97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5754

 

Introduced 2/16/2012, by Rep. Mike Fortner

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the General Assembly, State Employees, State Universities, Downstate Teachers, and Judges Articles of the Illinois Pension Code. Requires each retirement system that does not already have a self-managed plan to establish and maintain one. Authorizes participants to irrevocably elect to participate in the self-managed plan. Provides that, for the purpose of calculating traditional benefit package benefits and contributions, the annual salary of a participant may not, except under certain circumstances, exceed the greater of (i) the annual salary cap for new hires or (ii) the annual salary of the participant during the 365 days immediately before the effective date of the amendatory Act. Requires participation in the self-managed plan to the extent that a participant's salary exceeds the salary cap. Revises the schedule of contributions for participants. Shifts a portion of the employer contributions for downstate teachers and university employees from the State to the actual employer. Authorizes the Boards of Trustees of each system to triennially recalculate the normal cost of benefit plans offered by the systems. Defines "traditional benefit package" and "self-managed plan". Amends the State Mandates Act to require implementation without reimbursement. Effective immediately.


LRB097 19807 EFG 65077 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY
STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

 

 

A BILL FOR

 

HB5754LRB097 19807 EFG 65077 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, 2-108.2, 2-126.2, 2-134.1,
614-103.12a, 14-103.40, 14-103.41, 14-133.2, 14-135.08a,
715-112.1, 15-165.1, 16-121.1, 16-122.2, 16-122.3, 16-158.2,
816-181.4, 18-111.1, 18-118.1, 18-118.2, 18-133.2, and 18-140.1
9and by changing Sections 2-126, 14-133, 15-157, 15-158.2,
1016-152, and 18-133 as follows:
 
11    (40 ILCS 5/2-103.1 new)
12    Sec. 2-103.1. Traditional benefit package. "Traditional
13benefit package" means the defined benefit retirement program
14maintained by the System, which includes retirement annuities
15payable directly from the System, as provided in Sections
162-119, 2-119.01, 2-119.1, and 2-120; survivor's annuities
17payable directly from the System, as provided in Sections
182-121, 2-121.1, 2-121.2, and 2-121.3; and contribution
19refunds, as provided in Section 2-123.
 
20    (40 ILCS 5/2-103.2 new)
21    Sec. 2-103.2. Self-managed plan. "Self-managed plan" means
22the defined contribution retirement program maintained by the

 

 

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1System, as described in Section 2-126.2. The self-managed plan
2does not include retirement annuities or survivor's benefits
3payable directly from the System, as provided in Sections
42-119, 2-119.01, 2-119.1, 2-120, 2-121, 2-121.1, 2-121.2, and
52-121.3 or refunds determined under Section 2-123.
 
6    (40 ILCS 5/2-108.2 new)
7    Sec. 2-108.2. Limitation on salary. For the purpose of
8calculating traditional benefit package benefits and
9contributions, the annual earnings, salary, or wages of a
10participant shall not exceed the greater of (i) the amount
11specified under subsection (b-5) of Section 1-160 or (ii) the
12annual salary of the participant during the 365 days
13immediately before the effective date of this Section.
 
14    (40 ILCS 5/2-126)  (from Ch. 108 1/2, par. 2-126)
15    Sec. 2-126. Contributions by participants.
16    (a) Each participant shall contribute toward the cost of
17his or her retirement annuity a percentage of each payment of
18salary received by him or her for service as a member as
19follows: for service between October 31, 1947 and January 1,
201959, 5%; for service between January 1, 1959 and June 30,
211969, 6%; for service between July 1, 1969 and January 10,
221973, 6 1/2%; for service after January 10, 1973, 7%; for
23service after December 31, 1981, 8 1/2%.
24    (b) Beginning August 2, 1949, each male participant, and

 

 

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1from July 1, 1971, each female participant shall contribute
2towards the cost of the survivor's annuity 2% of salary.
3    A participant who has no eligible survivor's annuity
4beneficiary may elect to cease making contributions for
5survivor's annuity under this subsection. A survivor's annuity
6shall not be payable upon the death of a person who has made
7this election, unless prior to that death the election has been
8revoked and the amount of the contributions that would have
9been paid under this subsection in the absence of the election
10is paid to the System, together with interest at the rate of 4%
11per year from the date the contributions would have been made
12to the date of payment.
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    (e-1) Notwithstanding any provision of this Code to the
17contrary, (i) for a participant who does not file an election
18under subsection (a-5) of Section 2-126.2, any contributions on
19amounts of salary in excess of the amount specified under
20Section 2-108.2 for that year shall instead be used to finance
21self-managed plan benefits and (ii) for a participant who files
22an election under subsection (a-5) of Section 2-126.2, any
23contributions made after the date of the election, including
24the contributions for a survivor's annuity, shall be used to
25finance the benefits under Section 2-126.2. Notwithstanding
26any provision of this Code to the contrary, a participant who

 

 

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1does not file an election under subsection (a-5) of Section
22-126.2 shall contribute toward the traditional benefit
3package a percentage of salary equal to the greater of (i)
4one-half of the normal cost of the traditional benefit package
5or (ii) 6% of salary.
6(Source: P.A. 96-1490, eff. 1-1-11.)
 
7    (40 ILCS 5/2-126.2 new)
8    Sec. 2-126.2. Self-managed plan.
9    (a) The General Assembly Retirement System must establish
10and administer a self-managed plan that shall offer
11participants the opportunity to accumulate assets for
12retirement through a combination of participant and State
13contributions that may be invested in mutual funds, collective
14investment funds, or other investment products and used to
15purchase annuity contracts, that are fixed, variable, or a
16combination of fixed and variable. The plan must be qualified
17under the Internal Revenue Code of 1986.
18    The General Assembly Retirement System shall be the plan
19sponsor for the self-managed plan and shall prepare a plan
20document and adopt any rules and procedures that are considered
21necessary or desirable for the administration of the
22self-managed plan. Consistent with its fiduciary duty to the
23participants and beneficiaries of the self-managed plan, the
24Board of Trustees of the System may delegate aspects of plan
25administration as it sees fit to companies authorized to do

 

 

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1business in this State.
2    (a-5) A participant may file an irrevocable election to
3transfer to the self-managed plan an amount equal to the
4participant's total contributions under the traditional
5benefit package, with interest. By filing the election, a
6participant forfeits all accrued rights and benefits under the
7traditional benefit package.
8    (b) Notwithstanding any other provision of this Code, (i)
9for a participant who does not file an election under
10subsection (a-5) of this Section, any portion of his or her
11salary that exceeds the amount specified in Section 2-108.2 for
12that year shall be subject to the self-managed plan and (ii)
13for a participant who files an election under subsection (a-5)
14of this Section, the entirety of the participant's salary
15shall, after the date of the election, be subject to the
16self-managed plan created under this Section.
17    (c) The System shall solicit proposals to provide
18administrative services and funding vehicles for the
19self-managed plan from insurance and annuity companies and
20mutual fund companies, banks, trust companies, or other
21financial institutions authorized to do business in this State.
22In reviewing the proposals received and approving and
23contracting with no fewer than 2 and no more than 7 companies,
24the Board of Trustees of the System shall consider, among other
25things, the following criteria:
26        (1) the nature and extent of the benefits that would be

 

 

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1    provided to the participants;
2        (2) the reasonableness of the benefits in relation to
3    the premium charged;
4        (3) the suitability of the benefits to the needs and
5    interests of the participants and the State; and
6        (4) the ability of the company to provide benefits
7    under the contract and the financial stability of the
8    company.
9    The System shall periodically review each approved
10company. A company may continue to provide administrative
11services and funding vehicles for the self-managed plan only so
12long as it continues to be an approved company under contract
13with the Board.
14    In addition to the companies approved by the System under
15this subsection (c), the System may offer its participants an
16investment fund managed by the Illinois State Board of
17Investment.
18    (d) Participants in the program must be allowed to direct
19the transfer of their account balances among the various
20investment options offered, subject to applicable contractual
21provisions. The participant shall not be deemed a fiduciary by
22reason of providing such investment direction. A person who is
23a fiduciary shall not be liable for any loss resulting from
24that investment direction and shall not be deemed to have
25breached any fiduciary duty by acting in accordance with that
26direction. Neither the System nor the State shall guarantee any

 

 

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1of the investments in the participant's account balances.
2    (e) Participation in the self-managed plan under this
3Section shall constitute participation in the General Assembly
4Retirement System.
5    (f) The self-managed plan shall be funded by contributions
6from participants in the self-managed plan and State
7contributions as provided in this Section.
8    The contribution rate for participants in the self-managed
9plan shall be, (i) for a participant who does not file an
10election under subsection (a-5) of this Section, 6% of the
11amount of salary in excess of the limit specified in Section
122-108.2 in that year, in addition to the amount specified under
13subsection (e-1) of Section 2-126 for that year and (ii) for a
14participant who files an election under subsection (a-5) of
15Section 2-126.2, 8% of any amount of salary up to and including
16the limit specified in Section 2-108.2 for that year and 6% of
17any amount of salary in excess of that limit for that year.
18This required contribution shall be made as an employer pick-up
19under Section 414(h) of the Internal Revenue Code of 1986 or
20any successor Section thereof. Any participant in the System's
21traditional benefit package prior to his or her election to
22participate in the self-managed plan shall continue to have the
23employer pick up the contributions required under Section
242-126. However, the amounts picked up after the election of the
25self-managed plan shall be remitted to and treated as assets of
26the self-managed plan. In no event shall a participant have the

 

 

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1option of receiving these amounts in cash. Participants may
2make additional contributions to the self-managed plan in
3accordance with procedures prescribed by the System, to the
4extent permitted under rules adopted by the System.
5    The program shall provide for State contributions to the
6self-managed plan in the following amounts: (i) for a
7participant who does not file an election under subsection
8(a-5) of this Section, 3% of the amount of salary in excess of
9the limit specified in Section 2-108.2 for that year and (ii)
10for a participant who does not file an election under
11subsection (a-5) of this Section, 7.1% of any amount of salary
12up to and including the limit specified in Section 2-108.2 for
13that year and 3% of any amount of salary in excess of that
14limit for that year.
15    The State of Illinois shall make contributions by
16appropriations to the System for participants in the
17self-managed plan under this Section. The amount required shall
18be certified by the Board of Trustees of the System and paid by
19the State in accordance with Section 2-134. The System shall
20not be obligated to remit the required State contributions to
21any of the insurance and annuity companies, mutual fund
22companies, banks, trust companies, financial institutions, or
23other sponsors of any of the funding vehicles offered under the
24self-managed plan until it has received the required State
25contributions from the State.
26    (g) If a participant in the self-managed plan who is

 

 

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1otherwise vested under this Article terminates employment, the
2participant shall be entitled to a benefit that is based on the
3account values attributable to both State and member
4contributions and any investment return thereon.
5    If a participant in the self-managed plan who is not
6otherwise vested under this Article terminates employment, the
7participant shall be entitled to a benefit based solely on the
8account values attributable to the participant's contributions
9and any investment return thereon, and the State contributions
10and any investment return thereon shall be forfeited. Any State
11contributions that are forfeited shall be held in escrow by the
12company investing those contributions and shall be used, as
13directed by the System, for future allocations of State
14contributions.
 
15    (40 ILCS 5/2-134.1 new)
16    Sec. 2-134.1. To calculate the normal cost of benefits. To
17calculate the normal cost of each plan offered by the system as
18a percentage of salary and to update those amounts at least
19every 3 years.
 
20    (40 ILCS 5/14-103.12a new)
21    Sec. 14-103.12a. Limitation on compensation. For the
22purpose of calculating traditional benefit package benefits
23and contributions, the annual earnings, salary, or wages of a
24participant shall not exceed the greater of (i) the amount

 

 

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1specified under subsection (b-5) of Section 1-160 or (ii) the
2annual salary of the participant during the 365 days
3immediately before the effective date of this Section. If,
4however, an employment contract that is in place on or before
5the effective date of this Section authorizes an increase in
6earnings, salary, or wages on or after the effective date of
7this Section, then the annual earnings, salary, or wages of the
8participant during the 365 days that immediately precede the
9date that the contract expires may be used in lieu of the
10amount specified in item (ii) of this Section.
 
11    (40 ILCS 5/14-103.40 new)
12    Sec. 14-103.40. Traditional benefit package. "Traditional
13benefit package" means the defined benefit retirement program
14maintained by the System, which includes retirement annuities
15payable directly from the System, as provided in Sections
1614-107, 14-108, 14-113, and 14-114; survivor's annuities
17payable directly from the System, as provided in Sections
1814-120, 14-121, and 14-121.1; and contribution refunds, as
19provided in Section 14-130.
 
20    (40 ILCS 5/14-103.41 new)
21    Sec. 14-103.41. Self-managed plan. "Self-managed plan"
22means the defined contribution retirement program maintained
23by the System, as described in Section 14-133.2. The
24self-managed plan does not include retirement annuities or

 

 

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1survivor's benefits payable directly from the System, as
2provided in Sections 14-107, 14-108, 14-113, 14-114, 14-120,
314-121, and 14-121.1 or refunds determined under Section
414-130.
 
5    (40 ILCS 5/14-133)  (from Ch. 108 1/2, par. 14-133)
6    Sec. 14-133. Contributions on behalf of members.
7    (a) Each participating employee shall make contributions
8to the System, based on the employee's compensation, as
9follows:
10        (1) Covered employees, except as indicated below, 3.5%
11    for retirement annuity, and 0.5% for a widow or survivors
12    annuity;
13        (2) Noncovered employees, except as indicated below,
14    7% for retirement annuity and 1% for a widow or survivors
15    annuity;
16        (3) Noncovered employees serving in a position in which
17    "eligible creditable service" as defined in Section 14-110
18    may be earned, 1% for a widow or survivors annuity plus the
19    following amount for retirement annuity: 8.5% through
20    December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5%
21    in 2004 and thereafter;
22        (4) Covered employees serving in a position in which
23    "eligible creditable service" as defined in Section 14-110
24    may be earned, 0.5% for a widow or survivors annuity plus
25    the following amount for retirement annuity: 5% through

 

 

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1    December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004
2    and thereafter;
3        (5) Each security employee of the Department of
4    Corrections or of the Department of Human Services who is a
5    covered employee, 0.5% for a widow or survivors annuity
6    plus the following amount for retirement annuity: 5%
7    through December 31, 2001; 6% in 2002; 7% in 2003; and 8%
8    in 2004 and thereafter;
9        (6) Each security employee of the Department of
10    Corrections or of the Department of Human Services who is
11    not a covered employee, 1% for a widow or survivors annuity
12    plus the following amount for retirement annuity: 8.5%
13    through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and
14    11.5% in 2004 and thereafter.
15    (b) Contributions shall be in the form of a deduction from
16compensation and shall be made notwithstanding that the
17compensation paid in cash to the employee shall be reduced
18thereby below the minimum prescribed by law or regulation. Each
19member is deemed to consent and agree to the deductions from
20compensation provided for in this Article, and shall receipt in
21full for salary or compensation.
22    (c) Notwithstanding any provision of this Code to the
23contrary, (i) for a participant who does not file an election
24under subsection (a-5) of Section 14-133.2, any contributions
25on amounts of salary in excess of the limit specified in
26Section 14-103.12a for that year shall instead be used to

 

 

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1finance self-managed plan benefits and (ii) for a participant
2who files an election under subsection (a-5) of Section
314-133.2, any contributions made after the date of the
4election, including contributions for a survivor's annuity,
5shall instead be used to finance the benefits under Section
614-133.2. Notwithstanding any provision of this Code to the
7contrary, a participant who does not file an election under
8subsection (a-5) of Section 14-133.2 shall contribute towards
9the traditional benefit package a percentage of salary equal to
10the greater of (i) one-half of the normal cost of the
11traditional benefit package or (ii) 6% of salary.
12(Source: P.A. 92-14, eff. 6-28-01.)
 
13    (40 ILCS 5/14-133.2 new)
14    Sec. 14-133.2. Self-managed plan.
15    (a) The State Employees' Retirement System of Illinois must
16establish and administer a self-managed plan that shall offer
17participants the opportunity to accumulate assets for
18retirement through a combination of participant and State
19contributions that may be invested in mutual funds, collective
20investment funds, or other investment products and used to
21purchase annuity contracts, that are fixed, variable, or a
22combination of fixed and variable. The plan must be qualified
23under the Internal Revenue Code of 1986.
24    The State Employees' Retirement System of Illinois shall be
25the plan sponsor for the self-managed plan and shall prepare a

 

 

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1plan document and adopt any rules and procedures that are
2considered necessary 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    (a-5) A participant may file an irrevocable election to
9transfer amounts equal to the participant's total
10contributions under the traditional benefit package, with
11interest, to the self-managed plan under this Section. By
12filing the election, a participant forfeits all accrued rights
13and benefits under the traditional benefit package.
14    (b) Notwithstanding any other provision of this Code, (i)
15for a participant who does not file an election under
16subsection (a-5) of this Section, any portion of his or her
17salary that exceeds the limit specified in Section 14-103.12a
18for that year shall be subject to the self-managed plan and
19(ii) for a participant who files an election under subsection
20(a-5) of this Section, the entirety of the participant's salary
21shall, after the date of the election, be subject to the
22self-managed plan created under this Section.
23    (c) The System shall solicit proposals to provide
24administrative services and funding vehicles for the
25self-managed plan from insurance and annuity companies and
26mutual fund companies, banks, trust companies, or other

 

 

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

 

 

HB5754- 17 -LRB097 19807 EFG 65077 b

1provisions. The participant shall not be deemed a fiduciary by
2reason of providing such investment direction. A person who is
3a fiduciary shall not be liable for any loss resulting from
4that investment direction and shall not be deemed to have
5breached any fiduciary duty by acting in accordance with that
6direction. Neither the System nor the State shall guarantee any
7of the investments in the participant's account balances.
8    (e) Participation in the self-managed plan under this
9Section shall constitute participation in the State Employees'
10Retirement System of Illinois.
11    (f) The self-managed plan shall be funded by contributions
12from participants in the self-managed plan and State
13contributions as provided in this Section.
14    The contribution rate for participants in the self-managed
15plan shall be, (i) for a participant who does not file an
16election under subsection (a-5) of this Section, 6% of the
17amount of salary in excess of the limit specified in 14-103.12a
18for that year, in addition to the amount specified under
19subsection (c) of Section 14-133 for that year and (ii) for a
20participant who files an election under subsection (a-5) of
21Section 14-133.2, 8% of any amount of salary up to and
22including the limit specified in Section 14-103.12a for that
23year and 6% of any amount of salary in excess of that limit for
24that year. This required contribution shall be made as an
25employer pick-up under Section 414(h) of the Internal Revenue
26Code of 1986 or any successor Section thereof. Any participant

 

 

HB5754- 18 -LRB097 19807 EFG 65077 b

1in the System's traditional benefit package prior to his or her
2election to participate in the self-managed plan shall continue
3to have the employer pick up the contributions required under
4Section 14-133. However, the amounts picked up after the
5election of the self-managed plan shall be remitted to and
6treated as assets of the self-managed plan. In no event shall a
7participant have the option of receiving these amounts in cash.
8Participants may make additional contributions to the
9self-managed plan in accordance with procedures prescribed by
10the System, to the extent permitted under rules adopted by the
11System.
12    The program shall provide for State contributions to the
13self-managed plan in the following amounts: (i) for a
14participant who does not file an election under subsection
15(a-5) of this Section, 3% of the amount of salary in excess of
16the limit specified in 14-103.12a for that year and (ii) for a
17participant who does not file an election under subsection
18(a-5) of this Section, 7.1% of any amount of salary up to and
19including the limit specified in Section 14-103.12a for that
20year and 3% of any amount of salary in excess of that limit for
21that year.
22    The State of Illinois shall make contributions by
23appropriations to the System for participants in the
24self-managed plan under this Section. The amount required shall
25be certified by the Board of Trustees of the System and paid by
26the State in accordance with Sections 14-132 and 14-135.08. The

 

 

HB5754- 19 -LRB097 19807 EFG 65077 b

1System shall not be obligated to remit the required State
2contributions to any of the insurance and annuity companies,
3mutual fund companies, banks, trust companies, financial
4institutions, or other sponsors of any of the funding vehicles
5offered under the self-managed plan until it has received the
6required State contributions from the State.
7    (g) If a participant in the self-managed plan who is
8otherwise vested under this Article terminates employment, the
9participant shall be entitled to a benefit that is based on the
10account values attributable to both State and member
11contributions and any investment return thereon.
12    If a participant in the self-managed plan who is not
13otherwise vested under this Article terminates employment, the
14participant shall be entitled to a benefit based solely on the
15account values attributable to the participant's contributions
16and any investment return thereon, and the State contributions
17and any investment return thereon shall be forfeited. Any State
18contributions that are forfeited shall be held in escrow by the
19company investing those contributions and shall be used, as
20directed by the System, for future allocations of State
21contributions.
 
22    (40 ILCS 5/14-135.08a new)
23    Sec. 14-135.08a. To calculate the normal cost of benefits.
24To calculate the normal cost of each plan offered by the system
25as a percentage of salary and to update those amounts at least

 

 

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1every 3 years.
 
2    (40 ILCS 5/15-112.1 new)
3    Sec. 15-112.1. Limitation on earnings and required
4participation in the self-managed plan.
5    (a) For the purpose of calculating traditional benefit
6package benefits and contributions, the annual earnings,
7salary, or wages of a participant shall not exceed the greater
8of (i) the amount specified under subsection (b-5) of Section
91-160 or (ii) the annual salary of the participant during the
10365 days immediately before the effective date of this Section.
11If, however, an employment contract that is in place on or
12before the effective date of this Section authorizes an
13increase in earnings, salary, or wages on or after the
14effective date of this Section, then the annual earnings,
15salary, or wages of the participant during the 365 days that
16immediately precede the date that the contract expires may be
17used in lieu of the amount specified in item (ii) of this
18Section.
19    (b) Notwithstanding any other provision of this Code, (i)
20for a participant who does not make an election under Section
2115-134.5, any portion of his or her salary that exceeds the
22limit specified in subsection (a) of this Section for that year
23shall be subject to the self-managed plan and (ii) for a
24participant who makes an election under Section 15-134.5, the
25entirety of the participant's salary shall, after the date of

 

 

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1the election, be subject to the self-managed plan created under
2this Section, as is provided in Section 15-158.2.
 
3    (40 ILCS 5/15-157)  (from Ch. 108 1/2, par. 15-157)
4    Sec. 15-157. Employee Contributions.
5    (a) Each participating employee shall make contributions
6towards the retirement benefits payable under the retirement
7program applicable to the employee from each payment of
8earnings applicable to employment under this system on and
9after the date of becoming a participant as follows: Prior to
10September 1, 1949, 3 1/2% of earnings; from September 1, 1949
11to August 31, 1955, 5%; from September 1, 1955 to August 31,
121969, 6%; from September 1, 1969, 6 1/2%. These contributions
13are to be considered as normal contributions for purposes of
14this Article.
15    Each participant who is a police officer or firefighter
16shall make normal contributions of 8% of each payment of
17earnings applicable to employment as a police officer or
18firefighter under this system on or after September 1, 1981,
19unless he or she files with the board within 60 days after the
20effective date of this amendatory Act of 1991 or 60 days after
21the board receives notice that he or she is employed as a
22police officer or firefighter, whichever is later, a written
23notice waiving the retirement formula provided by Rule 4 of
24Section 15-136. This waiver shall be irrevocable. If a
25participant had met the conditions set forth in Section

 

 

HB5754- 22 -LRB097 19807 EFG 65077 b

115-132.1 prior to the effective date of this amendatory Act of
21991 but failed to make the additional normal contributions
3required by this paragraph, he or she may elect to pay the
4additional contributions plus compound interest at the
5effective rate. If such payment is received by the board, the
6service shall be considered as police officer service in
7calculating the retirement annuity under Rule 4 of Section
815-136. While performing service described in clause (i) or
9(ii) of Rule 4 of Section 15-136, a participating employee
10shall be deemed to be employed as a firefighter for the purpose
11of determining the rate of employee contributions under this
12Section.
13    (b) Starting September 1, 1969, each participating
14employee shall make additional contributions of 1/2 of 1% of
15earnings to finance a portion of the cost of the annual
16increases in retirement annuity provided under Section 15-136,
17except that with respect to participants in the self-managed
18plan this additional contribution shall be used to finance the
19benefits obtained under that retirement program.
20    (c) In addition to the amounts described in subsections (a)
21and (b) of this Section, each participating employee shall make
22contributions of 1% of earnings applicable under this system on
23and after August 1, 1959. The contributions made under this
24subsection (c) shall be considered as survivor's insurance
25contributions for purposes of this Article if the employee is
26covered under the traditional benefit package, and such

 

 

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1contributions shall be considered as additional contributions
2for purposes of this Article if the employee is participating
3in the self-managed plan or has elected to participate in the
4portable benefit package and has completed the applicable
5one-year waiting period. Contributions in excess of $80 during
6any fiscal year beginning before August 31, 1969 and in excess
7of $120 during any fiscal year thereafter until September 1,
81971 shall be considered as additional contributions for
9purposes of this Article.
10    (d) If the board by board rule so permits and subject to
11such conditions and limitations as may be specified in its
12rules, a participant may make other additional contributions of
13such percentage of earnings or amounts as the participant shall
14elect in a written notice thereof received by the board.
15    (e) That fraction of a participant's total accumulated
16normal contributions, the numerator of which is equal to the
17number of years of service in excess of that which is required
18to qualify for the maximum retirement annuity, and the
19denominator of which is equal to the total service of the
20participant, shall be considered as accumulated additional
21contributions. The determination of the applicable maximum
22annuity and the adjustment in contributions required by this
23provision shall be made as of the date of the participant's
24retirement.
25    (f) Notwithstanding the foregoing, a participating
26employee shall not be required to make contributions under this

 

 

HB5754- 24 -LRB097 19807 EFG 65077 b

1Section after the date upon which continuance of such
2contributions would otherwise cause his or her retirement
3annuity to exceed the maximum retirement annuity as specified
4in clause (1) of subsection (c) of Section 15-136.
5    (g) A participating employee may make contributions for the
6purchase of service credit under this Article.
7    (h) Notwithstanding any provision of this Code to the
8contrary, (i) for a member who does not file an election under
9subsection (e) of Section 15-158.2, any contributions on
10amounts of salary in excess of the limit specified in Section
1115-112.1 for that year shall instead be used to finance
12self-managed plan benefits and (ii) for a member who files an
13election under subsection (e) of Section 15-158.2, any
14contributions made after the date of the election, including
15the contributions for a survivor's annuity, shall be used to
16finance the benefits under Section 15-158.2. Notwithstanding
17any provision of this Code to the contrary, a member who does
18not file an election under subsection (a-5) of Section 15-158.2
19shall contribute towards the traditional benefit package a
20percentage of salary equal to the greater of (i) one-half of
21the normal cost of the traditional benefit package or (ii) 6%
22of salary.
23(Source: P.A. 90-32, eff. 6-27-97; 90-65, eff. 7-7-97; 90-448,
24eff. 8-16-97; 90-511, eff. 8-22-97; 90-576, eff. 3-31-98;
2590-655, eff. 7-30-98; 90-766, eff. 8-14-98.)
 

 

 

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1    (40 ILCS 5/15-158.2)
2    Sec. 15-158.2. Self-managed plan.
3    (a) Purpose. The General Assembly finds that it is
4important for colleges and universities to be able to attract
5and retain the most qualified employees and that in order to
6attract and retain these employees, colleges and universities
7should have the flexibility to provide a defined contribution
8plan as an alternative for eligible employees who elect not to
9participate in a defined benefit retirement program provided
10under this Article. Accordingly, the State Universities
11Retirement System is hereby authorized to establish and
12administer a self-managed plan, which shall offer
13participating employees the opportunity to accumulate assets
14for retirement through a combination of employee and employer
15contributions that may be invested in mutual funds, collective
16investment funds, or other investment products and used to
17purchase annuity contracts, either fixed or variable or a
18combination thereof. The plan must be qualified under the
19Internal Revenue Code of 1986.
20    (b) Adoption by employers. Each employer subject to this
21Article may elect to adopt the self-managed plan established
22under this Section; this election is irrevocable. An employer's
23election to adopt the self-managed plan makes available to the
24eligible employees of that employer the elections described in
25Section 15-134.5.
26    The State Universities Retirement System shall be the plan

 

 

HB5754- 26 -LRB097 19807 EFG 65077 b

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

 

 

HB5754- 27 -LRB097 19807 EFG 65077 b

1    under the contract and the financial stability of the
2    company; and
3        (5) the efficacy of the contract in the recruitment and
4    retention of employees.
5    The System, in consultation with the employers, shall
6periodically review each approved company. A company may
7continue to provide administrative services and funding
8vehicles for the self-managed plan only so long as it continues
9to be an approved company under contract with the Board.
10    (d) Employee Direction. Employees who are participating in
11the program must be allowed to direct the transfer of their
12account balances among the various investment options offered,
13subject to applicable contractual provisions. The participant
14shall not be deemed a fiduciary by reason of providing such
15investment direction. A person who is a fiduciary shall not be
16liable for any loss resulting from such investment direction
17and shall not be deemed to have breached any fiduciary duty by
18acting in accordance with that direction. Neither the System
19nor the employer guarantees any of the investments in the
20employee's account balances.
21    (e) Participation. An employee eligible to participate in
22the self-managed plan must make a written election in
23accordance with the provisions of Section 15-134.5 and the
24procedures established by the System or become subject to the
25limitation specified in Section 15-112.1. Participation in the
26self-managed plan by an electing employee shall begin on the

 

 

HB5754- 28 -LRB097 19807 EFG 65077 b

1first day of the first pay period following the later of the
2date the employee's election is filed with the System, or the
3effective date as of which the employee's employer begins to
4offer participation in the self-managed plan, or the date the
5participant's annual salary exceeds the limitation specified
6in Section 15-112.1. Employers may not make the self-managed
7plan available earlier than January 1, 1998. An employee's
8participation in any other retirement program administered by
9the System under this Article shall terminate on the date that
10participation in the self-managed plan begins.
11    An employee who participates has elected to participate in
12the self-managed plan under this Section must continue
13participation while employed in an eligible position, and may
14not participate in any other retirement program administered by
15the System under this Article while employed by that employer
16or any other employer that has adopted the self-managed plan,
17unless the self-managed plan is terminated in accordance with
18subsection (i).
19    Participation in the self-managed plan under this Section
20shall constitute membership in the State Universities
21Retirement System.
22    A participant under this Section shall be entitled to the
23benefits of Article 20 of this Code.
24    (f) Establishment of Initial Account Balance. If at the
25time an employee elects to participate in the self-managed plan
26he or she has rights and credits in the System due to previous

 

 

HB5754- 29 -LRB097 19807 EFG 65077 b

1participation in the traditional benefit package, the System
2shall establish for the employee an opening account balance in
3the self-managed plan, equal to the amount of contribution
4refund that the employee would be eligible to receive under
5Section 15-154 if the employee terminated employment on that
6date and elected a refund of contributions, except that this
7hypothetical refund shall include interest at the effective
8rate for the respective years. The System shall transfer assets
9from the defined benefit retirement program to the self-managed
10plan, as a tax free transfer in accordance with Internal
11Revenue Service guidelines, for purposes of funding the
12employee's opening account balance.
13    (g) No Duplication of Service Credit. Notwithstanding any
14other provision of this Article, an employee may not purchase
15or receive service or service credit applicable to any other
16retirement program administered by the System under this
17Article for any period during which the employee was a
18participant in the self-managed plan established under this
19Section.
20    (h) Contributions.
21        (1) The self-managed plan shall be funded by
22    contributions from employees participating in the
23    self-managed plan and employer contributions as provided
24    in this Section.
25            (A) Before the effective date of this amendatory
26        Act of the 97th General Assembly, the The contribution

 

 

HB5754- 30 -LRB097 19807 EFG 65077 b

1        rate for employees participating in the self-managed
2        plan under this Section shall be equal to the employee
3        contribution rate for other participants in the
4        System, as provided in Section 15-157. This required
5        contribution shall be made as an "employer pick-up"
6        under Section 414(h) of the Internal Revenue Code of
7        1986 or any successor Section thereof. Any employee
8        participating in the System's traditional benefit
9        package prior to his or her election to participate in
10        the self-managed plan shall continue to have the
11        employer pick up the contributions required under
12        Section 15-157. However, the amounts picked up after
13        the election of the self-managed plan shall be remitted
14        to and treated as assets of the self-managed plan. In
15        no event shall an employee have an option of receiving
16        these amounts in cash. Employees may make additional
17        contributions to the self-managed plan in accordance
18        with procedures prescribed by the System, to the extent
19        permitted under rules prescribed by the System.
20            (B) On and after the effective date of this
21        amendatory Act of the 97th General Assembly, the
22        contribution rate for participants in the self-managed
23        plan shall be, (i) for a participant who does not file
24        an election under subsection (e) of this Section, 6% of
25        the amount of salary in excess of the limit specified
26        in 15-112.1 for that year, in addition to the amount

 

 

HB5754- 31 -LRB097 19807 EFG 65077 b

1        specified under subsection (h) of Section 15-157 for
2        that year and (ii) for a participant who files an
3        election under subsection (e) of this Section, 8% of
4        any amount of salary up to and including the limit
5        specified in Section 15-112.1 for that year and 6% of
6        any amount of salary in excess of that limit for that
7        year. This required contribution shall be made as an
8        employer pick-up under Section 414(h) of the Internal
9        Revenue Code of 1986 or any successor Section thereof.
10        Any participant in the System's traditional benefit
11        package prior to his or her election to participate in
12        the self-managed plan shall continue to have the
13        employer pick up the contributions required under
14        Section 15-157. However, the amounts picked up after
15        the election of the self-managed plan shall be remitted
16        to and treated as assets of the self-managed plan. In
17        no event shall a participant have the option of
18        receiving these amounts in cash. Participants may make
19        additional contributions to the self-managed plan in
20        accordance with procedures prescribed by the System,
21        to the extent permitted under rules adopted by the
22        System.
23        (2) The program shall provide for employer and State
24    contributions to the self-managed plan in the following
25    amounts: (i) for a member who does not file an election
26    under subsection (e) of this Section, 3% of the amount of

 

 

HB5754- 32 -LRB097 19807 EFG 65077 b

1    salary in excess of the limit specified in Section 15-112.1
2    for that year, to be paid by the actual employer, and (ii)
3    for a member who files an election under subsection (e) of
4    this Section, 7.1% of any amount of salary up to and
5    including the limit specified in Section 15-112.1 for that
6    year, to be paid by the State, and 3% of any amount of
7    salary in excess of that limit for that year, to be paid by
8    the actual employer.
9        The program shall provide for these employer and State
10    contributions to be credited to each self-managed plan
11    participant at a rate of 7.6% of the participating
12    employee's salary, less the amount used by the System to
13    provide disability benefits for the employee. The amounts
14    so credited shall be paid into the participant's
15    self-managed plan accounts in a manner to be prescribed by
16    the System.
17        (3) An amount of employer contribution, not exceeding
18    1% of the participating employee's salary, shall be used
19    for the purpose of providing the disability benefits of the
20    System to the employee. Prior to the beginning of each plan
21    year under the self-managed plan, the Board of Trustees
22    shall determine, as a percentage of salary, the amount of
23    employer contributions to be allocated during that plan
24    year for providing disability benefits for employees in the
25    self-managed plan.
26        (4) The State of Illinois shall make contributions by

 

 

HB5754- 33 -LRB097 19807 EFG 65077 b

1    appropriations to the System of the employer contributions
2    required for employees who participate in the self-managed
3    plan under this Section. The amount required shall be
4    certified by the Board of Trustees of the System and paid
5    by the State in accordance with Section 15-165. The System
6    shall not be obligated to remit the required employer
7    contributions to any of the insurance and annuity
8    companies, mutual fund companies, banks, trust companies,
9    financial institutions, or other sponsors of any of the
10    funding vehicles offered under the self-managed plan until
11    it has received the required employer contributions from
12    the State. In the event of a deficiency in the amount of
13    State contributions, the System shall implement those
14    procedures described in subsection (c) of Section 15-165 to
15    obtain the required funding from the General Revenue Fund.
16    (i) Termination. The self-managed plan authorized under
17this Section may be terminated by the System, subject to the
18terms of any relevant contracts, and the System shall have no
19obligation to reestablish the self-managed plan under this
20Section. This Section does not create a right to continued
21participation in any self-managed plan set up by the System
22under this Section. If the self-managed plan is terminated, the
23participants shall have the right to participate in one of the
24other retirement programs offered by the System and receive
25service credit in such other retirement program for any years
26of employment following the termination.

 

 

HB5754- 34 -LRB097 19807 EFG 65077 b

1    (j) Vesting; Withdrawal; Return to Service. A participant
2in the self-managed plan becomes vested in the employer
3contributions credited to his or her accounts in the
4self-managed plan on the earliest to occur of the following:
5(1) completion of 5 years of service with an employer described
6in Section 15-106; (2) the death of the participating employee
7while employed by an employer described in Section 15-106, if
8the participant has completed at least 1 1/2 years of service;
9or (3) the participant's election to retire and apply the
10reciprocal provisions of Article 20 of this Code.
11    A participant in the self-managed plan who receives a
12distribution of his or her vested amounts from the self-managed
13plan while not yet eligible for retirement under this Article
14(and Article 20, if applicable) shall forfeit all service
15credit and accrued rights in the System; if subsequently
16re-employed, the participant shall be considered a new
17employee. If a former participant again becomes a participating
18employee (or becomes employed by a participating system under
19Article 20 of this Code) and continues as such for at least 2
20years, all such rights, service credits, and previous status as
21a participant shall be restored upon repayment of the amount of
22the distribution, without interest.
23    (k) Benefit amounts. If an employee who is vested in
24employer contributions terminates employment, the employee
25shall be entitled to a benefit which is based on the account
26values attributable to both employer and employee

 

 

HB5754- 35 -LRB097 19807 EFG 65077 b

1contributions and any investment return thereon.
2    If an employee who is not vested in employer contributions
3terminates employment, the employee shall be entitled to a
4benefit based solely on the account values attributable to the
5employee's contributions and any investment return thereon,
6and the employer contributions and any investment return
7thereon shall be forfeited. Any employer contributions which
8are forfeited shall be held in escrow by the company investing
9those contributions and shall be used as directed by the System
10for future allocations of employer contributions or for the
11restoration of amounts previously forfeited by former
12participants who again become participating employees.
13(Source: P.A. 93-347, eff. 7-24-03.)
 
14    (40 ILCS 5/15-165.1 new)
15    Sec. 15-165.1. To calculate the normal cost of benefits. To
16calculate the normal cost of each plan offered by the system as
17a percentage of salary and to update those amounts at least
18every 3 years.
 
19    (40 ILCS 5/16-121.1 new)
20    Sec. 16-121.1. Limitation on salary. For the purpose of
21calculating traditional benefit package benefits and
22contributions, the annual earnings, salary, or wages of a
23member shall not exceed the greater of (i) the amount specified
24under subsection (b-5) of Section 1-160 or (ii) the annual

 

 

HB5754- 36 -LRB097 19807 EFG 65077 b

1salary of the member during the 365 days immediately before the
2effective date of this Section. If, however, an employment
3contract that is in place on or before the effective date of
4this Section authorizes an increase in earnings, salary, or
5wages on or after the effective date of this Section, then the
6annual earnings, salary, or wages of the member during the 365
7days that immediately precede the date that the contract
8expires may be used in lieu of the amount specified in item
9(ii) of this Section.
 
10    (40 ILCS 5/16-122.2 new)
11    Sec. 16-122.2. Traditional benefit package. "Traditional
12benefit package" means the defined benefit retirement program
13maintained by the System, which includes retirement annuities
14payable directly from the System, as provided in Sections
1516-132, 16-133, 16-133.1, and 16-136; survivor's annuities
16payable directly from the System, as provided in Sections
1716-140, 16-141, 16-142, 16-142.1, 16-142.2, 16-142.3, 16-143,
18and 16-143.1; and contribution refunds, as provided in Section
1916-151.
 
20    (40 ILCS 5/16-122.3 new)
21    Sec. 16-122.3. Self-managed plan. "Self-managed plan"
22means the defined contribution retirement program maintained
23by the System, as described in Section 16-158.2. The
24self-managed plan does not include retirement annuities or

 

 

HB5754- 37 -LRB097 19807 EFG 65077 b

1survivor's benefits payable directly from the System, as
2provided in Sections 16-132, 16-133, 16-133.1, 16-136, 16-140,
316-141, 16-142, 16-142.1, 16-142.2, 16-142.3, 16-143, and
416-143.1 or refunds determined under Section 16-151.
 
5    (40 ILCS 5/16-152)  (from Ch. 108 1/2, par. 16-152)
6    Sec. 16-152. Contributions by members.
7    (a) Each member shall make contributions for membership
8service to this System as follows:
9        (1) Effective July 1, 1998, contributions of 7.50% of
10    salary towards the cost of the retirement annuity. Such
11    contributions shall be deemed "normal contributions".
12        (2) Effective July 1, 1969, contributions of 1/2 of 1%
13    of salary toward the cost of the automatic annual increase
14    in retirement annuity provided under Section 16-133.1.
15        (3) Effective July 24, 1959, contributions of 1% of
16    salary towards the cost of survivor benefits. Such
17    contributions shall not be credited to the individual
18    account of the member and shall not be subject to refund
19    except as provided under Section 16-143.2.
20        (4) Effective July 1, 2005, contributions of 0.40% of
21    salary toward the cost of the early retirement without
22    discount option provided under Section 16-133.2. This
23    contribution shall cease upon termination of the early
24    retirement without discount option as provided in Section
25    16-176.

 

 

HB5754- 38 -LRB097 19807 EFG 65077 b

1    (b) The minimum required contribution for any year of
2full-time teaching service shall be $192.
3    (c) Contributions shall not be required of any annuitant
4receiving a retirement annuity who is given employment as
5permitted under Section 16-118 or 16-150.1.
6    (d) A person who (i) was a member before July 1, 1998, (ii)
7retires with more than 34 years of creditable service, and
8(iii) does not elect to qualify for the augmented rate under
9Section 16-129.1 shall be entitled, at the time of retirement,
10to receive a partial refund of contributions made under this
11Section for service occurring after the later of June 30, 1998
12or attainment of 34 years of creditable service, in an amount
13equal to 1.00% of the salary upon which those contributions
14were based.
15    (e) A member's contributions toward the cost of early
16retirement without discount made under item (a)(4) of this
17Section shall not be refunded if the member has elected early
18retirement without discount under Section 16-133.2 and has
19begun to receive a retirement annuity under this Article
20calculated in accordance with that election. Otherwise, a
21member's contributions toward the cost of early retirement
22without discount made under item (a)(4) of this Section shall
23be refunded according to whichever one of the following
24circumstances occurs first:
25        (1) The contributions shall be refunded to the member,
26    without interest, within 120 days after the member's

 

 

HB5754- 39 -LRB097 19807 EFG 65077 b

1    retirement annuity commences, if the member does not elect
2    early retirement without discount under Section 16-133.2.
3        (2) The contributions shall be included, without
4    interest, in any refund claimed by the member under Section
5    16-151.
6        (3) The contributions shall be refunded to the member's
7    designated beneficiary (or if there is no beneficiary, to
8    the member's estate), without interest, if the member dies
9    without having begun to receive a retirement annuity under
10    this Article.
11        (4) The contributions shall be refunded to the member,
12    without interest, within 120 days after the early
13    retirement without discount option provided under Section
14    16-133.2 is terminated under Section 16-176.
15    (f) Notwithstanding any provision of this Code to the
16contrary, (i) for a member who does not file an election under
17subsection (a-5) of Section 16-158.2, any contributions on
18amounts of salary in excess of the limit specified in Section
1916-121.1 for that year shall instead be used to finance
20self-managed plan benefits and (ii) for a member who files an
21election under subsection (a-5) of Section 16-158.2, any
22contributions made after the date of the election, including
23the contributions for a survivor's annuity, shall be used to
24finance the benefits under Section 16-158.2. Notwithstanding
25any provision of this Code to the contrary, a member who does
26not file an election under subsection (a-5) of Section 16-158.2

 

 

HB5754- 40 -LRB097 19807 EFG 65077 b

1shall contribute towards the traditional benefit package a
2percentage of salary equal to the greater of (i) one-half of
3the normal cost of the traditional benefit package or (ii) 6%
4of salary.
5(Source: P.A. 93-320, eff. 7-23-03; 94-4, eff. 6-1-05.)
 
6    (40 ILCS 5/16-158.2 new)
7    Sec. 16-158.2. Self-managed plan.
8    (a) The Teachers' Retirement System of the State of
9Illinois must establish and administer a self-managed plan that
10shall offer member the opportunity to accumulate assets for
11retirement through a combination of member and State
12contributions that may be invested in mutual funds, collective
13investment funds, or other investment products and used to
14purchase annuity contracts, that are fixed, variable, or a
15combination of fixed and variable. The plan must be qualified
16under the Internal Revenue Code of 1986.
17    The Teachers' Retirement System of the State of Illinois
18shall be the plan sponsor for the self-managed plan and shall
19prepare a plan document and adopt any rules and procedures that
20are considered necessary or desirable for the administration of
21the self-managed plan. Consistent with its fiduciary duty to
22the members and beneficiaries of the self-managed plan, the
23Board of Trustees of the System may delegate aspects of plan
24administration as it sees fit to companies authorized to do
25business in this State.

 

 

HB5754- 41 -LRB097 19807 EFG 65077 b

1    (a-5) A member may file an irrevocable election to transfer
2amounts equal to the member's total contributions under the
3traditional benefit package, with interest, to the
4self-managed plan under this Section. By filing the election, a
5member forfeits all accrued rights and benefits under the
6traditional benefit package.
7    (b) Notwithstanding any other provision of this Code, (i)
8for a member who does not file an election under subsection
9(a-5) of this Section, any portion of his or her salary that
10exceeds the limit specified in Section 16-121.1 for that year
11shall be subject to the self-managed plan and (ii) for a member
12who files an election under subsection (a-5) of this Section,
13the entirety of the member's salary shall, after the date of
14the election, be subject to the self-managed plan created under
15this Section.
16    (c) The System shall solicit proposals to provide
17administrative services and funding vehicles for the
18self-managed plan from insurance and annuity companies and
19mutual fund companies, banks, trust companies, or other
20financial institutions authorized to do business in this State.
21In reviewing the proposals received and approving and
22contracting with no fewer than 2 and no more than 7 companies,
23the Board of Trustees of the System shall consider, among other
24things, the following criteria:
25        (1) the nature and extent of the benefits that would be
26    provided to the members;

 

 

HB5754- 42 -LRB097 19807 EFG 65077 b

1        (2) the reasonableness of the benefits in relation to
2    the premium charged;
3        (3) the suitability of the benefits to the needs and
4    interests of the members and the State; and
5        (4) the ability of the company to provide benefits
6    under the contract and the financial stability of the
7    company.
8    The System shall periodically review each approved
9company. A company may continue to provide administrative
10services and funding vehicles for the self-managed plan only so
11long as it continues to be an approved company under contract
12with the Board.
13    In addition to the companies approved by the System under
14this subsection (c), the System may offer its members an
15investment fund managed by the Illinois State Board of
16Investment.
17    (d) Members in the program must be allowed to direct the
18transfer of their account balances among the various investment
19options offered, subject to applicable contractual provisions.
20The member shall not be deemed a fiduciary by reason of
21providing such investment direction. A person who is a
22fiduciary shall not be liable for any loss resulting from that
23investment direction and shall not be deemed to have breached
24any fiduciary duty by acting in accordance with that direction.
25Neither the System nor the State shall guarantee any of the
26investments in the member's account balances.

 

 

HB5754- 43 -LRB097 19807 EFG 65077 b

1    (e) Participation in the self-managed plan under this
2Section shall constitute participation in the Teachers'
3Retirement System of the State of Illinois.
4    (f) The self-managed plan shall be funded by contributions
5from members in the self-managed plan and State contributions
6as provided in this Section.
7    The contribution rate for members in the self-managed plan
8shall be, (i) for a member who does not file an election under
9subsection (a-5) of this Section, 6% of the amount of salary in
10excess of the limit specified in Section 16-121.1 for that
11year, in addition to the amount specified under subsection (f)
12of Section 16-152 for that year and (ii) for a member who files
13an election under subsection (a-5) of this Section, 8% of any
14amount of salary up to and including the limit specified in
15Section 16-121.1 for that year and 6% of any amount of salary
16in excess of that limit for that year. This required
17contribution shall be made as an employer pick-up under Section
18414(h) of the Internal Revenue Code of 1986 or any successor
19Section thereof. Any member in the System's traditional benefit
20package prior to his or her election to participate in the
21self-managed plan shall continue to have the employer pick up
22the contributions required under Section 16-152. However, the
23amounts picked up after the election of the self-managed plan
24shall be remitted to and treated as assets of the self-managed
25plan. In no event shall a member have the option of receiving
26these amounts in cash. Members may make additional

 

 

HB5754- 44 -LRB097 19807 EFG 65077 b

1contributions to the self-managed plan in accordance with
2procedures prescribed by the System, to the extent permitted
3under rules adopted by the System.
4    The program shall provide for employer and State
5contributions to the self-managed plan in the following
6amounts: (i) for a member who does not file an election under
7subsection (a-5) of this Section, 3% of the amount of salary in
8excess of the limit specified in Section 16-121.1 for that
9year, to be paid by the actual employer, and (ii) for a member
10who files an election under subsection (a-5) of this Section,
117.1% of any amount of salary up to and including the limit
12specified in Section 16-121.1 for that year, to be paid by the
13State, and 3% of any amount of salary in excess of that limit
14for that year, to be paid by the actual employer.
15    The State of Illinois shall make contributions by
16appropriations to the System for members in the self-managed
17plan under this Section. The amount required shall be certified
18by the Board of Trustees of the System and paid by the State in
19accordance with Section 16-158. The System shall not be
20obligated to remit the required State contributions to any of
21the insurance and annuity companies, mutual fund companies,
22banks, trust companies, financial institutions, or other
23sponsors of any of the funding vehicles offered under the
24self-managed plan until it has received the required State
25contributions from the State.
26    (g) If a member in the self-managed plan who is otherwise

 

 

HB5754- 45 -LRB097 19807 EFG 65077 b

1vested under this Article terminates employment, the member
2shall be entitled to a benefit that is based on the account
3values attributable to both State and member contributions and
4any investment return thereon.
5    If a member in the self-managed plan who is not otherwise
6vested under this Article terminates employment, the member
7shall be entitled to a benefit based solely on the account
8values attributable to the member's contributions and any
9investment return thereon, and the State contributions and any
10investment return thereon shall be forfeited. Any State
11contributions that are forfeited shall be held in escrow by the
12company investing those contributions and shall be used, as
13directed by the System, for future allocations of State
14contributions.
 
15    (40 ILCS 5/16-181.4 new)
16    Sec. 16-181.4. To calculate the normal cost of benefits. To
17calculate the normal cost of each plan offered by the system as
18a percentage of salary and to update those amounts at least
19every 3 years.
 
20    (40 ILCS 5/18-111.1 new)
21    Sec. 18-111.1. Limitation on salary. For the purpose of
22calculating traditional benefit package benefits and
23contributions, the annual earnings, salary, or wages of a
24participant shall not exceed the greater of (i) the amount

 

 

HB5754- 46 -LRB097 19807 EFG 65077 b

1specified under subsection (b-5) of Section 1-160 or (ii) the
2annual salary of the participant during the 365 days
3immediately before the effective date of this Section.
 
4    (40 ILCS 5/18-118.1 new)
5    Sec. 18-118.1. Traditional benefit package. "Traditional
6benefit package" means the defined benefit retirement program
7maintained by the System, which includes retirement annuities
8payable directly from the System, as provided in Sections
918-124, 18-125, and 18-125.1; survivor's annuities payable
10directly from the System, as provided in Sections 18-128,
1118-128.01, 18-128.1, 18-128.1, and 18-128.3; and contribution
12refunds, as provided in Section 18-129.
 
13    (40 ILCS 5/18-118.2 new)
14    Sec. 18-118.2. Self-managed plan. "Self-managed plan"
15means the defined contribution retirement program maintained
16by the System, as described in Section 18-133.2. The
17self-managed plan does not include retirement annuities or
18survivor's benefits payable directly from the System, as
19provided in Sections 18-124, 18-125, 18-125.1, 18-128,
2018-128.01, 18-128.1, 18-128.1, and 18-128.3 or refunds
21determined under Section 18-129.
 
22    (40 ILCS 5/18-133)  (from Ch. 108 1/2, par. 18-133)
23    Sec. 18-133. Financing; employee contributions.

 

 

HB5754- 47 -LRB097 19807 EFG 65077 b

1    (a) Effective July 1, 1967, each participant is required to
2contribute 7 1/2% of each payment of salary toward the
3retirement annuity. Such contributions shall continue during
4the entire time the participant is in service, with the
5following exceptions:
6        (1) Contributions for the retirement annuity are not
7    required on salary received after 18 years of service by
8    persons who were participants before January 2, 1954.
9        (2) A participant who continues to serve as a judge
10    after becoming eligible to receive the maximum rate of
11    annuity may elect, through a written direction filed with
12    the Board, to discontinue contributing to the System. Any
13    such option elected by a judge shall be irrevocable unless
14    prior to January 1, 2000, and while continuing to serve as
15    judge, the judge (A) files with the Board a letter
16    cancelling the direction to discontinue contributing to
17    the System and requesting that such contributing resume,
18    and (B) pays into the System an amount equal to the total
19    of the discontinued contributions plus interest thereon at
20    5% per annum. Service credits earned in any other
21    "participating system" as defined in Article 20 of this
22    Code shall be considered for purposes of determining a
23    judge's eligibility to discontinue contributions under
24    this subdivision (a)(2).
25        (3) A participant who (i) has attained age 60, (ii)
26    continues to serve as a judge after becoming eligible to

 

 

HB5754- 48 -LRB097 19807 EFG 65077 b

1    receive the maximum rate of annuity, and (iii) has not
2    elected to discontinue contributing to the System under
3    subdivision (a)(2) of this Section (or has revoked any such
4    election) may elect, through a written direction filed with
5    the Board, to make contributions to the System based only
6    on the amount of the increases in salary received by the
7    judge on or after the date of the election, rather than the
8    total salary received. If a judge who is making
9    contributions to the System on the effective date of this
10    amendatory Act of the 91st General Assembly makes an
11    election to limit contributions under this subdivision
12    (a)(3) within 90 days after that effective date, the
13    election shall be deemed to become effective on that
14    effective date and the judge shall be entitled to receive a
15    refund of any excess contributions paid to the System
16    during that 90-day period; any other election under this
17    subdivision (a)(3) becomes effective on the first of the
18    month following the date of the election. An election to
19    limit contributions under this subdivision (a)(3) is
20    irrevocable. Service credits earned in any other
21    participating system as defined in Article 20 of this Code
22    shall be considered for purposes of determining a judge's
23    eligibility to make an election under this subdivision
24    (a)(3).
25    (b) Beginning July 1, 1969, each participant is required to
26contribute 1% of each payment of salary towards the automatic

 

 

HB5754- 49 -LRB097 19807 EFG 65077 b

1increase in annuity provided in Section 18-125.1. However, such
2contributions need not be made by any participant who has
3elected prior to September 15, 1969, not to be subject to the
4automatic increase in annuity provisions.
5    (c) Effective July 13, 1953, each married participant
6subject to the survivor's annuity provisions is required to
7contribute 2 1/2% of each payment of salary, whether or not he
8or she is required to make any other contributions under this
9Section. Such contributions shall be made concurrently with the
10contributions made for annuity purposes.
11    (d) Notwithstanding any other provision of this Article,
12the required contributions for a participant who first becomes
13a participant on or after January 1, 2011 shall not exceed the
14contributions that would be due under this Article if that
15participant's highest salary for annuity purposes were
16$106,800, plus any increase in that amount under Section
1718-125.
18    (e) Notwithstanding any provision of this Code to the
19contrary, (i) for a participant who does not file an election
20under subsection (a-5) of Section 18-133.2, any contributions
21on amounts of salary in excess of the limit specified in
22Section 18-118.1 for that year shall instead be used to finance
23self-managed plan benefits and (ii) for a member who files an
24election under subsection (a-5) of Section 18-133.2, any
25contributions made after the date of the election, including
26the contributions for a survivor's annuity, shall be used to

 

 

HB5754- 50 -LRB097 19807 EFG 65077 b

1finance the benefits under Section 18-133.2. Notwithstanding
2any provision of this Code to the contrary, a member who does
3not file an election under subsection (a-5) of Section 18-133.2
4shall contribute towards the traditional benefit package a
5percentage of salary equal to the greater of (i) one-half of
6the normal cost of the traditional benefit package or (ii) 6%
7of salary.
8(Source: P.A. 96-1490, eff. 1-1-11.)
 
9    (40 ILCS 5/18-133.2 new)
10    Sec. 18-133.2. Self-managed plan.
11    (a) The Judges Retirement System of Illinois must establish
12and administer a self-managed plan that shall offer
13participants the opportunity to accumulate assets for
14retirement through a combination of participant and State
15contributions that may be invested in mutual funds, collective
16investment funds, or other investment products and used to
17purchase annuity contracts, that are fixed, variable, or a
18combination of fixed and variable. The plan must be qualified
19under the Internal Revenue Code of 1986.
20    The Judges Retirement System of Illinois shall be the plan
21sponsor for the self-managed plan and shall prepare a plan
22document and adopt any rules and procedures that are considered
23necessary or desirable for the administration of the
24self-managed plan. Consistent with its fiduciary duty to the
25participants and beneficiaries of the self-managed plan, the

 

 

HB5754- 51 -LRB097 19807 EFG 65077 b

1Board of Trustees of the System may delegate aspects of plan
2administration as it sees fit to companies authorized to do
3business in this State.
4    (a-5) A participant may file an irrevocable election to
5transfer amounts equal to the participant's total
6contributions under the traditional benefit package, with
7interest, to the self-managed plan under this Section. By
8filing the election, a participant forfeits all accrued rights
9and benefits under the traditional benefit package.
10    (b) Notwithstanding any other provision of this Code, (i)
11for a participant who does not file an election under
12subsection (a-5) of this Section, any portion of his or her
13salary that exceeds the limit specified in Section 18-111.1 for
14that year shall be subject to the self-managed plan and (ii)
15for a participant who files an election under subsection (a-5)
16of this Section, the entirety of the participant's salary
17shall, after the date of the election, be subject to the
18self-managed plan created under this Section.
19    (c) The System shall solicit proposals to provide
20administrative services and funding vehicles for the
21self-managed plan from insurance and annuity companies and
22mutual fund companies, banks, trust companies, or other
23financial institutions authorized to do business in this State.
24In reviewing the proposals received and approving and
25contracting with no fewer than 2 and no more than 7 companies,
26the Board of Trustees of the System shall consider, among other

 

 

HB5754- 52 -LRB097 19807 EFG 65077 b

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

 

 

HB5754- 53 -LRB097 19807 EFG 65077 b

1breached any fiduciary duty by acting in accordance with that
2direction. Neither the System nor the State shall guarantee any
3of the investments in the participant's account balances.
4    (e) Participation in the self-managed plan under this
5Section shall constitute participation in the Judges
6Retirement System of Illinois.
7    (f) The self-managed plan shall be funded by contributions
8from participants in the self-managed plan and State
9contributions as provided in this Section.
10    The contribution rate for participants in the self-managed
11plan shall be, (i) for a participant who does not file an
12election under subsection (a-5) of this Section, 6% of the
13amount of salary in excess of the limit specified in Section
1418-111.1 for that year, in addition to the amount specified
15under subsection (e) of Section 18-133 for that year and (ii)
16for a participant who files an election under subsection (a-5)
17of this Section, 8% of any amount of salary up to and including
18the limit specified in Section 18-111.1 for that year and 6% of
19any amount of salary in excess of that limit for that year.
20This required contribution shall be made as an employer pick-up
21under Section 414(h) of the Internal Revenue Code of 1986 or
22any successor Section thereof. Any participant in the System's
23traditional benefit package prior to his or her election to
24participate in the self-managed plan shall continue to have the
25employer pick up the contributions required under Section
2618-133. However, the amounts picked up after the election of

 

 

HB5754- 54 -LRB097 19807 EFG 65077 b

1the self-managed plan shall be remitted to and treated as
2assets of the self-managed plan. In no event shall a
3participant have the option of receiving these amounts in cash.
4participants may make additional contributions to the
5self-managed plan in accordance with procedures prescribed by
6the System, to the extent permitted under rules adopted by the
7System.
8    The program shall provide for State contributions to the
9self-managed plan in the following amounts: (i) for a
10participant who does not file an election under subsection
11(a-5) of this Section, 3% of the amount of salary in excess of
12the limit specified in Section 18-111.1 for that year and (ii)
13for a participant who does not file an election under
14subsection (a-5) of this Section, 7.1% of any amount of salary
15up to and including the limit specified in Section 18-111.1 for
16that year and 3% of any amount of salary in excess of that
17limit for that year.
18    The State of Illinois shall make contributions by
19appropriations to the System for participants in the
20self-managed plan under this Section. The amount required shall
21be certified by the Board of Trustees of the System and paid by
22the State in accordance with Sections 18-132 and 18-140. The
23System shall not be obligated to remit the required State
24contributions to any of the insurance and annuity companies,
25mutual fund companies, banks, trust companies, financial
26institutions, or other sponsors of any of the funding vehicles

 

 

HB5754- 55 -LRB097 19807 EFG 65077 b

1offered under the self-managed plan until it has received the
2required State contributions from the State.
3    (g) If a participant in the self-managed plan who is
4otherwise vested under this Article terminates employment, the
5participant shall be entitled to a benefit that is based on the
6account values attributable to both State and participant
7contributions and any investment return thereon.
8    If a participant in the self-managed plan who is not
9otherwise vested under this Article terminates employment, the
10participant shall be entitled to a benefit based solely on the
11account values attributable to the participant's contributions
12and any investment return thereon, and the State contributions
13and any investment return thereon shall be forfeited. Any State
14contributions that are forfeited shall be held in escrow by the
15company investing those contributions and shall be used, as
16directed by the System, for future allocations of State
17contributions.
 
18    (40 ILCS 5/18-140.1 new)
19    Sec. 18-140.1. To calculate the normal cost of benefits. To
20calculate the normal cost of each plan offered by the system as
21a percentage of salary and to update those amounts at least
22every 3 years.
 
23    Section 90. The State Mandates Act is amended by adding
24Section 8.36 as follows:
 

 

 

HB5754- 56 -LRB097 19807 EFG 65077 b

1    (30 ILCS 805/8.36 new)
2    Sec. 8.36. Exempt mandate. Notwithstanding Sections 6 and 8
3of this Act, no reimbursement by the State is required for the
4implementation of any mandate created by this amendatory Act of
5the 97th General Assembly.
 
6    Section 99. Effective date. This Act takes effect upon
7becoming law.

 

 

HB5754- 57 -LRB097 19807 EFG 65077 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 5/2-108.2 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 5/2-134.1 new
9    40 ILCS 5/14-103.12a new
10    40 ILCS 5/14-103.40 new
11    40 ILCS 5/14-103.41 new
12    40 ILCS 5/14-133from Ch. 108 1/2, par. 14-133
13    40 ILCS 5/14-133.2 new
14    40 ILCS 5/14-135.08a new
15    40 ILCS 5/15-112.1 new
16    40 ILCS 5/15-157from Ch. 108 1/2, par. 15-157
17    40 ILCS 5/15-158.2
18    40 ILCS 5/15-165.1 new
19    40 ILCS 5/16-121.1 new
20    40 ILCS 5/16-122.2 new
21    40 ILCS 5/16-122.3 new
22    40 ILCS 5/16-152from Ch. 108 1/2, par. 16-152
23    40 ILCS 5/16-158.2 new
24    40 ILCS 5/16-181.4 new
25    40 ILCS 5/18-111.1 new

 

 

HB5754- 58 -LRB097 19807 EFG 65077 b

1    40 ILCS 5/18-118.1 new
2    40 ILCS 5/18-118.2 new
3    40 ILCS 5/18-133from Ch. 108 1/2, par. 18-133
4    40 ILCS 5/18-133.2 new
5    40 ILCS 5/18-140.1 new
6    30 ILCS 805/8.36 new