5.50 C. Proportional Annuities

At the time of retirement, each retirement system in which the member has service credit computes a proportional retirement annuity for the amount of credit earned in that system, based upon its own pension formula, and the highest average earnings in any of the systems in which the member has participated.

Survivor annuity benefits are determined in a like manner.

Example:

  1. A member has established 12 years of service with System A, terminates from System A but leaves his or her contributions on deposit.

  2. The member later establishes 20 years of service credit with IMRF.

  3. The member’s final average earnings under System A were $800 per month and under IMRF Tier 1 were $1,200 per month.

  4. Both System A and IMRF require eight years of service credit to vest for a pension and both base the final average earnings on the highest consecutive 48 months of earnings credit.

Pension amounts calculated separately

Without reciprocity, the calculation of the pensions would be as follows:

System A - 12 years of service credit, $800 final wages

System A has a step rate formula of 1.67% for each of the first 10 years and 1.9% for each of the next 10 years.

10 years

x 1.67%

= 16.7000%

2 years

x 1.9%

=   3.8000%

 

 

   20.5000% x $800.00 = $164.00 per month

 

IMRF - 20 years of service credit, $1,200 final wages

IMRF has a step rate formula of 1.67% for each year of the first 15 years and 2% for each year over 15.

15 years

x 1.67%

= 25.0500%

5 years

x 2.0%

= 10.0000%

 

 

   35.0500% x $1200.00 = $420.00 per month

 

The total pension payments from System A and IMRF would be $584.00 per month.

Pension amounts calculated under reciprocity

If the member elects the provisions of the Reciprocal Act,

  1. Both pensions would be based on the final average earnings of IMRF (because those final wages are higher), and

  2. The step rates would be computed on the basis of the combined service as follows (note how the step rates used under IMRF reflect the greater service):

System A (service years 1 through 12)

10 years

x 1.67%

= 16.7000%

2 years

x 1.9%

=   3.8000%

 

 

   20.5000% x $1200.00 = $246.00 per month

 

IMRF (service years 13 through 32)

3 years

x 1.67%

=  5.0000%

17 years

x 2.0%

= 34.0000%

 

 

   39.0000% x $1200.00 = $468.00 per month

 

Under reciprocity, the total pension payments from System A and IMRF would be $714.00 per month, $130 more than available individually from each system.

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