A Few Things to Consider When Setting Your Retirement Date
                    by Judge John W. Gustafston


     By working just one day at the start of the month, service credit will be given for that
entire month.. That service credit will apply toward reaching your goal of the maximum pension
(85% of salary on the last day of service.)  Each month of service, during the first ten years will
add 0.2916 to the pension formula.  Each month of service, after ten years, will add 0.4166 to the
pension formula.  
     Retirement prior to "maxing out" at 85% has its obvious impact upon the amount a retiree
will receive when compared to the salary level being paid at the effective date of retirement. 
Without a reduction for early retirement (prior to age 60),  an 85% retiree will expect very little
change in net income as the loss of the 15% of salary is almost totally off-set by:


     (a) the elimination of the pension contribution (usually 11%),


     (b) the elimination of the deduction for withholding for state income tax (nearly 3%),


     (c) the amount of life insurance cost being deducted will be reduced, since the coverage is
reduced to $5,000.00 per unit for a retiree who is 60 years of age or more, rather than each unit
being computed on your present salary level and where the first unit provided by the state is
subject to a charge to the judge for insurance exceeding $50,000.


     (d) the yearly health insurance deductible of $300.00 for the judge is eliminated.  There
should be no uncovered cost for an emergency room visit if the judge is covered under Medicare
Parts A and B;  and the judge will only have to pay $50.00 per hospital admission.  If the judge
does not have Medicare Parts A and B, the yearly deductible is reduced from $300.00 to $100.00
unless the judge is hospitalized at a PPO provider.   (Caveat: A new benefits package is about to
be negotiated.  There are predictions of serious change in health care.  The benefit package will be
negotiated by CMS without the participation of anyone representing judges or retirees.)


     Work one day, increase your pension by a whole month and also have less deducted, sure
sounds like a good deal.  However, there are strings attached to that "gift" of credit for the whole
month.  There may be deductions from your salary check that you did not expect when the date of
retirement is set to commence on or shortly after the first of the month.  
     A judge's final salary check will be based upon the total sum of days of service plus all
weekends and all holiday days that occur in that month prior to the effective date of retirement,
called ("X"), and which is divided by the total number of days in that month, called ("Y").  A
judge will receive a percentage ("X" divided by "Y") of his salary for that month.
     If a judge is eligible (age and length of service requirement) and elects to receive a pension
at that time, the judge will also receive a pension check based upon the remaining number of days
in that month ("Y" minus "X") and which is then divided by "Y" , the total number of days in that
month.  This percentage will be then applied to a full pension benefit for that month.


     However, by working that one day into the next month, a judge becomes responsible for
certain monthly deductions, (d) and (e), at the full rate for the entire month as if the judge were
still on the bench.  So, from a salary check, the state will seek:
     (a)  a contribution to the pension fund for each day in the month prior to the effective
retirement date, (approximately $33.00 per day\0,


     (b)  a withholding for federal income tax for each day in the month prior to the effective
retirement date, (approximately $50.00 per day),
     
     (c)  a withholding for Illinois income tax for each day of the month prior to the effective
retirement date, (approximately $9.00 per day),


     (d)  the full monthly deduction for life insurance premiums, (approximately $100.00 per
month for $100,000.00 of coverage) even though the insurance will be reduced to the $5,000.00
per unit on the effective retirement date,


     (e)  the full monthly deduction for health care premiums for a judge and a dependent
(approximately $157.00 per month) without the elimination of or a reduction in the deductible for
health care services received during the month.


     In this writer's mind, there is no doubt that being required to pay the full monthly
premiums for life insurance and to then be denied the extent of the coverage that you have paid
for because you have retired is inequitable.  That coverage should remain at the amount paid for
that entire month and should not be reduced.  CMS, however, will not make a move to change
this inequity.


     Similarly,  the cost of health care premiums should be prorated to the number of days in
the month prior to the judge's retirement.  Further, the elimination of or reduction in the
deductible should go into effect on the date of retirement and should not be delayed until the end
of the month.  Appealing to CMS on this issue, also, has met with no success.  
     A judge's salary and a judge's pension are paid from separate sources.  The pension fund
can not be used to pay the full monthly deductions for life and health insurance coverage for any
month in which the judge is in service.  Any failure of earned salary to cover all of that month's
deductions will result in a bill being rendered to the judge for the shortfall for that month.
     At the approximate average salary of $300.00 per day for each day of the month, there
may not be enough salary earned to cover the combined total of deductions, withholdings and
contributions to the pension if retirement becomes effective at the beginning of a new month. 
     Therefore, to avoid an unexpected reduction in or total loss of an anticipated salary check
and also to obtain the most benefit for what is going to be deducted from your salary check, retire
at the end of the month.


     A second factor that should be taken into consideration in the setting of a retirement date
is the possibility of an increase in earnings that will affect the pension.  The COLA (Cost of Living
Adjustment) becomes effective July 1, at a percentage (which is usually an increase, but in theory
could be a decrease) as accepted by the legislature based upon national statistics.


     The likelihood of a general pay raise (as a result of the report of the Commission, which is
made every two years) from the legislature should also be given consideration, even though the
prospects are very slim.  The general pay raise, when granted, usually has become effective as of
July 1 after passage of the legislation (and may be in steps that also usually become effective on
July 1).  Therefore, with the possibility of these increases, retire after July 1, in the year in which
the Commission submits its report.


     A third factor to be considered is the date when the pension for a retiring judge will be
annually increased by three per cent (3%).  The annual increase takes place on the first day in each
January after a judge has been retired for a full year.  Thus, a judge who retires in December will
receive the annual increase to the pension in less than thirteen months.  But a judge who retires in
January will have to wait almost twenty-four months to receive the increase.  So, do not retire at
the beginning of the year.


     In summary, it is suggested that retirement occur:
          A.  Near the end of the month,
          B.  After July 1.
          C.  Before January of the next year.

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