Updated October 30, 2026. Quick answer: The Teachers’ Retirement System of Illinois pays an annual increase every January, shown in the February payment. Tier 1 annuitants nearly all receive a 3% annual increase, compounded; the first increase is 3% times the years elapsed since the annuity began, and members who opt into the Accelerated Annual Increase Program give up the 3% for a 1.5% noncompounded increase. Tier 2 annuitants receive the lesser of 3% or one-half of the CPI as of the preceding September, not compounded and based on the original annuity. The Tier 2 percentage for January 2027 is not set yet.
More on public pension retirement ages and eligibility: the Illinois TRS retirement age and eligibility rules for Tier 1 and Tier 2.
Tier 1: a fixed 3%
The TRS Tier 1 member guide says: “Nearly all annuitants receive a 3% annual increase in their annuities.” “The increase is effective in January of each year and is reflected in the payment you receive in February.” For the first increase, the guide says: “When we calculate the first increase percentage, we determine the number of years that have elapsed since your TRS retirement annuity began and the effective date of your initial increase, and then multiply that amount by 3%.” On timing, the increase comes on the later of two dates: the January 1 after the first anniversary in retirement, or “Jan. 1 following the date you reach age 61”.
The guide also describes an optional Accelerated Annual Increase (AAI) Program, a one-time payment. It says: “In return for this AAI payment, you must waive the 3% compounded annual increase applied to your pension. Instead, you will receive a 1.5% noncompounded annual increase”. beginning at a later date.
Tier 2: the lesser of 3% or half the CPI
The Tier 2 member guide says: “Annual cost-of-living increases for members will be calculated using either 3% or one-half of the Consumer Price Index as of the preceding September, whichever is less, of the originally granted retirement annuity.” If the Consumer Price Index change for the preceding September is zero or a decrease, the guide says the annuity is not increased. “When there is an increase, it will not be compounded.”
On timing, the guide says the increase comes on the January 1 occurring “either on or after the attainment of age 67 or the first anniversary of the annuity start date, whichever is later.”
Where 2027 stands
The Tier 2 increase for January 2027 is not set: it depends on the September 2026 CPI, and this page updates when TRS Illinois publishes it. Tier 1 stays at the annual 3% described above.
A worked example
As a computed illustration (not a source figure), a Tier 1 annuitant with a monthly benefit of $2,000 (invented, for the computation) would see a later annual 3% increase of $60 (computed) a month. A Tier 2 annuitant would see no more than that, and less when half of the CPI is below 3%.
Common mistakes
- Applying the Tier 1 rule to a Tier 2 annuitant. Tier 2 is the lesser of 3% or half the CPI, not compounded.
- Expecting a Tier 2 increase before age 67 or the first anniversary of the annuity start date, whichever is later.
- Looking for a 2027 Tier 2 percentage before the September 2026 CPI is published.
Related: TRS Illinois retirement decisions, how public pension decisions work, and whether Illinois taxes pensions.
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Answer againSources
- TRS Illinois, Tier 1 Member Guide: www.trsil.org
- TRS Illinois, Tier 2 Member Guide: www.trsil.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.