Money Purchase Formula
This method is called a money purchase or defined contribution plan. It is based on a combined amount of member and assumed employer contributions.
The member's portion is the normal (3-3/4% of earnings) member contributions. The employer's assumed portion is the members normal contribution multiplied by 1.4, resulting in 5.25%.
The total of these amounts--with interest credited to date of retirement--is the amount upon which the actuarially determined benefit is based.
The defined contribution method will usually provide a higher pension amount than the standard formula for younger (typically age 45 or less) members who terminate participation and leave their contributions on deposit and draw a pension at age 55 or later (or age 62 for Tier 2 members).
Also members who are beyond normal retirement age benefit from this formula. Pensions for all members are calculated using whichever produces the higher amount, the standard or money purchase pension formula.
The Special Needs (reversionary) annuity provides IMRF members with an additional tool for their estate planning. It provides a monthly survivor benefit separate from the IMRF surviving spouse pension and the $3,000 lump sum death benefit.
Under the Special Needs option, the member chooses to receive a lower pension payment so his or her IMRF pension payments can revert (become payable) to someone else upon the member's death.
When a member retires, an estimated total pension payout for his or her monthly pension is calculated. That is, the total value of all pension payments the member can expect to receive. (See 5.20 B. 3. Pension Payment Plans.)
If a member chooses to have his or her pension payments revert to someone else upon the member's death, the total pension payout to the member and to the individual the member names (the Special Needs beneficiary) cannot be greater than the total pension payout if the member did not choose this option.
Payments to the Special Needs beneficiary continue for the lifetime of that individual.
The amount of the pension payable to the Special Needs beneficiary depends upon whether the member has a spouse eligible for an IMRF surviving spouse pension:
Member's spouse is eligible for a surviving spouse pension:
Retired
with a Regular or SLEP Tier 1 pension:
Upon the member’s death, his or her spouse would receive a surviving spouse
pension equal to 50% of the member’s Standard pension.
The member can elect a Special Needs annuity that will provide his or her spouse (or some other person) a lifetime pension equal to 25%, 35%, or 40% of the member’s adjusted (reduced) pension.
Retired
with a Regular Tier 2, SLEP Tier 2, or ECO pension:
Upon the member’s death, his or her spouse would receive a surviving spouse
pension equal to 66-2/3% of the member’s Standard pension.
The member can elect a Special Needs annuity that will provide his or her spouse or some other person a lifetime pension equal to 25% of the member’s adjusted (reduced) pension.
(Members are not required to name their spouse, members can name any one individual as Special Needs beneficiary.)
Member has no spouse or
spouse is not eligible for
a surviving spouse pension:
Regardless of
which IMRF plan the member retired under, the member can elect a Special
Needs annuity that will provide any one individual a lifetime pension
equal to 50%, 75% or 100% of the member’s adjusted (reduced) pension.
In cases where a member’s spouse is not eligible for a surviving spouse
pension, this option allows the member to provide a benefit which
is similar to IMRF’s surviving spouse pension.
Once the member agrees to reduce his or her pension under the Special
Needs annuity option, the reduction is permanent. The member cannot
change the Special Needs Beneficiary or the percentage reduction selected.
If the Special Needs beneficiary predeceases the member, the pension
that would have been paid to that individual is no longer payable.
The member’s pension will not be increased.