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SERS webinar covers return-to-work rules, reciprocity and optional COLA buyout
Summary
Presenter reviewed how returning to state employment affects SERS pensions (75-day rule, contractual reemployment, and permanent reemployment), reciprocity among Illinois public retirement systems, and the tier 1 COLA buyout option.
SERS presenter (Staff member, State Employees' Retirement System) explained rules that determine whether a SERS pension continues or is suspended upon returning to state employment, the mechanics of reciprocal retirement systems, and a tier 1 cost-of-living adjustment (COLA) buyout option available to certain retirees.
Why it matters: Returning to work can suspend or end pension payments depending on appointment type and member tier; the COLA buyout option and reciprocity rules materially affect pension amounts and eligibility for future benefits.
The presenter said two return-to-work methods affect pensions differently: a nonpermanent appointment of 75 days or less (counting any part of a day as a full day) does not suspend pension payments, but retirees must track days carefully because pensions stop on the 76th day. Contractual personal services positions do not limit hours or suspend pensions in many cases, though exceptions apply for specific early-retirement incentive participants and certain tier 2 members. Permanent reemployment by the state suspends pension payments while working, requires contributions to SERS and Social Security, and earns additional service credit; after re-retirement the member must reapply for a new pension calculation.
On reciprocity, the presenter said Illinois's Retirement Systems Reciprocal Act allows service credit from participating public retirement systems to be combined when a member has pension credits in more than one system; members must submit a retirement application to each system and the systems exchange reciprocal information directly. Examples were shown demonstrating that using a higher final average compensation (FAC) from one system can increase pension amounts calculated for reciprocal service periods.
The presenter described a tier 1 COLA buyout option for members retiring between Dec. 1, 2018 and the current buyout availability date (presenter cited June 1, 2026): tier 1 members may elect to waive a 3% compounded COLA and instead receive a 1.5% noncompounded COLA plus a one-time lump-sum payment equal to 70% of the present-value difference between the two COLA streams (calculated by SERS actuarial assumptions). The buyout payment must be rolled to a qualifying retirement plan and is subject to IRS withholding rules. The presenter listed eligibility restrictions: must terminate service and be eligible to retire; cannot have previously received SERS retirement benefits; cannot elect level income, the Social Security offset removal, or the reversionary option; and may require permission from an alternate payee if a qualified domestic relations order (QDRO) exists.
Attendees were told buyout payments will be issued as soon as possible but may take several months, and SERS will calculate amounts using current actuarial assumptions.
