97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB1959

 

Introduced , by Rep. Mike Fortner

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the General Assembly and Judges Articles of the Illinois Pension Code. Allows persons who first became or become employees in the affected Systems on or after January 1, 2011 to elect to participate in a self-managed program of retirement benefits instead of the program of reformed retirement benefits currently offered. Provides that a self-managed plan shall authorize a participant to accumulate assets for retirement through a combination of employer and employee contributions that may be invested at the participant's direction in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts. Requires the affected Systems to make the self-managed plan available within 6 months after the effective date of the amendatory Act. Provides that, to the extent that the changes made by the amendatory Act are determined to be a new benefit increase under the new benefit increase provisions, the changes are exempt from the 5-year expiration provision. Effective immediately.


LRB097 06378 JDS 46460 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB1959LRB097 06378 JDS 46460 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 2-103.1, 2-103.2, 2-117.4, 2-126.2, 2-162.1,
618-118.1, 18-118.2, 18-120.2, 18-133.2, and 18-169.1 and
7changing Sections 2-126 and 18-133 as follows:
 
8    (40 ILCS 5/2-103.1 new)
9    Sec. 2-103.1. Reformed benefit package. "Reformed benefit
10package" means the benefit retirement program maintained by the
11System for persons who first became or become participants of
12the System on or after January 1, 2011. It includes the
13following benefits for those persons: retirement annuities
14payable directly from the System, as provided in Sections
152-119, 2-119.01, 2-119.1, and 2-120; survivor's annuities
16payable directly from the System, as provided in Sections
172-121, 2-121.1, 2-121.2, and 2-121.3; and contribution
18refunds, as provided in Section 2-123.
 
19    (40 ILCS 5/2-103.2 new)
20    Sec. 2-103.2. Self-managed plan. "Self-managed plan" means
21the defined contribution retirement program maintained by the
22System, as described in Section 2-126.2. The self-managed plan

 

 

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1does not include retirement annuities or survivor's benefits
2payable directly from the System, as provided in Sections
32-119, 2-119.01, 2-119.1, 2-120, 2-121, 2-121.1, 2-121.2, and
42-121.3 or refunds determined under Section 2-123.
 
5    (40 ILCS 5/2-117.4 new)
6    Sec. 2-117.4. Retirement program elections.
7    (a) For the purposes of this Section:
8    "Currently eligible participant" means a person who first
9became or becomes a participant under this Article on or after
10January 1, 2011 and is a participant under this Article before
11the day on which the System first offers the self-managed plan
12as an alternative to the reformed benefit package.
13    "Eligible participant" means either a currently eligible
14participant or a newly eligible participant of the System.
15    "Newly eligible participant" means a person who first
16becomes a participant under this Article on or after the date
17on which the System first offers the self-managed plan as an
18alternative to the reformed benefit package.
19    (b) When the System offers to participants under this
20Article a self-managed plan as an alternative to the reformed
21benefit package, each eligible participant shall be given the
22choice to elect which retirement program he or she wishes to
23participate in with respect to all periods of covered
24employment occurring on, before, and after the effective date
25of the participant's election. The retirement program election

 

 

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1made by an eligible participant must be made in writing, in the
2manner prescribed by the System, and within the time period
3described in this Section.
4    If an eligible participant elects the self-managed plan,
5then that election is irrevocable. If an eligible participant
6who elected to participate or participated by default in the
7reformed benefit plan terminates employment under this
8Article, then the participant, upon his or her subsequent
9re-employment under this Article, may make an election under
10this Section.
11    An eligible participant who fails to make an election under
12this Section shall, by default, participate in the reformed
13benefit package.
14    (c) An eligible participant may elect to participate in the
15reformed benefit package or the self-managed plan. An eligible
16participant must make this election within one year after the
17effective date of the adoption of the self-managed plan under
18Section 2-126.2 or 60 days after first becoming a participant
19under this Article, whichever is later, or, in the case of a
20currently eligible participant who terminates employment under
21this Article, within one year after his or her re-employment
22under this Article.
23    (d) If the eligible participant elects to participate in
24the self-managed plan, the system shall fund his or her account
25as stated in subsection (f) of Section 2-126.2.
26    (e) An eligible participant shall be provided with written

 

 

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1information prepared or prescribed by the System that describes
2the participant's retirement program choices. The eligible
3participant shall be offered an opportunity to receive
4counseling from the System before making his or her election.
5This counseling may consist of videotaped materials, group
6presentations, individual consultation with an employee or
7authorized representative of the System in person or by
8telephone or other electronic means, or any combination of
9these methods.
 
10    (40 ILCS 5/2-126)  (from Ch. 108 1/2, par. 2-126)
11    Sec. 2-126. Contributions by participants.
12    (a) Each participant shall contribute toward the cost of
13his or her retirement annuity a percentage of each payment of
14salary received by him or her for service as a member as
15follows: for service between October 31, 1947 and January 1,
161959, 5%; for service between January 1, 1959 and June 30,
171969, 6%; for service between July 1, 1969 and January 10,
181973, 6 1/2%; for service after January 10, 1973, 7%; for
19service after December 31, 1981, 8 1/2%.
20    (b) Beginning August 2, 1949, each male participant, and
21from July 1, 1971, each female participant shall contribute
22towards the cost of the survivor's annuity 2% of salary.
23    A participant who has no eligible survivor's annuity
24beneficiary may elect to cease making contributions for
25survivor's annuity under this subsection. A survivor's annuity

 

 

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1shall not be payable upon the death of a person who has made
2this election, unless prior to that death the election has been
3revoked and the amount of the contributions that would have
4been paid under this subsection in the absence of the election
5is paid to the System, together with interest at the rate of 4%
6per year from the date the contributions would have been made
7to the date of payment.
8    Notwithstanding any provision in this subsection (b) to the
9contrary, in the case of an employee who participates in the
10self-managed plan under Section 2-126.2, contributions for a
11survivor's annuity shall instead be used to finance the
12benefits available under Section 2-126.2.
13    (c) Beginning July 1, 1967, each participant shall
14contribute 1% of salary towards the cost of automatic increase
15in annuity provided in Section 2-119.1. These contributions
16shall be made concurrently with contributions for retirement
17annuity purposes.
18    (d) In addition, each participant serving as an officer of
19the General Assembly shall contribute, for the same purposes
20and at the same rates as are required of a regular participant,
21on each additional payment received as an officer. If the
22participant serves as an officer for at least 2 but less than 4
23years, he or she shall contribute an amount equal to the amount
24that would have been contributed had the participant served as
25an officer for 4 years. Persons who serve as officers in the
2687th General Assembly but cannot receive the additional payment

 

 

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1to officers because of the ban on increases in salary during
2their terms may nonetheless make contributions based on those
3additional payments for the purpose of having the additional
4payments included in their highest salary for annuity purposes;
5however, persons electing to make these additional
6contributions must also pay an amount representing the
7corresponding employer contributions, as calculated by the
8System.
9    (e) Notwithstanding any other provision of this Article,
10the required contribution of a participant who first becomes a
11participant on or after January 1, 2011 shall not exceed the
12contribution that would be due under this Article if that
13participant's highest salary for annuity purposes were
14$106,800, plus any increases in that amount under Section
152-108.1.
16(Source: P.A. 96-1490, eff. 1-1-11.)
 
17    (40 ILCS 5/2-126.2 new)
18    Sec. 2-126.2. Self-managed plan.
19    (a) The General Assembly finds that the State should have
20the flexibility to provide a defined contribution
21(self-managed) plan for eligible participants. Accordingly,
22the General Assembly Retirement System is hereby authorized to
23establish and administer a self-managed plan, which shall offer
24participants the opportunity to accumulate assets for
25retirement through a combination of participant and State

 

 

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1contributions that may be invested in mutual funds, collective
2investment funds, or other investment products and used to
3purchase annuity contracts that are fixed, variable, or a
4combination of fixed and variable. The plan must be qualified
5under the Internal Revenue Code of 1986.
6    (b) The Board shall adopt the self-managed plan established
7under this Section for participants under this Article. The
8adoption of the self-managed plan makes available to the
9eligible participants under this Article the elections
10described in Section 2-117.4.
11    The General Assembly Retirement System shall be the plan
12sponsor for the self-managed plan and shall prepare a plan
13document and adopt any rules and procedures as are considered
14necessary or desirable for the administration of the
15self-managed plan. Consistent with its fiduciary duty to the
16participants and beneficiaries of the self-managed plan, the
17Board of Trustees of the System may delegate aspects of plan
18administration as it sees fit to companies authorized to do
19business in this State.
20    (c) The System shall solicit proposals to provide
21administrative services and funding vehicles for the
22self-managed plan from insurance and annuity companies and
23mutual fund companies, banks, trust companies, or other
24financial institutions authorized to do business in this State.
25In reviewing the proposals received and approving and
26contracting with no fewer than 2 and no more than 7 companies,

 

 

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1the Board of Trustees of the System shall consider, among other
2things, the following criteria:
3        (1) the nature and extent of the benefits that would be
4    provided to the participants;
5        (2) the reasonableness of the benefits in relation to
6    the premium charged;
7        (3) the suitability of the benefits to the needs and
8    interests of the participants and the State; and
9        (4) the ability of the company to provide benefits
10    under the contract and the financial stability of the
11    company.
12    The System shall periodically review each approved
13company. A company may continue to provide administrative
14services and funding vehicles for the self-managed plan only so
15long as it continues to be an approved company under contract
16with the Board.
17    In addition to the companies approved by the System under
18this subsection (c), the System may offer its participants an
19investment fund managed by the Illinois State Board of
20Investment.
21    (d) Participants in the program must be allowed to direct
22the transfer of their account balances among the various
23investment options offered, subject to applicable contractual
24provisions. The participant shall not be deemed a fiduciary by
25reason of providing such investment direction. A person who is
26a fiduciary shall not be liable for any loss resulting from

 

 

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1that investment direction and shall not be deemed to have
2breached any fiduciary duty by acting in accordance with that
3direction. Neither the System nor the State shall guarantee any
4of the investments in the participant's account balances.
5    (e) Eligible participants, as defined in Section 2-117.4,
6must make a written election to participate in the self-managed
7plan in accordance with the provisions of Section 2-117.4 and
8the procedures established by the System. Participation in the
9self-managed plan shall begin on the first day of the month
10immediately following the month in which the participant's
11election is filed with the System, but not sooner than the
12effective date of the self-managed plan. The System shall make
13the self-managed plan available under this Article within 6
14months after the effective date of this amendatory Act of the
1597th General Assembly. A member's participation in the reformed
16benefit package under this Article shall terminate on the date
17that participation in the self-managed plan begins.
18    A member who has elected to participate in the self-managed
19plan under this Section must continue participation while he or
20she remains a participant under this Article, and may not
21participate in the reformed benefit package.
22    Participation in the self-managed plan under this Section
23shall constitute participation in the General Assembly
24Retirement System.
25    A participant under this Section shall be entitled to the
26benefits of Article 20 of this Code.

 

 

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1    (f) If, at the time a participant elects to participate in
2the self-managed plan, the participant has rights and credits
3in the System due to previous participation in the reformed
4benefit package, the System shall establish for the participant
5an opening account balance in the self-managed plan, equal to
6(1) the amount of the contribution refund that the participant
7would be eligible to receive under Section 2-123 if the
8participant terminated employment on that date and elected a
9refund of contributions and (2) an amount equal to the amount
10of employee contributions, plus interest. The interest used in
11this subsection (f) shall be calculated using the actual annual
12rates of return that the System has earned during the time
13period corresponding to the actual investment of the
14contributions being transferred. The System shall transfer
15assets from the reformed benefit package to the self-managed
16plan, as a tax-free transfer in accordance with Internal
17Revenue Service guidelines, for purposes of funding the
18participant's opening account balance.
19    (g) Notwithstanding any other provision of this Article, a
20participant may not purchase or receive service or service
21credit applicable to the reformed benefit package under this
22Article for any period during which the employee was a
23participant in the self-managed plan established under this
24Section.
25    (h) The self-managed plan shall be funded by contributions
26from participants in the self-managed plan and State

 

 

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1contributions as provided in this Section.
2    The contribution rate for participants in the self-managed
3plan under this Section shall be equal to the member
4contribution rate for other participants in the System, as
5provided in Section 2-126. This required contribution shall be
6made as an employer pick-up under Section 414(h) of the
7Internal Revenue Code of 1986 or any successor Section thereof.
8Any participant in the System's reformed benefit package before
9his or her election to participate in the self-managed plan
10shall continue to have the employer pick up the contributions
11required under Section 2-126. However, the amounts picked up
12after the election of the self-managed plan shall be remitted
13to and treated as assets of the self-managed plan. In no event
14shall a participant have the option of receiving these amounts
15in cash. Participants may make additional contributions to the
16self-managed plan in accordance with procedures prescribed by
17the System, to the extent permitted under rules adopted by the
18System.
19    The program shall provide for State contributions to be
20credited to each self-managed plan participant in an amount
21equal to the employee contributions required under this
22Section.
23    The State of Illinois shall make contributions by
24appropriations to the System for participants in the
25self-managed plan under this Section. The amount required shall
26be certified by the Board of Trustees of the System and paid by

 

 

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1the State in accordance with Section 2-134. The System shall
2not be obligated to remit the required State contributions to
3any of the insurance and annuity companies, mutual fund
4companies, banks, trust companies, financial institutions, or
5other sponsors of any of the funding vehicles offered under the
6self-managed plan until it has received the required State
7contributions from the State.
8    (i) A participant in the self-managed plan becomes vested
9in the State contributions credited to his or her accounts in
10the self-managed plan on the earliest to occur of the
11following: (1) attainment of 5 years of service credit; (2) the
12death of the participating member while employed under this
13Article, if the member has completed at least 1.5 years of
14service; or (3) the member's election to retire and apply the
15reciprocal provisions of Article 20 of this Code.
16    A participant in the self-managed plan who receives a
17distribution of his or her vested amounts from the self-managed
18plan while not yet eligible for retirement under this Article
19(and Article 20, if applicable) shall forfeit all service
20credit and accrued rights in the System; if he or she
21subsequently becomes a participant under this Article again, he
22or she shall be considered a new participant. If a former
23participant again becomes a participating member (or becomes
24employed by a participating system under Article 20 of this
25Code) and continues as such for at least 2 years, all rights,
26service credits, and previous status as a participant shall be

 

 

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1restored upon repayment of the amount of the distribution, with
2interest at the actuarially assumed rate from the date of
3distribution until the date of payment.
4    (j) If a participant in the self-managed plan who is vested
5in State contributions terminates employment, the participant
6shall be entitled to a benefit that is based on the account
7values attributable to both State and member contributions and
8any investment return thereon.
9    If a participant in the self-managed plan who is not vested
10in State contributions terminates employment, the participant
11shall be entitled to a benefit based solely on the account
12values attributable to the participant's contributions and any
13investment return thereon, and the State contributions and any
14investment return thereon shall be forfeited. Any State
15contributions that are forfeited shall be held in escrow by the
16company investing those contributions and shall be used, as
17directed by the System, for future allocations of State
18contributions or for the restoration of amounts previously
19forfeited by former participants who again become
20participating members.
 
21    (40 ILCS 5/2-162.1 new)
22    Sec. 2-162.1. New benefit increases. To the extent that the
23changes made to this Article by this amendatory Act of the 97th
24General Assembly authorizing the System to offer a self-managed
25plan are determined to be a new benefit increase within the

 

 

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1meaning of Section 2-162, the changes made by this amendatory
2Act are exempt from the provisions of subsection (d) of Section
32-162.
 
4    (40 ILCS 5/18-118.1 new)
5    Sec. 18-118.1. Reformed benefit package. "Reformed benefit
6package" means the defined benefit retirement program
7maintained by the System for persons who first became or become
8participants of the System on or after January 1, 2011. It
9includes the following benefits for those persons: retirement
10annuities payable directly from the System, as provided in
11Sections 18-124, 18-125, and 18-125.1; survivor's annuities
12payable directly from the System, as provided in Sections
1318-128, 18-128.01, 18-128.1, 18-128.1, and 18-128.3; and
14contribution refunds, as provided in Section 18-129.
 
15    (40 ILCS 5/18-118.2 new)
16    Sec. 18-118.2. Self-managed plan. "Self-managed plan"
17means the defined contribution retirement program maintained
18by the System, as described in Section 18-133.2. The
19self-managed plan does not include retirement annuities or
20survivor's benefits payable directly from the System, as
21provided in Sections 18-124, 18-125, 18-125.1, 18-128,
2218-128.01, 18-128.1, 18-128.1, and 18-128.3 or refunds
23determined under Section 18-129.
 

 

 

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1    (40 ILCS 5/18-120.2 new)
2    Sec. 18-120.2. Retirement program elections.
3    (a) For the purposes of this Section:
4    "Currently eligible participant" means a person who first
5became or becomes a participant under this Article on or after
6January 1, 2011 and is a participant under this Article before
7the day on which the System first offers the self-managed plan
8as an alternative to the reformed benefit package.
9    "Eligible participant" means either a currently eligible
10participant or a newly eligible participant of the System.
11    "Newly eligible participant" means a person who first
12becomes a participant under this Article on or after the date
13on which the System first offers the self-managed plan as an
14alternative to the reformed benefit package.
15    (b) When the System offers to members under this Article a
16self-managed plan as an alternative to the reformed benefit
17package, each eligible participant shall be given the choice to
18elect which retirement program he or she wishes to participate
19in with respect to all periods of covered employment occurring
20on, before, and after the effective date of the participant's
21election. The retirement program election made by an eligible
22participant must be made in writing, in the manner prescribed
23by the System, and within the time period described in this
24Section.
25    If an eligible participant elects the self-managed plan,
26then that election is irrevocable. If an eligible participant

 

 

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1who elected to participate or participated by default in the
2reformed benefit package terminates employment under this
3Article, then the participant, upon his or her subsequent
4re-employment under this Article, may make an election under
5this Section.
6    An eligible participant who fails to make an election under
7this Section shall, by default, participate in the reformed
8benefit package.
9    (c) An eligible participant may elect to participate in the
10reformed benefit package or the self-managed plan.
11    An eligible participant must make this election within one
12year after the effective date of the adoption of the
13self-managed plan under Section 18-133.2 or 60 days after first
14becoming a participant under this Article, whichever is later,
15or, in the case of a currently eligible participant who
16terminates employment under this Article, within one year after
17his or her re-employment under this Article.
18    (d) If the eligible participant elects to participate in
19the self-managed plan, the system shall fund his or her account
20as stated in subsection (f) of Section 18-133.2.
21    (e) An eligible participant shall be provided with written
22information prepared or prescribed by the System that describes
23the participant's retirement program choices. The eligible
24participant shall be offered an opportunity to receive
25counseling from the System before making his or her election.
26This counseling may consist of videotaped materials, group

 

 

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1presentations, individual consultation with an employee or
2authorized representative of the System in person or by
3telephone or other electronic means, or any combination of
4these methods.
 
5    (40 ILCS 5/18-133)  (from Ch. 108 1/2, par. 18-133)
6    Sec. 18-133. Financing; employee contributions.
7    (a) Effective July 1, 1967, each participant is required to
8contribute 7 1/2% of each payment of salary toward the
9retirement annuity. Such contributions shall continue during
10the entire time the participant is in service, with the
11following exceptions:
12        (1) Contributions for the retirement annuity are not
13    required on salary received after 18 years of service by
14    persons who were participants before January 2, 1954.
15        (2) A participant who continues to serve as a judge
16    after becoming eligible to receive the maximum rate of
17    annuity may elect, through a written direction filed with
18    the Board, to discontinue contributing to the System. Any
19    such option elected by a judge shall be irrevocable unless
20    prior to January 1, 2000, and while continuing to serve as
21    judge, the judge (A) files with the Board a letter
22    cancelling the direction to discontinue contributing to
23    the System and requesting that such contributing resume,
24    and (B) pays into the System an amount equal to the total
25    of the discontinued contributions plus interest thereon at

 

 

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1    5% per annum. Service credits earned in any other
2    "participating system" as defined in Article 20 of this
3    Code shall be considered for purposes of determining a
4    judge's eligibility to discontinue contributions under
5    this subdivision (a)(2).
6        (3) A participant who (i) has attained age 60, (ii)
7    continues to serve as a judge after becoming eligible to
8    receive the maximum rate of annuity, and (iii) has not
9    elected to discontinue contributing to the System under
10    subdivision (a)(2) of this Section (or has revoked any such
11    election) may elect, through a written direction filed with
12    the Board, to make contributions to the System based only
13    on the amount of the increases in salary received by the
14    judge on or after the date of the election, rather than the
15    total salary received. If a judge who is making
16    contributions to the System on the effective date of this
17    amendatory Act of the 91st General Assembly makes an
18    election to limit contributions under this subdivision
19    (a)(3) within 90 days after that effective date, the
20    election shall be deemed to become effective on that
21    effective date and the judge shall be entitled to receive a
22    refund of any excess contributions paid to the System
23    during that 90-day period; any other election under this
24    subdivision (a)(3) becomes effective on the first of the
25    month following the date of the election. An election to
26    limit contributions under this subdivision (a)(3) is

 

 

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1    irrevocable. Service credits earned in any other
2    participating system as defined in Article 20 of this Code
3    shall be considered for purposes of determining a judge's
4    eligibility to make an election under this subdivision
5    (a)(3).
6    (b) Beginning July 1, 1969, each participant is required to
7contribute 1% of each payment of salary towards the automatic
8increase in annuity provided in Section 18-125.1. However, such
9contributions need not be made by any participant who has
10elected prior to September 15, 1969, not to be subject to the
11automatic increase in annuity provisions.
12    (c) Effective July 13, 1953, each married participant
13subject to the survivor's annuity provisions is required to
14contribute 2 1/2% of each payment of salary, whether or not he
15or she is required to make any other contributions under this
16Section. Such contributions shall be made concurrently with the
17contributions made for annuity purposes.
18    Notwithstanding any provision in this subsection (c) to the
19contrary, in the case of an employee who participates in the
20self-managed plan under Section 14-133.2, contributions for a
21survivor's annuity shall instead be used to finance the
22benefits available under Section 18-133.2.
23    (d) Notwithstanding any other provision of this Article,
24the required contributions for a participant who first becomes
25a participant on or after January 1, 2011 shall not exceed the
26contributions that would be due under this Article if that

 

 

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1participant's highest salary for annuity purposes were
2$106,800, plus any increase in that amount under Section
318-125.
4(Source: P.A. 96-1490, eff. 1-1-11.)
 
5    (40 ILCS 5/18-133.2 new)
6    Sec. 18-133.2. Self-managed plan.
7    (a) The General Assembly finds that the State should have
8the flexibility to provide a defined contribution
9(self-managed) plan for eligible participants. Accordingly,
10the Judges Retirement System of Illinois is hereby authorized
11to establish and administer a self-managed plan, which shall
12offer participants the opportunity to accumulate assets for
13retirement through a combination of participant and State
14contributions that may be invested in mutual funds, collective
15investment funds, or other investment products and used to
16purchase annuity contracts that are fixed, variable, or a
17combination of fixed and variable. The plan must be qualified
18under the Internal Revenue Code of 1986.
19    (b) The Board shall adopt the self-managed plan established
20under this Section for participants under this Article. The
21adoption of the self-managed plan makes available to the
22eligible participants under this Article the elections
23described in Section 18-120.2.
24    The Judges Retirement System of Illinois shall be the plan
25sponsor for the self-managed plan and shall prepare a plan

 

 

HB1959- 21 -LRB097 06378 JDS 46460 b

1document and adopt any rules and procedures as are considered
2necessary or desirable for the administration of the
3self-managed plan. Consistent with its fiduciary duty to the
4participants and beneficiaries of the self-managed plan, the
5Board of Trustees of the System may delegate aspects of plan
6administration as it sees fit to companies authorized to do
7business in this State.
8    (c) The System shall solicit proposals to provide
9administrative services and funding vehicles for the
10self-managed plan from insurance and annuity companies and
11mutual fund companies, banks, trust companies, or other
12financial institutions authorized to do business in this State.
13In reviewing the proposals received and approving and
14contracting with no fewer than 2 and no more than 7 companies,
15the Board of Trustees of the System shall consider, among other
16things, the following criteria:
17        (1) the nature and extent of the benefits that would be
18    provided to the participants;
19        (2) the reasonableness of the benefits in relation to
20    the premium charged;
21        (3) the suitability of the benefits to the needs and
22    interests of the participants and the State; and
23        (4) the ability of the company to provide benefits
24    under the contract and the financial stability of the
25    company.
26    The System shall periodically review each approved

 

 

HB1959- 22 -LRB097 06378 JDS 46460 b

1company. A company may continue to provide administrative
2services and funding vehicles for the self-managed plan only so
3long as it continues to be an approved company under contract
4with the Board.
5    In addition to the companies approved by the System under
6this subsection (c), the System may offer its participants an
7investment fund managed by the Illinois State Board of
8Investment.
9    (d) Participants in the program must be allowed to direct
10the transfer of their account balances among the various
11investment options offered, subject to applicable contractual
12provisions. The participant shall not be deemed a fiduciary by
13reason of providing such investment direction. A person who is
14a fiduciary shall not be liable for any loss resulting from
15that investment direction and shall not be deemed to have
16breached any fiduciary duty by acting in accordance with that
17direction. Neither the System nor the State shall guarantee any
18of the investments in the participant's account balances.
19    (e) Eligible participants, as defined in Section 18-120.2,
20must make a written election to participate in the self-managed
21plan in accordance with the provisions of Section 18-120.2 and
22the procedures established by the System. Participation in the
23self-managed plan shall begin on the first day of the month
24immediately following the month in which the participant's
25election is filed with the System, but not sooner than the
26effective date of the self-managed plan. The System shall make

 

 

HB1959- 23 -LRB097 06378 JDS 46460 b

1the self-managed plan available under this Article within 6
2months after the effective date of this amendatory Act of the
397th General Assembly. A member's participation in the reformed
4benefit package under this Article shall terminate on the date
5that participation in the self-managed plan begins.
6    A member who has elected to participate in the self-managed
7plan under this Section must continue participation while he or
8she remains a participant under this Article, and may not
9participate in the reformed benefit package.
10    Participation in the self-managed plan under this Section
11shall constitute participation in the Judges Retirement System
12of Illinois.
13    A participant under this Section shall be entitled to the
14benefits of Article 20 of this Code.
15    (f) If, at the time a participant elects to participate in
16the self-managed plan, the participant has rights and credits
17in the System due to previous participation in the reformed
18benefit package, the System shall establish for the participant
19an opening account balance in the self-managed plan, equal to
20(1) the amount of the contribution refund that the participant
21would be eligible to receive under Section 18-129 if the
22participant terminated employment on that date and elected a
23refund of contributions and (2) an amount equal to the amount
24of employee contributions, plus interest. The interest used in
25this subsection (f) shall be calculated using the actual annual
26rates of return that the System has earned during the time

 

 

HB1959- 24 -LRB097 06378 JDS 46460 b

1period corresponding to the actual investment of the
2contributions being transferred. The System shall transfer
3assets from the reformed benefit package to the self-managed
4plan, as a tax-free transfer in accordance with Internal
5Revenue Service guidelines, for purposes of funding the
6participant's opening account balance.
7    (g) Notwithstanding any other provision of this Article, a
8participant may not purchase or receive service or service
9credit applicable to the reformed benefit package under this
10Article for any period during which the employee was a
11participant in the self-managed plan established under this
12Section.
13    (h) The self-managed plan shall be funded by contributions
14from participants in the self-managed plan and State
15contributions as provided in this Section.
16    The contribution rate for participants in the self-managed
17plan under this Section shall be equal to the member
18contribution rate for other participants in the System, as
19provided in Section 18-133. This required contribution shall be
20made as an employer pick-up under Section 414(h) of the
21Internal Revenue Code of 1986 or any successor Section thereof.
22Any participant in the System's reformed benefit package before
23his or her election to participate in the self-managed plan
24shall continue to have the employer pick up the contributions
25required under Section 18-133. However, the amounts picked up
26after the election of the self-managed plan shall be remitted

 

 

HB1959- 25 -LRB097 06378 JDS 46460 b

1to and treated as assets of the self-managed plan. In no event
2shall a participant have the option of receiving these amounts
3in cash. Participants may make additional contributions to the
4self-managed plan in accordance with procedures prescribed by
5the System, to the extent permitted under rules adopted by the
6System.
7    The program shall provide for State contributions to be
8credited to each self-managed plan participant in an amount
9equal to the employee contributions required under this
10Section.
11    The State of Illinois shall make contributions by
12appropriations to the System for participants in the
13self-managed plan under this Section. The amount required shall
14be certified by the Board of Trustees of the System and paid by
15the State in accordance with Sections 18-132 and 18-140. The
16System shall not be obligated to remit the required State
17contributions to any of the insurance and annuity companies,
18mutual fund companies, banks, trust companies, financial
19institutions, or other sponsors of any of the funding vehicles
20offered under the self-managed plan until it has received the
21required State contributions from the State.
22    (i) A participant in the self-managed plan becomes vested
23in the State contributions credited to his or her accounts in
24the self-managed plan on the earliest to occur of the
25following: (1) attainment of 5 years of service credit; (2) the
26death of the participating member while employed under this

 

 

HB1959- 26 -LRB097 06378 JDS 46460 b

1Article, if the member has completed at least 1.5 years of
2service; or (3) the member's election to retire and apply the
3reciprocal provisions of Article 20 of this Code.
4    A participant in the self-managed plan who receives a
5distribution of his or her vested amounts from the self-managed
6plan while not yet eligible for retirement under this Article
7(and Article 20, if applicable) shall forfeit all service
8credit and accrued rights in the System; if he or she
9subsequently becomes a participant under this Article again, he
10or she shall be considered a new participant. If a former
11participant again becomes a participating member (or becomes
12employed by a participating system under Article 20 of this
13Code) and continues as such for at least 2 years, all rights,
14service credits, and previous status as a participant shall be
15restored upon repayment of the amount of the distribution, with
16interest at the actuarially assumed rate from the date of
17distribution until the date of payment.
18    (j) If a participant in the self-managed plan who is vested
19in State contributions terminates employment, the participant
20shall be entitled to a benefit that is based on the account
21values attributable to both State and member contributions and
22any investment return thereon.
23    If a participant in the self-managed plan who is not vested
24in State contributions terminates employment, the participant
25shall be entitled to a benefit based solely on the account
26values attributable to the participant's contributions and any

 

 

HB1959- 27 -LRB097 06378 JDS 46460 b

1investment return thereon, and the State contributions and any
2investment return thereon shall be forfeited. Any State
3contributions that are forfeited shall be held in escrow by the
4company investing those contributions and shall be used, as
5directed by the System, for future allocations of State
6contributions or for the restoration of amounts previously
7forfeited by former participants who again become
8participating members.
 
9    (40 ILCS 5/18-169.1 new)
10    Sec. 18-169.1. New benefit increases. To the extent that
11the changes made to this Article by this amendatory Act of the
1297th General Assembly authorizing the System to offer a
13self-managed plan are determined to be a new benefit increase
14within the meaning of Section 18-169, the changes made by this
15amendatory Act are exempt from the provisions of subsection (d)
16of Section 18-169.
 
17    Section 99. Effective date. This Act takes effect upon
18becoming law.

 

 

HB1959- 28 -LRB097 06378 JDS 46460 b

1 INDEX
2 Statutes amended in order of appearance
3    40 ILCS 5/2-103.1 new
4    40 ILCS 5/2-103.2 new
5    40 ILCS 5/2-117.4 new
6    40 ILCS 5/2-126from Ch. 108 1/2, par. 2-126
7    40 ILCS 5/2-126.2 new
8    40 ILCS 5/2-162.1 new
9    40 ILCS 5/18-118.1 new
10    40 ILCS 5/18-118.2 new
11    40 ILCS 5/18-120.2 new
12    40 ILCS 5/18-133from Ch. 108 1/2, par. 18-133
13    40 ILCS 5/18-133.2 new
14    40 ILCS 5/18-169.1 new