Employers are required to immediately pay that portion of the present value of a pension attributable to earnings increases exceeding the greater of 6% or 1.5 times the increase in the CPI-Urban as of the previous September. This applies to earnings increases paid on or after January 1, 2012, to members retiring on or after February 1, 2012.
NOTE: This new law differs from the immediate payment required by school districts for earnings increases paid to TRS members.
When a member applies for a pension, IMRF calculates the member’s final rate of earnings. For pensions with an effective date of February 1, 2012, and later, IMRF will compare each 12 months’ earnings within the final rate of earnings period with the earnings for the previous 12 months.
Each group of 12 months in the 48-month FRE period (or 96-month FRE period for Tier 2 members) will be compared to the immediately preceding 12 months to determine if there is an increase of 6% or more.
Although Accelerated Payments apply to members retiring on or after February 1, 2012, only earnings increases paid after January 1, 2012 are subject to the limit.
IMRF will calculate the present value of the member’s pension with and without the earnings increases that exceed the limit. The member’s employer will be required to pay that portion of the present value attributable to earnings increases that exceed the limit (Accelerated Payment).
After receiving the Accelerated Payment invoice from IMRF, employers may dispute the increase by providing documentation of any exemption within 30 days or pay the amount due without interest within 90 days. After 90 days, employers will be charged interest based on the current assumed rate of return. The full amount must be paid within three years. When paying with First Data, employers must use the code 025 for Accelerated Payments.
Earnings increases exempted from this limit are those resulting from the following:
Overload or overtime, including cash-outs of accumulated time credited in lieu of overtime (commonly called "comp time").
An increase in the number of hours required to be worked
Standard employment promotions resulting in increased responsibility and workload
Certain lump sum payments for unused vacation payouts
Also exempted from the earnings increase limit:
Earnings increases for members who are more than 10 years from retirement eligibility.
Earnings increases resulting from periods where the member was paid through workers' compensation.
Earnings resulting from periods where the member was paid through workers' compensation.
Earnings increases paid under contracts or collective bargaining agreements entered into, amended or renewed before January 1, 2012.
Earnings increases due to amounts paid as required by federal or State law.
Earnings increases due to amounts paid as required by court mandate.
Earnings increases due to the participating employee returning to the regular number of hours worked after having a temporary reduction in the number of hours worked.
Earnings increases attributable to personnel policies adopted by the governing body before January 1, 2012, and applicable only to
members who were participating in IMRF before January 1, 2012.
Personnel policies eligible for this exemption must:
Be in writing, and
Specifically exempt earnings increases that would trigger an Accelerated Payment for employees hired on or after a specific date
(but no later than 1/1/2012), and
Be formally adopted by the employer’s governing body on or before 1/1/2012.
The only exemptions are for payments pursuant to formal, written personnel policies in effect before January 1, 2012, and which specifically exempt new hires from eligibility for the AP-triggering payments, or payments pursuant to an exempt CBA. If cash outs of sick and vacation time are not paid pursuant to exempt personnel policies, or an exempt contract or CBA, and the cash out causes an increase of 6% or more in one of the FRE 12-month periods, the AP will be required.
Employers can claim an exemption from an Accelerated Payment by returning the Exemption Form which will be included with the Accelerated Payment statement. See Exhibit 7B, Form 7.20 Request for an Accelerated Payment Exemption. Acceptable evidence of the exemption will include (this list is not exhaustive):
Copies of collective bargaining agreements
Copies of personal services contracts
Copies of Board minutes adopting personnel policies
Copies of check stubs or other statements related to employee wages (documenting compensation for overtime or increased hours of work)
Copies of Board minutes or other official announcements of promotions
If a portion of the increase is attributable to an exemption and IMRF approves the partial exemption, the pension cost due to the increase will be recalculated to consider only the non-exempt compensation. The employer will receive a revised Accelerated Payment Statement.
If the member has more than one employer during the final rate of earnings period, the employer that paid the triggering increase (an increase over compensation previously paid by the same employer) will be responsible for the pension cost of that increase. If both employers paid increases, the cost of those increases will be split in the same proportion as the increased wages that each employer contributed to the additional pension cost.