Nope. |
What is “Vested?”
Simply put, vested means “secured in the possession of or
assigned to a person.”
In public education, the term vested for a future retiree
means a pension fully and unconditionally guaranteed as a legal right, benefit,
or privilege – although any Tier 1 or Tier 2 educator in Illinois realizes that
save for the Illinois Supreme Court, the General Assembly would have ignored
any guarantees morally or legally implied.
In the private business world, the full benefit(s) of being vested may include different remunerations
in lieu of a defined benefit or pension.
Those would include but not be limited to profit sharing, stock options,
401K matching contributions, etc.
The benefit to any company or school district in providing
an accumulating vesting schedule is to retain the talent and productivity of
employee(s) at a firm or in a district over an extended period of time. Workers who decide to leave a company may
find themselves losing access to thousands of dollars or tens of thousands in
investment instruments.
According to
Investopedia.com, “This strategy (vesting employees) can backfire when it
promotes the retention of disgruntled employees who may hurt morale and simply
do the minimum required until it is possible to collect previously unvested
benefits.”
You already know
this person – you teach next to him/her.
Seriously, this
may also explain just one reason why the concept of tenure – the right to due
process in the dismissal of a public worker – seems so strange for the private
world to comprehend. It appears on the
surface a too-good-to-be-true deal.
Keep the talent. |
On the other
hand, without social security or matching retirement savings plans, educators
in Illinois are doubly dependent upon their defined benefit at the end of a
career.
Likewise, Illinois public pension schedules require a
considerably longer vesting schedule than normally found for private sector
benefits: Illinois pension participants do not qualify for retirement benefits
until completing between eight and ten years of service, while those in the
private sector are vested usually after seven years.
Regardless, in both cases, public or private benefits for an
employee become fully vested as prescribed by a schedule of accrual, often at a gradual pace over a
period of time. In the public sector
(and often in the private), age rules also establish a minimum age at which a participant can begin drawing those
retirement benefits.
Retirement benefits may also be capped at maximum levels or
at a percentage allowable as a final retirement benefit.
If you are a current active watching your older colleagues
figuring out whether or not to retire, you’ll begin to understand why they all
carry calculators. A considerable number
of items go into figuring out the numbers – and pity the poor English teachers,
who have acquired an expergefacient phobia for all things math.
Complicating all of this was the addition of a Tier 2 in
2010, changing the retirement qualifications for those hired after January of
2011.
Pension
System
|
Pension Code Section
|
Age & Vesting Rules
(Pre-2011 Hires)
|
Age & Vesting Rules
(Post-2011 Hires)
|
Teachers’ Retirement
System
|
40 ILCS 5/16-133
|
·
62 with 5 years of service
·
60 with 10 years of service
·
55 with 20 years of service
·
55 with 35 years of service (full annuity)
|
·
67 with 10 years of service
·
62 with 10 years of service for a reduced
benefit
|
In Illinois, there are more than a fifteen different public
sector pensions, each establishing separate and unique requirements for
vesting, in establishing age requirements, and providing maximum annuity
pay-outs.
Accrual Rate
In every Illinois public pension plan – teachers’ retirement
to judges – the Pension Code provides for a method to determine the benefits of
a pension over the course of an individual’s career in public service.
In sum, the benefit accrual rules follow two paths: the
percentage of pension benefit an employee accrues per unit (annual employment)
of service and the average pay rules – calculating pension benefits based on
average of final years of employee service.
This calculation provides the ultimate or highest amount (percentage) of
an ending salary/average that can be earned as retirement benefit.
Pension
System
|
Pension Code Section
|
Current Accrual Rate
|
Maximum Percent of Final Salary
|
Teachers’
Retirement
System
|
40 ILCS 5/16-133
|
2.2%
|
75%
|
Judges
Retirement
System
|
40 ILCS 5/18-125
|
Years 1-10: 3.5%
Years 10+: 5.0%
|
85%
|
Pension Codes in Illinois also regulate what contributions
are made by various employees, what caps may be in place, what percentage of
salary is required for contribution to retirement.
It’s a mixed bag, and one that is complicated, but it is
worth the time for a current teacher to know a little bit about before it
closes in – especially for you English teachers.
More to come.
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