Illinois TRS Tier 2 Explained: Age 67, the Salary Cap, and the Reform Debate

Which tier you are in — and why it is permanent

Illinois split TRS into two tiers in 2011. If your first day of TRS-covered work — anywhere in Illinois — was before January 1, 2011, you are Tier 1. If it was on or after that date, you are Tier 2. Reciprocal service in another Illinois public pension system before 2011 can also make you Tier 1.

Your tier follows you for your whole career. Changing districts does not change it. Taking a refund and returning can, because your "first contribution" clock may restart. If you are unsure, your TRS member account shows your tier.

The four rules that make Tier 2 different

Tier 2 uses the same 2.2% multiplier as Tier 1 and the same 75% maximum, so a full 34-year career still targets roughly 75% of your average salary. The differences are in the inputs and the timing.

Retirement age. Tier 1 members can retire unreduced at 60 with 10 years, at 62 with 5, or at any age with 35 years. Tier 2 requires age 67 with 10 years for an unreduced pension. A reduced pension is available from age 62, cut 6% for each year you are under 67.

Salary averaging. For members retiring on or after June 1, 2021 whose final average salary includes the 2020–21 school year, TRS uses the four highest years within the last ten for Tier 1 and the eight highest years within the last ten for Tier 2; those years no longer have to be consecutive. The longer Tier 2 averaging period can still bring in lower-paid years and reduce the average.

Salary cap. Tier 2 limits the salary the pension formula can use. For the 2026–27 school year the cap is $129,192.26 (it was $127,283.01 for 2025–26). The cap rises each year by the lesser of 3% or one-half of inflation. Earnings above the cap still happen — they just do not raise your pension.

COLA. Tier 1 gets a 3% compounding increase each year in retirement. Tier 2 gets the lesser of 3% or one-half of inflation, calculated only on the original benefit (not compounding), and it does not start until age 67 or one year after you retire, whichever is later.

The reform debate you keep hearing about

Tier 2 has a legal pressure point. Federal rules say a public pension that replaces Social Security must provide a benefit at least as good as Social Security would. Analysts have warned that for some Tier 2 members — especially those who leave mid-career or whose pay is near the cap — the capped, later, slower pension could eventually fall below that "safe harbor" line.

That is why Illinois lawmakers regularly float Tier 2 changes: lowering the retirement age, raising or removing the cap, or improving the COLA. As of now, none of the major fixes have become law, so plan around the current rules and treat any improvement as a possibility, not a certainty.

What Tier 2 members should actually do

Save outside the pension. The Illinois TRS Supplemental Savings Plan (a 457(b) account) exists partly because Tier 2's core benefit is thinner. Even a modest monthly contribution over a career meaningfully changes the retirement picture.

Watch the cap if you are a high earner or take on stipends and coaching. Once your creditable earnings pass the annual cap, extra pay does not build pension — that is the point where a tax-advantaged savings account does more for you than another duty assignment.

Get an estimate at 62 and at 67. The 6%-per-year reduction between those ages is steep. Seeing both numbers is the only way to judge whether working to 67 is worth it for your situation.

A worked Tier 2 example

Take a Tier 2 teacher who retires at 67 with 30 years and an eight-year salary average of $85,000. The formula is 30 × 2.2% = 66%, so the starting pension is about $56,100 a year, or roughly $4,675 a month, before the payment-option choice.

If the same teacher retired at 62 instead, the 6%-per-year reduction for being five years under 67 would cut the benefit by about 30% — to roughly $39,270 a year. That gap is why the age-67 rule dominates Tier 2 planning.