Today, the Illinois Teacher Retirement System provides qualifying teachers with a defined benefit pension. Once a teacher reaches the required number of service years, she qualifies for a pension which increases over time as she accumulates years in the classroom and increases in her salary. A teacher with more years in the classroom (who receives a higher salary) will have a larger pension than one who served for less time (and receives a lower salary).
A hundred years ago, however, Illinois teachers received a fixed, annual benefit that was determined independent of salary: a “flat pension.” The first Illinois pension laws were passed in 1915, and stipulated that a teacher who taught for a minimum of 25 years and was at least 50 years old qualified for a flat $400 annual benefit:
“To service pensioners—annuity of $400 per annum is paid to a teacher who retires after the attainment of age fifty, having served in the public schools of the United States for at least twenty-five years, the last fifteen of which have been spent in the public schools of Illinois, and provided the teacher has paid the sum of $400 into the fund.”
As a 1918 Illinois legislative commission found, there were severe issues with the original pension system. A teacher’s pension amount remained preset at $400, regardless of her salary or whether she taught for more than the required twenty-five years. “Under the Illinois law, the pension is $400 per year, regardless of the salary.” Plus, in order to qualify for a benefit, teachers needed to serve a minimum of 25 years, a fairly high threshold. For context, around the same time New York City estimated that nearly half of its teachers would leave the system before reaching 25 years of service. (If Illinois were to apply the same 25-year requirement today, only 23 percent of teachers would qualify for a pension according to current assumptions.)
Making matters worse, an Illinois teacher in 1915 who left the system before serving 15 years would only get half of her own contributions. And teachers who taught between 15- 24 years would neither qualify for the flat $400 annual pension nor receive a refund of their own contributions.
"Under the Illinois system, the withdrawing employee receives one-half of the sum contributed, if the contributor ceases to teach before serving fifteen years, but he receives no refund if he withdraws after giving more than fifteen years of service."
Under this rule, a teacher who taught 15 years was worse off than a teacher who taught 14 years or less. With such strict longevity requirements, a teacher who taught anything less than twenty five years would lose out on a benefit and potentially all of her original contributions. Current pension systems are often described as having "push-pull" effects that keep teachers in until they reach a certain number of years of service or encourage them to leave once they reach prescribed milestones. The old Illinois system was even worse, and essentially pushed people out at 14 years or trapped them until they reached 25 years.
Illinois would continue operating under the original 1915 pension laws until 1939 when the modern-day Teacher Retirement System was created. In 1939, Illinois restructured the teacher’s pension system (which struggled to remain solvent) so that pensions were based on salaries and the minimum service requirement was reduced to 10 years. In 1941, the minimum service requirement was further reduced to 5 years. It stayed that way until 2011, when the pension fund was in such dire financial straits that the legislature increased the minimum service requirements back to 10 years to reduce costs at the expense of teachers.
Illinois has improved its teacher retirement benefits since 1915, but still has much to improve.