Rep. Mike Fortner

Filed: 3/4/2011

 

 


 

 


 
09700HB3370ham001LRB097 08653 JDS 52145 a

1
AMENDMENT TO HOUSE BILL 3370

2    AMENDMENT NO. ______. Amend House Bill 3370 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Pension Code is amended by adding
5Sections 7-130.1, 7-130.2, 7-140.5, and 7-173.3 and changing
6Section 7-173 as follows:
 
7    (40 ILCS 5/7-130.1 new)
8    Sec. 7-130.1. Reformed benefit package. "Reformed benefit
9package" means the benefit retirement program maintained by the
10Fund for persons who first become participants of the Fund on
11or after January 1, 2011. It includes the following benefits
12for those persons: retirement annuities payable directly from
13the Fund; surviving spouse annuities payable directly from the
14Fund; child annuities payable directly from the Fund;
15contribution refunds; and separation benefits.
 

 

 

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1    (40 ILCS 5/7-130.2 new)
2    Sec. 7-130.2. Self-managed plan. "Self-managed plan" means
3the defined contribution retirement program maintained by the
4Fund, as described in Section 7-173.3. The self-managed plan
5does not include retirement, surviving spouse, or child
6annuities payable directly from the Fund, contribution
7refunds, or separation benefits.
 
8    (40 ILCS 5/7-140.5 new)
9    Sec. 7-140.5. Retirement program elections.
10    (a) For the purposes of this Article:
11    "Currently eligible participant" means a person who first
12became or becomes a participant under this Article on or after
13January 1, 2011 and is a participant under this Article before
14the day on which the Fund first offers the self-managed plan as
15an alternative to the reformed benefit package.
16    "Eligible participant" means either a currently eligible
17participant or a newly eligible participant of the Fund
18    "Newly eligible participant" means a person who first
19becomes a participant under this Article on or after the date
20on which the Fund first offers the self-managed plan as an
21alternative to the reformed benefit package.
22    (b) When the Fund offers to participants under this Article
23a self-managed plan as an alternative to the reformed benefit
24package, each eligible participant shall be given the choice to
25elect which retirement program he or she wishes to participate

 

 

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1in with respect to all periods of covered employment occurring
2on, before, and after the effective date of the participant's
3election. The retirement program election made by an eligible
4participant must be made in writing, in the manner prescribed
5by the Fund, and within the time period described in this
6Section.
7    If an eligible participant elects the self-managed plan,
8then that election is irrevocable. If an eligible participant
9who elected to participate or participated by default in the
10reformed benefit plan terminates employment under this
11Article, then the participant, upon his or her subsequent
12re-employment under this Article, may make an election under
13this Section.
14    An eligible participant who fails to make an election under
15this Section shall, by default, participate in the reformed
16benefit package.
17    (c) An eligible participant may elect to participate in the
18reformed benefit package or the self-managed plan. An eligible
19participant must make this election within one year after the
20effective date of the adoption of the self-managed plan under
21Section 7-173.3 or 60 days after first becoming a participant
22under this Article, whichever is later, or, in the case of a
23currently eligible participant who terminates employment under
24this Article, within one year after his or her re-employment
25under this Article.
26    (d) If the eligible participant elects to participate in

 

 

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1the self-managed plan, the Fund shall fund his or her account
2as stated in subsection (f) of Section 7-173.3.
3    (e) An eligible participant shall be provided with written
4information prepared or prescribed by the Fund that describes
5the participant's retirement program choices. The eligible
6participant shall be offered an opportunity to receive
7counseling from the Fund before making his or her election.
8This counseling may consist of videotaped materials, group
9presentations, individual consultation with an employee or
10authorized representative of the Fund in person or by telephone
11or other electronic means, or any combination of these methods.
 
12    (40 ILCS 5/7-173)  (from Ch. 108 1/2, par. 7-173)
13    Sec. 7-173. Contributions by employees.
14    (a) Each participating employee shall make contributions
15to the fund as follows:
16        1. For retirement annuity purposes, normal
17    contributions of 3 3/4% of earnings.
18        2. Additional contributions of such percentages of
19    each payment of earnings, as shall be elected by the
20    employee for retirement annuity purposes, but not in excess
21    of 10%. The selected rate shall be applicable to all
22    earnings paid following receipt by the Board of written
23    notice of election to make such contributions. Additional
24    contributions at the selected rate shall be made
25    concurrently with normal contributions.

 

 

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1        3. Survivor contributions, by each participating
2    employee, of 3/4% of each payment of earnings.
3    Notwithstanding this item 3, in the case of an employee who
4    participates in the self-managed plan under Section
5    7-173.3, contributions for a survivor's annuity shall
6    instead be used to finance the benefits available under
7    Section 1-173.3.
8    (b) Each employee shall make contributions for Federal
9Social Security taxes, for periods during which he is a covered
10employee, as required by the Social Security Enabling Act and
11State and federal law. For participating employees, such
12contributions shall be in addition to those required under
13paragraph (a) of this Section.
14    (c) Contributions shall be deducted from each
15corresponding payment of earnings paid to each employee and
16shall be remitted to the board by the participating
17municipality or participating instrumentality making such
18payment. The remittance, together with a report of the earnings
19and contributions shall be made as directed by the board. For
20township treasurers and employees of township treasurers
21qualifying as employees hereunder, the contributions herein
22required as deductions from salary shall be withheld by the
23school township trustees from funds available for the payment
24of the compensation of such treasurers and employees as
25provided in the School Code and remitted to the board.
26    (d) An employee who has made additional contributions under

 

 

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1paragraph (a)2 of this Section may upon retirement or at any
2time prior thereto, elect to withdraw the total of such
3additional contributions including interest credited thereon
4to the end of the preceding calendar year.
5    (e) Failure to make the deductions for employee
6contributions provided in paragraph (c) of this Section shall
7not relieve the employee from liability for such contributions.
8The amount of such liability may be deducted, with interest
9charged under Section 7-209, from any annuities or benefits
10payable hereunder to the employee or any other person receiving
11an annuity or benefit by reason of such employee's
12participation.
13    (f) A participating employee who has at least 40 years of
14creditable service in the Fund may elect to cease making the
15contributions required under this Section. The status of the
16employee under this Article shall be unaffected by this
17election, except that the employee shall not receive any
18additional creditable service for the periods of employment
19following the election. An election under this subsection
20relieves the employer from making additional employer
21contributions in relation to that employee.
22(Source: P.A. 96-1084, eff. 7-16-10; 96-1258, eff. 7-23-10;
23revised 9-2-10.)
 
24    (40 ILCS 5/7-173.3 new)
25    Sec. 7-173.3. Self-managed plan.

 

 

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1    (a) The General Assembly finds that the Illinois Municipal
2Retirement Fund should have the flexibility to provide a
3defined contribution (self-managed) plan for eligible
4participants. Accordingly, the Illinois Municipal Retirement
5Fund is hereby authorized to establish and administer a
6self-managed plan, which shall offer participants the
7opportunity to accumulate assets for retirement through a
8combination of participant and employer contributions that may
9be invested in mutual funds, collective investment funds, or
10other investment products and used to purchase annuity
11contracts that are fixed, variable, or a combination of fixed
12and variable. The plan must be qualified under the Internal
13Revenue Code of 1986.
14    (b) The Board shall adopt the self-managed plan established
15under this Section for eligible participants under this
16Article. The adoption of the self-managed plan makes available
17to the eligible participants under this Article the elections
18described in Section 7-140.5.
19    The Illinois Municipal Retirement Fund shall be the plan
20sponsor for the self-managed plan and shall prepare a plan
21document and adopt any rules and procedures that are considered
22necessary or desirable for the administration of the
23self-managed plan. Consistent with its fiduciary duty to the
24participants and beneficiaries of the self-managed plan, the
25Board of Trustees of the Fund may delegate aspects of plan
26administration as it sees fit to companies authorized to do

 

 

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1business in this State.
2    (c) The Fund shall solicit proposals to provide
3administrative services and funding vehicles for the
4self-managed plan from insurance and annuity companies and
5mutual fund companies, banks, trust companies, or other
6financial institutions authorized to do business in this State.
7In reviewing the proposals received and approving and
8contracting with no fewer than 2 and no more than 7 companies,
9the Board of Trustees of the Fund shall consider, among other
10things, the following criteria:
11        (1) the nature and extent of the benefits that would be
12    provided to the participants;
13        (2) the reasonableness of the benefits in relation to
14    the premium charged;
15        (3) the suitability of the benefits to the needs and
16    interests of the participants and the employers; and
17        (4) the ability of the company to provide benefits
18    under the contract and the financial stability of the
19    company.
20    The System shall periodically review each approved
21company. A company may continue to provide administrative
22services and funding vehicles for the self-managed plan only so
23long as it continues to be an approved company under contract
24with the Board.
25    In addition to the companies approved by the Fund under
26this subsection (c), the Fund may offer its participants an

 

 

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1investment fund managed by the Illinois State Board of
2Investment.
3    (d) Participants in the program must be allowed to direct
4the transfer of their account balances among the various
5investment options offered, subject to applicable contractual
6provisions. The participant shall not be deemed a fiduciary by
7reason of providing such investment direction. A person who is
8a fiduciary shall not be liable for any loss resulting from
9that investment direction and shall not be deemed to have
10breached any fiduciary duty by acting in accordance with that
11direction. Neither the Fund nor the employer shall guarantee
12any of the investments in the participant's account balances.
13    (e) Eligible participants, as defined in Section 7-140.5,
14must make a written election to participate in the self-managed
15plan in accordance with the provisions of Section 7-140.5 and
16the procedures established by the Fund. Participation in the
17self-managed plan shall begin on the first day of the month
18immediately following the month in which the participant's
19election is filed with the Fund, but not sooner than the
20effective date of the self-managed plan. The Fund shall make
21the self-managed plan available under this Article within 6
22months after the effective date of this amendatory Act of the
2397th General Assembly. A member's participation in the reformed
24benefit package under this Article shall terminate on the date
25that participation in the self-managed plan begins.
26    A member who has elected to participate in the self-managed

 

 

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1plan under this Section must continue participation while he or
2she remains a participant under this Article, and may not
3participate in the reformed benefit package.
4    Participation in the self-managed plan under this Section
5shall constitute participation in the Illinois Municipal
6Retirement Fund.
7    A participant under this Section shall be entitled to the
8benefits of Article 20 of this Code.
9    (f) If, at the time a participant elects to participate in
10the self-managed plan, the participant has rights and credits
11in the Fund due to previous participation in the reformed
12benefit package, the Fund shall establish for the participant
13an opening account balance in the self-managed plan, equal to
14(1) the amount of the separation benefit that the participant
15would be eligible to receive if the participant terminated
16employment on that date and elected a separation benefit and
17(2) an amount, representing employer contributions, equal to
18the amount of employee contributions, plus interest. The
19interest used in this subsection (f) shall be calculated using
20the actual annual rates of return that the Fund has earned
21during the time period corresponding to the actual investment
22of the contributions being transferred. The Fund shall transfer
23assets from the reformed benefit package to the self-managed
24plan, as a tax-free transfer in accordance with Internal
25Revenue Service guidelines, for purposes of funding the
26participant's opening account balance.

 

 

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1    (g) Notwithstanding any other provision of this Article, a
2participant may not purchase or receive service or service
3credit applicable to the reformed benefit package under this
4Article for any period during which the employee was a
5participant in the self-managed plan established under this
6Section.
7    (h) The self-managed plan shall be funded by contributions
8from participants in the self-managed plan and employer
9contributions as provided in this Section.
10    The contribution rate for participants in the self-managed
11plan under this Section shall be equal to the member
12contribution rate for other participants in the Fund, as
13provided in Section 7-173. This required contribution shall be
14made as an employer pick-up under Section 414(h) of the
15Internal Revenue Code of 1986 or any successor Section thereof.
16Any participant in the Fund's reformed benefit package before
17his or her election to participate in the self-managed plan
18shall continue to have the employer pick up the contributions
19required under Section 7-173. However, the amounts picked up
20after the election of the self-managed plan shall be remitted
21to and treated as assets of the self-managed plan. In no event
22shall a participant have the option of receiving these amounts
23in cash. Participants may make additional contributions to the
24self-managed plan in accordance with procedures prescribed by
25the Fund, to the extent permitted under rules adopted by the
26Fund.

 

 

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1    The program shall provide for employer contributions to be
2credited to each self-managed plan participant in an amount
3equal to the employee contributions, notwithstanding Section
47-172.
5    Each employer shall make contributions by appropriations
6to the Fund for participants in the self-managed plan under
7this Section. The amount required shall be certified by the
8Board of Trustees of the Fund and paid by the employer in
9accordance with Section 7-172. The Fund shall not be obligated
10to remit the required employer contributions to any of the
11insurance and annuity companies, mutual fund companies, banks,
12trust companies, financial institutions, or other sponsors of
13any of the funding vehicles offered under the self-managed plan
14until it has received the required employer contributions from
15the employer
16    (i) A participant in the self-managed plan becomes vested
17in the employer contributions credited to his or her accounts
18in the self-managed plan on the earliest to occur of the
19following: (1) attainment of 5 years of service credit; (2) the
20death of the participating member while employed under this
21Article, if the member has completed at least 1.5 years of
22service; or (3) the member's election to retire and apply the
23reciprocal provisions of Article 20 of this Code.
24    A participant in the self-managed plan who receives a
25distribution of his or her vested amounts from the self-managed
26plan while not yet eligible for retirement under this Article

 

 

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1(and Article 20, if applicable) shall forfeit all service
2credit and accrued rights in the Fund; if he or she
3subsequently becomes a participant under this Article again, he
4or she shall be considered a new participant. If a former
5participant again becomes a participant (or becomes employed by
6a participating system under Article 20 of this Code) and
7continues as such for at least 2 years, all rights, service
8credits, and previous status as a participant shall be restored
9upon repayment of the amount of the distribution, with interest
10at the actuarially assumed rate from the date of distribution
11until the date of payment.
12    (j) If a participant in the self-managed plan who is vested
13in employer contributions terminates employment, the
14participant shall be entitled to a benefit that is based on the
15account values attributable to both employer and employee
16contributions and any investment return thereon.
17    If a participant in the self-managed plan who is not vested
18in employer contributions terminates employment, the
19participant shall be entitled to a benefit based solely on the
20account values attributable to the participant's contributions
21and any investment return thereon, and the employer
22contributions and any investment return thereon shall be
23forfeited. Any employer contributions that are forfeited shall
24be held in escrow by the company investing those contributions
25and shall be used, as directed by the Fund, for future
26allocations of employer contributions or for the restoration of

 

 

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1amounts previously forfeited by former participants who again
2become participating members.
 
3    Section 90. The State Mandates Act is amended by adding
4Section 8.35 as follows:
 
5    (30 ILCS 805/8.35 new)
6    Sec. 8.35. Exempt mandate. Notwithstanding Sections 6 and 8
7of this Act, no reimbursement by the State is required for the
8implementation of any mandate created by this amendatory Act of
9the 97th General Assembly.
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.".