Illinois TRS Tier 1

This page documents how FinZot models the Illinois TRS Tier 1 defined benefit pension plan.

Who this plan covers: Education members of Teachers’ Retirement System of the State of Illinois, before January 1, 2011: first contributed to TRS (or to a reciprocal Illinois system).

Employee Contributions

Employee contributions are the portion of salary that the employee pays into the pension fund.

Field	Value
Contribution Rate	9% of salary
Tax Treatment	Pre-tax (reduces taxable income)

Vesting & Retirement Eligibility

Vesting

Vesting determines when an employee has earned the right to receive pension benefits. The following formula must evaluate to TRUE for the employee to be vested:

service_credits >= 5

Retirement Eligibility

Retirement eligibility determines when an employee can begin receiving pension payouts. The following formula must evaluate to TRUE:

(commencement_age >= 62 AND service_credits >= 5) OR(commencement_age >= 60 AND service_credits >= 10) OR(commencement_age >= 55 AND service_credits >= 20) OR(commencement_month = 6 AND commencement_age_months >= 654 AND service_credits >= 35)

Formula Variables:

• service_credits: Years of credited service
• commencement_age: Age when pension payments commence

Benefit Calculation

The annual pension benefit is calculated as:

Annual Benefit = Final Compensation × Benefit Factor × Service Credits

Final Compensation

Final compensation is the salary figure used in the benefit calculation, typically an average of the employee’s highest-earning years.

Field	Value
Method	Highest Consecutive Years
Years Averaged	4

Benefit Factor

The benefit factor is a percentage multiplier that typically varies based on retirement age. Higher ages generally yield higher factors.

CASE
  WHEN service_credits < 5 THEN 0.0
  WHEN commencement_age_months >= 720 OR service_credits >= 35 THEN IF(0.022 * service_credits >= 0.746, 0.75 / service_credits, 0.022)
  WHEN commencement_age_months >= 660 AND service_credits >= 20 THEN IF(0.022 * service_credits *(1 - 0.005 *(720 - commencement_age_months)) >= 0.746, 0.75 / service_credits, 0.022 *(1 - 0.005 *(720 - commencement_age_months)))
  ELSE 0.0
END

Formula Variables:

• commencement_age: Age when pension payments commence
• service_credits: Years of credited service

Cost-of-Living Adjustment (COLA)

The COLA formula determines how pension benefits grow over time after retirement to keep pace with inflation.

IF(years_since_retirement >= 2 AND age >= 61, initial_pension_benefit *(1 + 0.03 *(MAX(2, years_since_retirement -(age - 61)) -(commencement_month - 1) / 12)) * 1.03 ^(years_since_retirement - MAX(2, years_since_retirement -(age - 61))), current_pension_benefit)

Formula Variables:

• initial_pension_benefit: The annual benefit amount at retirement
• years_since_retirement: Number of years since retirement began

Tax Treatment

Pension payouts from this plan are taxable as ordinary income.

Social Security Coverage

Most Illinois TRS Tier 1 employers do not participate in Social Security. FinZot marks a job with this plan as non-covered by default: no 6.2% Social Security tax is withheld and those wages earn no Social Security benefit. Medicare is still withheld. If your employer does participate, turn that setting off on the income stream.

---

Note: FinZot’s pension estimates are for planning purposes only and may not reflect all plan provisions. For official benefit estimates, contact your plan administrator.