TRS Illinois: COLA, Vesting, Buyback and Refund

Updated August 19, 2026. Quick answer: Teachers’ Retirement System of the State of Illinois (TRS Illinois) — the COLA is automatic, and whether it compounds varies by tier, service credit can be purchased, and no DROP was found. Vesting takes 5 years in Tier 1 and 10 years in Tier 2. The four decisions below are the ones that are hard to reverse.

The verdicts

Those first two rows are separate questions and are routinely confused. Whether you get an increase at all is one thing; whether it compounds is another. A system can grant an increase automatically every year and still compute it against your original pension forever, which is a materially worse deal than it sounds.

The COLA

Tier 1: ‘Nearly all annuitants receive a 3% annual increase’ automatically — COMPOUNDED (each year’s 3% calculated on the current, already-increased benefit), beginning the later of Jan 1 following the member’s first anniversary in retirement, or Jan 1 following the date the member reaches age 61. TRS Illinois also offers an optional, irrevocable, one-time ‘Accelerated Annual Increase (AAI) Program’: an upfront lump-sum cash payment in exchange for permanently waiving the 3% compounded increase and instead receiving a smaller 1.5% NON-compounded increase beginning later. Tier 2: automatic annual increase equals the LESSER of 3% or one-half of the CPI increase (measured as of the preceding September), applied to the ORIGINALLY GRANTED annuity amount and NOT compounded. If the CPI change is zero or negative, there is no increase that year. Begins the Jan 1 on/after the later of age 67 or the first anniversary of the annuity start date. Tier 1 (2026 guide): 3% compounded annually (or 1.5% non-compounded if the AAI Program is elected). Tier 2 (2026 guide): lesser of 3% or 1/2 of CPI-based increase, not compounded, floor of 0% in flat/negative-CPI years.

Buying service credit

Out-of-system service (other states, Chicago public schools, U.S. public common schools); part-time teaching (7/1/1969-6/30/1990); substitute/homebound teaching (before 7/1990); leave of absence or involuntary layoff; pregnancy or adoption-related absence (before 7/1983); paid student teaching (on/after 8/7/2019); military service (up to 5 years total, two categories depending on timing relative to teaching); private school service (Illinois private schools only, max 2 years); reinstatement of previously canceled (refunded) service via redeposit. Unused/uncompensated sick leave (max 2 years/340 days) converts to service credit automatically at retirement rather than being purchased.

What it costs. For most categories: the contributions that would have been required had the service been earned under TRS, plus interest (generally 6%/year), plus required Teachers’ Health Insurance Security (THIS) Fund contributions (except active-duty military service, exempt from THIS). For military service not immediately following TRS teaching, and for private school credit, TRS uses an actuarial ‘normal cost’ rate (set annually by TRS actuaries) multiplied by the member’s salary in the first year of subsequent TRS employment.

Run your own numbers before deciding — some purchases never recover their cost, and the calculator shows which.

Taking a refund

Tier 1: refund equals 7% of creditable earnings before July 1, 1998, plus 8% thereafter, WITHOUT interest; available only after the member has terminated TRS-covered teaching. Tier 2: refund equals a flat 8% of creditable earnings, without interest, under parallel eligibility terms. In both tiers, THIS Fund contributions and the 1% survivor-benefit contribution are NOT included in / refundable as part of this payment. Per both guides, accepting a refund means the member ‘forfeit[s] all rights to TRS benefits’ — all associated service credit is canceled, eliminating eligibility for any future TRS annuity and any TRS survivor/death benefits tied to that service. THIS Fund contributions and the 1% survivor-benefit contribution are separately non-refundable (forfeited outright). The guides do NOT explicitly state that a refund forfeits Teachers’ Retirement Insurance Program (TRIP/THIS) health-insurance eligibility by name — but since TRIP eligibility is tied to receiving a TRS annuity, and a refund eliminates annuity eligibility for that service, this consequence is logically implied rather than stated verbatim. Treat the TRIP-specific forfeiture as UNCONFIRMED in TRS’s exact wording. Yes. A refund may be repaid (‘redeposited’) with interest running from the date of the refund to the date of repayment, restoring the canceled service credit. The restored credit may not be used as a basis for benefit payment until the member completes one full year of subsequent TRS-covered service after the refund (two years if returning through a reciprocal retirement system).

This is the irreversible one. Refund versus leaving it in sets out the decision in the order it should be made.

DROP

A full-text search of both the complete Tier 1 Member Guide (July 2026) and complete Tier 2 Member Guide (July 2026) turned up zero occurrences of ‘DROP’ or ‘deferred retirement option plan.’ TRS Illinois’s only post-retirement-related programs found are the standard lifetime annuity, the optional one-time ‘Accelerated Annual Increase (AAI) Program’ buyout (see COLA below), and a separate 457(b) Supplemental Savings Plan (voluntary DC savings for active members, not a DROP). None is a DROP in the conventional sense. N/A N/A

This is an absence-of-evidence finding: it means a DROP does not appear in the materials reviewed, not that the system has published a denial. DROP is rarer than it appears — of the twelve systems checked for this guide, only one has an active programme.

Survivor options

At retirement the default payout for both tiers is the ‘standard annuity’ (the largest lifetime payment, with only the standard TRS death benefit going to a named beneficiary — no continuing monthly payment). The alternative in both tiers is the ‘reversionary annuity’: the member’s own monthly annuity is reduced to fund an additional lifetime monthly annuity paid to ONE named, dependent surviving beneficiary after the member’s death. To qualify the beneficiary, before retirement the member must resign the position, name the beneficiary on the Retirement Application, complete all required payments, and provide proof of dependency. Yes. Both guides state verbatim: ‘Election of a reversionary annuity is irrevocable.’ Single exception: if the named dependent beneficiary predeceases the retiree and TRS receives a certified death certificate, the retiree’s annuity is reinstated to the full (standard) amount going forward, with no retroactive adjustment for the period already paid at the reduced rate.

What could not be verified

All facts sourced only from trsil.org: the official Tier 1 and Tier 2 Member Guide PDFs (both dated July 2026) and live trsil.org member pages; the Illinois Pension Code statute itself was not directly fetched (TRS’s own restatement of the Code was used instead). Two items explicitly UNCONFIRMED in TRS’s own wording: (1) whether a refund independently forfeits TRIP/THIS retiree health-insurance eligibility by name; (2) the exact percentage/actuarial reduction applied when electing a reversionary annuity. DROP absence is high-confidence based on exhaustive full-text search of both complete official guides.

These gaps are stated because a plan-rule page that hides its own limits is worse than no page. Your member handbook is the authority, and where it and this page disagree, the handbook wins.

Sources

• https://www.trsil.org/sites/default/files/documents/Tier1MemberGuide-July2026.pdf
• https://www.trsil.org/sites/default/files/documents/July2026-Tier2MG-web.pdf
• https://www.trsil.org/members/tier-i
• https://www.trsil.org/members/tier-ii
• https://www.trsil.org/members/tier-i/guide/chapter-fifteen-refund-of-retirement-contributions
• https://www.trsil.org/members/tier-ii/refunds

Read 2026-08-04.

Related: buyback calculator · is buying service credit worth it · refund or leave it in · DROP explained.

General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named. Powers of attorney, guardianship and trusts are governed by STATE law and differ change, and interest rates published by the IRS change every month – never rely on a rate quoted on any page, including this one. We are not a law firm or a tax adviser, and this is not legal or tax advice.