Reciprocity
The following information is general. Each member with reciprocal service has a unique case. The information provided is from the perspective that the MWRD Retirement Fund is the final fund under which the member works. This is the case the majority of the time. There is a section at the end of this document to explain benefits for members whose final fund is not the MWRD Retirement Fund.
Examples contained herein are intended to assist your understanding of reciprocity. They are in no way intended to represent your unique situation and do not represent a real annuity calculation. For a certified estimate of your benefit calculated under reciprocity, contact the Fund at (312) 751-3222.
Information about any other fund's annuity formula is based on our best knowledge of those benefits. We are not liable for any errors relative to another fund's annuity benefit formula. The best source of information relative to another fund's benefits is that fund or an annuity estimate certified by that fund.
Before getting into detail about reciprocity, it is important to understand the difference between a Tier I and a Tier II Participant.
Tier I Participant: An employee of the District who first became a member before January 1, 2011 under any reciprocal retirement system or pension fund established under Chapter 40 of the Illinois Compiled Statutes other than Judges Retirement System, General Assembly Retirement System, and all police and fire pension plans (whether Chicago or downstate). This includes any Commissioner who fits the criteria above who elects to participate in the Fund within 90 days after becoming a Commissioner.
Tier II Participant: An employee of the District who first became a member on or after January 1, 2011 except for those who were members of any reciprocal retirement system including the IMRF, Municipal Employees Annuity and Benefit Fund of Chicago, Laborers' Annuity and Benefit Fund of Chicago, County Employees Annuity and Benefit Fund of Cook County, Forest Preserve of Cook County Employees Annuity and Benefit Fund, Chicago Park Pension, State Employees Retirement System, State Universities Retirement System, Illinois Teachers Retirement System, or Chicago Teachers Pension Fund prior to January 1, 2011. This includes any Commissioner who fits the criteria above who elects to participate in the Fund within 90 days after becoming a Commissioner.
What is Reciprocity?
The MWRD Retirement Fund is one of 13 public pension systems covered under the Illinois Retirement Systems Reciprocal Act (Reciprocal Act). The Reciprocal Act ensures continuous pension credit for public employment in Illinois by allowing the combination of service credit and wage history within the State's public retirement systems.
In other words, if you participated with more than one more than one of the pension systems covered under the Reciprocal Act during your public service career, all of your service credit can be "combined" to calculate an annuity from each system.
If you have participated in one of the following Illinois Reciprocal retirement systems, you may have your benefit calculated according to the provisions of the Reciprocal Act:
|
County Employees' Annuity & Benefit Fund |
Municipal Employees' Annuity & Benefit Fund |
|
Forest Preserve District Employees' Annuity & Benefit Fund |
Park Employees' Annuity & Benefit Fund of Chicago |
|
General Assembly Retirement System |
Public School Teachers' Pension & Retirement Fund |
|
Illinois Municipal Retirement Fund |
State Employees' Retirement System of Illinois |
|
Judges' Retirement System |
State Teachers' Retirement System |
|
Laborers' Annuity & Benefit Fund |
State Universities Retirement System |
What are the Requirements for Reciprocity?
If you have service under one of the named funds, you may qualify for a reciprocal benefit, provided the following three conditions have been met:
1.) You have at least one year of credit in reciprocal system.
2.) You must not have forfeited credits by accepting a refund, unless the service is reinstated by repayment to that fund.
3.) You must not have already used the reciprocal service toward a retirement pension.
What are the advantages of reciprocity?
The advantages of Reciprocity depend on your unique circumstances. The following may or may not pertain to your case.
Qualification for Benefits as Tier I Participant Generally, members who enter service on or after January 1, 2011 are considered Tier II members. Fund benefits for Tier II members are subject to more stringent rules and limitations. However, if the member who enters service on or after January 1, 2011 was a member in one of the funds listed below prior to January 1, 2011, he or she will be considered Tier I. Qualifying funds are:
|
County Employees' Annuity & Benefit Fund |
Municipal Employees' Annuity & Benefit Fund |
|
Forest Preserve District Employees' Annuity & Benefit Fund |
Park Employees' Annuity & Benefit Fund of Chicago |
|
Illinois Municipal Retirement Fund |
Public School Teachers' Pension & Retirement Fund |
|
State Teachers' Retirement System |
State Employees' Retirement System of Illinois |
|
State Universities Retirement System |
Laborers' Annuity & Benefit Fund |
Combining service. The Reciprocal Act can provide for a benefit where one may not have been payable based on service with any one fund.
Service credit earned under any one of the reciprocal systems remains with that system. You do not "transfer" any service. Although each system exchanges information about your service credit and earnings, your service credit and contributions remain with the original system.
For example, if you had four years of service with the State of Illinois, that service alone would not qualify you for a retirement annuity from that fund. However, if you have 15 years of service with the MWRD Retirement Fund, you may qualify for a retirement annuity from both the MWRD Retirement Fund and the State Employees Retirement System.
To be eligible to retire under the Reciprocal Act, your total service credit with all retirement systems must meet or exceed the vesting requirements of each system. Your total service credit must meet the highest (longest) vesting period of all the systems under which you plan to retire.
For example, if a member's first system requires 10 years of service credit to vest and her second system requires eight, but the member has only eight years of combined service credit under both systems, she is not eligible to retire under the Reciprocal Act, because she has not met the longest vesting period (10 years).
The Reciprocal Act does not override or change any provisions of the individual systems. You must meet the specific requirements for each of your public pension systems before reciprocity can be applied.
Highest Average Earnings. When you retire under the Reciprocal Act, your pension systems review your earnings histories with all of the systems and apply their specific plan rules. Your highest average earnings are used to calculate your annuity.
For example, if you contributed to a reciprocal system decades ago when your earnings were much lower, and subsequently worked at the MWRD, your annuity from all funds would be calculated using your higher, more contemporary earnings.
Accelerate eligibility for an Unreduced Retirement Annuity for Tier I Participants. For Tier I Participants, the MWRD Retirement Fund requires that you reach age 60 with 5 years of service or age 55 (age 50 if hired before 6/13/97) with 30 years of service to qualify for an annuity to be calculated without reduction for early retirement.
If an employee has 25 years of pension service credit with the MWRD Retirement Fund and 5 years of service with a reciprocal fund, his MWRD Retirement Fund annuity will be exempt from reduction for early retirement. However, the other fund's benefit is subject to their requirements for age and service for an unreduced annuity.
Tier II Participants are eligible for an unreduced annuity at the age of 67 with a minimum of 10 years of pension service credit. There is no provision for an unreduced annuity based upon a certain minimum service requirement
Accelerate eligibility for a benefit calculated at the 2.4% benefit accrual rate. The MWRD Retirement Fund annuity formula is two-tiered. Members accrue 2.2% of their final average salary for the first twenty years of service and 2.4% per year for each year thereafter to a maximum of 80% of the final average salary.
For example, if a member has 5 years of service with a reciprocal system followed by 20 years of service with the MWRD Retirement Fund, the first 15 years of MWRD Retirement Fund service will be calculated at the 2.2% accrual rate and 5 years will be calculated at 2.4% per year.
How Do I Confirm Reciprocity?
In conjunction with the advantages to retiring under the reciprocal act, there are additional responsibilities for you, the member. You are responsible for:
a) Confirmation of all systems that you plan to retire under. Unless you specifically request an estimate calculated under Reciprocal Act provisions, the Fund may not be able to gather the information necessary to calculate the estimate under these provisions. One helpful way of informing the MWRD Retirement Fund that you may have reciprocal credit is to complete the reciprocal section of the information form that is completed on the first day of employment. That form should be updated whenever there is a change of address, change of marital status, or a change of family status.
b) Verification that your service credit with each system is correct. Once a reciprocal estimate is completed, our letter to you includes the statement: "Although the other fund has certified its portion of the estimated benefit, the MWRD Retirement Fund cannot assume liability for their mistakes. We hope you remember how long you were employed reciprocally." In that letter we will note how many years of service were considered and from what system and what dates of service are covered in that system. We will also mention any concurrent or overlapping service and any associated reduction of service.
What if I took a refund of contributions from the Reciprocal Fund?
You may be eligible to reinstate your service credit if you have taken a refund. If so, you may reinstate your service credit by repaying your refunded contributions with interest to the system that paid the refund.
If you wish to reinstate a refund and reestablish service credit with a system, you should contact the system that paid the refund to determine if you are eligible to reinstate your refund, the amount, and the payment method required.
In order to be eligible to pay for refunded reciprocal time, you must complete at least two (2) years of service under a participating system subsequent to the date of the last refund.
Concurrent Service Credit, Overlapping Service Credit and Reciprocal Provisions.
By law, a member can not receive more than one year (12 months) of pension service credit for any given year. Concurrent service under the Reciprocal Act will be reduced based on one of the following rules:
1) If you have less than six months of concurrent reciprocal service, the system which will provide the better benefit for that period will take the service credit and the other system will remove the concurrent service from its pension calculation.
2) If you have six or more months of concurrent reciprocal service, the concurrent service credit will be divided proportionally among the reciprocal systems according to earnings during the period of concurrency.
3) If the service overlaps, but there is no concurrency, service will be granted by the system 1) under which he is employed the longest during that year, and/or 2) which provides the higher benefit, and/or 3) by agreement between the systems after reviewing the facts surrounding the employee's service, shall grant service credit for the entire period. The other system shall grant no service.
Example of how a service overlap can affect your pension.
John is 60 years old as of April 30, 2013. He has 25 years of service credit with the MWRD Retirement Fund for the period from July 20, 1989 through April 30, 2013. Prior to coming to work at the MWRD John worked for the City of Chicago and has 6.0 years pension service credit for the period May 31, 1984 through July 17, 1989. City of Chicago employment was covered by the Municipal Employees Annuity and Benefit Fund of Chicago (MEABF).
Both the MEABF and the MWRD Retirement Fund are able to grant a full year of service credit for 1989. However, there is not a true "concurrency," because John separated from one system before beginning to work in the other. This is an overlap of service credit.
To determine which system will grant service for 1989, the MWRD Retirement Fund and the MEABF will compare the benefits paid by their respective systems. Each Fund has its own benefit formula.
The MEABF benefit formula is currently:
- 2.4%/year of a four-year final average salary for all years;
- Dependent upon benefit eligibility under that fund; and
- Is subject to applicable legislation as of the date of retirement.
The MWRD Retirement Fund formula is currently:
- 2.2%/year of a two-year final average salary for the first 20 years;
- 2.4%/year of a two-year final average salary after 20 years of pension service; and
- Dependent upon eligibility criteria as detailed in the statutes.
The annuity benefit accrual for 1989 would be calculated as follows, assuming that the two-year final average salary is $6,500 per month and the four-year final average salary is $6,250 per month.
|
A |
B |
A X B |
C |
A X B X C |
|
|
Fund |
Overlapping Time |
Annuity Accrual Factor |
Accrued Annuity % |
Final Average Salary |
Earned Annuity for 1989 |
|
MEABF |
1.0000 |
2.4% |
2.4% |
$6,250 |
$150 |
|
MWRDRF |
1.0000 |
2.2% |
2.2% |
$6,500 |
$143 |
Because the annuity paid by the MEABF for the one-year period is greater than that paid by the MWRDRF for the same one-year period, MEABF will grant one-year service credit for 1989, and MWRDRF will grant none. John's combined service will be 30 years, 6 years with the MEABF and 24 years with the MWRD Retirement Fund.
Retirement age requirements between systems
Not all systems have the same minimum age requirements to begin receiving a pension. For Tier I Participants in the MWRD Retirement Fund, you are eligible to begin receiving a pension as young as age 55 or age 50 if you were hired before June 13, 1997.
If the reciprocal systems you will retire under have different age requirements, as a general rule, you can begin receiving only that portion of the pension you earned from the system with the earlier age requirement.
Once you reach the minimum age requirement of your other system(s) you would then receive your pension from that system(s).
For example, if you were retiring under the MWRD Retirement Fund (which has a minimum retirement age of 55) and another system with a minimum retirement age of 60, you could receive the MWRD Retirement Fund portion of your reciprocal pension at age 55 and the portion of your pension earned under the other plan when you reached age 60.
Requesting Pension Estimates
Pension estimates will allow you to make an informed decision about your retirement planning.
Reciprocal pension estimates take longer to process than an estimate from a single system. You should submit a request for a reciprocal pension estimate to the last system you participated in. The MWRD Retirement Fund is unable to provide reciprocal pension estimates for members whose most recent service credit I with another retirement system.
If the last system you participated in is the MWRD Retirement Fund, you should request a pension estimate from us. You can do so by calling our office at (312) 751-3222 and requesting one. Make sure to mention that you have reciprocal service credit, and provide the names of your reciprocal systems.
Please note that it takes longer for us to process a reciprocal pension estimate than it does an estimate using only MWRD Retirement Fund service credit. We must contact your other reciprocal system(s) and wait for them to provide us with your service credit and salary information.
How to begin the reciprocal retirement process
When you choose a retirement date, you should request a separate application from each system you have service credit with. Submit your application to all reciprocal systems 30 days before your planned retirement date, but no more than six months in advance. Be sure you indicate on your application that you are applying for a reciprocal pension and list the names of the reciprocal system(s) you have service credit with.
Keep in mind that the application process for a reciprocal pension may take longer than applying for a pension with a single system. This is because your reciprocal systems must exchange information and then calculate your pension based on the combined data.
In order to retire under the Reciprocal Act, you must retire under all systems at the same time.
When will you begin receiving your pension from each system?
If you have not received your first benefit payment within 90 days of your retirement date, you should immediately contact the retirement system.
When a member retires from MWRD Retirement Fund alone, payment will typically begin four to six weeks from the retirement date, depending on the retirement date. However, if you retire with the MWRD Retirement Fund and a reciprocal system(s), we must wait for your reciprocal system(s) to forward us your service and salary data. In most cases, payment will begin within three months of retirement.
Returning to work after retiring under the Reciprocal Act
If you retire under the Reciprocal Act, return to work, and participate in a retirement system from which you have:
- Applied for retirement
The MWRD does not allow return to work for retired employees. However, if you return to work with another system under which you retired (or applied for retirement), your pension payments from all systems will be stopped. When you retire again, you will begin receiving your pension.
Please note that this is the case even if the other fund's annuity commencement date is in the future.
- Not applied for retirement.
Your pension payments will continue, even if your new position requires you to participate in a reciprocal system, provided you did not use service from that system to calculate your reciprocal pension. When you retire again, the amount of your pension will not be
If you return to work for an employer that does not participate in any of the Illinois reciprocal retirement systems, or for private industry, or if you are self-employed, your pension payments will continue.
Examples of Reciprocal Pensions
Joan is an MWRD employee and a Tier I Participant. She is 56 years of age. She has 5 years of service with the County Employees' Annuity and Benefit Fund of Cook County (CEAB) from 1976 to 1980. She has 25 years of service with the MWRD Retirement Fund from 1989 to 2013. Her two-year final average salary is $7,000 monthly. Her four-year final average salary is $6,580.00 monthly. We will show her benefit calculated under two scenarios, with and without reciprocity.
1.) If Joan only had District time, her service would be 25 years. Her benefit would be calculated as follows:
20.00 years at 2.2%: 44.00%
5.00 years at 2.4%: 12.00%
Total from service: 56.00%
Because Joan has less than 30 years of service and she is less than age 60, her annuity will be reduced for early retirement. The reduction for early retirement is 6% per year for each year under age 60 or for each year of service less than 30 years, whichever yields a lower discount. Joan is 5 years away from 30 years of service but only 4 years away from age 60. Therefore, her early retirement discount will be 24% (6% x 4 years), leaving her 76% of the benefit (100% - 24%).
Joan's monthly MWRD benefit is then calculated as follows:
56.00% x 76.00% $7,000.00 = $2,979.20
2.) If Joan's service with CEAB qualified for Reciprocity, her benefit from the MWRD would be calculated as follows:
15.00* years at 2.2%: 33.00%
10.00 years at 2.4%: 24.00%
Total from service: 57.00%
* Joan's 5 years at CEAB have been used toward the "step" in the formula. The first 20 years are calculated at 2.2% and the remainder at 2.4%. In this case only 15 years are being calculated at 2.2% because of the 5 years at CEAB.
Because Joan's combined service is 30 years (5 years CEAB time and 25 years MWRD Retirement Fund time), the early retirement discount would no longer apply.
Joan's monthly MWRD benefit is then calculated as follows:
57.00% x $7,000.00 = $3,990.00
Joan's monthly benefit from CEAB is calculated at 2.4% per year for all years of service of a four-year final average salary. Joan's monthly CEAB benefit is calculated as follows:
5 years at 2.4%: 12.00%
12.00% x $6,580.00 = $ 789.60
Joan's combined benefit would be $4,779.60 ($3,990 + $789.60). However, Joan's combined benefit is limited to the highest benefit that either one of the funds would have paid her if all of her service were spent in either of the two funds. This is referred to as limiting the combined annuity to the "maximum benefit." This is provided for under the Statutes.
Definition
40 ILCS 5/20-124 Maximum Benefits: "In no event shall the combined retirement or survivors annuities exceed the highest annuity which would have been payable by any participating system in which the employee has pension credits, if all of his pension credits had been validated in that system.
If the combined annuities should exceed the highest maximum as determined in accordance with this Section, the respective annuities shall be reduced proportionately according to the ratio which the amount of each proportional annuity bears to the aggregate of all such annuities."
In this case, if Joan had spent all years of service at the MWRD, her benefit payable from the MWRD Retirement Fund would be:
MWRD Maximum
|
20.00 years at 2.2%: |
44.00% |
|
10.00 years at 2.4%: |
24.00% |
|
Total from service: |
68.00% |
MWRD Maximum Annuity: 68.00% x $7,000.00 = $4,760.00
If Joan had spent all years of service at the CEAB, her benefit payable from the CEAB would be:
CEAB Maximum
|
30.00 years at 2.4%: |
72.00% |
|
Total from service: |
72.00% |
CEAB Maximum Annuity: 72.00% x $6,580.00 = $4,737.60
The higher of the two maximums is $4,760.00, the MWRD Retirement Fund maximum. This is the highest combined annuity that the member may receive. In cases where this happens, the shares are proportionately reduced to the highest maximum benefit.
Recall from above that the MWRD Retirement Fund share is $3,990.00 and the CEAB share is $789.60. The MWRD share would be reduced as follows:
$3,990.00 x $4,760.00 ¸ $4,779.60 = $3,973.64
The CEAB share would be reduced similarly:
$789.60 x $4,760.00 ¸ $4,779.60 = $ 786.36
The sum of the shares now equals the highest maximum:
$3,973.64 + $ 786.36 = $4,760.00
