2018 PENSION LAW

Changes affecting retirees

ANNUAL Cost of living adjustment (COLA)

Currently 2.0 percent each Jan. 1

1/1/2019 – 1/1/2023 = 1.0 percent

1/1/2024 = 1.1 percent

1/1/2025 = 1.2 percent

1/1/2026 = 1.3 percent

1/1/2027 = 1.4 percent

1/1/28 and thereafter = 1.5 percent

COLA Eligibility

Beginning 7/1/2024, eligibility for receipt of first COLA changes to normal retirement age (age 65-66, depending on date of birth). Exempt: members who retire under Rule of 90, and members who retire at least age 62 with at least 30 years of service credit.

COLA Trigger

The COLA trigger in current law is eliminated. The trigger would have increased the COLA to 2.5 percent if the pension fund is at least 90 percent funded for two consecutive years.

Changes affecting active teachers

Contribution rates

Beginning 7/1/2018: 7.5 percent employee, 7.71 percent employer

Beginning 7/1/2019: 7.5 percent employee, 7.92 percent employer

Beginning 7/1/2020: 7.5 percent employee, 8.13 percent employer

Beginning 7/1/2021: 7.5 percent employee, 8.34 percent employer

Beginning 7/1/2022: 7.5 percent employee, 8.55 percent employer

Beginning 7/1/2023 and after: 7.75 percent employee, 8.75 percent employer

The law provides state funding for the higher employer contribution through a pension adjustment in the school aid formula.

Early retirement benefits

Augmentation in the early retirement reduction factors will be phased out over a five-year period beginning 7/1/2019, completed by 6/30/2024. (This reduces early retirement benefits.) Exempt: members who retire at least age 62 with at least 30 years of service.

Deferred benefits

Augmentation on deferred benefits will be reduced to zero percent beginning 7/1/2019.

Interest payable on refunds to members will be reduced from 4 percent to 3 percent effective 7/1/2018.

Interest due on payments and purchases from members, employers reduced from 8.5 percent to 7.5 percent effective 7/1/2018.