SB1916 94TH GENERAL ASSEMBLY

LRB094 11572 EFG 42576 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB1916

Introduced 2/25/2005, by Sen. Chris Lauzen

SYNOPSIS AS INTRODUCED:

40 ILCS 5/2-101	from Ch. 108 1/2, par. 2-101
40 ILCS 5/2-101.5 new
40 ILCS 5/2-105	from Ch. 108 1/2, par. 2-105
40 ILCS 5/2-117	from Ch. 108 1/2, par. 2-117
40 ILCS 5/2-117.4 new
40 ILCS 5/14-102.5 new
40 ILCS 5/14-103.05	from Ch. 108 1/2, par. 14-103.05
40 ILCS 5/14-103.40 new
40 ILCS 5/14-103.41 new
40 ILCS 5/14-105.8 new
40 ILCS 5/14-133	from Ch. 108 1/2, par. 14-133
40 ILCS 5/14-133.2 new
40 ILCS 5/15-101.5 new
40 ILCS 5/16-102.5 new
40 ILCS 5/18-101	from Ch. 108 1/2, par. 18-101
40 ILCS 5/18-102	from Ch. 108 1/2, par. 18-102
40 ILCS 5/18-102.5 new
40 ILCS 5/18-112.7 new
40 ILCS 5/18-120	from Ch. 108 1/2, par. 18-120

Amends the Illinois Pension Code. Directs the Board of the State Employees' Retirement System to establish a self-managed plan. Provides that a person who becomes a participant in that System or a judge, constitutional officer, or member of the General Assembly on or after the effective date of that self-managed plan must participate in the self-managed plan. Allows current judges, constitutional officers, members of the General Assembly, and members of the State Employees' Retirement System who are not yet vested to elect to participate in the self-managed plan. Also provides that any future benefit increase or other change in the GA, Judges, State Employees, State Universities, or Downstate Teacher retirement system applies only during periods when the retirement system is at least 90% funded. Effective immediately.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT in relation to public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Pension Code is amended by changing Sections 2-101, 2-105, 2-117, 14-103.05, 14-133, 18-101, 18-102, and 18-120 and by adding Sections 2-101.5, 2-117.4, 14-102.5, 14-103.40, 14-103.41, 14-105.8, 14-133.2, 15-101.5, 16-102.5, 18-102.5, and 18-112.7 as follows:

(40 ILCS 5/2-101) (from Ch. 108 1/2, par. 2-101)

Sec. 2-101. Creation of system. A retirement system is created to provide retirement annuities, survivor's annuities and other benefits for certain members of the General Assembly, certain elected state officials, and their beneficiaries.

The system shall be known as the "General Assembly Retirement System". All its funds and property shall be a trust separate from all other entities, maintained for the purpose of securing payment of annuities and benefits under this Article.

Participation in the retirement system created under this Article is restricted to persons who become participants before the effective date of the self-managed plan established under Section 14-133.2 of this Code. Beginning on that date, the System shall not accept any new participants.

(Source: P.A. 83-1440.)

(40 ILCS 5/2-101.5 new)

Sec. 2-101.5. Limitation on changes in benefits and other terms.

(a) The General Assembly finds and declares that pursuant to Article XIII, Section 5 of the Illinois Constitution, the benefits provided by the retirement plan established under this Article for existing participants in the plan cannot and should not be diminished or impaired. It also finds, however, that the retirement plan is seriously underfunded, and that those benefits should not be further enhanced so long as that underfunding continues.

(b) Notwithstanding any other provision of law, an amendment to this Article (or to any other provision of law that has the effect of changing the provisions of this Article or the terms of the retirement plan established under this Article) that becomes law after the effective date of this Section is intended to be contingent upon the funding status of the System and shall be operative only during periods when the actuarial funding ratio of the System, as determined by the System's most recent actuarial valuation, is at least 90%. Whenever the System's funding ratio is less than 90%, the provisions of all such amendments shall be temporarily inoperative, and the provisions of this Article and the retirement plan established under this Article that were in effect on the effective date of this Section shall be in effect and shall control all benefit elections and calculations and all other matters under this Article.

(40 ILCS 5/2-105) (from Ch. 108 1/2, par. 2-105)

Sec. 2-105. Member. "Member": Members of the General Assembly of this State, including persons who enter military service while a member of the General Assembly, and any person serving as Governor, Lieutenant Governor, Secretary of State, Treasurer, Comptroller, or Attorney General for the period of service in such office.

Any person who has served for 10 or more years as Clerk or Assistant Clerk of the House of Representatives, Secretary or Assistant Secretary of the Senate, or any combination thereof, may elect to become a member of this system while thenceforth engaged in such service by filing a written election with the board. Any person so electing shall be deemed an active member of the General Assembly for the purpose of validating and transferring any service credits earned under any of the funds and systems established under Articles 3 through 18 of this Code.

Notwithstanding any other provision of this Article, however, a person shall not be deemed a member for the purposes of this Article unless he or she became a participant of the System before the effective date of the self-managed plan established under Section 14-133.2 of this Code.

(Source: P.A. 85-1008.)

(40 ILCS 5/2-117) (from Ch. 108 1/2, par. 2-117)

Sec. 2-117. Participants - Election not to participate.

(a) Every person who was a member on November 1, 1947, or in military service on such date, is subject to the provisions of this system beginning upon such date, unless prior to such date he or she filed with the board a written notice of election not to participate.

Every person who becomes a member after November 1, 1947 and before the effective date of the self-managed plan established under Section 14-133.2, and who is then not a participant, becomes a participant beginning upon the date of becoming a member unless, within 24 months from that date, he or she has filed with the board a written notice of election not to participate.

(b) A member who has filed notice of an election not to participate (and a former member who has not yet begun to receive a retirement annuity under this Article) may become a participant with respect to the period for which the member elected not to participate upon filing with the board, before April 1, 1993, a written rescission of the election not to participate. Upon contributing an amount equal to the contributions he or she would have made as a participant from November 1, 1947, or the date of becoming a member, whichever is later, to the date of becoming a participant, with interest at the rate of 4% per annum until the contributions are paid, the participant shall receive credit for service as a member prior to the date of the rescission, both before and after November 1, 1947. The required contributions shall be made before commencement of the retirement annuity; otherwise no credit for service prior to the date of participation shall be granted.

(Source: P.A. 86-273; 87-1265.)

(40 ILCS 5/2-117.4 new)

Sec. 2-117.4. Election to participate in self-managed plan.

(a) A person who, on the day before the effective date of the self-managed plan established under Section 14-133.2 of this Code, is a participant in this System with less than 4 years of creditable service may make a one-time, irrevocable election to terminate participation in this System and instead participate in the self-managed plan established under Section 14-133.2. This election must be made in the manner prescribed in Section 14-105.8 of this Code and must be submitted both to this System and the Article 14 retirement system. Participation in this System shall terminate on the effective date of participation in the self-managed plan established under Section 14-133.2.

(b) For each person who elects to participate in the self-managed plan established under Section 14-133.2, the System shall transfer to the Article 14 retirement system an amount equal to the amount of contribution refund that the person would be eligible to receive under Section 2-123 if he or she terminated employment on that date and elected to receive a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The transfer shall be accomplished as a tax-free transfer in accordance with Internal Revenue Service guidelines, and shall be used to fund the person's opening account balance under the self-managed plan.

(40 ILCS 5/14-102.5 new)

Sec. 14-102.5. Limitation on changes in benefits and other terms.

(a) The General Assembly finds and declares that pursuant to Article XIII, Section 5 of the Illinois Constitution, the benefits provided by the retirement plan established under this Article for existing participants in the plan cannot and should not be diminished or impaired. It also finds, however, that the retirement plan is seriously underfunded, and that those benefits should not be further enhanced so long as that underfunding continues.

(b) Notwithstanding any other provision of law, an amendment to this Article (or to any other provision of law that has the effect of changing the provisions of this Article or the terms of the retirement plan established under this Article) that becomes law after the effective date of this Section is intended to be contingent upon the funding status of the System and shall be operative only during periods when the actuarial funding ratio of the System, as determined by the System's most recent actuarial valuation, is at least 90%. Whenever the System's funding ratio is less than 90%, the provisions of all such amendments shall be temporarily inoperative, and the provisions of this Article and the retirement plan established under this Article that were in effect on the effective date of this Section shall be in effect and shall control all benefit elections and calculations and all other matters under this Article.

(40 ILCS 5/14-103.05) (from Ch. 108 1/2, par. 14-103.05)

Sec. 14-103.05. Employee.

(a) Any person employed by a Department who receives salary for personal services rendered to the Department on a warrant issued pursuant to a payroll voucher certified by a Department and drawn by the State Comptroller upon the State Treasurer, including an elected official described in subparagraph (d) of Section 14-104, shall become an employee for purpose of membership in the Retirement System on the first day of such employment.

A person who becomes a judge, constitutional officer, or member of the General Assembly on or after the effective date of the self-managed plan established under Section 14-133.2 and is not eligible to participate in the Judges Retirement System of Illinois or the General Assembly Retirement System shall be deemed an employee for purposes of membership in this System beginning on the first day of such service.

A person who elects under Section 2-117.4 or 18-112.7 of this Code to participate in the self-managed plan established under Section 14-133.2 shall be deemed an employee for purposes of membership in this System beginning on the first day of participation in the self-managed plan.

A person entering service on or after January 1, 1972 and prior to January 1, 1984 shall become a member as a condition of employment and shall begin making contributions as of the first day of employment.

A person entering service on or after January 1, 1984 shall, upon completion of 6 months of continuous service which is not interrupted by a break of more than 2 months, become a member as a condition of employment. Contributions shall begin the first of the month after completion of the qualifying period.

The qualifying period of 6 months of service is not applicable to: (1) a person who has been granted credit for service in a position covered by the State Universities Retirement System, the Teachers' Retirement System of the State of Illinois, the General Assembly Retirement System, or the Judges Retirement System of Illinois unless that service has been forfeited under the laws of those systems; (2) a person entering service on or after July 1, 1991 in a noncovered position; or (3) a person to whom Section 14-108.2a or 14-108.2b applies; or (4) a person who is serving as a judge, constitutional officer, or member of the General Assembly.

(b) The term "employee" does not include the following:

(1) persons participating in members of the State Legislature, and persons electing to become members of the General Assembly Retirement System pursuant to Section 2-105;

(2) incumbents of offices normally filled by vote of the people, other than judges, constitutional officers, and members of the General Assembly;

(3) except as otherwise provided in this Section, any person appointed by the Governor with the advice and consent of the Senate unless that person elects to participate in this system;

(3.1) any person serving as a commissioner of an ethics commission created under the State Officials and Employees Ethics Act unless that person elects to participate in this system with respect to that service as a commissioner;

(3.2) any person serving as a part-time employee in any of the following positions: Legislative Inspector General, Special Legislative Inspector General, employee of the Office of the Legislative Inspector General, Executive Director of the Legislative Ethics Commission, or staff of the Legislative Ethics Commission, regardless of whether he or she is in active service on or after July 8, 2004 (the effective date of Public Act 93-685), unless that person elects to participate in this System with respect to that service; in this item (3.2), a "part-time employee" is a person who is not required to work at least 35 hours per week;

(3.3) any person who has made an election under Section 1-123 and who is serving either as legal counsel in the Office of the Governor or as Chief Deputy Attorney General;

(4) except as provided in Section 14-108.2 or 14-108.2c, any person who is covered or eligible to be covered by the Teachers' Retirement System of the State of Illinois, the State Universities Retirement System, or the Judges Retirement System of Illinois;

(5) an employee of a municipality or any other political subdivision of the State;

(6) any person who becomes an employee after June 30, 1979 as a public service employment program participant under the Federal Comprehensive Employment and Training Act and whose wages or fringe benefits are paid in whole or in part by funds provided under such Act;

(7) enrollees of the Illinois Young Adult Conservation Corps program, administered by the Department of Natural Resources, authorized grantee pursuant to Title VIII of the "Comprehensive Employment and Training Act of 1973", 29 USC 993, as now or hereafter amended;

(8) enrollees and temporary staff of programs administered by the Department of Natural Resources under the Youth Conservation Corps Act of 1970;

(9) any person who is a member of any professional licensing or disciplinary board created under an Act administered by the Department of Professional Regulation or a successor agency or created or re-created after the effective date of this amendatory Act of 1997, and who receives per diem compensation rather than a salary, notwithstanding that such per diem compensation is paid by warrant issued pursuant to a payroll voucher; such persons have never been included in the membership of this System, and this amendatory Act of 1987 (P.A. 84-1472) is not intended to effect any change in the status of such persons;

(10) any person who is a member of the Illinois Health Care Cost Containment Council, and receives per diem compensation rather than a salary, notwithstanding that such per diem compensation is paid by warrant issued pursuant to a payroll voucher; such persons have never been included in the membership of this System, and this amendatory Act of 1987 is not intended to effect any change in the status of such persons;

(11) any person who is a member of the Oil and Gas Board created by Section 1.2 of the Illinois Oil and Gas Act, and receives per diem compensation rather than a salary, notwithstanding that such per diem compensation is paid by warrant issued pursuant to a payroll voucher; or

(12) a person employed by the State Board of Higher Education in a position with the Illinois Century Network as of June 30, 2004, who remains continuously employed after that date by the Department of Central Management Services in a position with the Illinois Century Network and participates in the Article 15 system with respect to that employment.

(Source: P.A. 92-14, eff. 6-28-01; 93-685, eff. 7-8-04; 93-839, eff. 7-30-04; 93-1069, eff. 1-15-05.)

(40 ILCS 5/14-103.40 new)

Sec. 14-103.40. Traditional Benefit Package. "Traditional benefit package": The defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System as provided in Sections 14-107, 14-108, 14-108.3, 14-108.4, 14-109, 14-110, 14-112, 14-113, 14-114, and 14-115; disability benefits payable under Sections 14-123, 14-123.1, 14-124, 14-125, 14-125.1, and 14-126; death benefits payable directly from the System as provided in Sections 14-116, 14-117, and 14-128; widow's annuities and survivor's benefits payable directly from the System as provided in Sections 14-118, 14-119, 14-120, 14-121, 14-121.1, and 14-122; and contribution refunds as provided in Section 14-130.

(40 ILCS 5/14-103.41 new)

Sec. 14-103.41. Self-Managed Plan. "Self-managed plan": The defined contribution retirement program maintained under the System as described in Section 14-133.2. The self-managed plan also includes disability benefits as provided in Sections 14-123, 14-123.1, 14-124, 14-125, 14-125.1, and 14-126. The self-managed plan does not include retirement annuities, death benefits, or widow's or survivor's benefits payable directly from the System as provided in Sections 14-107, 14-108, 14-108.3, 14-108.4, 14-109, 14-110, 14-112, 14-113, 14-114, 14-115, 14-116, 14-117, 14-118, 14-119, 14-120, 14-121, 14-121.1, 14-122, and 14-128 or refunds determined under Section 14-130.

(40 ILCS 5/14-105.8 new)

Sec. 14-105.8. Retirement program elections.

(a) Until the effective date of the self-managed plan established under Section 14-133.2, all participating employees are participants under the traditional benefit package.

(b) All participating employees who first become members of the System on or after the effective date of the self-managed plan shall be participants under the self-managed plan.

(c) A person who, on the day before the effective date of the self-managed plan, is a participating employee in this System with less than 8 years of creditable service may make a one-time, irrevocable election to participate in the self-managed plan. This election must be made in writing, in the manner prescribed by the System, and within 60 days after the effective date of the self-managed plan. If an employee terminates employment after making the election to participate in the self-managed plan, then any subsequent return to participation in the System shall be as a participant in the self-managed plan.

An eligible employee who fails to make this election shall, by default, participate in the traditional benefit package.

(d) A person who, on the day before the effective date of the self-managed plan, is a participating employee in the Article 2 or Article 18 retirement system with less than 4 years of creditable service in that system may make a one-time, irrevocable election to terminate participation in that Article 2 or 18 retirement system and instead participate in the self-managed plan established under Section 14-133.2. This election must be made in writing, in the manner prescribed by this System, and within 60 days after the effective date of the self-managed plan, and must be submitted both to this System and the Article 2 or 18 retirement system. If the person terminates employment after making the election to participate in the self-managed plan, then any subsequent return to participation in this System shall be as a participant in the self-managed plan.

(e) An eligible employee shall be provided with written information prepared or prescribed by the System that describes the employee's retirement program choices. Each eligible employee shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(40 ILCS 5/14-133) (from Ch. 108 1/2, par. 14-133)

Sec. 14-133. Contributions on behalf of members.

(a) Each participating employee shall make contributions to the System, based on the employee's compensation, as follows:

(1) Covered employees, except as indicated below, 3.5% for retirement annuity, and 0.5% for a widow or survivors annuity;

(2) Noncovered employees, except as indicated below, 7% for retirement annuity and 1% for a widow or survivors annuity;

(3) Noncovered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter;

(4) Covered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(5) Each security employee of the Department of Corrections or of the Department of Human Services who is a covered employee, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(6) Each security employee of the Department of Corrections or of the Department of Human Services who is not a covered employee, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter.

(a-1) Notwithstanding any provision in subsection (a) to the contrary, in the case of an employee who participates in the self-managed plan under Section 14-133.2, contributions for widow or survivors annuity shall instead be used to finance the benefits available under Section 14-133.2.

(b) Contributions shall be in the form of a deduction from compensation and shall be made notwithstanding that the compensation paid in cash to the employee shall be reduced thereby below the minimum prescribed by law or regulation. Each member is deemed to consent and agree to the deductions from compensation provided for in this Article, and shall receipt in full for salary or compensation.

(Source: P.A. 92-14, eff. 6-28-01.)

(40 ILCS 5/14-133.2 new)

Sec. 14-133.2. Self-managed plan.

(a) Adoption of Plan. The Board of Trustees of the System shall establish and administer a self-managed plan, which shall offer participating employees the opportunity to accumulate assets for retirement through a combination of employee and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination thereof. The self-managed plan shall be funded by contributions from employees participating in the self-managed plan and State contributions as provided in this Section. The plan must be qualified under the Internal Revenue Code of 1986. The self-managed plan shall take effect on a date specified by the Board, which shall be as soon as may practicable, but in no event before it receives U.S. Internal Revenue Service approval.

(b) Administration of Plan. The State Employees' Retirement System of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and prescribe such rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(c) Selection of service providers and funding vehicles. The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participating employees and the State;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of employees.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

(d) Employee Direction. Employees who are participating in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the employer guarantees any of the investments in the employee's account balances.

(e) Participation. For an employee who is required to participate in the self-managed plan under Section 14-105.8(b), participation in the self-managed plan shall begin on the first day of participation in this System. For an employee who elects to participate in the self-managed plan under Section 14-105.8(c), participation in the self-managed plan shall begin on the first day of the first pay period following the later of the date the employee's election is filed with the System or the effective date of the self-managed plan. For an employee who elects to participate in the self-managed plan under Section 14-105.8(d), participation in the self-managed plan shall begin on the later of the first day of the month following the month in which the employee's election is filed with the System or the effective date of the self-managed plan. An employee's participation in the traditional benefit package under this Article terminates on the date that participation in the self-managed plan begins.

An employee who participates in the self-managed plan under this Section must continue participation while employed in an eligible position, and may not participate in the traditional benefit package administered by the System under this Article while employed by the State under this Article.

Participation in the self-managed plan under this Section shall constitute membership in the State Employees' Retirement System of Illinois.

A participant under the self-managed plan shall be entitled to the benefits of Article 20 of this Code.

(f) No Duplication of Service Credit. Notwithstanding any other provision of this Article, an employee may not purchase or receive service or service credit applicable to the traditional benefit package under this Article for any period during which the employee was a participant in the self-managed plan established under this Section.

(g) Initial Account Balance. If, at the time an employee under this System elects to participate in the self-managed plan, he or she has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the employee an initial account balance in the self-managed plan, equal to the amount of contribution refund that the employee would be eligible to receive under Section 14-130 if the employee terminated employment on that date and elected a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the employee's initial account balance.

At the time a person elects to participate in the self-managed plan under Section 2-117.4 or 18-112.7, the System shall establish for the person an initial account balance in the self-managed plan, equal to the amount transferred to this System under whichever of those Sections is applicable.

No State contributions shall be transferred to the self-managed plan when the employee's initial account balance is established.

(h) Employee Contributions. The contribution rate for employees participating in the self-managed plan under this Section shall be equal to the employee contribution rate applicable to participants of the same class under Section 14-133. This required contribution shall be made as an "employer pick-up" under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any employee who participated in the System's traditional benefit package prior to his or her participation in the self-managed plan shall continue to have the employer pick up the contributions required under Section 14-133. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall an employee have an option of receiving these amounts in cash. Employees may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules prescribed by the System.

(i) Employer Contributions. Employers shall make employer contributions to the System for employees who participate in the self-managed plan in the same manner as for employees who participate in the traditional benefit package. Employer contributions to the self-managed plan shall commence as of the same pay period as the employee's participation. In the case of a person who elects under Section 2-117.4 or 18-112.7 of this Code to participate in the self-managed plan, employer contributions to the plan shall be paid by the State Comptroller out of moneys appropriated and available for that purpose.

The program shall provide for employer contributions to be credited to each self-managed plan participant at a rate of 7.6% of the participating employee's salary, less the amount used by the System to provide disability benefits for the employee. The amounts so credited shall be paid into the participant's self-managed plan accounts in a manner to be prescribed by the System.

The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement any procedures necessary to obtain the required funding from the General Revenue Fund.

An amount of employer contribution, not exceeding 1% of the participating employee's salary, shall be used for the purpose of providing the disability benefits of the System to the employee. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of employer contributions to be allocated during that plan year for providing disability benefits for employees in the self-managed plan.

(j) Vesting; Withdrawal; Return to Service. A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) completion of 8 years of service credit under this Article; (2) the death of the participating employee while employed by an employer under this Article, if the participant has completed at least 1.5 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code. In the case of a person who elects to participate in the self-managed plan under Section 2-117.4 or 18-112.8, the service credit terminated under those Sections shall be included in the calculation of service credit under this subsection.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed, the participant shall be considered a new employee. If a former participant again becomes a participating employee (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all such rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(k) Benefit amounts. If an employee participating in the self-managed plan who is vested in employer contributions terminates employment, the employee shall be entitled to a benefit that is based on the account values attributable to both employer and employee contributions and any investment return thereon.

If an employee participating in the self-managed plan who is not vested in employer contributions terminates employment, the employee shall be entitled to a benefit based solely on the account values attributable to the employee's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used as directed by the System for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participating employees.

(40 ILCS 5/15-101.5 new)

Sec. 15-101.5. Limitation on changes in benefits and other terms.

(a) The General Assembly finds and declares that pursuant to Article XIII, Section 5 of the Illinois Constitution, the benefits provided by the retirement plan established under this Article for existing participants in the plan cannot and should not be diminished or impaired. It also finds, however, that the retirement plan is seriously underfunded, and that those benefits should not be further enhanced so long as that underfunding continues.

(b) Notwithstanding any other provision of law, an amendment to this Article (or to any other provision of law that has the effect of changing the provisions of this Article or the terms of the retirement plan established under this Article) that becomes law after the effective date of this Section is intended to be contingent upon the funding status of the System and shall be operative only during periods when the actuarial funding ratio of the System, as determined by the System's most recent actuarial valuation, is at least 90%. Whenever the System's funding ratio is less than 90%, the provisions of all such amendments shall be temporarily inoperative, and the provisions of this Article and the retirement plan established under this Article that were in effect on the effective date of this Section shall be in effect and shall control all benefit elections and calculations and all other matters under this Article.

(40 ILCS 5/16-102.5 new)

Sec. 16-102.5. Limitation on changes in benefits and other terms.

(a) The General Assembly finds and declares that pursuant to Article XIII, Section 5 of the Illinois Constitution, the benefits provided by the retirement plan established under this Article for existing participants in the plan cannot and should not be diminished or impaired. It also finds, however, that the retirement plan is seriously underfunded, and that those benefits should not be further enhanced so long as that underfunding continues.

(b) Notwithstanding any other provision of law, an amendment to this Article (or to any other provision of law that has the effect of changing the provisions of this Article or the terms of the retirement plan established under this Article) that becomes law after the effective date of this Section is intended to be contingent upon the funding status of the System and shall be operative only during periods when the actuarial funding ratio of the System, as determined by the System's most recent actuarial valuation, is at least 90%. Whenever the System's funding ratio is less than 90%, the provisions of all such amendments shall be temporarily inoperative, and the provisions of this Article and the retirement plan established under this Article that were in effect on the effective date of this Section shall be in effect and shall control all benefit elections and calculations and all other matters under this Article.

(40 ILCS 5/18-101) (from Ch. 108 1/2, par. 18-101)

Sec. 18-101. Creation of fund.

A retirement system is created to be known as the "Judges Retirement System of Illinois". It shall be a trust separate and distinct from all other entities, maintained for the purpose of securing the payment of annuities and benefits as prescribed herein.

Participation in the retirement system created under this Article is restricted to persons who become participants before the effective date of the self-managed plan established under Section 14-133.2 of this Code. Beginning on that date, the System shall not accept any new participants.

(Source: Laws 1963, p. 161.)

(40 ILCS 5/18-102) (from Ch. 108 1/2, par. 18-102)

Sec. 18-102. Purpose.

The purpose of the system is to establish an efficient method of permitting retirement, without hardship or prejudice, of certain judges who are aged or otherwise incapacitated, by enabling them to accumulate reserves for themselves and their dependents for old age, disability, death, and termination of employment.

(Source: Laws 1963, p. 161.)

(40 ILCS 5/18-102.5 new)

Sec. 18-102.5. Limitation on changes in benefits and other terms.

(a) The General Assembly finds and declares that pursuant to Article XIII, Section 5 of the Illinois Constitution, the benefits provided by the retirement plan established under this Article for existing participants in the plan cannot and should not be diminished or impaired. It also finds, however, that the retirement plan is seriously underfunded, and that those benefits should not be further enhanced so long as that underfunding continues.

(b) Notwithstanding any other provision of law, an amendment to this Article (or to any other provision of law that has the effect of changing the provisions of this Article or the terms of the retirement plan established under this Article) that becomes law after the effective date of this Section is intended to be contingent upon the funding status of the System and shall be operative only during periods when the actuarial funding ratio of the System, as determined by the System's most recent actuarial valuation, is at least 90%. Whenever the System's funding ratio is less than 90%, the provisions of all such amendments shall be temporarily inoperative, and the provisions of this Article and the retirement plan established under this Article that were in effect on the effective date of this Section shall be in effect and shall control all benefit elections and calculations and all other matters under this Article.

(40 ILCS 5/18-112.7 new)

Sec. 18-112.7. Election to participate in self-managed plan.

(a) A person who, on the day before the effective date of the self-managed plan established under Section 14-133.2 of this Code, is a participant in this System with less than 4 years of creditable service may make a one-time, irrevocable election to terminate participation in this System and instead participate in the self-managed plan established under Section 14-133.2. This election must be made in the manner prescribed in Section 14-105.8 of this Code and must be submitted both to this System and the Article 14 retirement system. Participation in this System shall terminate on the effective date of participation in the self-managed plan established under Section 14-133.2.

(b) For each person who elects to participate in the self-managed plan established under Section 14-133.2, the System shall transfer to the Article 14 retirement system an amount equal to the amount of contribution refund that the person would be eligible to receive under Section 18-129 if he or she terminated employment on that date and elected to receive a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The transfer shall be accomplished as a tax-free transfer in accordance with Internal Revenue Service guidelines, and shall be used to fund the person's opening account balance under the self-managed plan.

(40 ILCS 5/18-120) (from Ch. 108 1/2, par. 18-120)

Sec. 18-120. Employee participation. An eligible judge who is not a participant shall become a participant beginning on the date he or she becomes an eligible judge, unless the judge files with the board a written notice of election not to participate within 30 days of the date of being notified of the option.

A person electing not to participate shall thereafter be ineligible to become a participant unless the election is revoked as provided in Section 18-121.

Notwithstanding any other provision of this Article, however, a person shall not be deemed an eligible or participating judge for the purposes of this Article unless he or she became a participant of the System before the effective date of the self-managed plan established under Section 14-133.2 of this Code.

(Source: P.A. 83-1440.)

Section 99. Effective date. This Act takes effect upon becoming law.