98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB2349

 

Introduced , by Rep. John E. Bradley

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/24-101  from Ch. 108 1/2, par. 24-101
40 ILCS 5/24-105.1
40 ILCS 5/24-107  from Ch. 108 1/2, par. 24-107

    Amends the Deferred Compensation Article of the Illinois Pension Code. Provides that a school district or community college district may administer a plan authorized in Section 403(b) of the Internal Revenue Code of 1986 and may authorize companies to provide annuities and other investments as part of the plan without a competitive selection process, subject to certain stated conditions. Among those conditions, provides that the company may not charge more than 10 times the fees and expenses of an investment in the deferred compensation plan for State employees. Effective immediately.


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FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Sections 24-101, 24-105.1, and 24-107 as follows:
 
6    (40 ILCS 5/24-101)  (from Ch. 108 1/2, par. 24-101)
7    Sec. 24-101. Notwithstanding any law to the contrary, the
8State of Illinois or any unit of local government or school
9district may enter into a written contract with any of its
10employees to defer a part of their gross compensation and may
11invest such funds in any such manner as prescribed by the
12deferred compensation program adopted by it under this Article.
13Compensation deferred pursuant to a deferred compensation
14program adopted under this Article shall not exceed the amount
15of compensation allowed to be deferred without being subject to
16income tax in the year in which it is earned, pursuant to
17Section 403(b) or 457 of the United States Internal Revenue
18Code or laws supplementary or amendatory thereto.
19    It is hereby declared to be in the public interest to
20provide public employees with a plan for the deferral of
21compensation and the accrual of income and gain thereon if such
22deferred compensation be invested, and to encourage the
23continued service of public employees by making available such

 

 

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1benefits to them.
2(Source: P.A. 82-145.)
 
3    (40 ILCS 5/24-105.1)
4    Sec. 24-105.1. Changes in federal law. To the extent that
5federal law or regulations which require a governmental
6employer to own the assets of its deferred compensation plan
7are changed to allow plans established under Section 403(b) or
8457 of the Internal Revenue Code to hold their assets in trust,
9a custodial account, an annuity contract, an insurance contract
10or some other contract, the Department of Central Management
11Services and units of local government with plans established
12under Section 24-107 shall within a reasonable time amend their
13plans accordingly.
14(Source: P.A. 89-478, eff. 6-18-96.)
 
15    (40 ILCS 5/24-107)  (from Ch. 108 1/2, par. 24-107)
16    Sec. 24-107. Local government plans.
17    (a) Any unit of local government or school district may
18establish for its employees a deferred compensation program.
19Participation shall be by written agreement between each
20employee and the legislative authority of the unit of local
21government or school district providing for the deferral of
22such compensation and the subsequent investment and
23administration of such funds.
24    (b) Any unit of local government may establish an

 

 

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1employer-funded money purchase retirement plan for those of its
2full time employees who are not eligible to participate in any
3pension fund or retirement system established under Articles 2
4through 18 of this Code. Contributions to the plan shall be
5made by the unit of local government only from general purpose
6funds not derived from real property taxes imposed by the unit,
7at a rate to be determined from time to time by the unit of
8local government. However, the rate of employer contribution
9shall be (i) the same for all employees participating in the
10plan, and (ii) not more than 10% of the employee's salary.
11    Any benefits accruing to the participants in a retirement
12plan established under this subsection shall be protected from
13impairment in accordance with Article XIII, Section 5 of the
14Illinois Constitution. However, the unit of local government
15establishing such a plan may terminate it at any time, unless
16it has otherwise contractually agreed with its participating
17employees.
18    (c) The agency or department designated by the unit of
19local government or school district to establish and administer
20a plan or program authorized under subsection (a) or (b) of
21this Section may invest the assets of the plan in investments
22deemed appropriate by the agency or department, including but
23not limited to life insurance or annuity contracts, and share
24or share certificate accounts of State or federal credit
25unions, the accounts of which are insured as required by the
26Illinois Credit Union Act or the Federal Credit Union Act,

 

 

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1whichever is applicable. The payment of employer contributions
2to a retirement plan established under subsection (b), and
3investment and payment to a participant of deferred
4compensation and income or gain thereon, if any, shall not be
5construed to be prohibited uses of the general assets of the
6unit of local government or school district.
7    (d) A school district or community college district may
8administer a plan authorized in Section 403(b) of the Internal
9Revenue Code of 1986, and its subsequent amendments, and may
10authorize companies to provide annuities and other investments
11as part of the plan without a competitive selection process, if
12the school district or community college district includes the
13following provisions in its agreements with the authorized
14companies:
15        (1) The company will fully disclose all fees and
16    expenses to the school or community college district and to
17    employees.
18        (2) No annuity or other investment will have total fees
19    and expenses that are more than (i) double the fees charged
20    by the same company to a public employee for a similar
21    product in a contiguous state or (ii) 10 times the fees and
22    expenses of an investment in the deferred compensation plan
23    for State employees.
24        (3) No individual product fees will be charged to
25    participants in the plan, including but not limited to
26    surrender fees, back-end loads, and redemption fees.

 

 

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1        (4) The company will not provide undisclosed
2    commissions or incentives to agents, representatives, or
3    brokers, including but not limited to free trips and cash
4    bonuses.
5        (5) Nothing of value, including but not limited to
6    cash, food, and drink, will be provided by any employee or
7    representative of the company, or any agent,
8    representative, or broker, to an officer or employee of the
9    school or community college to gain access to the officer
10    or employee.
11    This Section does not limit the power or authority of any
12unit of local government, school district or any institution
13supported in whole or in part by public funds to establish and
14administer any other deferred compensation plans other than
15those described herein that may be authorized by law and deemed
16appropriate by the officials of such subdivisions or
17institutions.
18(Source: P.A. 87-794.)
 
19    Section 99. Effective date. This Act takes effect upon
20becoming law.