Chicago Heights Aims to Cut Costs with Early Retirement Incentive

The could reduce its workforce costs significantly if the newly-approved Early Retirement Incentive program entices enough employees.

Last Wednesday the City Council approved use of a program from the Illinois Municipal Retirement Fund aimed at offering eligible employees a buyout so they can retire up to five years early.

The benefit to the city would be the option of not replacing the retiree by instead distributing his or her responsibilities to current employees, Mayor David Gonzalez said. The city could also choose to replace the employee but pay the replacement a lesser salary, also reducing manpower costs, the mayor added.

To retire five years early, employees would have to pay 4.5 percent of the yearly salary they would have received those five years. The city would also incur an Early Retirement Incentive cost for each retiree based on his or her salary.

An example Gonzalez gave at the council meeting involved an employee that makes $50,243 per year. To retire early, that employee would have to pay a little more than $11,304, which equals around $471 per month over two years with no interest. The ERI cost the city must pay for this employee is $9,000 per year.

If the city decided not to replace that employee, the city expects to save more than $56,000 per year, due to unloading medical benefits, FICA costs and IMRF costs along with the employee's salary. 

In the same example, if the city did replace the employee, but at a reduced yearly salary of $33,000, the mayor said it would still save more than $10,000 per year.

Gonzalez said 26 employees are eligible for the Early Retirement Incentive. The ERI cost the city must pay is based on how many employees take the buyout. Regardless, the city must pay the ERI cost off completely before it can offer another round of buyouts, Corperation Counsel T.J. Somer said at the meeting. 

The city will concentrate on not replacing retirees, if possible, according to Gonzalez.