TRS Illinois Tier 1 vs Tier 2 — Every Difference That Affects Your Pension

How Your Tier Is Determined

There's one question: when did you first contribute to TRS or any Illinois reciprocal retirement system (IMRF, SURS, CTPF)?

• Before January 1, 2011 → Tier 1
• On or after January 1, 2011 → Tier 2

That date is locked in permanently. It doesn't change if you leave teaching and come back, switch districts, or take a break.

Retirement Age

This is the biggest practical difference.

Tier 1 offers three paths to an unreduced pension:

• Age 55 with 35 years of service
• Age 60 with 10 years of service
• Age 62 with 5 years of service

Early retirement is available at age 55 with 20 years, but the benefit is reduced by 6% for each year you're under 60 — a permanent cut.

Tier 2 has one path to unreduced retirement: age 67 with 10 years of service. Early retirement starts at age 62 with 10 years, penalized at 6% per year under age 67. That means retiring at 62 costs you a 30% reduction.

Final Average Salary

Your pension formula multiplies your years of service by a percentage of your Final Average Salary (FAS).

• Tier 1: Average of the highest 4 consecutive salary years within the last 10 years of service.
• Tier 2: Average of the highest 8 years within the last 10 years. Public Act 102-0016 removed the requirement that these 8 years be consecutive, which slightly helps members who had a salary dip mid-career.

Both tiers multiply at 2.2% of FAS per year of service, up to a maximum of 75% of FAS (reached at 34 years).

The Pensionable Salary Cap

Tier 1 members who established membership after June 30, 1996, have a high cap — $350,000 in FY 2025–26 and $360,000 in FY 2026–27 — that mainly affects the highest-paid members.

Tier 2 caps are much lower and hit real salaries:

• FY 2024–25: $125,773.73
• FY 2025–26: $127,283.01
• FY 2026–27: $129,192.26

Earnings above the cap don't count toward your pension and aren't subject to TRS contributions. For a veteran Tier 2 teacher earning above this threshold, the cap compresses your FAS and limits your pension in ways that Tier 1 members never experience.

Cost-of-Living Adjustments

After retirement, your pension grows each year through a COLA. The two tiers calculate this completely differently:

• Tier 1: 3% compounded annually, starting the January after you turn 61 or the first anniversary of retirement, whichever is later. Compounding means the dollar increase grows every year.
• Tier 2: The lesser of 3% or half the CPI-U, applied as a simple increase on your original starting pension. No compounding. In a low-inflation environment, this means Tier 2 COLAs barely keep pace with rising costs, and the gap between the two tiers widens every year.

What About Tier 2 Reform?

Union advocacy groups (IEA, IFT) have pushed for "Tier 2 Safe Harbor" legislation to improve Tier 2 benefits and ensure the plan meets IRS Safe Harbor requirements. Public Act 104-0002, signed June 16, 2025, created a Social Security Wage Base (SSWB) Reserve Fund for contributions associated with earnings-limit adjustments and possible benefit top-ups if an enforceable determination finds Tier 2 benefits below federal minimums. It did not replace the Tier 2 formula described above. Plan using current enacted benefits and eligibility rules rather than proposals for additional changes.

Finding Your Tier-Specific Path

A combined TRS handbook covers both tiers in the same document, which makes it easy to accidentally apply the wrong rule. The TRS Illinois Retirement Guide separates every decision point by tier, so you're only looking at the numbers that apply to you.

See more Illinois guides →