HB5872ham001 96TH GENERAL ASSEMBLY

Personnel and Pensions Committee

Filed: 3/11/2010

09600HB5872ham001 LRB096 20604 AMC 37580 a

AMENDMENT TO HOUSE BILL 5872

AMENDMENT NO. ______. Amend House Bill 5872 by replacing everything after the enacting clause with the following:

"Section 5. The Illinois Pension Code is amended by adding Sections 2-103.1, 2-103.2, 2-126.2, 14-103.40, 14-103.41, 14-133.2, 16-122.2, 16-122.3, 16-158.2, 18-118.1, 18-118.2, and 18-133.2 and changing Sections 2-126, 14-133, 15-158.2, 16-152, and 18-133 as follows:

(40 ILCS 5/2-103.1 new)

Sec. 2-103.1. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 2-119, 2-119.01, 2-119.1, and 2-120; survivor's annuities payable directly from the System, as provided in Sections 2-121, 2-121.1, 2-121.2, and 2-121.3; and contribution refunds, as provided in Section 2-123.

(40 ILCS 5/2-103.2 new)

Sec. 2-103.2. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 2-126.2. The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System, as provided in Sections 2-119, 2-119.01, 2-119.1, 2-120, 2-121, 2-121.1, 2-121.2, and 2-121.3 or refunds determined under Section 2-123.

(40 ILCS 5/2-126) (from Ch. 108 1/2, par. 2-126)

Sec. 2-126. Contributions by participants.

(a) Each participant shall contribute toward the cost of his or her retirement annuity a percentage of each payment of salary received by him or her for service as a member as follows: for service between October 31, 1947 and January 1, 1959, 5%; for service between January 1, 1959 and June 30, 1969, 6%; for service between July 1, 1969 and January 10, 1973, 6 1/2%; for service after January 10, 1973, 7%; for service after December 31, 1981, 8 1/2%.

(b) Beginning August 2, 1949, each male participant, and from July 1, 1971, each female participant shall contribute towards the cost of the survivor's annuity 2% of salary.

A participant who has no eligible survivor's annuity beneficiary may elect to cease making contributions for survivor's annuity under this subsection. A survivor's annuity shall not be payable upon the death of a person who has made this election, unless prior to that death the election has been revoked and the amount of the contributions that would have been paid under this subsection in the absence of the election is paid to the System, together with interest at the rate of 4% per year from the date the contributions would have been made to the date of payment.

(c) Beginning July 1, 1967, each participant shall contribute 1% of salary towards the cost of automatic increase in annuity provided in Section 2-119.1. These contributions shall be made concurrently with contributions for retirement annuity purposes.

(d) In addition, each participant serving as an officer of the General Assembly shall contribute, for the same purposes and at the same rates as are required of a regular participant, on each additional payment received as an officer. If the participant serves as an officer for at least 2 but less than 4 years, he or she shall contribute an amount equal to the amount that would have been contributed had the participant served as an officer for 4 years. Persons who serve as officers in the 87th General Assembly but cannot receive the additional payment to officers because of the ban on increases in salary during their terms may nonetheless make contributions based on those additional payments for the purpose of having the additional payments included in their highest salary for annuity purposes; however, persons electing to make these additional contributions must also pay an amount representing the corresponding employer contributions, as calculated by the System.

(e) Notwithstanding any provision in this Section to the contrary, for a participant who first becomes a participant under this Article after January 1, 2011, any contributions on amounts in excess of the Social Security Covered Wage Base for that year, including the contributions for a survivor's annuity, shall instead be used to finance the benefits under Section 2-126.2.

(Source: P.A. 90-766, eff. 8-14-98.)

(40 ILCS 5/2-126.2 new)

Sec. 2-126.2. Self-managed plan.

(a) The General Assembly Retirement System must establish and administer a self-managed plan that shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and State contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

The General Assembly Retirement System shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(b) Notwithstanding any other provision of this Article, for a participant who first becomes a participant under this Article after January 1, 2011, any portion of the participant's yearly salary that exceeds the Social Security Covered Wage Base for that year shall be subject to the self-managed plan created under this Section.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the State; and

(4) the ability of the company to provide benefits under the contract and the financial stability of the company.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the Illinois State Board of Investment.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from that investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State shall guarantee any of the investments in the participant's account balances.

(e) Participation in the self-managed plan under this Section shall constitute participation in the General Assembly Retirement System.

(f) The self-managed plan shall be funded by contributions from participants in the self-managed plan and State contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for other participants in the System, as provided in Section 2-126. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 2-126. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the employee contributions required under this Section.

The State of Illinois shall make contributions by appropriations to the System for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 2-134. The System shall not be obligated to remit the required State contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required State contributions from the State.

(g) If a participant in the self-managed plan who is otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit that is based on the account values attributable to both State and member contributions and any investment return thereon.

If a participant in the self-managed plan who is not otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the State contributions and any investment return thereon shall be forfeited. Any State contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of State contributions.

(40 ILCS 5/14-103.40 new)

Sec. 14-103.40. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 14-107, 14-108, 14-113, and 14-114; survivor's annuities payable directly from the System, as provided in Sections 14-120, 14-121, and 14-121.1; and contribution refunds, as provided in Section 14-130.

(40 ILCS 5/14-103.41 new)

Sec. 14-103.41. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 14-133.2. The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System, as provided in Sections 14-107, 14-108, 14-113, 14-114, 14-120, 14-121, and 14-121.1 or refunds determined under Section 14-130.

(40 ILCS 5/14-133) (from Ch. 108 1/2, par. 14-133)

Sec. 14-133. Contributions on behalf of members.

(a) Each participating employee shall make contributions to the System, based on the employee's compensation, as follows:

(1) Covered employees, except as indicated below, 3.5% for retirement annuity, and 0.5% for a widow or survivors annuity;

(2) Noncovered employees, except as indicated below, 7% for retirement annuity and 1% for a widow or survivors annuity;

(3) Noncovered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter;

(4) Covered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(5) Each security employee of the Department of Corrections or of the Department of Human Services who is a covered employee, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(6) Each security employee of the Department of Corrections or of the Department of Human Services who is not a covered employee, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter.

(b) Contributions shall be in the form of a deduction from compensation and shall be made notwithstanding that the compensation paid in cash to the employee shall be reduced thereby below the minimum prescribed by law or regulation. Each member is deemed to consent and agree to the deductions from compensation provided for in this Article, and shall receipt in full for salary or compensation.

(c) Notwithstanding any provision in this Section to the contrary, for an employee who (1) first becomes an employee under this Article after January 1, 2011 or (2) is a member of the System on January 1, 2011 and becomes employed in a double-exempt position, as defined in subsection (b) of Section 14-133.2, after January 1, 2011, any contributions on amounts in excess of the Social Security Covered Wage Base for that year, including the contributions for a survivor's annuity, shall instead be used to finance the benefits under Section 14-133.2.

(Source: P.A. 92-14, eff. 6-28-01.)

(40 ILCS 5/14-133.2 new)

Sec. 14-133.2. Self-managed plan.

(a) The State Employees' Retirement System of Illinois must establish and administer a self-managed plan that shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and State contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

The State Employees' Retirement System of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(b) Notwithstanding any other provision of this Article, for an employee who (1) first becomes an employee under this Article after January 1, 2011 or (2) is a member of the System on January 1, 2011 and becomes employed in a double-exempt position after January 1, 2011, any portion of the employee's yearly salary that exceeds the Social Security Covered Wage Base for that year shall be subject to the self-managed plan created under this Section.

For the purposes of this Section, (i) "double-exempt position" means a position that is both Rutan-exempt and exempt from the Personnel Code under Section 4(d)(1) or Section 4(d)(3) of that Code and (ii) "Rutan" means the opinion of the United States Supreme Court in Rutan v. Republican Party of Illinois, 497 U.S. 62 (1990).

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the State; and

(4) the ability of the company to provide benefits under the contract and the financial stability of the company.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the Illinois State Board of Investment.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from that investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State shall guarantee any of the investments in the participant's account balances.

(e) Participation in the self-managed plan under this Section shall constitute participation in the State Employees' Retirement System of Illinois.

(f) The self-managed plan shall be funded by contributions from participants in the self-managed plan and State contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for other participants in the System, as provided in Section 14-133. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 14-133. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the employee contributions required under this Section.

The State of Illinois shall make contributions by appropriations to the System for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Sections 14-132 and 14-135.08. The System shall not be obligated to remit the required State contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required State contributions from the State.

(g) If a participant in the self-managed plan who is otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit that is based on the account values attributable to both State and member contributions and any investment return thereon.

If a participant in the self-managed plan who is not otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the State contributions and any investment return thereon shall be forfeited. Any State contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of State contributions.

(40 ILCS 5/15-158.2)

Sec. 15-158.2. Self-managed plan.

(a) Purpose. The General Assembly finds that it is important for colleges and universities to be able to attract and retain the most qualified employees and that in order to attract and retain these employees, colleges and universities should have the flexibility to provide a defined contribution plan as an alternative for eligible employees who elect not to participate in a defined benefit retirement program provided under this Article. Accordingly, the State Universities Retirement System is hereby authorized to establish and administer a self-managed plan, which shall offer participating employees the opportunity to accumulate assets for retirement through a combination of employee and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination thereof. The plan must be qualified under the Internal Revenue Code of 1986.

(b) Adoption by employers. Each employer subject to this Article must may elect to adopt the self-managed plan established under this Section; this election is irrevocable. An employer's election to adopt the self-managed plan makes available to the eligible employees of that employer the elections described in Section 15-134.5.

The State Universities Retirement System shall be the plan sponsor for the self-managed plan and shall prepare a plan document and prescribe such rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State, to the employers, or to a combination of both.

(c) Selection of service providers and funding vehicles. The System, in consultation with the employers, shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participating employees and the employer;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of employees.

The System, in consultation with the employers, shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

(d) Employee Direction. Employees who are participating in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the employer guarantees any of the investments in the employee's account balances.

(e) Participation. An employee eligible to participate in the self-managed plan must make a written election in accordance with the provisions of Section 15-134.5 and the procedures established by the System. Participation in the self-managed plan by an electing employee shall begin on the first day of the first pay period following the later of the date the employee's election is filed with the System or the effective date as of which the employee's employer begins to offer participation in the self-managed plan. Employers may not make the self-managed plan available earlier than January 1, 1998. An employee's participation in any other retirement program administered by the System under this Article shall terminate on the date that participation in the self-managed plan begins.

An employee who has elected to participate in the self-managed plan under this Section must continue participation while employed in an eligible position, and may not participate in any other retirement program administered by the System under this Article while employed by that employer or any other employer that has adopted the self-managed plan, unless the self-managed plan is terminated in accordance with subsection (i).

Notwithstanding any other provision of this Article, for a participant who first becomes a participant under this Article after January 1, 2011, any portion of the participant's yearly salary that exceeds the Social Security Covered Wage Base for that year shall be subject to the self-managed plan created under this Section.

Participation in the self-managed plan under this Section shall constitute membership in the State Universities Retirement System.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) Establishment of Initial Account Balance. If at the time an employee elects to participate in the self-managed plan he or she has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the employee an opening account balance in the self-managed plan, equal to the amount of contribution refund that the employee would be eligible to receive under Section 15-154 if the employee terminated employment on that date and elected a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the employee's opening account balance.

(g) No Duplication of Service Credit. Notwithstanding any other provision of this Article, an employee may not purchase or receive service or service credit applicable to any other retirement program administered by the System under this Article for any period during which the employee was a participant in the self-managed plan established under this Section.

(h) Contributions. The self-managed plan shall be funded by contributions from employees participating in the self-managed plan and employer contributions as provided in this Section.

The contribution rate for employees participating in the self-managed plan under this Section shall be equal to the employee contribution rate for other participants in the System, as provided in Section 15-157. This required contribution shall be made as an "employer pick-up" under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any employee participating in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 15-157. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall an employee have an option of receiving these amounts in cash. Employees may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules prescribed by the System.

The program shall provide for employer contributions to be credited to each self-managed plan participant at a rate of 7.6% of the participating employee's salary, less the amount used by the System to provide disability benefits for the employee. The amounts so credited shall be paid into the participant's self-managed plan accounts in a manner to be prescribed by the System.

An amount of employer contribution, not exceeding 1% of the participating employee's salary, shall be used for the purpose of providing the disability benefits of the System to the employee. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of employer contributions to be allocated during that plan year for providing disability benefits for employees in the self-managed plan.

The State of Illinois shall make contributions by appropriations to the System of the employer contributions required for employees who participate in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 15-165. The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement those procedures described in subsection (c) of Section 15-165 to obtain the required funding from the General Revenue Fund.

(i) Termination. The self-managed plan authorized under this Section may be terminated by the System, subject to the terms of any relevant contracts, and the System shall have no obligation to reestablish the self-managed plan under this Section. This Section does not create a right to continued participation in any self-managed plan set up by the System under this Section. If the self-managed plan is terminated, the participants shall have the right to participate in one of the other retirement programs offered by the System and receive service credit in such other retirement program for any years of employment following the termination.

(j) Vesting; Withdrawal; Return to Service. A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) completion of 5 years of service with an employer described in Section 15-106; (2) the death of the participating employee while employed by an employer described in Section 15-106, if the participant has completed at least 1 1/2 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed, the participant shall be considered a new employee. If a former participant again becomes a participating employee (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all such rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(k) Benefit amounts. If an employee who is vested in employer contributions terminates employment, the employee shall be entitled to a benefit which is based on the account values attributable to both employer and employee contributions and any investment return thereon.

If an employee who is not vested in employer contributions terminates employment, the employee shall be entitled to a benefit based solely on the account values attributable to the employee's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions which are forfeited shall be held in escrow by the company investing those contributions and shall be used as directed by the System for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participating employees.

(Source: P.A. 93-347, eff. 7-24-03.)

(40 ILCS 5/16-122.2 new)

Sec. 16-122.2. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 16-132, 16-133, 16-133.1, and 16-136; survivor's annuities payable directly from the System, as provided in Sections 16-140, 16-141, 16-142, 16-142.1, 16-142.2, 16-142.3, 16-143, and 16-143.1; and contribution refunds, as provided in Section 16-151.

(40 ILCS 5/16-122.3 new)

Sec. 16-122.3. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 16-158.2. The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System, as provided in Sections 16-132, 16-133, 16-133.1, 16-136, 16-140, 16-141, 16-142, 16-142.1, 16-142.2, 16-142.3, 16-143, and 16-143.1 or refunds determined under Section 16-151.

(40 ILCS 5/16-152) (from Ch. 108 1/2, par. 16-152)

Sec. 16-152. Contributions by members.

(a) Each member shall make contributions for membership service to this System as follows:

(1) Effective July 1, 1998, contributions of 7.50% of salary towards the cost of the retirement annuity. Such contributions shall be deemed "normal contributions".

(2) Effective July 1, 1969, contributions of 1/2 of 1% of salary toward the cost of the automatic annual increase in retirement annuity provided under Section 16-133.1.

(3) Effective July 24, 1959, contributions of 1% of salary towards the cost of survivor benefits. Such contributions shall not be credited to the individual account of the member and shall not be subject to refund except as provided under Section 16-143.2.

(4) Effective July 1, 2005, contributions of 0.40% of salary toward the cost of the early retirement without discount option provided under Section 16-133.2. This contribution shall cease upon termination of the early retirement without discount option as provided in Section 16-176.

(b) The minimum required contribution for any year of full-time teaching service shall be $192.

(c) Contributions shall not be required of any annuitant receiving a retirement annuity who is given employment as permitted under Section 16-118 or 16-150.1.

(d) A person who (i) was a member before July 1, 1998, (ii) retires with more than 34 years of creditable service, and (iii) does not elect to qualify for the augmented rate under Section 16-129.1 shall be entitled, at the time of retirement, to receive a partial refund of contributions made under this Section for service occurring after the later of June 30, 1998 or attainment of 34 years of creditable service, in an amount equal to 1.00% of the salary upon which those contributions were based.

(e) A member's contributions toward the cost of early retirement without discount made under item (a)(4) of this Section shall not be refunded if the member has elected early retirement without discount under Section 16-133.2 and has begun to receive a retirement annuity under this Article calculated in accordance with that election. Otherwise, a member's contributions toward the cost of early retirement without discount made under item (a)(4) of this Section shall be refunded according to whichever one of the following circumstances occurs first:

(1) The contributions shall be refunded to the member, without interest, within 120 days after the member's retirement annuity commences, if the member does not elect early retirement without discount under Section 16-133.2.

(2) The contributions shall be included, without interest, in any refund claimed by the member under Section 16-151.

(3) The contributions shall be refunded to the member's designated beneficiary (or if there is no beneficiary, to the member's estate), without interest, if the member dies without having begun to receive a retirement annuity under this Article.

(4) The contributions shall be refunded to the member, without interest, within 120 days after the early retirement without discount option provided under Section 16-133.2 is terminated under Section 16-176.

(c) Notwithstanding any provision in this Section to the contrary, for a member who (1) first becomes a member under this Article after January 1, 2011 or (2) is a member of the System on January 1, 2011 and becomes employed in a contractual position with the governing board after January 1, 2011, any contributions on amounts in excess of the Social Security Covered Wage Base for that year, including the contributions for a survivor's annuity, shall instead be used to finance the benefits under Section 16-158.2.

(Source: P.A. 93-320, eff. 7-23-03; 94-4, eff. 6-1-05.)

(40 ILCS 5/16-158.2 new)

Sec. 16-158.2. Self-managed plan.

(a) The Teachers' Retirement System of the State of Illinois must establish and administer a self-managed plan that shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and State contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

The Teachers' Retirement System of the State of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(b) Notwithstanding any other provision of this Article, for a member who (1) first becomes a member under this Article after January 1, 2011 or (2) is a member of the System on January 1, 2011 and becomes employed in a contractual position with the governing board after January 1, 2011, any portion of the member's yearly salary that exceeds the Social Security Covered Wage Base for that year shall be subject to the self-managed plan created under this Section.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the State; and

(4) the ability of the company to provide benefits under the contract and the financial stability of the company.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the Illinois State Board of Investment.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from that investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State shall guarantee any of the investments in the participant's account balances.

(e) Participation in the self-managed plan under this Section shall constitute participation in the Teachers' Retirement System of the State of Illinois.

(f) The self-managed plan shall be funded by contributions from participants in the self-managed plan and State contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for other participants in the System, as provided in Section 16-152. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 16-152. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the employee contributions required under this Section.

The State of Illinois shall make contributions by appropriations to the System for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 16-158. The System shall not be obligated to remit the required State contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required State contributions from the State.

(g) If a participant in the self-managed plan who is otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit that is based on the account values attributable to both State and member contributions and any investment return thereon.

If a participant in the self-managed plan who is not otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the State contributions and any investment return thereon shall be forfeited. Any State contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of State contributions.

(40 ILCS 5/18-118.1 new)

Sec. 18-118.1. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 18-124, 18-125, and 18-125.1; survivor's annuities payable directly from the System, as provided in Sections 18-128, 18-128.01, 18-128.1, 18-128.1, and 18-128.3; and contribution refunds, as provided in Section 18-129.

(40 ILCS 5/18-118.2 new)

Sec. 18-118.2. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 18-133.2. The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System, as provided in Sections 18-124, 18-125, 18-125.1, 18-128, 18-128.01, 18-128.1, 18-128.1, and 18-128.3 or refunds determined under Section 18-129.

(40 ILCS 5/18-133) (from Ch. 108 1/2, par. 18-133)

Sec. 18-133. Financing; employee contributions.

(a) Effective July 1, 1967, each participant is required to contribute 7 1/2% of each payment of salary toward the retirement annuity. Such contributions shall continue during the entire time the participant is in service, with the following exceptions:

(1) Contributions for the retirement annuity are not required on salary received after 18 years of service by persons who were participants before January 2, 1954.

(2) A participant who continues to serve as a judge after becoming eligible to receive the maximum rate of annuity may elect, through a written direction filed with the Board, to discontinue contributing to the System. Any such option elected by a judge shall be irrevocable unless prior to January 1, 2000, and while continuing to serve as judge, the judge (A) files with the Board a letter cancelling the direction to discontinue contributing to the System and requesting that such contributing resume, and (B) pays into the System an amount equal to the total of the discontinued contributions plus interest thereon at 5% per annum. Service credits earned in any other "participating system" as defined in Article 20 of this Code shall be considered for purposes of determining a judge's eligibility to discontinue contributions under this subdivision (a)(2).

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

(b) Beginning July 1, 1969, each participant is required to contribute 1% of each payment of salary towards the automatic increase in annuity provided in Section 18-125.1. However, such contributions need not be made by any participant who has elected prior to September 15, 1969, not to be subject to the automatic increase in annuity provisions.

(c) Effective July 13, 1953, each married participant subject to the survivor's annuity provisions is required to contribute 2 1/2% of each payment of salary, whether or not he or she is required to make any other contributions under this Section. Such contributions shall be made concurrently with the contributions made for annuity purposes.

(d) Notwithstanding any provision in this Section to the contrary, for a participant who first becomes a participant under this Article after January 1, 2011, any contributions on amounts in excess of the Social Security Covered Wage Base for that year, including the contributions for a survivor's annuity, shall instead be used to finance the benefits under Section 18-133.2.

(Source: P.A. 91-653, eff. 12-10-99.)

(40 ILCS 5/18-133.2 new)

Sec. 18-133.2. Self-managed plan.

(a) The Judges Retirement System of Illinois must establish and administer a self-managed plan that shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and State contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

The Judges Retirement System of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(b) Notwithstanding any other provision of this Article, for a participant who first becomes a participant under this Article after January 1, 2011, any portion of the participant's yearly salary that exceeds the Social Security Covered Wage Base for that year shall be subject to the self-managed plan created under this Section.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the State; and

(4) the ability of the company to provide benefits under the contract and the financial stability of the company.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the Illinois State Board of Investment.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from that investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State shall guarantee any of the investments in the participant's account balances.

(e) Participation in the self-managed plan under this Section shall constitute participation in the Judges Retirement System of Illinois.

(f) The self-managed plan shall be funded by contributions from participants in the self-managed plan and State contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for other participants in the System, as provided in Section 18-133. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 18-133. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the employee contributions required under this Section.

The State of Illinois shall make contributions by appropriations to the System for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Sections 18-132 and 18-140. The System shall not be obligated to remit the required State contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required State contributions from the State.

(g) If a participant in the self-managed plan who is otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit that is based on the account values attributable to both State and member contributions and any investment return thereon.

If a participant in the self-managed plan who is not otherwise vested under this Article terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the State contributions and any investment return thereon shall be forfeited. Any State contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of State contributions.

Section 99. Effective date. This Act takes effect upon becoming law.".