Early Retirement Incentive

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 enhanced accordingly.

Eligible Members

To be eligible to retire under the IMRF ERI:

• Your employer must adopt the program.
• You must be participating in IMRF on the effective date of your employer's ERI program. You would still be considered participating in IMRF if you are on layoff status with right of re-employment, on IMRF Benefit Protection Leave of Absence, or receiving IMRF disability benefits for less than two years.
• You must be at least age 57 and have at least 20 years of service credit by your date of retirement.
• The 20 years of service credit can only include service with IMRF employers. It cannot include service credit with another retirement system, reciprocal service, or unused, unpaid sick leave.
• Your date of retirement must be the first day of the month following your date of termination.
• 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 2

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

Example

Members participating in a Tier 2 plan and who are age 67 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.

Be aware that purchasing service credit totaling more than 40 years (including unused and unpaid sick leave) will not positively impact your retirement benefit.

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. Employer determines retiring members' termination dates. Employer is to give members 30 days' notice of the date. Members may waive the 30-day notice.
4. Member submits an "Application for IMRF Pension” form to IMRF 30 days before termination date.
5. Employer submits a " Termination of IMRF Participation" form for member.
6. IMRF calculates the member's cost for the ERI and sends invoice to the member and employer. IMRF will begin deducting 24 equal installments from member’s pension toward ERI cost.
7. IMRF begins paying an estimated ERI enhanced pension, typically within eight weeks following member's final date of employment. The member is notified of their Benefit options. If they are eligible for a refund of contributions (surviving spouse, SLEP, Voluntary Additional Contributions), members can use their refunds to pay their ERI cost, if desired.
8. After final payroll is received, IMRF recalculates member's pension to determine final pension amount and ERI cost.

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 (FRE) period up to the wage cap. For more information on how your FRE is determined, refer to the Tier 2 Retirement Benefits page.

In the example below, we’ll be calculating the ERI costs of a member who has purchased 5 years of regular service credit.

To determine the cost for a portion of a year of service, you need to divide the number of months by 12 to get the multiplier you need for your calculation. For example, to calculate the cost of 3 years and 7 months of service, follow the equation below.

*If you do not have an eligible surviving spouse when you retire, your ERI contribution is calculated at the reduced rate of 3.75% for Regular plan members and 6.75% for SLEP.

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 ERI 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.

See the Death and Survivor Benefits and Voluntary Additional Contributions pages for more information.

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 ERI, you can never work for any IMRF employer, even in a position that does not participate in IMRF or as an independent contractor, without facing financial consequences. If 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 chose 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 62 at retirement:

• You would be required to repay IMRF for all pension payments received less the amount you paid
• When you again retire, your pension will be recalculated without the enhancements.

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 qualified spouse would receive 66-2/3% 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 a surviving spouse pension is payable, the remainder of the 24 equal installments will be deducted from the surviving spouse pension
• If a surviving spouse pension is not payable, the balance will be deducted from the lump sum death benefit payment.

If you paid more for the ERI than the amount paid out to you and an eligible surviving spouse, then the amount not paid out will be paid as a benefit to your beneficiary or 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 your current employer is SLEP and it adopts the ERI, you would purchase SLEP service credit.
• If your current employer is Regular, you would purchase Regular service credit

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.

• If both employers adopt the program and of your 20 years of total service credit you have:
  • Less than 15 years of SLEP service credit: you would purchase Regular service credit (4.5% per year purchased x Regular ERI final rate of earnings*)
  • 15 or more years of SLEP service credit: you would purchase the number of years desired; your cost would be calculated as follows:
    • 7.5% per year purchased x SLEP ERI final rate of earnings plus*
    • 4.5% per year purchased x Regular ERI final rate of earnings*
    •  

    *If you do not have an eligible surviving spouse when you retire, the ERI contribution will be adjusted to:

    • 6.75% per year purchased x SLEP ERI final rate of earnings plus
    • 3.75% per year purchased x Regular ERI final rate of earnings

For information on how your Regular Tier 2 pension is calculated and refunded, see the Retirement Benefits and Pension Options & Refunds at Retirement pages.

Pension Reductions Under Regular Tier 2

The IMRF ERI does not alter the existing IMRF benefit formula. Under Regular Tier 2, the current benefit formula calls for a pension reduction if you retire before age 67. This reduction will apply if your ERI enhanced age is less than 67.

When you retire under Regular Tier 2 ERI

If your actual age is 62 or greater

You can avoid the reduction by purchasing sufficient service to reach an enhanced age of 67 or 35 years of service credit.

If your actual age is less than 62

The pension reduction will be calculated using your enhanced age and service credit. For example: