This is only a summary and is not intended to modify the terms of the law. In the event of any inconsistencies between this summary and the law, the law controls.
Click here to see a PDF copy Public Act 94-0004. It is 78 pages long.
ERO (formerly called "modified ERO")
The Early Retirement Option (ERO) is available for members who retire between age 55 and 60 with less than 35 years of service. Election of an ERO retirement is optional and is funded by both member and employer contributions. ERO is funded in part by an additional 4/10ths of a percent (0.4%) member contribution based on your active teaching salaries. Members who do not use ERO receive a refund without interest of this contribution when they retire.
- Contribution rates for ERO are as follows:
- Members: 11.5 percent of highest salary used in final average salary multiplied by the lesser of: (a) each year that the member is under age 60 or (b) the member’s creditable service is less than 35 years.
- Employers: 23.5 percent of highest salary used to calculate the final average salary multiplied by each year that a member is under age 60.
- School districts have the right to limit ERO participation in any year to no less than 10 percent of eligible members. The right to participate in ERO must be assigned on the basis of seniority in that district.
Unlike earlier ERO extensions, the new legislation does not expire. However, the law requires the TRS actuaries to consider the sufficiency of the employer and member contributions for ERO. There is a specific process that will begin in 2012 for these reviews. If the proposed rates are not acceptable to the General Assembly, the ERO provision will be terminated on June 30, 2013. In general, the provision intends that the ERO contributions and ERO benefits will be revenue neutral so the state will not be responsible for any contributions.
- A maximum of two years of sick leave (340 days) can still be used for service credit.
- Employers pay a charge for sick leave days granted in excess of the member’s normal annual allotment and used for service credit.
End-of-career salary increases over 6 percent
- Employers are required to pay the cost of pension benefits resulting from end-of-career salary increases over 6 percent that impact final average salary.
- Salary increases of up to 20 percent per year with the same employer still count for pension purposes, but the employer will make what could be a substantial lump-sum contribution to fund the cost when the member retires.
- The change does not apply to increases granted under contracts or collective bargaining agreements entered into, amended or renewed prior to June 1, 2005.
For persons who become TRS members after June 30, 2005, the actuarial benefit is eliminated. For current members, this retirement benefit is based on member contributions plus interest, plus an employer contribution. The actuarial benefit is paid only if it is higher than the regular 2.2 formula benefit. Some other retirement systems refer to this type of calculation as a "money purchase" benefit.
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