How the Illinois State Retirement System Works

Kelly Hernandez
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The Illinois State Retirement System (SRS) is administered by the SRS Board of Trustees. It works similarly to the federal government’s Social Security system but only state employees can participate in the program. State employees contribute a portion of their salaries as they work and when they retire, the money they contributed to the system begins to pay them back. Retired state workers are provided with these pension plan payments regularly to help them live comfortably in retirement.

State employees, such as police officers, judges, or state officials, who save for retirement using a state retirement plan must contribute a specific percentage of each paycheck to be eligible for payments when they retire. These contributions are made pre-tax, but they must pay income taxes on distributions or if they withdraw funds early.

If you’re an Illinois state worker or considering a job with the state, it’s important to learn more about the state retirement plan that may be available to you. Reviewing state employee benefits and ensuring you’re taking advantage of what your employer has to offer ensures you’ll be prepared for retirement and able to live comfortably when you stop working.

Types of Retirement Systems

There are three different state retirement systems available in Illinois for state workers. The state employee retirement plan that you’re eligible to participate in depends on your job. Each system has its own regulations and requirements.

State Employees’ Retirement System (SERS)

The Illinois State Employees’ Retirement System (SERS) is the most common retirement plan because it allows most state employees to participate. If you work for the state government in some capacity, you may be allowed to participate in this retirement plan after you’ve been on the job for six months.

It’s important not to hop around to different jobs throughout your career if you want to dedicate your salary to this retirement plan in the hopes of having a comfortable retirement. State employees may include police officers, firefighters, teachers, and other state government workers who aren’t judges or elected in their position by the residents of Illinois.

Once you’ve worked in your state job for at least six months, you may start contributing to SERS. The percentage of your salary you must contribute to participate depends on your job and whether you make Social Security payments; contribution percentages are as follows:

  • Employees who pay Social Security must contribute at least 4% of their salaries.
  • Employees who don’t pay Social Security must contribute at least 8% of their salaries.
  • High-risk employees who pay Social Security must contribute at least 8.5% of their salaries.
  • High-risk employees who don’t pay Social Security must contribute at least 12% of their salaries.

High-risk state employees are firefighters, policemen, or security workers who are employed through the Juvenile Justice system or Illinois Department of Corrections.

When you begin contributing to SERS, you’re either a Tier 1 or Tier 2 member. You’re a Tier 1 member if you started working for the state before 2011. When you turn 60, you may retire with full pension benefits as long as you’ve worked for the state for at least eight years. If you retire early, keep in mind the benefits you receive are reduced by 0.5% each month you retire before you turn 60.

You fall into the Tier 2 category if you began working for the state after 2011. You may retire with full benefits when you turn 62, as long as you’ve worked for the state for at least 10 years. However, if you wait to retire until you’re 67, the benefits you receive increase by 3%.

Judges’ Retirement System (JRS)

If you work for the state as a judge, associate judge, or are the director of the Office of the Illinois Courts and previously served as a judge, you’re eligible for the Judges’ Retirement System (JRS). To participate in this state employee retirement plan, you must contribute at least 8.5% of your salary throughout your working years.

You may retire with full benefits when you turn 55 but the amount of pension you’re awarded in retirement may vary. Your pension payments depend on how long you worked for the state as a judge and the salary you earned throughout your working years. The highest pension benefits you may receive in retirement is 85% of the salary you were earning when you retired.

General Assembly Retirement System (GARS)

Officials who were elected into their positions and those who served on the Illinois General Assembly or executive branch are eligible to participate in the General Assembly Retirement System (GARS). At least 11.5% of your salary must be contributed to this state employee retirement plan to be eligible for pension payments when you retire.

If you’ve contributed to GARS and have worked for the state for at least eight years, you can retire with full pension benefits when you turn 55. However, if you’ve only worked as an elected official for four years, you can’t retire with full benefits until you turn at least 62.

The number of years you worked for the state and the salary you earned when you retired determine the amount of retirement benefits you’re awarded. The maximum benefits you’re eligible to receive through GARS is 85% of the salary you earned when you retired.

Illinois Flexible Spending Accounts

Illinois offers all state employees the option to contribute to and utilize a Flexible Spending Account (FSA). The program is administered by ConnectYourCare and allows eligible state workers to deposit a portion of their paycheck into an account without paying taxes.

This money may then be used for approved medical and dependent care expenses. By utilizing the FSA program as a state employee, you save on income and Social Security taxes on the money you contribute to the account.

This program also ensures you budget for important medical expenses by taking a set amount of money from your paycheck before you receive it. You choose how much money you want deducted from your paycheck, but you generally save money using an FSA if you know you’ll spend at least $240 per year in eligible medical expenses.

Retirement Taxes in Illinois

It’s important to keep Illinois state taxes and federal retirement income taxes in mind when planning for your retirement. If these taxes are high, they may affect your retirement age and the amount of retirement income you have each month when you stop working.


When you contribute to your SRS retirement plan, the contributions you make are not taxed. Your federal income taxes are deferred until you begin receiving distributions or you withdraw money from the plan.

You’re required to report your pension income with the Internal Revenue Service (IRS) and pay taxes on it. The amount of taxes depends on how much you receive in retirement and other factors, such as the deductions you’re eligible to claim.


Illinois is a state that doesn’t tax your pension or retirement income. You’re only responsible for paying federal taxes on the retirement income you begin to receive when you stop working. In addition to your SRS retirement benefits, any retirement income you receive from an IRA, 401(k), or Social Security is also not susceptible to state income taxes.

Financial Health of the Illinois Retirement System

As of June 30, 2017, there were 60,612 Illinois state employees actively contributing to SERS; 58,4523 former state employees were receiving retirement benefits through SERS as of June 30, 2017.

The benefits the Illinois retirement system is expected to pay for retirees and surviving spouses continue to increase, raising concerns about its financial health. As of June 30, 2017, the program was only 33.4% fully funded. This means the assets in the program are far less than the liabilities that are required to be paid out to participants upon retirement.

Tips for Retirement

Preparing for Retirement

  • Create a budget that includes saving for retirement.
  • Be realistic about how much you’ll need in order to retire comfortably.
  • Pay down debt as aggressively as possible.
  • Diversify your retirement plan.
  • Remain flexible with your retirement plan and ready to make changes as needed.

During Your Retirement

  • Create a monthly budget and stick with it.
  • Eliminate unnecessary spending.
  • Keep an emergency fund on hand.
  • Consider taking on a part-time job for additional income.
  • Ensure your health insurance policy is comprehensive.

As an Illinois state employee, you may participate in one of the state’s retirement systems. When you retire, you may receive pension benefits from the state but it’s also important to diversify your retirement strategy to ensure you can live comfortably when you stop working.

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