The 2019 Illinois state budget included some changes to the Illinois Pension Code, in an attempt to deal with the state’s pension costs. These revisions include a completely voluntary “buyout” program of which some SEIU Local 73 members may be eligible and only if they choose to opt-in. The buyout option will likely be available in fall of 2018.
SEIU Local 73 members who are Tier 1 participants (all employees hired before January 1, 2011) in SERS (the State Employees’ Retirement System) and SURS (the State University Retirement System) and who plan on retiring through June 30, 2021 will have the option to accept a reduced annual cost of living adjustment (COLA) in retirement, in exchange for a one-time lump sum payment.
The current COLA for Tier 1 participants in these pension plans is a 3% compounded annual increase. This voluntary program would change that to a COLA of 1.5% that is only calculated from the original pension amount, and not compounded, in exchange for a lump sum payment equal to 70% of the difference in the value between the two COLA options.
Please keep in mind the following:
- This program is completely voluntary and requires participants to opt-in. For those who do not opt-in, you will retain the full rights to your earned pension.
- Be sure to have all of the information before choosing to opt-in, since participation could negatively impact your financial security in retirement.
- The lump sum payment is not offered in cash, instead it is rolled over into a qualified retirement plan such as an IRA or 401K.
- Once agreed to, this option is irreversible. Even if someone returns to active employment after retiring and accepting the buyout, their COLA will remain at the simple 1.5%. Likewise, any survivor annuities will also have the 1.5% COLA.
Thanks to our colleagues at Council 31 AFSCME whose resource Understanding Pension Code Changes in the FY19 Budget Implementation Bill helped create this post.