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THEMUNICIPAL EMPLOYEES’ANNUITY AND BENEFIT
FUND OF CHICAGO
BOOKLET OF INFORMATION ON THE LAW GOVERNING THE FUND
INCLUDING AMENDATORY PROVISIONSTHROUGH JULY 1, 2002
OFFICE OF THE FUND221 North LaSalle Street, Room 500
Chicago, Illinois 60601(312) 236-4700
MAJOR AMENDMENTS DUE TO LEGISLATIVE CHANGES
(House Bill 600 – signed January 16, 2004)
Automatic increases in annuities will now take effect in the January of each year in which they are to be provided. (amendment to page 24)
An employee who previously
withdrew contributions from the Fund, may have his rights under the Fund restored after repaying the withdrawn contributions with interest after completing the required amount of service after the date of the refund. The required service is:
• 90 days of service under this
Fund, or • 2 years of service under any
participating Fund under the Reciprocal Act. (amendment to page 41)
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THE MUNICIPAL EMPLOYEES’ANNUITY AND BENEFIT
FUND OF CHICAGO
BOOKLET OF INFORMATION ON THE LAWGOVERNING THE FUND
INCLUDING AMENDATORY PROVISIONSTHROUGH JULY 1, 2002
OFFICE OF FUND
221 North LaSalle Street, Room 500Chicago, Illinois 60601
(312) 236-4700
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THE MUNICIPAL EMPLOYEES’ANNUITY AND BENEFIT FUND OF CHICAGO
THE RETIREMENT BOARD
(Board of Trustees)
John K. Gibson .................................................. President
(Elective Member)
Tariq G. Malhance..................................... Vice-President
(City Comptroller, Ex-Officio Member)
Judith C. Rice .................................................... Treasurer
(City Treasurer and
Ex-Officio Member and Treasurer)
Joseph M. Malatesta ........................ Recording Secretary
(Elective Member)
Peter Brejnak ........................................................ Trustee
(Elective Member)
APPOINTED BY THE BOARD
Terrance R. Stefanski ..........................Executive Director
William A. Marovitz ........................................... Attorney
Frederick P. Heiss ............................................... Attorney
Gabriel, Roeder, Smith & Company ................... Actuary
Terence P. Sullivan, M.D. ................................. Physician
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TABLE OF CONTENTS
1. Introduction ......................................................................... 5
2. General Provisions .............................................................. 7A. Inception of the FundB. Applying for Benefits and Benefit CounselingC. Persons IncludedD. Persons Automatically ExcludedE. AdministrationF. Treasurer and Legal AdvisorG. InvestmentsH. Income of the Fund and Rate of Employee
and City Contributions1. Annual Tax Levy2. Investment Income3. Deductions from Employees’ Salaries
3. Major Amendments ........................................................... 12
4. Annuities for Employees .................................................. 15A. Age and Service Requirements for Employee AnnuitiesB. Methods For Determining Employee AnnuityC. TABLE 1 - Percentage of Salary Payable Under the
Minimum 10 Year Service Formula AnnuityD. Annuity Increases after RetirementE. Reversionary Annuity
5. Surviving Spouse Annuities ............................................. 28A. Age and Service Requirements for Spouse AnnuitiesB. Methods For Determining Spouse AnnuitiesC. Duty Death - Spouse AnnuityD. Spouses Not Entitled to Annuity
6. Annuities for Children ...................................................... 34
7. Credit for Service Prior to Date ofMembership in the Fund ................................................... 34
8. Service for Certain Governmental Units of theState of Illinois: Reciprocal Act ...................................... 35
9. Disability Benefits ............................................................. 36A. Ordinary DisabilityB. Duty Disability
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TABLE OF CONTENTS
10. Refund of Annuity Contributions ..................................... 39A. Refund to Employee upon Withdrawal from ServiceB. Possible Refund to Employee’s Children, Heirs,
Estate, or Designated PersonC. Refund in Lieu of AnnuityD. Refund of Salary Deductions if Employee
is Not Married
11. Repayment of Refunds ...................................................... 41
12. Computation of Service Credit ......................................... 41
13. Qualified Illinois Domestic Relations Order (QILDRO) ... 42
14. Suspension of Benefits ..................................................... 43
15. Present Income Tax Information ...................................... 44A. Federal Income Tax
1. Annuities2. Refunds, IRA Rollovers
B. State of Illinois Income Tax
16. Deductions from Annuity for Health Insurance .............. 45
17. Conclusion ......................................................................... 46
TABLE INDEX
Table 1Table Showing Percentage of SalaryPayable Under the Minimum 10 Year ServiceFormula Annuity ...................................................................... 22
Table 2Reversionary Annuity Factors ................................................ 27
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1. INTRODUCTION
March 2003
To the Participants in the Municipal Employees’ Annuity andBenefit Fund of Chicago
This booklet has been prepared by the Retirement Board toprovide general information about the benefits available tothe members of this system, and to the survivors of deceasedmembers.
A detailed and complete coverage of all the applicable lawwould defeat the purpose of this handbook. Correspond-ingly, it is not intended to contain a synopsis of all the pro-visions of the law governing the Municipal Employees’Annuity and Benefit Fund of Chicago, either. Individualcircumstances can differ and may require explanations andexamples that would be somewhat different from those con-tained herein. The full text of the law governing the Fundmay be found in Chapter 40, Act 5, Articles 1, 8 and 20 ofthe Illinois Compiled Statutes, and supersedes anythingstated or implied in this booklet.
Recently, the Illinois State Legislature amended certain sec-tions of the law governing the Fund; and, we are pleased toinform you of these improvements. Changes with the great-est significance are:
• the 2.4% accrual rate with an 80% maximum;
• earlier post-retirement increases for eligible retirees;
• greater benefits for eligible spouses of employees whodie in service;
• elimination of the service requirement for child’s an-nuity if the employee dies in service; and
• ordinary disability salary deductions paid by the Fund.
These changes and others are discussed at the respectivesections in this booklet as well as the Major Amendmentssection.
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Our sole mission is to provide benefits for you, the mem-bers. Let us assure you of our continued commitment toour mission; and, to our primary goals — to provide youwith the best service, and to preserve the fiscal integrity andfinancial stability of the Fund.
On behalf of the entire membership, the Board of Trustees,once again, express their most sincere appreciation to theMayor, City Council and other City Officials, and to theGovernor and members of the Illinois State Legislature, fortheir steadfast support of legislative changes intended toimprove benefits and strengthen the Fund.
We hope you enjoy reading this handbook.
Respectfully submitted,
The Retirement Board,Municipal Employees’ Annuity andBenefit Fund of Chicago
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2. GENERAL PROVISIONS
A. Inception of the Fund
The Municipal Employees’ Annuity and Benefit Fund ofChicago came into being in the year 1921 by virtue of anAct of the Illinois Legislature. It superseded the formerMunicipal Pension Fund, which was created by Act of theLegislature in the year 1911, and also the Public SchoolEmployees’ Pension Fund, which was established in the year1903. The present Municipal Employees’ Annuity and Ben-efit Fund, which will hereinafter be referred to as the “Fund,”applies to cities in the State of Illinois having populationsof more than 500,000 inhabitants.
B. Applying for Benefits and Benefit Counseling
Employee participants may call this office to set up an ap-pointment to receive information about their benefit rights.Employees may also request to have an estimate of benefitssent to them by mail. Every effort is made to provide theinformation requested as quickly as possible.
An employee considering retirement should request an es-timate of benefits before finalizing his or her resignation. Ifthe employee has any service credit to be established or re-established, or has any service credit with a reciprocal fund,the employee should request an estimate at least six monthsbefore resignation. It is advisable that applicants for ben-efits make an appointment with this office to ensure thattheir applications are properly filed. If it is not possible toappear at this office, the application will be mailed to theemployee participant upon request.
Before a benefit application can be considered for payment,an applicant will be required to submit proof of date of birth,spouse’s date of birth, a marriage certificate, children’s datesof birth, death certificate, or divorce papers, if applicable.
When you are hired, a Fund Membership Record Form willbe given to you by your employer and should be returned tothe Fund promptly. The Designated Beneficiary portionmust be notarized in order to be in effect. There are nota-ries available at the Fund office if you personally return theMembership Record Form and would like to designate yourbeneficiary at that time.
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Delay in receipt of benefits may result if the MembershipRecord Form and proofs have not been submitted.
C. Persons Included
The Fund automatically covers and includes all employeesof the City of Chicago and Board of Education of the Cityof Chicago except teachers, policemen, firemen, and labor-ers. The constitutionally elected officials, employees of theLaw Department of the City of Chicago and employees ofthe Board of Election Commissioners, whether or not suchpersons are serving by temporary appointment or in a pro-visional or exempt position as specified in the personnelordinance, may elect to join the Fund.
The Fund also covers and includes:
(1) Elected officials of the City of Chicago who, whilein office, file written application for membership withthe Retirement Board.
(2) Law Department and Board of Election Commission-ers employees with service of one year or more whofile written application for membership with the Re-tirement Board.
(3) Employees employed by the Retirement Board.
(4) Employees employed by the Public Building Com-mission, who have service credit in the MunicipalFund, and who file a written application for mem-bership with the Retirement Board.
(5) Employees employed by the Chicago Housing Au-thority, who have service credit in the MunicipalFund, and who file a written application for mem-bership with the Retirement Board.
D. Persons Automatically Excluded
The Fund excludes:
(1) Those who work in positions ordinarily not requir-ing at least four months of service during a year ifsalary is arranged on a monthly basis, and certainminimum periods for persons with salaries arrangedon a weekly, daily, or hourly basis.
(2) Those classified as being in the labor service, except-ing those who are already participants in the Fund.
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(3) Those who are covered and included in some otherpublic fund in operation in the City of Chicago forthe benefit of employees of the City of Chicago orBoard of Education of the City of Chicago, such aspolicemen, firemen, teachers, and certain others, orin another pension fund of the Chicago Housing Au-thority or the Public Building Commission. A per-son receiving an annuity from the Chicago Police,Fire, Teachers, Laborers, or Park District PensionFunds (except for a spouse annuity), is not eligible tobe a member of this Fund.
E. Administration
The Fund is administered by a Board of Trustees, called“The Retirement Board.” This board is composed of fivemembers: the City Treasurer and the City Comptroller asex-officio members, and three members who are elected bythe contributors to the Fund. The elective members mustbe employees who hold their position in service by certifi-cation and appointment as a result of competitive civil ser-vice examination as distinguished from temporary appoint-ment, for a period of not less than five years prior to thedate of election for trustee, or who hold a position that is notexempt from the personnel ordinance.
The Retirement Board elects one of its own members aspresident and one as recording secretary, and is by law re-quired to hold regular meetings in the months of March,June, September and December of each year. Because ofthe large volume of business to be transacted, however, itactually holds meetings at least once each month, and some-times more often. The Retirement Board, among its manyother duties, is required by law to consider and pass uponall applications for annuity and benefits; to invest the mon-ies of the Fund in a certain prescribed manner; to make rulesand regulations for the proper conduct of the affairs of theFund; to have an audit of the accounts of the Fund made atleast once each year by a person qualified to perform suchservice; and to submit a detailed report of the affairs of theFund to the City Council each year.
F. Treasurer and Legal Advisor
The law provides that the City Treasurer shall be the Trea-surer and Custodian of the Fund. The Corporation Counselof the City is the legal advisor of the Retirement Board.
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G. Investments
The Municipal Fund invests the reserves of the plan underthe “prudent person” rule. The “prudent person” rule re-quires that a fiduciary discharge his duties with respect to aplan with the care, skill, prudence, and diligence under thecircumstances then prevailing that a prudent person actingin a like capacity and familiar with such matters would usein the conduct of an enterprise of a like character with likeaims.
In summary, by State Statute, some investments for the Fundthat would be deemed prudent are: U.S. Government, U.S.Government agencies, and other obligations guaranteed byeither; municipal bonds; first mortgage bonds, debentures,and notes of any corporation of the United States or of anystate, district, or territory thereof; obligations of the gov-ernment of Canada or any of its provinces; and certain gov-ernment agency mortgages.
Also deemed prudent are common and preferred stocks andconvertible debentures; deposits in federal and state-char-tered savings and loans, state and national banks and fed-eral and state credit unions; listed options, contracts, andagreements of an Illinois-authorized life insurer; mortgagepass-through securities; pooled or separate funds managedby a national or Illinois state bank, national or Illinois lifeinsurance company for preferred and common stock or realestate and loans upon real estate; shares of a registered in-vestment company.
The Retirement Board is authorized to employ investmentcounsel. Each advisor is registered under The Advisor’sAct of 1940.
H. Income of the Fund and Rate of Employee and CityContributions
The Fund derives its income from three primary sources:(1) a tax levy made annually for the purposes of the Fund;(2) investment income; and (3) deductions from employ-ees’ salaries.
(1) Annual tax levy: the annual tax levy for the Fund isan amount equal to the amount of contributions bythe employees to the Fund made in the calendar yeartwo years prior to the year for which the tax was lev-ied, multiplied by 1.25. All City contributions forthe purposes of the Fund are derived from this tax.
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All payments by the City are made by means of aseparate special tax levied for purposes of the Fund,and the City’s payments or contributions are thus notpaid out of the general or corporate or other funds ofthe City but out of the special tax receipts from thelevy made solely for the purposes of the Fund. If thetax levied and collected in any year is insufficient tocover all of the required City contributions for suchyear, the deficit will have to be made up through aneventual increase in the authorized levy for the Fundby Act of the State Legislature.
(2) Investment income: the investment income of theFund is substantial and is an important item. Everydollar of such income received reduces the tax loadby the same amount. In a sound pension plan, theinvestment income alone finances a considerableportion of the annual pension payments.
(3) Deductions from employees’ salaries:
(a) All employee participants have a deduction of 6.5%made from each salary payment for the purpose ofproviding an annuity for themselves.
(b) All participants have an additional 1.5% deductedfrom each payment of salary for the purpose ofproviding a surviving spouse’s annuity.
(c) All participants have an additional .5% deductedfrom each salary payment for the purpose of pro-viding the automatic post-retirement or cost-of-liv-ing increases in annuity after retirement.
(d) In addition to the above deductions, Board of Edu-cation employees who have the Board of Educa-tion pay 7% of their salary for pension contribu-tions have an additional deduction of .595% madefrom each salary payment. This additional deduc-tion allows the 7% Board of Education pickup tobe added to the employee’s salary in calculatingfinal average salary.
(e) The City pays the entire cost of ordinary and dutydisability benefits and cost of administration.
The above stated percentages are applied to the amount of com-pensation or salary appropriated, fixed or arranged for theemployee’s position, exclusive of overtime or extra salary.
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3. MAJOR AMENDMENTS
Significant Amendments Made in the 2002 Legislative SessionHB5168 & SB314
• Approved June 28, 2002 and July 1, 2002
• Beginning January 1, 2002, the accrual rate for the mini-mum formula annuity is changed from 2.2% to 2.4%of final average salary and the maximum annuity ischanged from 75% to 80% of final average salary.
• Eligible present and future employee annuitants receivethe 3% post-retirement increase beginning at the latestof the first payment date after the third anniversary ofretirement, age 53, or January 1, 2002, if this is earlierthan the first payment date after the first anniversary ofretirement or age 60.
• For the eligible spouse of an employee who dies in ser-vice on or after August 27, 2002, with at least 10 yearsof service, the annuity is to be no less than 50% of theminimum formula annuity the employee would havebeen entitled to based on service and salary to the dateof death without regard to age eligibility requirements.This is equal to 2.4% of final average salary for eachyear of service. The marriage has to be in effect for tenfull years at the date of death.
• For children of employees who die in service on or af-ter June 28, 2002, there is no service requirement foreligibility for children’s annuity.
• For ordinary disability benefits paid on or after Janu-ary 1, 2001, the ordinary disability benefit is 50% ofthe employee’s salary at the date of disability. Theamounts ordinarily contributed by the employee forannuity purposes are provided by the Fund. These de-ductions would not be refundable.
Significant Amendments Made in the 2001 Legislative SessionEGTRRA
• On June 7, 2001, the Economic Growth and Tax ReliefReconciliation Act of 2001 was signed by President Bush.
• Beginning January 1, 2002, payments for eligible op-tional service credits may be made with funds rolled
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over from a 457 deferred compensation plan or a 403(b)tax deferred annuity plan (if allowed by the 457 or403(b) plan).
Significant Amendments Made in the 2000 Legislative SessionHB1583
• Approved July 6, 2000
• For those annuities granted before January 1, 1998, allpayments will be made on the first day of the calendarmonth, for the entire month without proration.
• The reversionary annuity table is extended down to age50 from age 55.
• An employee or widow(er) whose annuity wouldamount to less than $800 per month may elect to re-ceive a refund in lieu of annuity.
• The Board may pay an annuity (if the person qualifies)directly to a Medicare approved, State certified nurs-ing home or to a publicly owned and operated nursinghome, hospital, or mental institution.
• Annuities of a widow(er) who remarry on or after Sep-tember 4, 2000, would not be terminated upon remarriage.
Significant Amendments Made in the 1999 Legislative Session
• No Changes
Significant Amendments Made in the 1998 Legislative SessionHB1612
• Approved August 11, 1998
• Allows Qualified Illinois Domestic Relations Ordersbeginning July 1, 1999.
HB3515
• Approved August 14, 1998
• Beginning January 1, 1999, any employee already re-ceiving an annuity as of August 14, 1998, will receivea minimum of $850 per month for life (reciprocal an-nuitants must have at least 5 years of Municipal ser-vice). Any future employee annuitant withdrawing from
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service after August 14, 1998, after attainment of age60 with 10 or more years of service would qualify forthis minimum.
• Beginning January 1, 1999, widow(er)s already receiv-ing an annuity as of August 14, 1998 will receive aminimum of $800 per month for life (reciprocal annu-itants must have at least 5 years of Municipal service).For spouses of retirees dying after August 14, 1998, 10years of service is required. For spouses of employeesdying in service after August 14, 1998, 5 years of ser-vice is required.
• Beginning January 1, 1999, the automatic annual in-crease for employee annuitants changed to 3% com-pounded for all past current and future annuitants re-gardless of the effective date of the annuity. Term an-nuities are not eligible for the increase.
• Employees withdrawing on or after January 1, 1999with at least 10 years of service will be eligible for theminimum formula upon attainment of age 60.
• Beginning August 14, 1998, an employee can elect toreduce his or her annuity by a maximum of $400 permonth to provide a reversionary annuity to a survivingspouse, parent, child, brother, or sister. A reversionaryannuity when added to a surviving spouse annuity can-not exceed the employee’s reduced annuity. The wait-ing period between the employee’s signing of the re-versionary designation and the death of the employeeis decreased from 2 years to 1 year for reversionaryannuities paid to a parent, child, brother, or sister.
• Spouses and widows that are eligible for the “50% ofemployee amount” will no longer have this amount re-duced for under age 55 if the employee dies after Janu-ary 1, 1998 and withdrew from service on or after June27, 1997, and the employee retired after age 55 with atleast 25 years of service or after age 50 with at least 30years of service. The age discount will only apply ifthe spouse is under age 50.
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4. ANNUITIES FOR EMPLOYEES
A. Age and Service Requirements for Employee Annuities
An annuity is paid in equal monthly installments with thefirst payment generally due on the first day of the calendarmonth following the date of withdrawal.
The age and service requirements for annuity are as follows:Money Purchase Annuity
• 10 years of service, payable no earlier than age 55;
• Any service and withdrawal on or after the attain-ment of age 60;
Minimum Formula Annuity
• 30 years of service, payable no earlier than age 50;
• 20 years of service, payable no earlier than age 55;
• 10 years of service, payable no earlier than age 60;
Minimum Annuity - $850 per month
• 10 years of service and withdrawal on or after theattainment of age 60.
If an employee withdraws from service with the servicecredit required for a money purchase annuity or a minimumformula annuity but before reaching the age required forthe annuity to become payable, he or she may let the contri-butions remain in the Fund and receive an annuity begin-ning upon application for such annuity after he or she hasattained the required age. (Please note that the employeemust be at least age 60 at withdrawal from service to beeligible for the minimum annuity.)
In the event withdrawal from service occurs prior to attain-ment of the age required for benefits to become payableand the employee wishes to receive an annuity, it is of theutmost importance that he or she file an application for suchbenefit upon attainment of the required age for eligibility.Annuity rights will not begin until such application is filed.
Employees with at least 10 years of service who have at-tained age 55 at the time they withdraw from service mustaccept an annuity if not eligible for a refund of their accu-mulated annuity contributions. If the annuity of such em-ployee is less than $800 a month, the employee may elect to
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receive a refund of his or her accumulated annuity contri-butions in lieu of the annuity.
If the total credits for an employee provide an annuity ofless than $100 a month, an annuity for a period of time at$100 a month is payable.
B. Methods for Determining Employee Annuities
Outlined below are three different methods, which are usedto determine the amount of an employee’s annuity. Theemployee is entitled to the largest benefit.
(1) Money Purchase Method - Based on AccumulatedSalary Deductions and City Contributions
This method uses the total amount accumulated fromdeductions from salary and City contributions for theemployee’s annuity, together with interest to date ofwithdrawal from service, to provide an annuity forlife determined in accordance with insurance prin-ciples. It is commonly known as the “money pur-chase” method.
The amount of annuity, which an employee may re-ceive, will therefore depend on age at retirement,years of service, and salary earnings throughout hisor her period of service. The maximum annual an-nuity is an amount equal to 60% of the highest an-nual salary earned.
As previously noted, employees now have deductedfrom their salaries for their own annuities 6.5% eachpay period. The City then contributes an amountequal to 6% of their salaries. Interest is added tothese amounts from the end of the month in whichthe deductions were made and is compounded annu-ally.
In addition to this 6.5% of salary, employees con-tribute an additional .5% of salary for their share ofthe cost of the 3% automatic increase in their annu-ities after retirement, as described elsewhere in thisbooklet.
When an employee retires, if he or she then has therequired number of years of service, the total amount
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to his or her credit is used to purchase an annuity forhim or her computed according to the CombinedAnnuity Mortality Table at 3% interest. If an em-ployee retires under age 60 with less than 20 years ofservice, the amount of City contributions is reducedby 10% for each year of service under 20 years indetermining accumulated credits at retirement. Theannuity payments begin no earlier than age 55.
If retirement is due to expiration of ordinary disabil-ity credit, full City contributions are used to deter-mine the annuity. The annuity payments begin afterthe last disability payment regardless of age.
It will probably be necessary for the employee tocontact the office to ascertain the money purchaseannuity benefit.
(2) Minimum Formula Annuity Method
An employee will be entitled to a minimum formulaannuity if he or she withdraws from service
with at least 30 years of service credit (payable noearlier than age 50);
with at least 20 years of service credit (payable noearlier than age 55);or
with at least 10 years of service credit (payable noearlier than age 60).
In computing the length of service under a mini-mum formula annuity method of computation, theequivalent of one full month of service in a calen-dar year equals one-half year of service credit, andservice in five additional months constitutes onefull year of credit.
Example: If you began working on December 1, 1974and worked continuously until June 30, 2003, youwould be credited with 29.5 years of service credit.You would receive a ½ year credit for 1974, 28years for the period from January 1, 1975 throughDecember 31, 2002 and 1 year for 2003.
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A minimum formula annuity is computed asfollows:
a) Determine the final average salary—the high-est average monthly salary for any four consecu-tive years within the last ten years of serviceimmediately preceding the date of retirement.
In computing the average salary, the actual sal-ary earned exclusive of overtime or extra salaryis used. The salary for Board of Education em-ployees who have the Board of Education pay7% of their salary for pension contributions isthe straight time pay plus 7%.
The normal salary base is for a 12 month peryear, 5 day work week of 8 hours a day and 40hours a week with straight time rate of compen-sation. The normal salary base may be adjustedaccording to a position’s normal and establishedwork period.
The annual wage for any year is the greater of(1) such monthly, weekly, daily or hourly ratethat was applicable for the greater number ofmonths, weeks, days or hours in the year underconsideration, or (2) the average of suchmonthly, weekly, daily, or hourly salary or wagerate as was applicable for the total number ofmonths, weeks, days, or hours, respectively ineach year under consideration.
Example Annual Salary
Final year ........................................... $ 46,000
One year earlier ................................. 44,000
Two years earlier ................................ 41,000
Three years earlier ............................. 37,000
Total ................................................... $ 168,000
Divide by 48 for average monthly salary .. $ 3,500
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b) Determine the percentage of final average sal-ary based on length of service. The total num-ber of years of service is multiplied by 2.4% andthen by the average monthly salary. The maxi-mum annuity is 80% of the highest averagemonthly salary.
Example: 23 Years of Service
23 years x 2.4% = 55.2%
c) Determine the age discount if retirement isearlier than age 60 with less than 25 years ofservice. There is no reduction in the percentageof final average salary for retirement on or afterage 60. For retirement before age 60 there is adiscount for every month or fraction thereof thatthe employee is under age 60.
Age Discount.25%/Month Under 60
Age at Retirement if Less than 25 Years of Service
60 ................................. 0%59 ................................. 3%58 ................................. 6%57 ................................. 9%56 ................................. 12%55 ................................. 15%
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d) Multiply the percentage of final average sal-ary by the difference between 100% and theage discount determined in (c), so, for example,at age 55 using the age discount (15%), the an-nuity is 100% minus 15%, or 85% of the unre-duced annuity.
Example: 23 Years of Service
Age at Retirement % From Service x Discount Factor60 55.2% x (100%) = 55.20%59 55.2% x (100-3%) = 53.54%58 55.2% x (100-6%) = 51.89%57 55.2% x (100-9%) = 50.23%56 55.2% x (100-12%) = 48.58%55 55.2% x (100-15%) = 46.92%
e) Multiply the average monthly salary by thepercentage determined in (d) to determine themonthly pension.
Using the same average salary of $3,500, theamount of annuity would be:
Example: 23 Years of ServiceWith Average Monthly Salary of $3,500.00
Age at Retirement60 $3,500 x .5520 = $1,932.0059 $3,500 x .5354 = $1,873.9058 $3,500 x .5189 = $1,816.1557 $3,500 x .5023 = $1,758.0556 $3,500 x .4858 = $1,700.3055 $3,500 x .4692 = $1,642.20
The factors combining the age discount with thepercentage based on length of service can befound in Table 1. The total percentage cannotexceed 80%.
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(3) Minimum Annuity Method
Beginning January 1, 1999, an employee withdraw-ing from service at age 60 or over, with at least 10years of Municipal service will receive a minimumannuity of $850 per month for life.
Beginning January 1, 1999, the minimum amount ofannuity for an employee annuitant in receipt of an-nuity on August 14, 1998, is $850 per month for lifefor an annuitant receiving a life or a term annuity.For reciprocal annuities, the employee must have atleast 5 years of Municipal service credit.
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Table Showing Percentage of Salary Payable Under the Minimum 10 Year Service Formula Annuity(See information with respect to calculation of final average salary)
Years Age Age Age Age Age Ageof 50-54 55 Years 55 Years 56 Years 56 Years 57 Years
Service Years 6 Months 6 Months
10
11
12
13
14
15
16
17
18
19
20 40.80% 41.52% 42.24% 42.96% 43.68%
21 42.84 43.60 44.35 45.11 45.86
22 44.88 45.67 46.46 47.26 48.05
23 46.92 47.75 48.58 49.40 50.23
24 48.96 49.82 50.69 51.55 52.42
25 60.00 60.00 60.00 60.00 60.00
26 62.40 62.40 62.40 62.40 62.40
27 64.80 64.80 64.80 64.80 64.80
28 67.20 67.20 67.20 67.20 67.20
29 69.60 69.60 69.60 69.60 69.60
30 72.00% 72.00 72.00 72.00 72.00 72.00
31 74.40 74.40 74.40 74.40 74.40 74.40
32 76.80 76.80 76.80 76.80 76.80 76.80
33 79.20 79.20 79.20 79.20 79.20 79.20
34 80.00* 80.00* 80.00* 80.00* 80.00* 80.00*
35 80.00* 80.00* 80.00* 80.00* 80.00* 80.00*
*80% is the Maximum
C. TABLE 1
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Table Showing Percentage of Salary PayableUnder the Minimum 10 Year Service Formula Annuity
(See information with respect to calculation of final average salary)
Years Age Age Age Age Age Ageof 57 Years 58 Years 58 Years 59 Years 59 Years 60 Years
Service 6 Months 6 Months 6 Months or Over
10 24.00%
11 26.40
12 28.80
13 31.20
14 33.60
15 36.00
16 38.40
17 40.80
18 43.20
19 45.60
20 44.40% 45.12% 45.84% 46.56% 47.28% 48.00
21 46.62 47.38 48.13 48.89 49.64 50.40
22 48.84 49.63 50.42 51.22 52.01 52.80
23 51.06 51.89 52.72 53.54 54.37 55.20
24 53.28 54.14 55.01 55.87 56.74 57.60
25 60.00 60.00 60.00 60.00 60.00 60.00
26 62.40 62.40 62.40 62.40 62.40 62.40
27 64.80 64.80 64.80 64.80 64.80 64.80
28 67.20 67.20 67.20 67.20 67.20 67.20
29 69.60 69.60 69.60 69.60 69.60 69.60
30 72.00 72.00 72.00 72.00 72.00 72.00
31 74.40 74.40 74.40 74.40 74.40 74.40
32 76.80 76.80 76.80 76.80 76.80 76.80
33 79.20 79.20 79.20 79.20 79.20 79.20
34 80.00* 80.00* 80.00* 80.00* 80.00* 80.00*
35 80.00* 80.00* 80.00* 80.00* 80.00* 80.00*
*80% is the Maximum
C. TABLE 1
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D. Annuity Increases After Retirement
Any employee participant who retires on annuity on or af-ter the attainment of age 60, except one who receives only aterm annuity, is entitled to automatic annual increases equalto 3% of the currently payable monthly annuity. The firstsuch increase is given on the first annuity payment date fol-lowing the first anniversary of retirement on annuity.
Example: The employee retires June 30, 1999, withan annuity of $2,000 a month. In July, 2000 themonthly annuity would be increased by $60; inJuly, 2001 by $61.80 (.03 x $2,060.00), with theseincreases continuing each July thereafter.
Eligible employees who retire on annuity prior to the age of60 years receive such increases beginning at the later of thefirst payment date after the third anniversary of retirementand age 53 if this is earlier than the first annuity paymentdate following the attainment of age 60; otherwise, the in-creases begin on the first annuity payment date followingthe later of the attainment of age 60 and the first anniver-sary of retirement.
These increases are financed by the .5% added contribu-tions from the salaries of employees and by contributionsfrom the City.
These automatic increases do not apply to survivor annu-itants or reversionary annuitants.
Employees not entitled to these increases or who resign andtake a refund receive a refund of the .5% deducted. Nointerest is paid on this .5% deduction when refunded.
E. Reversionary Annuity
A reversionary annuity is a reduction of employee’s annu-ity to provide a life annuity for a spouse, parent, child, brotheror sister.
Under certain conditions an employee may elect to reducehis or her retirement annuity to provide a life annuity withthe value of the amount by which his or her annuity is re-duced, to begin upon the employee’s death, for a spouse,parent, child, brother or sister.
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An employee must make this election to reduce his or herannuity at or prior to retirement on annuity.
This election to reduce an annuity may be made by the em-ployee at any time prior to the date of retirement, or at thetime of retirement, by filing a written designation with theRetirement Board indicating the amount by which he or shewishes to reduce the annuity and the person to whom thereversionary annuity is payable, in the event such desig-nated person should outlive the employee. The amount ofreduction may be decided at a later date than the intent toreduce as long as the amount is decided at or before retire-ment.
The written designation can be revoked or canceled as fol-lows:
(1) by a written request by the employee at any time priorto retirement on annuity;
(2) upon the death of the employee prior to retirementon annuity;
(3) upon the death of the designated person prior to theemployee’s retirement on annuity; or
(4) upon the death of the employee before the expirationof one year (365 days) from the date the written des-ignation was filed with the Retirement Board for areversionary annuity for a parent, child, brother, orsister, even though the employee has retired and re-ceived the reduced annuity for any part of such oneyear period.
If the designated person dies prior to the employee but whilethe employee is retired and receiving the reduced retirementannuity, the employee’s full retirement annuity before re-duction will be restored beginning on the date of the desig-nated person’s death and paid for the balance of the retiredemployee’s lifetime. There is no retroactive payment of thefull annuity; that is, of the difference between the full andreduced annuity.
The annuity to the designated person will begin the day af-ter the day of death of the employee and will continue to bepaid monthly thereafter until the death of the designated
26
person. Reversionary annuities are paid on the first of themonth with the first payment on the first day of the calendarmonth following the date of death of the annuitant.
The amount by which an employee may reduce the retire-ment annuity is subject to the following limitations:
(1) Employees may reduce the retirement annuity by anamount up to a maximum of $400 a month;
(2) The amount of monthly annuity to the designatedperson may not be less than $50 a month; and
(3) The amount of monthly annuity to a designatedspouse plus the amount of spouse’s annuity providedunder the other provisions of law governing the op-eration of the Fund may not exceed an amount equalto the reduced annuity payable to the employee.
The employee annuitant’s 3% yearly increase after retire-ment is based on the unreduced retirement annuity of theemployee at retirement. The reversionary annuitant doesnot receive automatic annual increases.
The amount of the monthly reversionary annuity is deter-mined by multiplying the amount of the monthly reductionin the employee’s annuity by a factor shown in the follow-ing table.
The factor is based on: (a) the age of the employee on thedate of retirement; and (b) the difference between the age ofthe employee and the age of the reversionary annuitant asof the retirement date of the employee.
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Table 2For Every $1 Reduction in Employee’s Retirement An-nuity a Reversionary Annuitant for the Ages StatedWould Be Entitled to the Amounts Shown:
For example, if an employee age 65 on the date of retire-ment has designated a reversionary annuitant whowas four years younger on the same date, for every$1 reduction in retirement annuity, the reversionaryannuity would be $2.61, subject to limitations dis-cussed herein. (In determining ages, months are dis-regarded.) A $100 reduction by the employee wouldgive the reversionary annuitant an amount of $261.
It is suggested that if any employee is interested in provid-ing for an annuity for a designated person in accordancewith the provisions of the Act discussed above, the employeemake written inquiry, including a statement as to age of thedesignated person, to the Retirement Board. The Board willbe glad to give information in reference to the different pos-sibilities available and also will furnish the employee witha form for filing with the Retirement Board.
Any interested employee should exercise this option assoon as possible. This option may be revoked by theemployee at any time prior to retirement.
Employee’s Age
50-51 52-54 55-57 58-60 61-63 64-66 67-69 70+
Years Younger
30 or more 3.03 2.56 2.18 1.84 1.55 1.29 1.08 0.91
25 - 29 3.16 2.68 2.29 1.94 1.63 1.37 1.15 0.97
20 - 24 3.35 2.85 2.44 2.07 1.75 1.48 1.25 1.06
15 - 19 3.60 3.08 2.65 2.26 1.92 1.63 1.39 1.19
10 - 14 3.96 3.40 2.94 2.53 2.16 1.85 1.59 1.37
5 - 9 4.46 3.84 3.35 2.90 2.51 2.16 1.88 1.64
0 - 4 5.15 4.47 3.93 3.44 3.00 2.61 2.29 2.02
Years Older
1 - 5 6.12 5.36 4.76 4.21 3.71 3.26 2.88 2.56
6 - 10 7.48 6.61 5.93 5.30 4.71 4.16 3.70 3.29
11 - 15 9.37 8.35 7.58 6.83 6.11 5.40 4.82 4.32
16 - 20 11.99 10.78 9.84 8.93 8.02 7.13 6.43 5.87
21 - 25 15.59 14.06 12.91 11.82 10.73 9.66 8.88 8.35
26 - 30 20.42 18.49 17.15 15.96 14.80 13.65 12.97 12.82
31 or more 27.07 24.72 23.34 22.32 21.45 20.62 20.85 23.28
ReversionaryAnnuitant’s
Age
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5. SURVIVING SPOUSE ANNUITIES
A. Age and Service Requirements for Spouse Annuities
A spouse’s annuity is paid in equal monthly payments forlife or a period of time. A spouse’s monthly annuity alwaysbegins upon the death of the employee. The spouse willreceive his or her first annuity payment on the first of themonth following the date of the employee’s death. The lastmonthly payment will be on the first day of the month ofthe spouse’s death or termination of temporary annuity.
The following surviving spouses are entitled to a spouse’sannuity for ordinary death:
(1) the spouse of an employee whose death occurs whilein service;
(2) the spouse of an employee whose death occurs afterretirement on annuity, if marriage occurred while theemployee was still in service;
(3) the spouse of an employee whose death occurs afterwithdrawal from service, having at least ten years ofservice credit, if marriage occurred while the em-ployee was still in service, provided that the employeedid not take a refund of his or her contributions to theFund.
Surviving spouses are entitled to a spouse’s annuity for dutydeath when the death results from an injury incurred in theperformance of an act of duty.
If the total credits for spouse’s annuity provide an annuityfor life of less than $100 a month, an annuity for a period oftime at $100 a month is payable.
The maximum amount of annuity the spouse can receivefor an ordinary death is 50% of the highest salary receivedby the employee, regardless of the method of computation.
B. Methods for Determining Spouse Annuities
These are the three basic methods used to determine theamount of a spouse’s annuity for an ordinary death. Thespouse is entitled to the largest benefit, subject to the 50%of highest salary maximum.
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(1) Money Purchase Annuity - Based on AccumulatedSalary Deductions and City Contributions
This method of computing the spouse’s annuity isknown as the “money purchase method.” That is,the accumulated salary deductions and City contri-butions with interest to the credit of the spouse areused to provide the spouse’s annuity.
Each employee now has 1.5% deducted from his orher salary for the purpose of providing an annuityfor his or her spouse. The City then contributes anamount equal to 2% of salary. To these amounts in-terest is added and compounded annually. Such sal-ary deductions and City contributions continue whilethe employee is in service until the employee’s re-tirement from service.
The amount of spouse’s annuity, just as in the case ofthe employee’s own annuity, is determined by theperiod of service of the employee, employee’s sal-ary, and employee’s and spouse’s ages with the samereduction in City contributions if retirement or deathout of service occurs before age 60 with less than 20years of service. The City contributions are not re-duced for death in service.
If the employee dies in service, the spouse’s annuitywill be based on the entire sum existing to theemployee’s credit for employee annuity and spouseannuity in the Fund at the time of his or her death.
If the employee should die while receiving annuity,the spouse’s annuity is based on the sums existing tothe spouse’s credit in the Fund on the date of theemployee’s retirement on annuity. The sums to thespouse’s credit are used to provide an annuity, suchannuity being deferred into the future and to beginupon the date of death of the employee.
The mortality tables and interest credits used in thesecomputations would be similar to those used in thecomputations for the employee’s annuity and arespecified in the Act.
(2) Minimum Formula Annuity Method
A minimum formula annuity is provided for thespouse of an employee who dies in service or retires
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from service after his or her attainment of age 55with at least 20 years of service or attainment of age50 with at least 30 years of service.
The amount of such minimum spouse’s annuity isequal to 50% of the annuity the employee would havebeen entitled to had he or she retired from service onthe day preceding the day of his or her death or equalto 50% of the annuity the employee was receivingon the date of his or her death provided that his orher spouse on such date is age 55 or older. If thespouse is under age 55 on the date of such computa-tion, the minimum annuity will be equal to 50% ofthe employee’s annuity computed as stated, but dis-counted .25% for each month that the spouse is lessthan age 55 if the employee had less than 25 years ofservice or age 50 if the employee had at least 25 yearsof service and the employee withdrew on or after June27, 1997.
Spouse DiscountYears under .25% per MonthRequired Age Spouse Under Required Age
0 0%1 3%2 6%3 9%4 12%5 15%
If the spouse is age 55 (if the employee had less than25 years of service) or age 50 (if the employee had atleast 25 years of service) there is no age discount. Ifthe spouse is age 50 and is to be discounted for herage under 55, the formula would provide for a 15%discount; therefore, the annuity would be 100% -15%, or 85% of the otherwise unreduced annuity.
Example: An employee dies in service July 1, 2002, atage 62 with 24 years of service and a final averagemonthly salary of $3,500. The annuity would be cal-culated as follows:
Employee Annuity: $3,500 x .5760 = $2,016.00
Spouse Annuity, Spouse Age 58: 50% x $2,016.00 x 100% = $1,008.00
Spouse Annuity, Spouse Age 53: 50% x $2,016.00 x (100 - 6)% = $947.52
Spouse Annuity, Spouse Age 50: 50% x $2,016.00 x (100 -15)% = $856.80
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Example: An employee retires June 30, 2002, at age 62with 24 years of service and a final average monthlysalary of $3,500. The annuity would be calculatedas follows:
Employee Annuity: $3,500 x .5760 = $2,016.00
The spouse’s annuity would be based on one half ofthe annuity the employee was receiving on the dateof death. This includes the 3% post-retirement in-creases the employee would receive July 1, 2003, andeach July 1 thereafter. If the spouse is under age 55on the date of employee’s death, the minimum annu-ity will be equal to 50% of the employee’s annuitycomputed as stated, but discounted .25% for eachmonth that the spouse is less than age 55 at theemployee’s death. If the employee were to die onDecember 31, 2004, the spouse annuity under theminimum formula annuity method would be calcu-lated as follows:
Employee Annuity as of:
July 1, 2002 $2,016.00
July 1, 2003 $2,076.48
July 1, 2004 $2,138.77
December 31, 2004 $2,138.77
Spouse Annuity, Spouse Age 58: 50% x $2,138.77 x 100% = $1,069.39
Spouse Annuity, Spouse Age 53: 50% x $2,138.77 x (100 - 6)% = $1,005.22
Spouse Annuity, Spouse Age 50: 50% x $2,138.77 x (100 -15)% = $908.98
The “spouse’s minimum formula annuity” methoddiscussed herein provides one calculation of aspouse’s annuity.
Keep in mind that the spouse is entitled to the great-est annuity provided by the statute.
Regardless of the method used for computing theemployee’s annuity, if a deceased employee is re-ceiving a retirement annuity at the time of his or herdeath, the spouse may elect to receive, in lieu of anyother annuity, 50% of the deceased employee’s re-tirement annuity at the time of death reduced by .25%for each month that the spouse’s age on the date ofdeath is less than 55 (if the employee had less than
32
25 years of service) or age 50 ( if the employee hadat least 25 years of service and withdrew on or afterJune 27, 1997). If there has been any refund of ex-cess spouse deductions, it must be repaid for thespouse to receive this annuity.
If an employee dies in service with at least 10 yearsof service, the annuity would be no less than 50% ofthe minimum formula annuity the employee wouldhave been entitled to based on service and salary tothe date of death without regard to age eligibility re-quirements. The employee’s annuity would be equalto 2.4% of final average salary for each year of ser-vice to a maximum of 80%. There would be no agediscount for the employee or spouse. This benefit isonly for an employee who has been married to his/her spouse for at least 10 years on the date of death.
Example: An employee dies in service August 31, 2002,at age 48 with 28 years of service and a final averagemonthly salary of $3,500. The annuity would be cal-culated as follows:
Employee Annuity: $3,500 x .672 = $2,352.00
Spouse Annuity: $2,352 x .50 = $1,176.00
(3) Minimum Annuities for Spouses
Beginning January 1, 1999, if the employee dies inservice, the spouse’s minimum annuity will be $800per month for life, provided the employee had at least5 years of Municipal service.
The spouse of any employee with at least 10 years ofMunicipal service who dies after retirement on an-nuity, will receive a minimum annuity of $800 permonth for life beginning upon the employee’s deathbut no earlier than January 1, 1999.
Beginning January 1, 1999, the minimum amount ofannuity for spouse annuitants in receipt of annuityon August 14, 1998, is $800 per month for life forthose spouse annuitants receiving a life or term an-nuity, regardless of years of service, or in the case ofa reciprocal annuity if the employee had at least 5years of Municipal service.
33
Maximum Annuities For Spouses (continued)
The maximum spouse’s annuity provided by the “moneypurchase method,” the “minimum formula annuity method,”or the “minimum annuity method” cannot exceed an amountequal to 50% of the highest salary earned by the employee.
C. Duty Death - Spouse Annuity
The maximum surviving spouse’s annuity in the event of anemployee’s duty death is an amount equal to 60% of theemployee’s highest salary, to be paid to the surviving spouseuntil the date upon which the employee would have attainedthe age of 65. After such date the surviving spouse wouldreceive an annuity equal in amount to that which would havebeen provided for the spouse by the employee had the em-ployee lived and continued in service until attainment ofage 65 at the salary on the date of death.
However, if the spouse receives any award or compensa-tion from the Industrial Commission as a result of theemployee’s duty death, the amount so received is deductedfrom the amount of the surviving spouse’s annuity.
D. Spouses Not Entitled to Annuity
The following spouses are not entitled to a surviving spouse’sannuity:
(1) The spouse of an employee who withdraws and dieswhile out of service if the employee and spouse werenot married while employee was in service;
(2) The spouse of an employee with ten or more years ofservice who dies while out of service and who hasreceived a refund of contributions for annuity purposes;
(3) The spouse of an employee with less than ten yearsof service who dies out of service while not eligiblefor an employee annuity;
(4) The former spouse of an employee whose judgmentof dissolution (formerly known as a divorce decree)of marriage has been vacated or set aside after theemployee’s death, unless the proceedings to vacateor set aside the judgment were filed in court withinfive years after the entry thereof and within one yearafter the employee’s death, and unless the board ismade a party defendant to such proceedings.
34
6. ANNUITIES FOR CHILDRENAnnuities are provided for unmarried children of a deceasedemployee who are under the age of 18, if the child was con-ceived or born before withdrawal from service.
These conditions having been fulfilled, the following pro-visions must also apply:
(1) the death of the employee must be in service; or
(2) if the employee died while in receipt of annuity, hemust have retired after his attainment of age 55 orafter his attainment of age 50 with at least 30 yearsof service.
The child (or children) of an employee is defined as thenatural child or children, or any child or children legallyadopted by the employee at least one year prior to the deathof the employee and before the employee withdrew fromservice.
The child’s annuity is an amount equal to $220 a monthwhen there is a surviving spouse and $250 a month whenthere is no surviving spouse. The combined monthly annu-ities for the surviving spouse and/or children cannot exceed60% of the deceased employee’s final salary (70% of de-ceased employee’s final salary for duty death).
7. CREDIT FOR SERVICE PRIOR TO DATEOF MEMBERSHIP IN THE FUND
Participants can pay for periods of creditable prior servicerendered to the City or Board of Education and receive creditfor all such service for all annuity purposes. These paymentscan be made while in City service, or within 90 days afterwithdrawal from City service, or while in reciprocal ser-vice. Credit for such prior service is allowed for ordinarydisability benefit purposes for periods of disability on orafter August 22, 1997. If an employee elects to establishcredit for only a fraction of a period of service that he or sheis eligible to establish, this period should be the earliest ser-vice for which credit may be established.
The amount payable for such past service during which anemployee did not contribute to the Fund is equal to theamount that would have been paid to the Fund had suchemployee been a participant and contributor during suchtime, plus interest that would have accrued on such contri-
35
butions had they been made at the time service was ren-dered. This required interest payment is not a penalty, inview of the fact that the interest payment is credited to theemployee’s individual account and is subject to refund inthe event a refund becomes payable. By paying interest,the related City contribution for annuity purposes is alsocredited with interest.
Subject to certain limitations and restrictions, certain formerservice with the Chicago Transit Authority, the ChicagoHousing Authority, and the Public Building Commissionmay be paid for and credited. There may also be periods ofmilitary service or service with a local labor organizationfor which an employee may establish service credit.
Service as a City of Chicago policeman, fireman, or teachermay also be paid to this Fund if the employee does not havecredit for that service in another Fund.
8. SERVICE FOR CERTAIN GOVERNMEN-TAL UNITS OF THE STATE OF ILLINOIS:
RECIPROCAL ACT
Under an Act of the Legislature of this State, which becamea law in 1955, and as subsequently amended, provision ismade for reciprocity of pension credit among certain desig-nated public retirement systems in operation in Illinois. Youcan thus, under certain specified conditions, receive annu-ity on the basis of continued service credits in two or moreof the included systems.
The Retirement Systems Reciprocal Act has as its purposethe vesting of credits in cases where an employee transfersfrom one governmental unit in the State of Illinois to an-other. It applies in general with certain differences to thefollowing retirement systems:
- State Employees’ Retirement System of Illinois- Teachers’ Retirement System of the State of Illinois- State Universities Retirement System of Illinois- Illinois Municipal Retirement Fund- Judges’ Retirement System of Illinois- General Assembly Retirement System of Illinois- County Employees’ and Officers’ Annuity and Benefit
Fund of Cook County- Forest Preserve District Employees’ Annuity and Ben-
efit Fund of Cook County
36
- Municipal Employees’ Annuity and Benefit Fund ofChicago
- Laborers’ and Retirement Board Employees’ Annuityand Benefit Fund of Chicago
- Park Employees’ Annuity and Benefit Fund of Chicago- Metropolitan Water Reclamation District Retirement
Fund- Public School Teachers’ Pension and Retirement Fund
of Chicago
Pension credit of not less than one year established in anyof these Retirement Systems may provide a larger retire-ment income.
There are variations in cases involving the Reciprocal Act.It would be advisable for you to contact the office of thisFund for information if you have service in another retire-ment system.
9. DISABILITY BENEFITSThere are two classifications of disability benefits, as fol-lows:
(1) Ordinary disability benefits are provided for employ-ees who become disabled as the result of any causeother than an accidental injury incurred while in theperformance of an act of duty.
(2) Duty disability benefits relate solely to disablementresulting from an accidental injury incurred while inthe performance of an act of duty. Disablement be-cause of commonly termed heart attacks, strokes, orany disablement falling within the broad field of coro-nary involvement or heart disease, is not consideredto be the result of an accidental injury incurred in theperformance of duty. However, if the employee isreceiving payments from Workers’ Compensation forsuch a disability, the employee would be eligible forduty disability salary deductions for annuity purposesand service credit.
In all cases, including those cases where the payment fromWorkers’ Compensation exceeds the amount that would bepayable by the Fund, it is necessary for a disabled employeeto make application to the Retirement Board for disabilitybenefits prior to the date on which he or she recovers. In no
37
event should such application be filed more than one yearafter the date of disablement. Disability benefit cannot bepaid for any period of time more than one year prior to thedate on which the application for disability is received bythe Fund.
In addition, we would like to point out that salary increasesgranted after an employee participant becomes disabled donot serve to increase the rate of disability payments unlesssuch salary increase predates the date of disablement.
A. Ordinary Disability
Ordinary disability benefit is payable to any member of theFund who becomes disabled. The amount of this benefit,which is called “Ordinary Disability Benefit,” is equal to50% of the employee’s annual salary at the time of disable-ment. In addition to the ordinary disability benefit, the em-ployee will also be credited with 8.5% of his or her salaryfor pension purposes so that annuity rights continue to in-crease just as though the employee were working. Suchamounts of pension contributions for disability benefits paidon or after January 1, 2001 are not refundable to the em-ployee or the employee’s heirs and will be used for annuitypurposes only.
Ordinary disability benefit is payable after the first 30 daysof disablement, provided the employee is not then in receiptof salary. Ordinary disability benefit is payable until theearlier of the date the disability ceases or the date the periodof disability exceeds in aggregate 25% of the total service,but not to exceed a lifetime total of five years. Service forthis purpose is counted only for the period a person has con-tributed to the Fund.
Payment for service rendered prior to the date an employeeparticipant joined the Fund (past temporary service) doesincrease the period of time for which a disabled employeeis eligible to receive disability benefit but only for periodsof disability on or after August 22, 1997.
An employee whose disability continues after receipt of or-dinary disability benefit for the maximum period of timeand who withdraws from service while still so disabled isentitled to receive an annuity regardless of age.
38
B. Duty Disability
Duty Disability Benefits relate solely to disablement result-ing from an accidental injury incurred while in the perfor-mance of an act of duty.
Duty disability benefit is payable to any member of the Fundwho becomes disabled as the result of an accidental injuryincurred while in the performance of an act of duty, andbegins on the first regular and normal work date for whichthe employee fails to receive salary.
The amount of full duty disability benefit is equal to 75% ofsalary at the date of injury. However, if the employee’sdisability, in any measure, has resulted from any physicaldefect or disease which existed at the time such injury wassustained, the duty disability benefit shall be 50% of salary.In addition to the duty disability benefit, the employee willalso be credited with 8.5% of his or her salary for pensionpurposes so that annuity rights continue to increase just asthough the employee were working. Such amounts of con-tributions are not refundable to the employee or his or herheirs and will be used for annuity purposes only.
If the employee’s duty disability continues for more than 5years, the benefits will be increased by 10% on January 1of the sixth year. The City contributions for pension pur-poses will remain 8.5% of the salary at the date of injury.
Duty disability benefit is payable during disability until theemployee attains age 65 for disability commencing prior toage 60, or for a period of five years for disability commenc-ing at age 60 or older.
Recipients of duty disability benefit also have a right to re-ceive child’s disability benefit of $10 a month for each un-married child less than age 18. Children’s disability ben-efits shall not exceed 15% of the employee’s salary, nor shallthe total duty disability benefit and children’s disability ben-efits exceed 90% of the salary of such employee at the timeof the injury.
Employees disabled as the result of an accidental injury havea right to receive benefits under the provisions of the Work-ers’ Compensation Act, and any amount so received or re-ceivable under such Act must be deducted from paymentsof duty disability benefit.
39
10. REFUND OF ANNUITY CONTRIBUTIONS
A. Refund to an Employee Upon Withdrawal fromService
Employees with the following lengths of service and agesat withdrawal from service are entitled to receive a refundof the amount accumulated to their credit from salary de-duction for annuity (excluding deductions in lieu for dutydisability benefits received on or after January 1, 1982 anddeductions in lieu for ordinary disability benefits receivedon or after January 1, 2001):
(1) withdrawal from service under age 55 with any lengthof service; or
(2) withdrawal from service at age 55 but under age 60with less than 10 years of service.
An employee receives interest on all contributions (exceptthe .5% deduction made for annuity increases after retire-ment) as long as he or she is in service. The employee doesnot receive interest credits after withdrawal from service.The .5% deduction is refunded without interest.
An employee who receives such refund forfeits all rights inthe Fund for himself or herself and for any other personwho might benefit through the employee for service ren-dered prior to date of application for refund.
An employee who withdraws from service and who doesnot elect to receive a refund and who later returns to servicereceives credit for service prior to the date of withdrawal.
B. Possible Refund to an Employee’s Children, Heirs,Estate, or Designated Person
All of the accumulated money contributed by the employee(except for the .5% deductions withheld to provide annuityincreases) that is not paid out either in the form of annuityto the employee or to the spouse or minor children, or to adesignated person described under the reversionary annuitysection, will be refunded to a person whom the employeehas designated in writing. The designation must be filedwith the Retirement Board before the employee’s death. Ifno such person is designated, then the remaining employeecontributions will be payable to the employee’s children in
40
equal parts, with the children of a deceased child taking theshare of their parent. If there is no designated person ordescendant surviving the employee, the refundable amountwill be paid to the employee’s estate. Under no condition isa refund made of City contributions. City contributions areused for annuity purposes only.
C. Refund in Lieu of Annuity
An employee or spouse annuitant may elect to receive arefund of the employee’s accumulated salary deductions inlieu of a monthly annuity to which he or she would other-wise be entitled if such employee’s or spouse’s annuity isless than $800 a month.
The purpose of this provision is to give the annuitant someflexibility in his or her financial planning for the future. Itmay be that a single lump sum payment instead of a monthlyannuity may be more valuable to the annuitant under theparticular circumstances then existing. In such a case, theright to withdraw the accumulated contributions may bedesirable.
By withdrawal of the single lump sum, the employee orspouse forfeits all rights for annuity and any other benefitsbased on such accumulations.
An annuitant who elects such refund in lieu of monthly an-nuity payments must make proper application for such re-fund. The pension office will be glad to give the annuitantassistance in this respect.
D. Refund of Salary Deductions if Employee Is NotMarried
An employee is entitled to a refund of his or her contribu-tions for spouse’s annuity upon retirement from service ifnot married on the date of retirement on annuity.
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11. REPAYMENT OF REFUNDS
If an employee who has received a refund subsequently re-enters service of the employer (or another employer underthe Reciprocal Act) and again becomes a contributor to theFund and renders at least two years of contributing servicefrom date of re-entry, he or she may have all rights restoredthat were previously forfeited by repaying into the Fund therefund previously received with 3% interest (or 4% inter-est, whichever applies) to date of payment.
An employee does not need to establish credit for the entirerefunded period, but may elect to establish credit for only afraction of the period. Credit will be restored in the orderthat it was earned.
Full or partial payment must be made while the employee isstill in service.
12. COMPUTATION OF SERVICE CREDIT
In computing the terms of service of an employee, the fol-lowing periods are counted as periods of service for annuitypurposes, if the employee has made contributions for thisservice.
(a) any time during which the member performed the du-ties of his or her position while in receipt of salary;
(b) vacations (except final vacation), leaves of absencewith whole or part pay, and leaves of absence with-out pay not longer than 90 days (leave of absencewithout pay does not count for minimum formula andminimum annuity purposes);
(c) leaves of absence without pay during which time themember is employed full-time by a local labor orga-nization and continues his contributions to the Fundas though he were an active employee;
(d) any period of disability for which he or she receiveddisability benefit or whole or part pay; and
(e) any period of disability because of commonly termedheart attacks, strokes, or any disablement falling
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within the broad field of coronary involvement orheart disease for which the employee is not eligiblefor duty disability payments but is receiving paymentsfrom Workers’ Compensation. It is necessary for theemployee to apply for duty disability benefits in or-der to receive this service credit.
No credit shall be granted for periods of time while on asuspension.
The manner in which these periods of time are counted dif-fers according to purpose and is explained in the varioussections of this booklet. Refer to the provisions for mini-mum formula annuities or to service credit for ordinary dis-ability benefits.
13. QUALIFIED ILLINOIS DOMESTICRELATIONS ORDER (QILDRO)
The Illinois General Assembly established the Qualified Il-linois Domestic Relations Order (QILDRO) effective July1, 1999. The QILDRO allows for the division of a retire-ment benefit or a refund of contributions due to divorce. Itdoes not establish a new benefit, nor does it create a newmember or beneficiary.
Generally, the QILDRO orders the payment of a benefit toan ex-spouse as the alternate payee. It may also be payableto a child or other dependent as the alternate payee. TheQILDRO does not apply to lump sum death benefits, survi-vor annuities, or disability benefits. The QILDRO muststate when it would go into effect and the specific dollaramount to be deducted from the refund or retirement annu-ity.
The QILDRO is usually issued at the time of divorce andsent to the Fund. It is recorded and retained until the em-ployee applies for a refund or retirement annuity. The Fundwill notify the employee and the alternate payee that it wasreceived.
Any employee in service before July 1, 1999 must sign aconsent form for the QILDRO to go into effect. Any em-
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ployee who begins service after July 1, 1999 accepts theQILDRO as a condition of employment.
Any employee who has questions about a QILDRO shoulddiscuss it with his or her attorney. If a QILDRO will beused in a divorce settlement, the employee should contactthe Fund.
14. SUSPENSION OF BENEFITS
When an employee who has withdrawn from service re-enters service, any annuity previously granted will be can-celed. It is the employee’s responsibility to notify the Fundof this re-entry into service. This applies to service for theCity, Board of Education, Park District, Police Departmentor Fire Department of the City of Chicago. If an employeereceiving an annuity under the provisions of the ReciprocalAct returns to any system from which he or she is receivinga proportional annuity, the proportional annuity from allparticipating systems may be suspended during the periodof re-employment. This depends on the law governing thesystem covering the employee upon re-employment. If anemployee receiving an annuity from this Fund returns towork for the City, Board of Education, Park District, PoliceDepartment or Fire Department of the City of Chicago, theannuity from this Fund will be suspended and any recipro-cal systems involved will be notified.
When the employee subsequently retires on annuity, themoney purchase annuity will be recalculated based on thetotal sum to his or her credit for annuity purposes accordingto the statutes, including contributions by the employee andthe city for annuity purposes after the re-entry into service.An annuity based on the minimum annuity formula will notbe recalculated unless the employee earns at least three yearsof additional service credit after the date of re-entry. Thisservice must be Municipal service.
If you are considering returning to work, it is advisable tocontact us in advance and we can advise you what effect itmay have on your annuity.
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15. PRESENT INCOME TAX INFORMATION
A. Federal Income Tax
(1) Annuities. An employee may have paid for part ofthe cost of annuity and if so, he or she is entitled torecover this cost. The cost for income tax purposesdoes not include any interest credited by the Fund,nor does it include any salary deductions that weretax deferred or salary deductions picked up by theBoard of Education.
For almost all annuities beginning on or after No-vember 19, 1996, the amount excludable from fed-eral income tax is based on the Simplified Method ofreporting. A portion of each annuity payment is ex-cludable from income until the full cost has been re-covered. Under this method, the recovery of the“Cost” (previously taxed contributions) is spread outover a number of years based on the combined agesof the employee and spouse at retirement. Theamount of each annuity check to be excluded is de-termined by dividing the previously taxed contribu-tions by a factor from a table provided by the Inter-nal Revenue Service.
(2) Refunds, IRA Rollovers. If the employee receivesa refund, that part of the refund that represents inter-est credits together with salary deductions that weredeferred beginning January 1, 1982, or picked-up bythe Board of Education beginning September 1981,will be subject to federal income tax.
The Fund will furnish this information when the re-fund is granted.
The taxable portion of a refund may be “rolled over”tax free either directly from plan to plan or by theemployee within 60 days after receiving the refund.If the employee chooses not to have the eligiblerollover distribution paid from the plan to an eligibleretirement plan in a direct rollover, the eligiblerollover distribution is subject to mandatory 20% in-come tax withholding. Please consult a tax advisoror IRS publication 590 on Individual Retirement Ar-rangements.
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Under certain conditions there would be an additional10% tax on the refund income that is not rolled over.
NOTE: Since the Internal Revenue Code is frequentlyamended, and the regulations, rulings, and decisionsof the Tax and other Federal courts from time to timealter or modify present procedures, the foregoing maynot be applicable in its entirety at a future date.
If an employee has any questions or doubts in his orher mind about the income tax liability in relation tothe annuity or other benefits from the Municipal Fund,he or she should consult a tax advisor, IRS Publica-tion 575, Pension and Annuity Income, or the districtdirector of the local income tax office.
B. State of Illinois Income Tax
Annuities and refunds payable by this Fund are presentlyexempt in full from payment of an Illinois State income tax.
16. DEDUCTIONS FROM ANNUITYFOR THE PURPOSE
OF RETIREE HEALTH INSURANCE
Legislation enacted in the year 1963 permits the trustees tomake premium deductions from employee participant’s an-nuity checks for coverage in an employer sponsored non-profit group hospital or medical surgical plan, if the annu-itant elects to have such deductions made for such purpose.
This does not mean that the Retirement Board will set up aplan. It merely gives the Fund the right to make the pre-mium deduction at the annuitant’s request, and nothing else.
The employee or spouse must make the election to havegroup coverage continued in the Employer sponsored an-nuitant healthcare plan by means of deductions from his orher monthly annuity at the time of application for such an-nuity.
For City of Chicago employees, application for annuitantgroup health insurance must be made within 30 days of thedate the employee applies to receive an annuity or within
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30 days of the employee’s death for a widow(er). An annu-itant can only enroll the spouse and dependents in the An-nuitant Plan who are covered under the employee’s activemedical plan on the date of retirement. If an annuitantchooses to enroll the eligible spouse or dependent more than30 days after the coverage begins under the Annuitant Plan,proof of good health will be required for the spouse or de-pendent.
For Board of Education employees, enrollment is open for30 days beginning with the date the employee applies toreceive an annuity, for 30 days after the employee’s death,or for 30 days after the expiration of COBRA coverage. Ifan annuitant elects to drop his or her coverage now or at alater date, that annuitant may not re-enroll for coverage.Similarly, if an annuitant ceases coverage for a dependent,that dependent may not be re-enrolled at a later date.
The City of Chicago’s Annuitant Medical Benefits Plan isadministered by the City of Chicago Benefits ManagementOffice. Inquiries may be directed to the City of ChicagoBenefits Management Office, 333 South State Street, Room400, Chicago, Illinois 60604-3978, (312) 747-8660.
The Board of Education’s annuitant Health Care Plan is ad-ministered by Blue Cross Blue Shield. Inquiries may bemade to Blue Cross Blue Shield, 300 East Randolph Street,Chicago, Illinois 60601-5099, (312) 653-0107.
17. CONCLUSIONThis booklet is not intended to contain, nor does it contain,a synopsis of all provisions of the law governing the Mu-nicipal Employees’ Annuity and Benefit Fund of Chicago.There may be exceptions and modifications in the case ofstatements or explanations given in this booklet. A detailedand complete coverage of all applicable law would defeatthe purpose of this intended general outline. The full text ofthe law governing the Fund may be found in Act 5, Articles1, 8, and 20, Chapter 40 of the Illinois Compiled Statutes,and supersedes anything stated or implied in this booklet.
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NOTES:
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