Updated October 30, 2026. Quick answer: SURS pays an automatic Tier I increase each Jan. 1, so the next Tier I increase is Jan. 1, 2027. For Tier I it is a fixed 3% compounded increase. Tier II begins on the Jan. 1 on or after the later of age 67 or the first anniversary of the annuity’s start, and is the lesser of half the CPI-U change or 3%, not compounded, and the Tier II percentage for 2027 is not set yet. These rules are for the Traditional Plan.
More on public pension retirement ages and eligibility: the Illinois SURS retirement age and eligibility rules for Tier II and Tier I.
Tier I: a fixed 3%
The SURS Traditional Member Guide for Tier I says: “Each Jan. 1, your monthly retirement benefit will automatically receive a 3% compounded increase.” It adds: “The first AAI will begin on the Jan. 1 following the month in which you retire and will be prorated for the number of months you were retired.”
Tier II: half the CPI-U change or 3%
The Tier II guide says: “If you elect a lifetime monthly benefit, a non-compounding annual increase will apply to the monthly retirement annuity beginning on the Jan. 1 occurring on or after the later of your attainment of age 67 or the first anniversary of the commencement of your annuity.” It continues: “This annual increase will be the lesser of half of the change in Consumer Price Index-Urban (CPI-U) from the preceding year or 3%, computed on the original retirement annuity amount.” It adds: “For any year the CPI-U decreases or is zero, no annual increase will apply.” The guide prints no Tier II percentage for any year, so this page states none.
Who is covered
The Tier I guide explains the groups: “If you first began participation prior to Jan. 1, 2011, you are considered a Tier I member. If you first began participation on or after Jan. 1, 2011, you would be considered a Tier II member.” This page covers the Traditional Plan only. The Portable Plan and the Retirement Savings Plan have their own guides, which were not used here.
Where 2027 stands
The Tier II increase for January 2027 is not set yet: SURS prints the formula but no Tier II percentage, and this page updates when SURS publishes one. Tier I is a fixed 3% each January 1. The Illinois Pension Code text could not be read for this page, so the rules rest on the SURS guides, which are dated April 2026 and summarize the law.
A worked example
As a computed illustration (not a source figure), a Tier I retiree with a monthly benefit of $2,000 (invented, for the computation) would see a 3% increase of $60 (computed) a month. A Tier II retiree would see at most 3% of the original annuity, and less if half the CPI-U change is below 3%.
Common mistakes
- Applying the fixed 3% to a Tier II retiree. Tier II gets the lesser of half the CPI-U change or 3%.
- Expecting Tier II increases to compound. The guide describes them as non-compounding and computed on the original annuity.
- Expecting an increase in a year the CPI-U falls. The Tier II guide says none applies when the CPI-U decreases or is zero.
Related: Illinois SURS retirement decisions, how public pension decisions work, and whether Illinois taxes pensions.
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Answer againSources
- SURS, Traditional Member Guide, Tier I: surs.org
- SURS, Traditional Member Guide, Tier II: surs.org
- Related official page (not quoted): IRS Tax Topic 410, Pensions and annuities: www.irs.gov
- Related official page (not quoted): IRS Tax Topic 411, Pensions: the General Rule and the Simplified Method: www.irs.gov
Read from the primary documents linked above on October 30, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.