.

1964       A six percent reduction was taken for each year in which retirement occurs earlier than age 60. However, there was no reduction if retirement was necessitated by disability.

1963       The purchase of optional service credit for leave of absence [was] permitted. The military service credit maximum became five years. School nurses became TRS members. Members were permitted to retire at age 60 or over with 10 or more years of creditable service provided that one year was completed after July 1, 1963, and three years were com­pleted after July 1 following age 55. Annuitants were required to return to teach­ing for three years to receive an actuarial calculation. This was based on the enactment of new laws. Monthly survivor benefits payable to survi­vors of a member who died while receiving a disability allowance were not limited to 80 percent of a member's disability allowance. A change was made in calculating the amount due and estimating the interest rates for con­tingent service of new members in TRS on July 1, 1963 and thereafter.

1959       Membership contributions were required to be submitted monthly by employers; 170 days equaled 1.000 years of service. The survivor benefits program was enacted.

1949       The full-time teaching basis definition became normal employment requiring not less than 450 hours. The maximum retirement allowance [was] $4,800 per year. Fractional years of credit could be used and average salary could be based on the high­est five consecutive years of credit in the last 10 years. An application for disability had to be made while teaching or within 31 days of teaching. A permanent disability retirement benefit became the larger of $400 per year or 30 per­cent of the most recent salary subject to a maximum benefit of $1,000 per year. Average salary [was] determined by the highest five consecutive years within the last 10 years.

1944       Retirement allowances became payable monthly.

1941       The minimum disability allowance [was] $400 per year for any member at age 50 with 25 or more years of service. The death refund included additional contribu­tions made for verified outside service. The requirement for continuous service in TRS before retirement was reduced from 10 years to five years. The age retirement allowance could not exceed 3/5 of the maximum salary on which contributions were based. The maximum retirement allowance became $1,500 per year.

1939       An age retirement allowance calculated under an actuarial plan considered the member and state contributions and the retiring member's exact age on [his or her] retirement date. The classification of teachers in relation to contributions [was] determined by the amount of a member's salary rather than by years of teaching. The minimum retirement benefit became $400 for members retiring with 25 years of credit­able service. Permanent disability benefits became payable for 10 or more years of service. The minimum disability benefit [was] $200 per year. Upon the death of a member, a refund of accumulated contributions became payable to the estate or beneficiary. Teachers who ceased teaching became entitled to a refund of all contributions made to TRS without interest. Their applications could not be processed until four months after teaching had ceased.

1915       Retirement benefits began for some teachers and were paid quarterly using a “flat benefit plan.” They included a permanent disability payment if an educator had 15 years of service credit.

A History of Employees' Contribution Rates:
The annual contribution of 9.0 percent is broken down to 8.0 percent for retirement annuities (of which 0.5 percent is for annual COLAs) and 1.0 percent for death benefits.

2016: 9.0 percent

2005: 9.4 percent

1998: 9 percent

1971: 8 percent

1969: 7.5 percent

1959: 7 percent

1953: 6 percent

1947: 5 percent

1939: 4 percent

1933-39: $10/year for first 10 years, $20/year for next 5 years, $30/year for next 10 years. Prior to 1933: $5/year for first 10 years, $10/year for next 5 years, $30/year for next 10 years. (1933 amendment required back assessment payment to bring contributions for prior years to rates effective July 1, 1933).

1 comment:

  1. COLA:

    The first automatic annual increase for TRS was enacted in 1969 and set at 1.5 percent, with each increase always calculated from the member’s original pension. Inflation in the United States at the end of 1969 was 6.18 percent.

    The AAI was increased in 1972 to 2 percent, when inflation was 3.65 percent. During the next seven years, inflation averaged 7.56 percent, with a high of 11.8 percent at the end of 1974.

    Inflation increased from 6.84 percent to 9.28 percent during 1978, and in that year the TRS AAI was increased to 3 percent – but still calculated each year from the member’s initial pension amount.

    The TRS AAI remained unchanged until 1990, when the formula was altered in state law to require subsequent increases to be compounded – calculated from the member’s current pension amount instead of the original amount. Inflation at the beginning of 1990 was 5.4 percent (via Fred Klonsky, via TRS).