Illinois General Assembly - Full Text of HB0315
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Full Text of HB0315  99th General Assembly




State of Illinois
2015 and 2016


Introduced , by Rep. Joe Sosnowski


40 ILCS 5/15-158.2

    Amends the State Universities Article of the Illinois Pension Code. In a Section relating to the self-managed plan, provides that pursuant to federal law, all employees with applicable retirement plans will be provided options to: (i) establish, (ii) contribute to, and (iii) transfer any guaranteed or vested portion of their traditional accounts, on any day, into qualified in-plan Roth accounts, without distribution. Effective immediately.

LRB099 03928 RPS 23944 b






HB0315LRB099 03928 RPS 23944 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 changing
5Section 15-158.2 as follows:
6    (40 ILCS 5/15-158.2)
7    Sec. 15-158.2. Self-managed plan.
8    (a) Purpose. The General Assembly finds that it is
9important for colleges and universities to be able to attract
10and retain the most qualified employees and that in order to
11attract and retain these employees, colleges and universities
12should have the flexibility to provide a defined contribution
13plan as an alternative for eligible employees who elect not to
14participate in a defined benefit retirement program provided
15under this Article. Accordingly, the State Universities
16Retirement System is hereby authorized to establish and
17administer a self-managed plan, which shall offer
18participating employees the opportunity to accumulate assets
19for retirement through a combination of employee and employer
20contributions that may be invested in mutual funds, collective
21investment funds, or other investment products and used to
22purchase annuity contracts, either fixed or variable or a
23combination thereof. The plan must be qualified under the



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1Internal Revenue Code of 1986.
2    (b) Adoption by employers. Each employer subject to this
3Article may elect to adopt the self-managed plan established
4under this Section; this election is irrevocable. An employer's
5election to adopt the self-managed plan makes available to the
6eligible employees of that employer the elections described in
7Section 15-134.5.
8    The State Universities Retirement System shall be the plan
9sponsor for the self-managed plan and shall prepare a plan
10document and prescribe such rules and procedures as are
11considered necessary or desirable for the administration of the
12self-managed plan. Consistent with its fiduciary duty to the
13participants and beneficiaries of the self-managed plan, the
14Board of Trustees of the System may delegate aspects of plan
15administration as it sees fit to companies authorized to do
16business in this State, to the employers, or to a combination
17of both.
18    (c) Selection of service providers and funding vehicles.
19The System, in consultation with the employers, shall solicit
20proposals to provide administrative services and funding
21vehicles for the self-managed plan from insurance and annuity
22companies and mutual fund companies, banks, trust companies, or
23other financial institutions authorized to do business in this
24State. In 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



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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 participating employees and the employer;
8        (4) the ability of the company to provide benefits
9    under the contract and the financial stability of the
10    company; and
11        (5) the efficacy of the contract in the recruitment and
12    retention of employees.
13    The System, in consultation with the employers, shall
14periodically review each approved company. A company may
15continue to provide administrative services and funding
16vehicles for the self-managed plan only so long as it continues
17to be an approved company under contract with the Board.
18    (d) Employee Direction. Employees who are participating in
19the program must be allowed to direct the transfer of their
20account balances among the various investment options offered,
21subject to applicable contractual provisions. The participant
22shall not be deemed a fiduciary by reason of providing such
23investment direction. A person who is a fiduciary shall not be
24liable for any loss resulting from such investment direction
25and shall not be deemed to have breached any fiduciary duty by
26acting in accordance with that direction. Neither the System



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1nor the employer guarantees any of the investments in the
2employee's account balances.
3    (e) Participation. An employee eligible to participate in
4the self-managed plan must make a written election in
5accordance with the provisions of Section 15-134.5 and the
6procedures established by the System. Participation in the
7self-managed plan by an electing employee shall begin on the
8first day of the first pay period following the later of the
9date the employee's election is filed with the System or the
10effective date as of which the employee's employer begins to
11offer participation in the self-managed plan. Employers may not
12make the self-managed plan available earlier than January 1,
131998. An employee's participation in any other retirement
14program administered by the System under this Article shall
15terminate on the date that participation in the self-managed
16plan begins.
17    An employee who has elected to participate in the
18self-managed plan under this Section must continue
19participation while employed in an eligible position, and may
20not participate in any other retirement program administered by
21the System under this Article while employed by that employer
22or any other employer that has adopted the self-managed plan,
23unless the self-managed plan is terminated in accordance with
24subsection (i).
25    Notwithstanding any other provision of this Article, a Tier
262 member shall have the option to enroll in the self-managed



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2    Participation in the self-managed plan under this Section
3shall constitute membership in the State Universities
4Retirement System.
5    A participant under this Section shall be entitled to the
6benefits of Article 20 of this Code.
7    (f) Establishment of Initial Account Balance. If at the
8time an employee elects to participate in the self-managed plan
9he or she has rights and credits in the System due to previous
10participation in the traditional benefit package, the System
11shall establish for the employee an opening account balance in
12the self-managed plan, equal to the amount of contribution
13refund that the employee would be eligible to receive under
14Section 15-154 if the employee terminated employment on that
15date and elected a refund of contributions, except that this
16hypothetical refund shall include interest at the effective
17rate for the respective years. The System shall transfer assets
18from the defined benefit retirement program to the self-managed
19plan, as a tax free transfer in accordance with Internal
20Revenue Service guidelines, for purposes of funding the
21employee's opening account balance.
22    (g) No Duplication of Service Credit. Notwithstanding any
23other provision of this Article, an employee may not purchase
24or receive service or service credit applicable to any other
25retirement program administered by the System under this
26Article for any period during which the employee was a



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1participant in the self-managed plan established under this
3    (h) Contributions. The self-managed plan shall be funded by
4contributions from employees participating in the self-managed
5plan and employer contributions as provided in this Section.
6    The contribution rate for employees participating in the
7self-managed plan under this Section shall be equal to the
8employee contribution rate for other participants in the
9System, as provided in Section 15-157. This required
10contribution shall be made as an "employer pick-up" under
11Section 414(h) of the Internal Revenue Code of 1986 or any
12successor Section thereof. Any employee participating in the
13System's traditional benefit package prior to his or her
14election to participate in the self-managed plan shall continue
15to have the employer pick up the contributions required under
16Section 15-157. However, the amounts picked up after the
17election of the self-managed plan shall be remitted to and
18treated as assets of the self-managed plan. In no event shall
19an employee have an option of receiving these amounts in cash.
20Employees may make additional contributions to the
21self-managed plan in accordance with procedures prescribed by
22the System, to the extent permitted under rules prescribed by
23the System.
24    The program shall provide for employer contributions to be
25credited to each self-managed plan participant at a rate of
267.6% of the participating employee's salary, less the amount



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1used by the System to provide disability benefits for the
2employee. The amounts so credited shall be paid into the
3participant's self-managed plan accounts in a manner to be
4prescribed by the System.
5    An amount of employer contribution, not exceeding 1% of the
6participating employee's salary, shall be used for the purpose
7of providing the disability benefits of the System to the
8employee. Prior to the beginning of each plan year under the
9self-managed plan, the Board of Trustees shall determine, as a
10percentage of salary, the amount of employer contributions to
11be allocated during that plan year for providing disability
12benefits for employees in the self-managed plan.
13    The State of Illinois shall make contributions by
14appropriations to the System of the employer contributions
15required for employees who participate in the self-managed plan
16under this Section. The amount required shall be certified by
17the Board of Trustees of the System and paid by the State in
18accordance with Section 15-165. The System shall not be
19obligated to remit the required employer contributions to any
20of the insurance and annuity companies, mutual fund companies,
21banks, trust companies, financial institutions, or other
22sponsors of any of the funding vehicles offered under the
23self-managed plan until it has received the required employer
24contributions from the State. In the event of a deficiency in
25the amount of State contributions, the System shall implement
26those procedures described in subsection (c) of Section 15-165



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1to obtain the required funding from the General Revenue Fund.
2    (i) Termination. The self-managed plan authorized under
3this Section may be terminated by the System, subject to the
4terms of any relevant contracts, and the System shall have no
5obligation to reestablish the self-managed plan under this
6Section. This Section does not create a right to continued
7participation in any self-managed plan set up by the System
8under this Section. If the self-managed plan is terminated, the
9participants shall have the right to participate in one of the
10other retirement programs offered by the System and receive
11service credit in such other retirement program for any years
12of employment following the termination.
13    (j) Vesting; Withdrawal; Return to Service. A participant
14in the self-managed plan becomes vested in the employer
15contributions credited to his or her accounts in the
16self-managed plan on the earliest to occur of the following:
17(1) completion of 5 years of service with an employer described
18in Section 15-106; (2) the death of the participating employee
19while employed by an employer described in Section 15-106, if
20the participant has completed at least 1 1/2 years of service;
21or (3) the participant's election to retire and apply the
22reciprocal provisions of Article 20 of this Code.
23    A participant in the self-managed plan who receives a
24distribution of his or her vested amounts from the self-managed
25plan while not yet eligible for retirement under this Article
26(and Article 20, if applicable) shall forfeit all service



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1credit and accrued rights in the System; if subsequently
2re-employed, the participant shall be considered a new
3employee. If a former participant again becomes a participating
4employee (or becomes employed by a participating system under
5Article 20 of this Code) and continues as such for at least 2
6years, all such rights, service credits, and previous status as
7a participant shall be restored upon repayment of the amount of
8the distribution, without interest.
9    (k) Benefit amounts. If an employee who is vested in
10employer contributions terminates employment, the employee
11shall be entitled to a benefit which is based on the account
12values attributable to both employer and employee
13contributions and any investment return thereon.
14    If an employee who is not vested in employer contributions
15terminates employment, the employee shall be entitled to a
16benefit based solely on the account values attributable to the
17employee's contributions and any investment return thereon,
18and the employer contributions and any investment return
19thereon shall be forfeited. Any employer contributions which
20are forfeited shall be held in escrow by the company investing
21those contributions and shall be used as directed by the System
22for future allocations of employer contributions or for the
23restoration of amounts previously forfeited by former
24participants who again become participating employees.
25    (l) Roth account. Pursuant to Section 902 of the federal
26American Taxpayer Relief Act of 2012, all employees with



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1applicable retirement plans will be provided options to: (1)
2establish, (2) contribute to, and (3) transfer any guaranteed
3or vested portion of their traditional accounts, on any day,
4into qualified in-plan Roth accounts, without distribution.
5(Source: P.A. 98-92, eff. 7-16-13.)
6    Section 99. Effective date. This Act takes effect upon
7becoming law.