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. The final average salary is subject to a cap.   As of January 1, 2023, the cap is $123,489.18.
• 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. The COLA is applied to original employee annuity amount.  It is 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%