Early Retirement Incentive

for Tier 1 Regular Plan Members
Beach

IMRF’s Early Retirement Incentive (ERI) is an employer option that allows eligible members to purchase up to five years of service credit at retirement. For each month and/or year of service credit a member purchases, the member’s retirement age is increased accordingly.

Eligible Members

To be eligible to retire under the IMRF ERI:

Your date of retirement must be no later than 12 months from the effective date of your employer's ERI program. You cannot have previously received a pension using IMRF service credit.

ERI Member Benefits Under Regular Tier 1

If you are eligible for an ERI, you may purchase from one month up to five years of additional service credit. For each period of service established, your age at retirement will be increased accordingly.

Example

Your actual age56 years 5 monthsYour actual service22 years 3 months
You purchase3 years 7 monthsAdds to your actual service3 years 7 months
Your ERI age60 years 0 monthsYour ERI service25 years 10 months

Members participating in a Tier 1 plan and who are age 60 or older may also purchase up to five years of additional service credit. Although age enhancement is no longer necessary, the additional service credit will result in a larger pension.

Although you can use reciprocal service credit to meet the service requirement for the IMRF ERI, you will not be eligible to receive a pension from the reciprocal system unless you meet its age requirement without the IMRF ERI age and service enhancements.

Notice of Intent to Retire Under ERI

If your employer adopts the ERI and you intend to retire under it, you would notify IMRF of your intention to do by submitting a "Notice of Intent to Retire Under Employer’s IMRF Early Retirement Incentive" form. You can

IMRF must receive your "Notice of Intent" no later than when you file your "Application for Retirement" form. We recommend you file your "Notice of Intent" form as soon as your employer adopts the ERI and you decide to retire under it.

When IMRF receives your "Notice of Intent" form to retire under your employer’s ERI, you are not guaranteed that you are eligible for a pension or for the ERI.

As a general rule, your "Notice of Intent" form is not a letter of resignation. Although you may file a "Notice of Intent" form you are not required to apply for an IMRF pension. However, some employers may treat a "Notice of Intent" form as a letter of resignation. If you have any questions regarding this, talk with your employer.

When IMRF receives your applications, you will receive a letter of acknowledgement and the publication, "Can I Afford to Retire?" Your employer will receive a courtesy copy of the acknowledgment letter.

Calculating the Cost of Your ERI Service

For each year of Regular service credit you purchase, you will pay 4.5% of your highest 12 consecutive months of salary within the final rate of earnings period.

Example
The highest 12 months of salary $27,000
x (times) member contribution x (times) 4.5%
Subtotal $ 1,215
x (times) 3 years 7 months =
(7 months = 7/12 years or .583)
x(times) 3.583
Member ERI cost $4,353

If you do not have an eligible surviving spouse when you retire, your contribution is reduced to 3.75%.

You can also request an ERI pension estimate which will include your ERI costs by

Paying ERI Member Costs

Lump Sum Payments from Employer

If you receive any lump sum payments for vacation, sick leave and/or personal leave, your employer must forward the net payment (gross amount less federal and state taxes, IMRF member contributions, etc.) to IMRF. The net payment will be applied toward your ERI cost.

If the net payment for sick, vacation, and/or personal time is greater than your ERI cost, your employer would forward to IMRF an amount required to pay your cost. Your employer would forward to you any remaining balance of the net payment.

If the net payment is less than your ERI cost, you will be billed separately by IMRF. Please do not send any payment to IMRF until you receive an invoice from IMRF.

This payment must be sent to IMRF. As long as the payment for vacation, sick leave and/or personal leave is due to your retirement, it is payable to IMRF.

Refunds from IMRF

If you are entitled to a refund from IMRF for surviving spouse, SLEP, or Voluntary Additional Contributions, you may request that the refund be applied toward your ERI cost. If the refund is greater than your ERI cost, IMRF will refund the balance to you.

Rollover from IRA, 457 Plan or 403b Plan

You may roll over funds from a traditional IRA, a conduit IRA, 457 plan, or 403b plan to pay your ERI cost. A conduit IRA is an IRA where you have rolled over only funds from a qualified pension plan (like IMRF); you have not added any other money to it. Funds from a Roth IRA cannot be used to pay for the ERI.

24 Equal Installments

Your contributions for the ERI can be paid in a single sum or deducted from your pension in 24 equal monthly installments. Interest is not charged during the 24 months. The 24-month payment period is fixed by law and cannot be extended.

Additional Member Payments

Once deductions for the 24 equal monthly installments begin, you can forward additional payments or pay off the balance of your ERI cost at any time.

Returning to Work After ERI

If you retire under the ERI and you return to work for any IMRF employer in any position, even as an independent contractor, you will lose the ERI enhancements and pay IMRF the difference between the ERI enhanced pension and the pension you would have received without the ERI--less the amount you paid for the ERI.

Exception: you can hold an elected position and continue to receive your ERI pension if you choose to not participate in IMRF and your pension is not based on any service earned in that position during any term of office.

If you would not have been entitled to a pension without an ERI, i.e., you were less than age 55 at retirement:

You may retire under ERI only once. For example, you retire under ERI and return to work for an IMRF employer. If that employer adopted ERI, you would not be eligible to retire under it.

Death Benefits After ERI

If a surviving spouse pension is payable, your spouse would receive approximately one-half of your enhanced ERI pension.

If you die and a balance for your ERI cost remains, the remainder will be deducted from the IMRF death benefit:

If you paid more for the ERI than you received in an enhanced pension, the amount not paid out as a benefit will be refunded to your beneficiary or to your estate.

Participation in Multiple Plans

If you have both Regular and SLEP service credit the type of service credit you can purchase under the ERI will be determined by your current employer:

If you are participating under two IMRF employers, one SLEP and one Regular, the type of service credit purchased under the ERI will be determined by which employer adopts the ERI.

Pension Reductions Under Regular Tier 1

The IMRF ERI does not alter the existing IMRF benefit formula. Under Regular Tier 1, the current benefit formula calls for a pension reduction if you retire before age 60. This reduction will apply if your ERI enhanced age is less than 60.

If when you retire under Regular Tier 1 ERI:

Example
Actual Age51 years 4 monthsActual Service22 years 3 months
You purchase5 years 0 monthsAdd to actual service5 years 0 months
ERI age56 years 4 monthsERI service27 years 3 months
Months ERI enhanced age less than 60:44
Pension would be reduced 1/4% for each month under age 60:44 months x .25% = 11

In this example, the amount of your ERI enhanced pension would be permanently reduced by 11%.

Steps to Retire with ERI

  1. Employer passes the resolution adopting the IMRF ERI.
  2. Employer informs its IMRF members of the adoption of the ERI and of the program's effective date.
  3. Members intending to retire under the ERI notify IMRF of their intent by completing a "Member's Notice of Intent to Retire Under the IMRF ERI" form (paper form or through Member Access). The Notice of Intent does not guarantee a member's eligibility for the ERI or for an IMRF pension.
  4. IMRF sends a letter to the member and employer after receiving the member’s Notice of Intent.
  5. Employer determines retiring members' termination dates. Employer is to give members 30 days' notice of the date. Members may waive the 30-day notice. However, if a member requests to retire before July 1st so he or she will be eligible for the 13th payment the following year, the employer must allow the member to do so.
  6. Member submits an "Application for Retirement Annuity" (paper form or through Member Access) to IMRF 30 days before termination date.
  7. Employer submits a "Notice of Termination of IMRF Participation" for member.
  8. IMRF begins paying an estimated ERI enhanced pension.
  9. Employer submits member's final payroll report.
  10. After final payroll received, IMRF recalculates member's pension to determine final pension amount.
  11. If a member is eligible for optional payment plan (actual age less than 62), IMRF notifies member of the optional payment plan.
  12. If member is eligible for a refund of contributions (surviving spouse, SLEP, Voluntary Additional), IMRF notifies member of refund. Member can use refund to pay member ERI costs, if desired.
  13. IMRF calculates the member's cost for the ERI and sends an invoice to employer.
  14. Employer returns invoice with the net payment for the member's sick, vacation, and/or personal time. If net payment greater than member's ERI cost, employer forwards balance of net payment to member.
  15. Thirty days after the employer invoice is sent, IMRF sends an invoice to the member indicating ERI service purchased, payments received, and balance remaining. Member can return invoice with any payments toward his or her cost of the ERI.
  16. Thirty days after the member invoice is sent or payment received from the member, if any balance remains for member's ERI cost, IMRF begins deducting 24 equal installments (without interest) from the member's pension.