101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB2740

 

Introduced , by Rep. Thomas Morrison

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the General Assembly, State Employee, State Universities, Downstate Teachers, and Judges Articles of the Illinois Pension Code. Requires the Board of each System to establish and maintain a voluntary defined contribution plan to address the retirement preparedness gap for participants in a defined benefit plan who are not on track to maintain their standard of living in retirement. Provides that the contribution rate shall be established by the Board. Provides that the plan shall exist and serve in addition to other retirement, pension, and benefit plans established under the Code. Provides that any Tier 2 participant who first becomes a participant on or after establishment of the plan shall automatically be enrolled, unless he or she opts out within 60 days after first becoming a participant. Authorizes Tier 1 participants and Tier 2 participants who first became participants before the plan was established to enroll in the plan. Contains provisions concerning investment options, qualified plan status, and distribution requirements. Defines terms and repeals a definition added by Public Act 98-599, which has been held unconstitutional. Effective immediately.


LRB101 09219 RPS 54313 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB2740LRB101 09219 RPS 54313 b

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 adding
5Sections 2-105.3, 2-165.5, 14-103.42, 14-155.5, 15-200.5,
616-106.42, 16-205.5, 18-110.1, 18-110.2, and 18-121.5 as
7follows:
 
8    (40 ILCS 5/2-105.3 new)
9    Sec. 2-105.3. Tier 1 participant; Tier 2 participant. "Tier
101 participant": A participant who first became a participant
11before January 1, 2011.
12    "Tier 2 participant": A participant who first became a
13participant on or after January 1, 2011.
 
14    (40 ILCS 5/2-165.5 new)
15    Sec. 2-165.5. Defined contribution plan.
16    (a) Authority. No later than one year after the effective
17date of this amendatory Act of the 101st General Assembly, the
18Board shall establish and maintain a defined contribution plan
19to address the retirement preparedness gap for participants in
20a defined benefit plan who are not on track to maintain their
21standard of living in retirement. The plan shall be designed as
22a qualified tax-deferred savings plan under the Internal

 

 

HB2740- 2 -LRB101 09219 RPS 54313 b

1Revenue Code of 1986, as amended. The plan shall exist and
2serve in addition to other retirement, pension, and benefit
3plans established under this Code. All assets and income of the
4plan shall be held in trust for the exclusive benefit of
5participants and their beneficiaries.
6    (b) Enrollment. Tier 1 participants and Tier 2 participants
7who first became participants before the defined contribution
8plan was established shall have the opportunity to voluntarily
9elect to enroll in the plan. Each Tier 2 participant who
10becomes a participant on or after the establishment of the
11defined contribution plan shall be automatically enrolled in
12the plan at a contribution rate that is established by the
13Board, unless he or she opts out within 60 days after the date
14that he or she becomes a participant.
15    (c) Investments. The plan shall be designed to enable
16participants to generate a stream of income to replace their
17pre-retirement income in retirement. The Board shall establish
18a default investment option in which employees are
19automatically invested upon initial enrollment in the plan or
20upon re-enrollment in the plan and absent direction by the
21participant to the contrary. Such investment in a default
22investment option shall be deemed to have been made by
23participant direction so long as the Board has provided
24reasonable notice and description of the default investment
25option and the participant's right to select other investment
26options.

 

 

HB2740- 3 -LRB101 09219 RPS 54313 b

1    (d) Distributions. The plan shall provide a variety of
2options for distributions to participants and their
3beneficiaries and shall meet the relevant requirements of the
4Internal Revenue Code of 1986, as amended. The manner and
5timing of benefit distributions shall meet the distribution
6requirements of Section 401(a)(9) of the Internal Revenue Code
7of 1986, as amended. Distributions upon the death of the
8participant shall meet the requirements of Section 401(a)(37)
9of the Internal Revenue Code of 1986, as amended.
 
10    (40 ILCS 5/14-103.42 new)
11    Sec. 14-103.42. Tier 2 member. "Tier 2 member": A member of
12this System who first becomes a member under this Article on or
13after January 1, 2011 and who is not a Tier 1 member.
 
14    (40 ILCS 5/14-155.5 new)
15    Sec. 14-155.5. Defined contribution plan.
16    (a) Authority. No later than one year after the effective
17date of this amendatory Act of the 101st General Assembly, the
18Board shall establish and maintain a defined contribution plan
19to address the retirement preparedness gap for participants in
20a defined benefit plan who are not on track to maintain their
21standard of living in retirement. The plan shall be designed as
22a qualified tax-deferred savings plan under the Internal
23Revenue Code of 1986, as amended. The plan shall exist and
24serve in addition to other retirement, pension, and benefit

 

 

HB2740- 4 -LRB101 09219 RPS 54313 b

1plans established under this Code. All assets and income of the
2plan shall be held in trust for the exclusive benefit of
3participants and their beneficiaries.
4    (b) Enrollment. Tier 1 members and Tier 2 members who first
5became participants before the defined contribution plan was
6established shall have the opportunity to voluntarily elect to
7enroll in the plan. Each Tier 2 member who becomes a
8participant on or after the establishment of the defined
9contribution plan shall be automatically enrolled in the plan
10at a contribution rate that is established by the Board, unless
11he or she opts out within 60 days after the date that he or she
12becomes a participant.
13    (c) Investments. The plan shall be designed to enable
14participants to generate a stream of income to replace their
15pre-retirement income in retirement. The Board shall establish
16a default investment option in which employees are
17automatically invested upon initial enrollment in the plan or
18upon re-enrollment in the plan and absent direction by the
19participant to the contrary. Such investment in a default
20investment option shall be deemed to have been made by
21participant direction so long as the Board has provided
22reasonable notice and description of the default investment
23option and the participant's right to select other investment
24options.
25    (d) Distributions. The plan shall provide a variety of
26options for distributions to participants and their

 

 

HB2740- 5 -LRB101 09219 RPS 54313 b

1beneficiaries and shall meet the relevant requirements of the
2Internal Revenue Code of 1986, as amended. The manner and
3timing of benefit distributions shall meet the distribution
4requirements of Section 401(a)(9) of the Internal Revenue Code
5of 1986, as amended. Distributions upon the death of the
6participant shall meet the requirements of Section 401(a)(37)
7of the Internal Revenue Code of 1986, as amended.
 
8    (40 ILCS 5/15-200.5 new)
9    Sec. 15-200.5. Defined contribution plan.
10    (a) Authority. No later than one year after the effective
11date of this amendatory Act of the 101st General Assembly, the
12Board shall establish and maintain a defined contribution plan
13to address the retirement preparedness gap for participants in
14a defined benefit plan who are not on track to maintain their
15standard of living in retirement. The plan shall be designed as
16a qualified tax-deferred savings plan under the Internal
17Revenue Code of 1986, as amended. The plan shall exist and
18serve in addition to other retirement, pension, and benefit
19plans established under this Code. All assets and income of the
20plan shall be held in trust for the exclusive benefit of
21participants and their beneficiaries.
22    (b) Enrollment. Tier 1 participants and Tier 2 participants
23who first became participants before the defined contribution
24plan was established shall have the opportunity to voluntarily
25elect to enroll in the plan. Each Tier 2 participant who

 

 

HB2740- 6 -LRB101 09219 RPS 54313 b

1becomes a participant on or after the establishment of the
2defined contribution plan shall be automatically enrolled in
3the plan at a contribution rate that is established by the
4Board, unless he or she opts out within 60 days after the date
5that he or she becomes a participant.
6    (c) Investments. The plan shall be designed to enable
7participants to generate a stream of income to replace their
8pre-retirement income in retirement. The Board shall establish
9a default investment option in which employees are
10automatically invested upon initial enrollment in the plan or
11upon re-enrollment in the plan and absent direction by the
12participant to the contrary. Such investment in a default
13investment option shall be deemed to have been made by
14participant direction so long as the Board has provided
15reasonable notice and description of the default investment
16option and the participant's right to select other investment
17options.
18    (d) Distributions. The plan shall provide a variety of
19options for distributions to participants and their
20beneficiaries and shall meet the relevant requirements of the
21Internal Revenue Code of 1986, as amended. The manner and
22timing of benefit distributions shall meet the distribution
23requirements of Section 401(a)(9) of the Internal Revenue Code
24of 1986, as amended. Distributions upon the death of the
25participant shall meet the requirements of Section 401(a)(37)
26of the Internal Revenue Code of 1986, as amended.
 

 

 

HB2740- 7 -LRB101 09219 RPS 54313 b

1    (40 ILCS 5/16-106.42 new)
2    Sec. 16-106.42. Tier 2 member. "Tier 2 member": A member of
3the System who first becomes a member under this Article on or
4after January 1, 2011 and who is not a Tier 1 member.
 
5    (40 ILCS 5/16-205.5 new)
6    Sec. 16-205.5. Defined contribution plan.
7    (a) Authority. No later than one year after the effective
8date of this amendatory Act of the 101st General Assembly, the
9Board shall establish and maintain a defined contribution plan
10to address the retirement preparedness gap for participants in
11a defined benefit plan who are not on track to maintain their
12standard of living in retirement. The plan shall be designed as
13a qualified tax-deferred savings plan under the Internal
14Revenue Code of 1986, as amended. The plan shall exist and
15serve in addition to other retirement, pension, and benefit
16plans established under this Code. All assets and income of the
17plan shall be held in trust for the exclusive benefit of
18participants and their beneficiaries.
19    (b) Enrollment. Tier 1 members and Tier 2 members who first
20became participants before the defined contribution plan was
21established shall have the opportunity to voluntarily elect to
22enroll in the plan. Each Tier 2 member who becomes a
23participant on or after the establishment of the defined
24contribution plan shall be automatically enrolled in the plan

 

 

HB2740- 8 -LRB101 09219 RPS 54313 b

1at a contribution rate that is established by the Board, unless
2he or she opts out within 60 days after the date that he or she
3becomes a participant.
4    (c) Investments. The plan shall be designed to enable
5participants to generate a stream of income to replace their
6pre-retirement income in retirement. The Board shall establish
7a default investment option in which employees are
8automatically invested upon initial enrollment in the plan or
9upon subsequent re-enrollment and absent direction by the
10participant to the contrary. Such investment in a default
11investment option shall be deemed to have been made by
12participant direction so long as the Board has provided
13reasonable notice and description of the default investment
14option and the participant's right to select other investment
15options.
16    (d) Distributions. The plan shall provide a variety of
17options for distributions to participants and their
18beneficiaries and shall meet the relevant requirements of the
19Internal Revenue Code of 1986, as amended. The manner and
20timing of benefit distributions shall meet the distribution
21requirements of Section 401(a)(9) of the Internal Revenue Code
22of 1986, as amended. Distributions upon the death of the
23participant shall meet the requirements of Section 401(a)(37)
24of the Internal Revenue Code of 1986, as amended.
 
25    (40 ILCS 5/18-110.1 new)

 

 

HB2740- 9 -LRB101 09219 RPS 54313 b

1    Sec. 18-110.1. Tier 1 participant. "Tier 1 participant": A
2participant who first became a participant of this System
3before January 1, 2011.
 
4    (40 ILCS 5/18-110.2 new)
5    Sec. 18-110.2. Tier 2 participant. "Tier 2 participant": A
6participant who first becomes a participant of this System on
7or after January 1, 2011.
 
8    (40 ILCS 5/18-121.5 new)
9    Sec. 18-121.5. Defined contribution plan.
10    (a) Authority. No later than one year after the effective
11date of this amendatory Act of the 101st General Assembly, the
12Board shall establish and maintain a defined contribution plan
13to address the retirement preparedness gap for participants in
14a defined benefit plan who are not on track to maintain their
15standard of living in retirement. The plan shall be designed as
16a qualified tax-deferred savings plan under the Internal
17Revenue Code of 1986, as amended. The plan shall exist and
18serve in addition to other retirement, pension, and benefit
19plans established under this Code. All assets and income of the
20plan shall be held in trust for the exclusive benefit of
21participants and their beneficiaries.
22    (b) Enrollment. Tier 1 participants and Tier 2 participants
23who first became participants before the defined contribution
24plan was established shall have the opportunity to voluntarily

 

 

HB2740- 10 -LRB101 09219 RPS 54313 b

1elect to enroll in the plan. Each Tier 2 participant who
2becomes a participant on or after the establishment of the
3defined contribution plan shall be automatically enrolled in
4the plan at a contribution rate that is established by the
5Board, unless he or she opts out within 60 days after the date
6that he or she becomes a participant.
7    (c) Investments. The plan shall be designed to enable
8participants to generate a stream of income to replace their
9pre-retirement income in retirement. The Board shall establish
10a default investment option in which employees are
11automatically invested upon initial enrollment in the plan or
12upon subsequent re-enrollment and absent direction by the
13participant to the contrary. Such investment in a default
14investment option shall be deemed to have been made by
15participant direction so long as the Board has provided
16reasonable notice and description of the default investment
17option and the participant's right to select other investment
18options.
19    (d) Distributions. The plan shall provide a variety of
20options for distributions to participants and their
21beneficiaries and shall meet the relevant requirements of the
22Internal Revenue Code of 1986, as amended. The manner and
23timing of benefit distributions shall meet the distribution
24requirements of Section 401(a)(9) of the Internal Revenue Code
25of 1986, as amended. Distributions upon the death of the
26participant shall meet the requirements of Section 401(a)(37)

 

 

HB2740- 11 -LRB101 09219 RPS 54313 b

1of the Internal Revenue Code of 1986, as amended.
 
2    (40 ILCS 5/2-105.1 rep.)
3    Section 10. The Illinois Pension Code is amended by
4repealing Section 2-105.1.
 
5    Section 99. Effective date. This Act takes effect upon
6becoming law.

 

 

HB2740- 12 -LRB101 09219 RPS 54313 b

1 INDEX
2 Statutes amended in order of appearance
3    40 ILCS 5/2-105.3 new
4    40 ILCS 5/2-165.5 new
5    40 ILCS 5/14-103.42 new
6    40 ILCS 5/14-155.5 new
7    40 ILCS 5/15-200.5 new
8    40 ILCS 5/16-106.42 new
9    40 ILCS 5/16-205.5 new
10    40 ILCS 5/18-110.1 new
11    40 ILCS 5/18-110.2 new
12    40 ILCS 5/18-121.5 new
13    40 ILCS 5/2-105.1 rep.