Calculation of a Regular plan pension (Tier 1 and Tier 2)
A Regular Plan retirement pension is based on the member's length of service and final monthly rate of earnings (FRE). All service is considered in calculating a pension, including partial years.
Under Tier 1, the final monthly rate of earnings is the sum of the highest total earnings during any 48 consecutive months within the last 10 years of service divided by 48.
Under Tier 2, the final monthly rate of earnings is the sum of the highest total earnings (under the wage cap) during any 96 consecutive months within the last 10 years of service divided by 96.
Those 48 or 96 months (as appropriate) can include the month after the last day of work, if a member receives his or her final paycheck in that month. In that case, the member could still receive an IMRF monthly pension for that month.
Note that there are limitations on earnings depending on the member's first date of participation (not based on Tier). In all cases, the following limitations should be applied before determining which months will be used for the FRE period.
For those members who began participation before January 1, 2012, the earnings in each of the last three months of the FRE period are limited to no more than a 25% increase over the highest of the other 45 months (93 months for Tier 2 members) in the final rate period.
For members who began participation on or after January 1, 2012, the earnings in each of the last 24 months of the FRE period are limited to no more than a 25% increase over the highest month of the other 72 months in the FRE period.
Alternative FRE Formula: “Lifetime FRE”
The Illinois Pension Code provides for an alternative FRE formula when a member has higher earnings at the beginning of his or her career. This FRE is known as a “Lifetime FRE.” This FRE averages all of a member’s earnings reported by all of his or her employer(s) over the member’s entire career.
When a member retires, IMRF calculates the FRE using both methods and uses the FRE that provides the member with the larger pension
IMRF Pension Calculation Illustration
The formula for computing an IMRF Regular plan monthly pension (Tier 1 and Tier 2) is as follows:
|
First 15 years of service: |
1-2/3% x years of service x final monthly rate of earnings |
plus |
Service over 15 years: |
2% x years of service x final monthly rate of earnings |
For example:
8 years of
service 13% of final rate of earnings
10 years of service 17% of final rate of earnings
15 years of service 25% of final rate of earnings
20 years of service 35% of final rate of earnings
25 years of service 45% of final rate of earnings
Note: the total pension at retirement (including any portion attributable to converted sick leave) cannot exceed 75% of the member’s final rate of earnings
Example:
A Tier 1 member retires at age 60 with 20 years of service and final monthly
rate of earnings of $2,000. The pension calculation is as follows:
|
First 15 years of service: |
1-2/3% x 15 x $2,000 = |
$500 |
+ |
Service over 15 years: |
2% x 5 x $2,000 = |
$200 |
|
Total monthly pension |
|
$700 |
The above example assumes the member retired under IMRF's standard plan.
Note: Members retiring under Tier 2 must be at least age 62; normal retirement age is 67.