Act 447 of 1951: how the old pension formula is computed

Why a 1951 statute decides what you will collect

**Act 447 of May 15, 1951** created the Government Employees Retirement System. Many people consider it dead since Act 106-2017, and it is exactly the opposite: Act 106 **froze** each participant's Accrued Pension **computed under their system's provisions as of the 2017 cut**. That is, for everyone who started working before that date, the formula that decides part of their check **is this one**.

This guide explains that formula: where the percentages come from, what «average compensation» exactly is, and why two employees with the same years of service can collect different amounts.

Two warnings first. **One:** Act 447 has been amended dozens of times since 1951 and the official OGP compilation we used is revised to **August 2, 2025**. What follows is what that text says. **Two:** we compute nobody's pension here. Your figure depends on your entry date, your system and your record, and the one who computes it is the Retirement Board.

The base formula: 1.5% up to twenty years, 2% beyond

**Article 2-101(a)** puts it this way: the annuity amount shall be **one and a half percent (1.5%) of average compensation**, multiplied by the number of credited service years **up to twenty (20) years**, **plus two percent (2%)** of average compensation multiplied by credited years **in excess of twenty (20)**.

In round numbers, and computing nobody's case: twenty years yield 30% of average compensation (20 × 1.5%). Year twenty-one is worth 2%, not 1.5%. That is why years past the twentieth weigh more, and why leaving at nineteen and a half years costs more than it looks.

But the percentage is not everything. That same article says **when the full annuity is paid**: it is payable **in full** to those retiring at **fifty-eight (58) or older**, and to members of the Police Corps or Fire Corps retiring at **fifty (50) or older** having completed at least **twenty-five (25)** years of creditable service.

And here is the reduction that surprises many: **except for police and firefighters**, anyone who applies for and is granted an annuity **before turning 58** receives it **reduced**, reduced to the sum that, for their age on the retirement date, represents the **actuarial equivalent** of a pension payable at 58. It is not a discretionary penalty: it is an actuarial conversion.

«Average compensation» does not mean the same for everyone

This is the figure that changes the result most and the one most people get wrong. The statute carries **two different definitions**, and which one applies depends on when you entered.

**If you entered the System on or before April 1, 1990.** **Article 1-102(14)** defines average compensation as **«the highest annual average compensation of a System participant during any three (3) years of creditable service»**. Note «any»: the three best years, not the last three.

**If you first entered after April 1, 1990.** **Article 1-108** changes the rule: it is computed **on the average of the last five (5) years** of credited service, and that five-year period is the base period.

And that same Article 1-108 carries an anti-spiking rule worth knowing: if the annual compensation of any year in the base period **exceeds by more than ten percent (10%)** the compensation of the immediately preceding year, **whatever exceeds that 10% is excluded** from the computation. A large raise in the final year does not inflate the pension as much as people think.

For that same group, **Article 1-109** adds that services rendered **are credited on the basis of full months**.

When you could leave, under the old statute

**Article 2-101(a)** sets the exit doors of the defined benefit program:

And it defines the **deferred retirement annuity** for those who separate early: participants whose separation occurs **before age 58**, with **at least 10 and fewer than 25 years** of credited service, who have **not requested or received a refund of their accumulated contributions**, are entitled to a deferred annuity at **58**, or at **50** for police and firefighters and **55** for other participants, if in either case they completed **at least 25 years** of service.

That condition of **not having taken the refund of contributions** appears again and again in the statute. Withdrawing your contributions on leaving closes the door to the annuity. It is the decision most people make young without knowing its cost.

The annuity also **begins on the date you file the retirement application**, and in no case before your separation. It is not retroactive to the date you qualified.

• **Optional retirement at 55** with at least **25 years** of credited service.
• **Optional retirement at 58** with at least **10 years** of credited service.
• **Police and firefighters:** additionally, the option of an annuity at **50** with at least **25 years** of credited service.

Those who entered after April 1, 1990: different rules

**Article 2-103** builds a separate regime for «new participants», and it is considerably harsher on age:

**Subsection (a)** also sets a **minimum pension of five hundred (500) dollars a month** for participants who retired under Chapter 2, effective July 1, 2013, providing that any pensioner receiving less would get, from that date, the increase needed to reach that figure. That is what the compiled text says; **how it is applied today, after Act 106-2017, we did not verify** and it must be confirmed with the Retirement Board.

• **Years-of-service annuity (subsection a):** optional **at 65** with a minimum of **10 credited years** and without having requested a refund of contributions. The amount is **1.5% of average compensation × credited years**, flat, with no 2% step.
• **High risk (subsection b):** police and firefighters entering after that date may retire **at 55 with 30 years** of service, and the amount is **75% of average compensation**. If they complete **30 years without reaching 55**, the amount is **65%**.
• **Early retirement (subsection c):** whoever separates **at 55 with at least 25 credited years** receives the subsection (a) annuity **with an actuarial reduction** computed under the Actuarial Guides adopted by the Board of Trustees.
• **Deferred annuity (subsection d):** whoever separates before 65 without having taken a refund is entitled to the annuity **on turning 65**, computed with the subsection (a) formula.

The merit annuity: thirty years, regardless of age

**Article 2-102** creates the option most people chase: retirement is **optional for any participant in active service from the date they have completed at least thirty (30) years of credited service**. It requires no minimum age to open the door.

For participants under the **Coordination Plan** with Social Security who **have not turned 65**, subsection (b) computes the merit annuity as follows:

Subsection (b)(3) carries a limitation worth understanding: **years in excess of thirty serve only as a basis for computing average compensation**. They add no additional percentage in this mode. Working thirty-five years instead of thirty does not take you above 75% by this route.

And subsection (c) warns of the recomputation: **as soon as those participants turn 65 or older and become fully insured** under the Federal Social Security Act, **their pension is recomputed** under the subsection (d) formula.

• **30 or more credited years and under age 55:** **sixty-five percent (65%)** of average compensation.
• **30 or more credited years and age 55 or older:** **seventy-five percent (75%)** of average compensation.

The recomputation at 65 and the $6,600 breakpoint

This is the part of the old statute that causes the most confusion, and it comes from the **Coordination Plan** with Social Security. **Article 2-101(e)** (**excepting members of the Police Corps and mayors**) provides that, for participants under that plan, the annuity is computed with a different formula **from age 65**, if the participant achieved **fully insured** status under the Federal Social Security Act. That formula is the sum of four products, all anchored to a salary cap of **six thousand six hundred dollars ($6,600) a year**:

That same subsection settles the two cases people ask about. If the participant **did not achieve** fully insured status and **does not qualify** for Social Security primary benefits, they receive the base-formula annuity **until they qualify**, and **when they qualify it is recomputed** under this formula. And if retirement **occurred before 65**, they receive the base-formula annuity **until turning 65**, and **on turning 65 it is recomputed**; from then on they collect at the resulting rate.

**Article 2-102(d)** applies the same logic to the merit annuity, also **excepting police and mayors**: at 65 and fully insured, the amount becomes **1.5% of average compensation up to $6,600 a year × credited years**, plus the percentage applicable under subsection (b) on average compensation **in excess** of that $6,600.

What to take from this section is not the arithmetic: it is that **the pension amount can change on turning 65**, by design of the statute, and that this recomputation has been written down for decades. If it happens to you, it is not a Board error.

• **1%** of average compensation **up to $6,600 a year** × credited years, **up to twenty (20) years**.
• **1.5%** of average compensation **up to $6,600 a year** × credited years **in excess of twenty (20)**.
• **1.5%** of average compensation **in excess of that $6,600** × credited years, **up to twenty (20) years**.
• **2%** of average compensation **in excess of that $6,600** × credited years **in excess of twenty (20)**.

What this guide does not do

**We do not compute pensions.** This guide explains where the statute's numbers come from. Your figure depends on your System entry date, on whether you are under the Coordination Plan, on your credited years and your salary record, and the one who officially computes it is the Retirement Board.

**We did not verify the Board of Trustees' Actuarial Guides**, which set the early-retirement actuarial reduction of Article 2-103(c) and the actuarial equivalent of Article 2-101(a). Without them one cannot say how much a pension drops for leaving early, and we will not estimate it.

**We did not verify how the $500 minimum pension** of Article 2-103(a) is applied today after Act 106-2017. The compiled text carries it; its current application must be confirmed.

**And this statute does not operate alone.** Since Act 106-2017, what is collected under this formula is the **Accrued Pension frozen at the 2017 cut**, and everything after goes to a defined contribution account. If what you want is to understand the cut, that is another guide of ours and we link it below.