Legislation

Legislation

Please note: SURS does not endorse specific pension reform legislation. Our goal is to update and educate SURS members concerning legislation that may affect their retirement benefits.

House

HB 3867
- Supplemental Defined Contribution Plan
Sponsor(s): Representative Thomas Morrison

HB 3867 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.

HB 3867 requires the SURS Board of Trustees to establish and maintain a defined contribution plan to address the retirement preparedness gap for participants in a defined benefit plan who are not on track to maintain their standard of living in retirement. The plan must be established within one year of the effective date of the legislation and must exist and serve in addition to other retirement, pension and benefit plans established under the Illinois Pension Code. All assets and income of the plan must be held in trust for the exclusive benefit of participants and their beneficiaries.

Each person who first became a participant of SURS before Jan. 1, 2011 (Tier I participants) and each person who first became a participant of SURS on or after Jan. 1, 2011 (Tier II participants) but prior to the creation of the supplemental defined contribution plan may voluntarily elect to enroll in the plan. Each person who becomes a Tier II participant after the creation of the supplemental defined contribution plan will be automatically enrolled in the plan at a contribution rate established by the board, unless he or she opts out within 60 days after becoming a participant.

The supplemental defined contribution plan must be designed to enable participants to generate a stream of income to replace their pre-retirement income in retirement and must provide a variety of options for distributions to participants and their beneficiaries.

HB 3867 is identical to Senate Bill 1801 of the 100th General Assembly, as introduced.

HB 3867 takes effect immediately upon becoming law.

Status:

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HB 3868
- Unbalanced Budget Response Act
Sponsor(s): Representative Jim Durkin

HB 3868 creates the Unbalanced Budget Response Act.

HB 3868 authorizes the governor to designate a contingency reserve to balance the budget. The contingency reserve may be comprised of amounts appropriated from funds held by the state treasurer to any agency for fiscal year 2017 and fiscal year 2018, including amounts appropriated under a statutory continuing appropriation. However, the governor cannot designate amounts to be set aside as a contingency reserve from amounts appropriated for: (1) payment of debt service; (2) general state aid for schools; or (3) grants for early childhood education.

Additionally, HB 3868 authorizes the governor to delay payments under any statutory continuing appropriation, except for payments of debt service, for fiscal year 2017 and fiscal year 2018. Any payment so delayed may be paid out of the next fiscal year’s appropriation.

HB 3868 is identical to Senate Bill 2063 of the 100th General Assembly.

HB 3868 takes effect immediately upon becoming law.

Status:

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HB 3926
- Governor’s Introduced FY 2018 Budget
Sponsor(s): Representative Jim Durkin

HB 3926 appropriates $1,461,685,000 for the annual required state contribution to SURS for fiscal year 2018. Of this amount, $1,321,685,000 is appropriated from the General Revenue Fund, and $140,000,000 is appropriated from the state Pensions Fund. The certified fiscal year 2018 state contribution to SURS is $1,753,685,000.

HB 3926 also appropriates $0 from the Education Assistance Fund for the state contribution to the College Insurance Program (“CIP”) for fiscal year 2018. The certified fiscal year 2018 state contribution to CIP is $4,133,336.

HB 3926 is identical to Senate Bill 2164 of the 100th General Assembly, as introduced.

HB 3926 takes effect July 1, 2017, if Senate Bill 2063 of the 100th General Assembly (the Unbalanced Budget Response Act), as introduced in the Illinois Senate, becomes law.

Status:

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HB 4027
- Pension Reform
Sponsor(s): Representative Jim Durkin

HB 4027 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund, and Judges Retirement System articles of the Illinois Pension Code.   

Optional Hybrid Plan

HB 4027 creates an optional hybrid plan for individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan).   Individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.

For the defined benefit portion of the optional hybrid plan:

  • Final average salary (FAS) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning one year after retirement, calculated at ½ of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the optional hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least 1 year of service with the same employer are equal to a rate set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Future benefits under the optional hybrid plan can be modified.  Benefit increases under the optional hybrid plan cannot take effect unless they are approved by a resolution or ordinance of the governing body of the unit of local government responsible for those employees.  

The actual employer (university or community college) must contribute an amount equal to the normal cost of the defined benefit portion of the optional hybrid plan, minus the employee contributions, plus 2 percent.  SURS must annually certify the amount of unfunded liability accrued in each employer’s account to be paid by the employer so that SURS becomes 90 percent funded by fiscal year 2045.  The actual employer must also contribute an amount equal to the employer portion of the defined contribution portion of the optional hybrid plan, as set on an individual employee basis.

Beginning November 1, 2019, SURS must annually determine the amount of the state contribution that would have been required for the next fiscal year if the optional hybrid plan had not taken effect, based on the law in effect on May 31, 2019.  Beginning in fiscal year 2021, the an amount equal to the annual savings of the optional hybrid plan must be transferred from the General Revenue Fund to the Pension Stabilization Fund for distribution to the state-funded retirement systems until the earlier of fiscal year 2045 or until each system becomes 100 percent funded.

Tier I Offer and Consideration Pension Reform

HB 4027 requires each Tier I employee (i.e., each employee who first became a participant of SURS before Jan. 1, 2011, and who is not in the Self-Managed Plan) to elect one of two options: 

(1) To accept a reduced and delayed automatic annual increase in retirement (the lesser of 3 percent or ½ of the increase in CPI-U, non-compounded, beginning the January on or after the earlier of age 67 or five years after retirement); or 

(2) To keep the current Tier I automatic annual increase in retirement (3 percent compounded, beginning the January after retirement).

Each Tier I employee who elects to accept the reduced and delayed automatic annual increase in retirement will: receive a payment equal to 10 percent of his or her employee contributions made before the effective date of the election (which will not count towards his or her pension); pay reduced employee contributions moving forward (7.2 percent for regular employees and 8.55 percent for public safety employees); and have his or her future earnings increases count towards his or her pension.

Each Tier I employee who elects to keep the current Tier I automatic annual increase in retirement will not have his or her future earnings increases count towards his or her pension.

Generally, the election for Tier I employees will occur between Jan. 1, 2018 and March 31, 2018, and will become effective on July 1, 2018.  A Tier I employee who fails to make an election within the required time period is deemed to have chosen to keep the current Tier I automatic annual increase in retirement.

Retirees, Tier II employees (i.e., employees who first became participants of SURS on or after Jan. 1, 2011), and employees in the Self-Managed Plan are not required to make an election.

Accelerated Pension Benefit Payment Option

HB 4027 creates an accelerated pension benefit payment option for the first 10 percent of eligible SURS members each year.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, and annually thereafter, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Voluntary Defined Contribution Plan

HB 4027 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of Tier I employees by July 1, 2018.  Under the defined contribution plan, a Tier 1 employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier 1 employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on the state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

HB 4027 makes three changes to the funding formula for SURS:  First, it requires the state contribution for fiscal year 2018 through fiscal year 2045 to be based on total payroll (which includes payroll that is not pensionable), but excluding payroll attributable to participants in the voluntary defined contribution plan.  Second, beginning in fiscal year 2018, it requires any increases or decreases attributable to changes in the System’s actuarial and investment assumptions to be phased-in over a five-year period.  Third, it requires the fiscal year 2018 and fiscal year 2019 state contributions to be recertified based on changes made by the legislation.

Employer Funding Changes

HB 4027 provides that, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than the increase in CPI-U for any year during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.  Earnings increases under contracts or collective bargaining agreements entered into, amended or renewed before the effective date of the legislation are excluded from this provision.  (Current law provides that if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than 6 percent during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.)

Additionally, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed $140,000, then the employer must pay a contribution to SURS for the portion of earnings in excess of that amount.  The employer contribution equals the amount of earnings in excess of $140,000 multiplied by the level percentage of payroll needed for SURS to become 90 percent funded by fiscal year 2045.

Effective Date

HB 4027 takes effect immediately upon becoming law.

HB 4027 is identical to House Bill 4045 of the 100th General Assembly.

Status:

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HB 4045
- Pension Reform
Sponsor(s): Representative Robert Martwick and Senator John J. Cullerton

HB 4045 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, and Chicago Teachers Pension Fund articles of the Illinois Pension Code.   

Optional Hybrid Plan

HB 4045 creates an optional hybrid plan for individuals who first become participants of SURS on or after July 1, 2018, and for current Tier II participants who irrevocably elect to participate in the optional hybrid plan.  The optional hybrid plan does not apply to participants in the Self-Managed Plan.  Individuals who first become participants of SURS on or after July 1, 2018, (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.  

(Stated differently, individuals who first become participants of SURS on or after July 1, 2018, will have the option to participate in: the optional hybrid plan, the Tier II plan, or the Self-Managed Plan.  Current Tier II participants will have the option to elect to participate in the optional hybrid plan.)

For the defined benefit portion of the optional hybrid plan:

  • Final average salary (FAS) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning one year after retirement, calculated at ½ of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the optional hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least one year of service with the same employer are equal to a rate that may be set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Tier I Offer and Consideration Pension Reform

HB 4045 provides that the SURS Board of Trustees, by resolution, may allow a Tier I employee to make a voluntary, irrevocable election to accept a reduced and delayed automatic annual increase in retirement (the lesser of 3 percent or ½ of the increase in CPI-U, non-compounded, beginning the January 1 on or after the earlier of age 67 or five years after retirement).  (The current Tier I automatic annual increase in retirement is 3 percent compounded, beginning the January 1 after retirement).

Each Tier I employee who voluntarily elects to accept the reduced and delayed automatic annual increase in retirement will receive: (1) a consideration payment equal to 10 percent of his or her employee contributions made before the effective date of the election (which will not count towards his or her pension); and (2) a 10 percent reduction in future employee pension contributions (meaning that regular employees will pay 7.2 percent instead of 8.0 percent and public safety employees will pay 8.55 percent instead of 9.5 percent).  The 10 percent consideration payment must be made by SURS.

Accelerated Pension Benefit Payment Option

HB 4045 provides that, if approved by a resolution of the SURS Board of Trustees in any year, SURS must calculate the net present value of pension benefits for each eligible participant and must offer each eligible participant the opportunity to irrevocably elect to receive an accelerated pension benefit payment option equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.  During a period of three months determined by the SURS Board of Trustees, an eligible participant may irrevocably elect to receive an accelerated pension benefit payment in lieu of receiving any pension benefit from SURS.  The accelerated pension benefit payment must be paid by SURS.  An eligible participant must: no longer be a participating employee; have accrued the necessary service credit for retirement; have not received a retirement annuity from SURS; not be a party to a pending divorce proceeding and not have a QILDRO in effect against him or her under SURS; and not be a participant in the Self-Managed Plan.  The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon acceptance of an accelerated pension benefit payment, the participant forfeits all accrued rights and credits in SURS and no other benefit can be paid under SURS based on those terminated credits and creditable service.  If a person who has received an accelerated pension benefit payment subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A person who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Voluntary Defined Contribution Plan

HB 4045 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of eligible Tier I employees by July 1, 2018.  Only persons who are Tier I employees of SURS on the effective date of the legislation are eligible to participate in the defined contribution plan.  Under the defined contribution plan, a Tier I employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier I employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on the state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

HB 4045 requires the state to make additional contributions to SURS in FY 2019 and FY 2020 equal to 2 percent of the total payroll of each employee who elected to participate in the Optional Hybrid Plan or who would have been in the Optional Hybrid Plan but elected to participate in the Tier II plan.

HB 4045 provides that, if necessary, the board must recalculate and recertify the amount of the required state contribution for FY 2019, based on the changes made by the legislation.

Employer Funding Changes

HB 4045 requires each employer under SURS to contribute the following amounts:

  • In FY 2019 and FY 2020, the normal cost of the defined benefit plan, minus the employee contribution, for each employee of the employer who participates in the Optional Hybrid Plan or participates in the Tier II plan in lieu of the Optional Hybrid Plan; or
  • Beginning in FY 2021, the normal cost of the defined benefit plan, minus the employee contribution, plus 2 percent, for each employee of the employer who participates in the Optional Hybrid Plan or participates in the Tier II plan in lieu of the Optional Hybrid Plan; plus;
  • Beginning in FY 2019, the amount for that fiscal year to amortize any unfunded actuarial accrued liability attributable to the defined benefits of the employer’s employees who first became participants on or after July 1, 2018 and the employer’s employees who were previously Tier II participants but elected to participate in the Optional Hybrid Plan, determined as a level percentage of payroll over a 30-year rolling amortization period.

Stated differently, beginning in FY 2019, the employer will be responsible for: (1) the employer normal cost of the defined benefits of Optional Hybrid Plan participants and the employer normal cost of the defined benefits of participants who would have been in the Optional Hybrid Plan but elected to participate in the Tier II plan; and (2) the unfunded liability of the defined benefits of Optional Hybrid Plan participants, participants who would have been in the Optional Hybrid Plan but elected to participate in the Tier II plan, and participants who currently participate in the Tier II plan but elect to participate in the Optional Hybrid Plan.  Additionally, beginning in FY 2021, the employer will pay a 2 percent surcharge for Optional Hybrid Plan participants and participants who would have been in the Optional Hybrid Plan but elected to participate in the Tier II plan.  

HB 4045 requires SURS to create and maintain individual employer accounts for this purpose.

Effective Date

HB 4045 takes effect in accordance with the Effective Date of Laws Act.

Status:

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HB 4055
- Pension Reform
Sponsor(s): Representative Mark Batinick

HB 4055 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund and Judges Retirement System articles of the Illinois Pension Code.   

Optional Hybrid Plan

HB 4055 creates an optional hybrid plan for individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan).  Individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.

For the defined benefit portion of the optional hybrid plan:

  • Final average salary (“FAS”) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning 1 year after retirement, calculated at ½ of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the optional hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least one year of service with the same employer are equal to a rate set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Future benefits under the optional hybrid plan can be modified.  Benefit increases under the optional hybrid plan cannot take effect unless they are approved by a resolution or ordinance of the governing body of the unit of local government responsible for those employees.  

The actual employer (university or community college) must contribute an amount equal to the normal cost of the defined benefit portion of the optional hybrid plan, minus the employee contributions, plus 2 percent.  SURS must annually certify the amount of unfunded liability accrued in each employer’s account to be paid by the employer so that SURS becomes 90 percent funded by fiscal year 2045.  The actual employer must also contribute an amount equal to the employer portion of the defined contribution portion of the optional hybrid plan, as set on an individual employee basis.

Beginning November 1, 2019, SURS must annually determine the amount of the state contribution that would have been required for the next fiscal year if the optional hybrid plan had not taken effect, based on the law in effect on May 31, 2019.   Beginning in fiscal year 2021, the an amount equal to the annual savings of the optional hybrid plan must be transferred from the General Revenue Fund to the Pension Stabilization Fund for distribution to the state-funded retirement systems until the earlier of fiscal year 2045 or until each system becomes 100 percent funded.

Accelerated Pension Benefit Payment Option

HB 4055 creates an accelerated pension benefit payment option.  Eligible SURS members may elect the accelerated pension benefit payment option between January 1, 2018 and July 1, 2018.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Voluntary Defined Contribution Plan

HB 4055 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of Tier I employees by July 1, 2018.  Under the defined contribution plan, a Tier 1 employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier 1 employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on the state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

HB 4055 makes three changes to the funding formula for SURS:  First, it requires the state contribution for fiscal year 2018 through fiscal year 2045 to be based on total payroll (which includes payroll that is not pensionable), but excluding payroll attributable to participants in the voluntary defined contribution plan.  Second, beginning in fiscal year 2018, it requires any increases or decreases in the state contribution attributable to changes in the System’s actuarial and investment assumptions to be phased-in over a five-year period.  Third, it requires the fiscal year 2018 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

HB 4055 provides that, beginning in fiscal year 2019, if a contract or collective bargaining agreement entered into, amended, or renewed on or after the effective date of the legislation provides for earnings to exceed the salaries provided under the preceding contract or collective bargaining agreement, then the employer must pay the current value of the projected amount of the resulting increase in benefits, reflecting whether the participants are Tier I or Tier II members, to SURS.

Effective Date

HB 4055 takes effect immediately upon becoming law.

Status:

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HB 4057
- Pension Reform
Sponsor(s): Representative Jeanne M. Ives

HB 4057 amends the General Provisions, General Assembly Retirement System, Illinois Municipal Retirement Fund, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.   

Restrictions on Pensionable Earnings and Service Credit

HB 4057 prohibits payments for unused sick or vacation time from counting towards the final rate of earnings of individuals who first become participants in SURS on or after the effective date of the legislation.  HB 4057 also prohibits individuals who first become participants in SURS on or after the effective date of the legislation from receiving service credit for unused sick leave.

Employee Non-Participation in SURS

HB 4057 establishes that a person is not required to participate in SURS.  An active employee may terminate his or her participation in SURS (including active participation in the Tier III Plan, if applicable) by notifying SURS in writing.  An active employee terminating participation in SURS is entitled to a refund of his or her contributions (other than contributions to the Self-Managed Plan or the Tier III Plan) minus the benefits received prior to the termination of participation.

Tier III Defined Contribution Plan

HB 4057 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  SURS must utilize the framework of the Self-Managed Plan and must endeavor to adapt the benefits and structure of the Self-Managed Plan to the Tier III plan.  Tier I participants and Tier II participants may make a voluntary, irrevocable election to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III defined contribution plan.  Additionally, all persons who first become participants in SURS on or after July 1, 2018, must participate in the Tier III defined contribution plan.  Participants in the Tier III defined contribution plan will receive any applicable retiree health insurance benefits upon retirement.

A Tier I or Tier II member who elects to participate in the Tier III defined contribution plan may irrevocably elect to terminate all participation in the defined benefit plan. Upon such election, SURS must transfer an amount equal to the amount of the contribution refund that the member would be eligible to receive, including interest at the effective rate for the respective years, to the member’s individual account in the defined contribution plan.  

Participant contributions to the Tier III defined contribution plan are at the rate of 8 percent of earnings.  State contributions to the Tier III defined contribution plan are at the rate of 7.6 percent of earnings (minus an amount to cover the cost of any defined disability benefits offered under the defined contribution plan).  (Participant contributions to the Tier III defined contribution plan are also reduced by an amount to cover the cost of any defined disability benefits.)  Tier III participants must have one year of service credit in the defined contribution plan to vest in state contributions.  Failure to vest results in the forfeiture of state contributions and any earnings thereon.  

The Tier III defined contribution plan must offer a variety of options for investments, including investments handled by SURS as well as private sector investment options; provide a variety of options for payouts to inactive participants and their survivors; and, to the extent authorized under federal law and as authorized by SURS, allow former participants to transfer or roll over employee and vested state contributions, and the earnings thereon, from the Tier III defined contribution plan into other qualified retirement plans.

Accelerated Pension Benefit Payment Option

HB 4057 creates an accelerated pension benefit payment option.  Eligible SURS members may elect the accelerated pension benefit payment option between January 1, 2018, and July 1, 2018.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Employer Funding Changes

HB 4057 ends the requirement that the employer pay the present value of the increase in benefits resulting from earnings increases above 6% during the final rate of earnings period to SURS.  Instead, HB 4057 provides that, beginning in fiscal year 2019, if a contract or collective bargaining agreement entered into, amended, or renewed on or after the effective date of the legislation provides for earnings to exceed the salaries provided under the preceding contract or collective bargaining agreement, then the employer must pay the current value of the projected amount of the resulting increase in benefits, reflecting whether the participants are Tier I or Tier II members, to SURS.

Effective Date

HB 4057 takes effect immediately upon becoming law.

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HB 4060
- Pension Reform
Sponsor(s): Representative Allen Skillicorn

HB 4060 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.   

Tier III Defined Contribution Plan

HB 4060 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  SURS must utilize the framework of the Self-Managed Plan and must endeavor to adapt the benefits and structure of the Self-Managed Plan to the Tier III plan.  Tier I participants and Tier II participants may make a voluntary, irrevocable election to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III defined contribution plan.  Additionally, all persons who first become participants in SURS on or after July 1, 2018, must participate in the Tier III defined contribution plan.  Participants in the Tier III defined contribution plan will receive any applicable retiree health insurance benefits.

A Tier I or Tier II member who elects to participate in the Tier III defined contribution plan may irrevocably elect to terminate all participation in the defined benefit plan. Upon such election, SURS must transfer an amount equal to the amount of the contribution refund that the member would be eligible to receive, including interest at the effective rate for the respective years, to the member’s individual account in the defined contribution plan.  

Participant contributions to the Tier III defined contribution plan are at the rate of 8 percent of earnings.  State contributions to the Tier III defined contribution plan are at the rate of 7.6 percent of earnings (minus an amount to cover the cost of any defined disability benefits offered under the defined contribution plan).  (Participant contributions to the Tier III defined contribution plan are also reduced by an amount to cover the cost of any defined disability benefits.)  Tier III participants must have five years of service credit in the defined contribution plan to vest in state contributions.  Failure to vest results in the forfeiture of state contributions and any earnings thereon.  

The Tier III defined contribution plan must offer a variety of options for investments, including investments handled by SURS as well as private sector investment options; provide a variety of options for payouts to inactive participants and their survivors; and, to the extent authorized under federal law and as authorized by SURS, allow former participants to transfer or roll over employee and vested state contributions, and the earnings thereon, from the Tier III defined contribution plan into other qualified retirement plans.

SURS, in consultation with the employers, must solicit proposals to provide administrative services and funding vehicles for the Tier III defined contribution plan from insurance and annuity companies, mutual fund companies, banks, trust companies or other financial institutions authorized to do business in Illinois.  SURS must contract with no fewer than two and no more than seven companies to provide administrative services and funding vehicles for the Tier III defined contribution plan.  Each approved company must be periodically reviewed by SURS in consultation with the employers.

Accelerated Pension Benefit Payment Option

HB 4060 creates an accelerated pension benefit payment option for up to 10 percent of eligible SURS members each year.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, and annually thereafter, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Effective Date

HB 4060 takes effect immediately upon becoming law.

Status:

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HB 4064
- Pension Reform
Sponsor(s): Representative Jim Durkin

HB 4064 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Chicago Teachers Pension Fund articles of the Illinois Pension Code. 

Tier I Offer and Consideration Pension Reform

HB 4064 requires each Tier I employee (i.e., each employee who first became a participant of SURS before Jan. 1, 2011, and who is not in the Self-Managed Plan) to elect one of two options: 

(1) To accept a reduced and delayed automatic annual increase in retirement (the lesser of 3 percent or ½ of the increase in CPI-U, non-compounded, beginning the January on or after the earlier of age 67 or five years after retirement); or 

(2) To keep the current Tier I automatic annual increase in retirement (3 percent compounded, beginning the January after retirement).

Each Tier I employee who elects to accept the reduced and delayed automatic annual increase in retirement will: receive a payment equal to 10 percent of his or her employee contributions made before the effective date of the election (which will not count towards his or her pension); pay reduced employee contributions moving forward (7.2 percent for regular employees and 8.55 percent for public safety employees); and have his or her future earnings increases count towards his or her pension.

Each Tier I employee who elects to keep the current Tier I automatic annual increase in retirement will not have his or her future earnings increases count towards his or her pension.

Generally, the election for Tier I employees will occur between Jan. 1, 2018, and March 31, 2018, and will become effective on July 1, 2018.  A Tier I employee who fails to make an election within the required time period is deemed to have chosen to keep the current Tier I automatic annual increase in retirement.

Retirees, Tier II employees (i.e., employees who first became participants of SURS on or after Jan. 1, 2011), and employees in the Self-Managed Plan are not required to make an election.

State Funding Changes

HB 4064 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

HB 4064 takes effect immediately upon becoming law.

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HB 4065
- Pension Reform
Sponsor(s): Representative Jim Durkin

HB 4065 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund and Judges Retirement System articles of the Illinois Pension Code.   

Optional Hybrid Plan

HB 4065 creates an optional hybrid plan for individuals who first become participants of SURS on or after six months after the effective date of the legislation (and who are not participants in the Self-Managed Plan).   Individuals who first become participants of SURS on or after six months after the effective date of the legislation (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.

For the defined benefit portion of the optional hybrid plan:

  • Final average salary (FAS) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning 1 year after retirement, calculated at ½ of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the optional hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least one year of service with the same employer are equal to a rate set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Future benefits under the optional hybrid plan can be modified.  Benefit increases under the optional hybrid plan cannot take effect unless they are approved by a resolution or ordinance of the governing body of the unit of local government responsible for those employees.  

Beginning November 1, 2019, SURS must annually determine the amount of the state contribution that would have been required for the next fiscal year if the optional hybrid plan and the changes in employer contributions had not taken effect, based on the law in effect on May 31, 2019.   Beginning in fiscal year 2021, an amount equal to the annual savings of the optional hybrid plan must be transferred from the General Revenue Fund to the Pension Stabilization Fund for distribution to the State-funded retirement systems until the earlier of fiscal year 2045 or until each system becomes 100 percent funded.

Accelerated Pension Benefit Payment Option

HB 4065 makes an accelerated pension benefit payment option available to eligible SURS participants between January 1, 2018 and July 1, 2018.  An eligible SURS participant is a person who is no longer a participating employee; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; is not a party to pending divorce proceeding and does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, SURS must calculate the net present value of pension benefits for each eligible participant.  SURS must offer each eligible participant the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon acceptance of an accelerated pension benefit payment, the participant forfeits all accrued rights and credits in SURS.  If the participant subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS, and terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits. 

Voluntary Defined Contribution Plan

HB 4065 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of eligible Tier I employees by July 1, 2018.  Only individuals who are Tier I employees of SURS on the effective date of the legislation are eligible to participate in the defined contribution plan.  Under the defined contribution plan, a Tier I employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier I employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

HB 4065 makes four changes to the funding formula for SURS:  First, it requires the state contribution for fiscal year 2018 through fiscal year 2045 to be based on total payroll (which includes payroll that is not pensionable), but excluding payroll attributable to participants in the voluntary defined contribution plan.  Second, it requires a change in an actuarial or investment assumption that first applies in fiscal year 2018 or thereafter to be implemented in equal annual amounts over a five-year period beginning in the fiscal year in which the change first applies.  Third, it requires a change in an actuarial or investment assumption that first applied in fiscal year 2014, 2015, 2016 or 2017 to be phased-in over the years remaining in the five-year period from the fiscal year in which the change first applied, beginning in fiscal year 2018.  [For example, 80 percent of the cost of the changes that impacted the fiscal year 2017 state contribution would be implemented in equal annual amounts over the following fiscal years: 2018, 2019, 2020 and 2021.]  Fourth, it requires the fiscal year 2018 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

Beginning in fiscal year 2019, HB 4065 requires the actual employer (university or community college) to contribute an annual amount equal to: 

(1) The normal cost of the defined benefit portion of the optional hybrid plan or the defined benefit plan (as applicable), minus the employee contributions, plus 2 percent (for its Tier III employees and Tier III employees who elect to participate in Tier II); plus 

(2) The amount required for that fiscal year to amortize any unfunded actuarial accrued liability attributable to the employer’s account (for the defined benefits attributable to its Tier III employees and Tier III employees who elect to participate in Tier II), determined as a level percentage of payroll over a 30-year rolling amortization period; plus 

(3) The total amount of earnings in excess of $140,000 for each employee multiplied by the level percentage of payroll used in the fiscal year in which the academic year began, as determined by SURS, to be sufficient for SURS to become 90 percent funded by the end of state fiscal year 2045.

HB 4065 requires SURS to create and maintain individual employer accounts for this purpose.

HB 4065 also requires the employer to pay the present value of benefits resulting from earnings increases above CPI-U during the final rate of earnings period to SURS, for academic years beginning on or after July 1, 2018.  Earnings increases under contracts or collective bargaining agreements entered into, amended or renewed before the effective date of the legislation are excluded from this requirement.  (Current law requires an employer to pay the present value of benefits resulting from earnings increases above 6 percent during the final rate of earnings period to SURS.)

Effective Date

HB 4065 takes effect immediately upon becoming law.

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HB 4371
- State Serial Long Term Pension Obligation Bonds
Sponsor(s): Representative Robert Martwick

HB 4371 amends the General Obligation Bond Act to authorize the issuance of $107.42 billion of State Serial Long Term Pension Obligation Bonds.  The proceeds of the bonds must be deposited directly into the State Serial Long Term Pension Obligation Bond Fund.  Moneys in the fund can only be used to make payments to the state pension systems on a pro-rated basis in an amount sufficient to bring the actuarially accrued unfunded liability of each individual fund to a 90 percent level.  

HB 4371 requires the State Employees’ Retirement System, State Universities Retirement System and Teachers’ Retirement System to each establish a designated investment fund for 36 percent of the bond proceeds received from any issuance of State Serial Long Term Pension Obligation Bonds.  Each designated investment fund must be used solely for the purpose of taking advantage of interest arbitrage from the bond proceeds and for making debt service contributions related to the bonds.

HB 4371 authorizes the State Serial Long Term Pension Obligation Bonds to be issued and sold from time to time, in one or more series, in such amounts and at such prices as may be directed by the governor, upon recommendation by the director of the Governor’s Office of Management and Budget.  The term of such bonds cannot exceed 30 years.

HB 4371 also amends the State Pension Fund Continuing Appropriation Act to provide a continuing appropriation of all amounts necessary for the payment of principal and interest due on State Serial Long Term Pension Obligation Bonds.

HB 4371 takes effect immediately upon becoming law.

Filed with the Clerk on January 30, 2018. 

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HB 4411
- No Lobbyists for Multiple Pension Systems
Sponsor(s): Representative Carol Ammons

House Amendment #1 to HB 4411 adds language to the legislation that would prohibit a direct relative of a member of the General Assembly from serving on the board of a retirement system, board of a pension fund or investment board under the Illinois Pension Code.  It defines a “direct relative” as a spouse, child or sibling.

HB 4411 amends the General Provisions Article of the Illinois Pension Code.  It prohibits the State Employees’ Retirement System, State Universities Retirement System, Teachers’ Retirement System, Chicago Teachers’ Pension Fund and Illinois State Board of Investment from entering into a contract for lobbying services with a lobbyist who represents one of the other aforementioned retirement systems or investment boards.  

HB 4411 takes effect immediately upon becoming law.

Filed with the Clerk on January 30, 2018.

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HB 4412
- Retirement System Senior Administrative Staff Composition
Sponsor(s): Representative Carol Ammons and Senator Elgie R. Sims, Jr.

HB 4412 amends the General Provisions article of the Illinois Pension Code.  It requires each retirement system, pension fund and investment board to make its best efforts to ensure that the racial and ethnic makeup of its senior administrative staff represents the racial and ethnic makeup of its membership.

HB 4412 takes effect immediately upon becoming law.

Became Public Act 100-0902 on August 17, 2018.

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HB 4413
- Public Broadcast of Pension System Board Meetings
Sponsor(s): Representative Carol Ammons and Senator Andy Manar

Senate Amendment #1 to HB 4413 exempts Downstate Policemen’s Pension Funds and Downstate Firefighters’ Pension Funds from the requirements of the legislation.

HB 4413 amends the General Provisions Article of the Illinois Pension Code.  It requires any open meeting of the board of trustees of a retirement system or pension fund or any committee established by a retirement system or pension fund to be broadcast to the public and maintained in real-time on the retirement system or pension fund’s website using a high-speed Internet connection.  The retirement system or pension fund must make both audio and video available for the broadcast and maintenance of such meetings.

HB 4413 takes effect on January 31, 2019.

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HB 4414
- Pension System Executive Director and CIO Senate Confirmation
Sponsor(s): Representative Carol Ammons

HB 4414 amends the State Employees’ Retirement System, State Universities Retirement System, Teachers’ Retirement System and Chicago Teachers’ Pension Fund Articles of the Illinois Pension Code.  It requires appointments to the position of executive director or chief investment officer to be made with the advice and consent of the Senate.  For the Chicago Teachers’ Pension Fund, the position of chief legal officer must also be made with the advice and consent of the Senate. 

HB 4414 takes effect immediately upon becoming law.

Filed with the Clerk on January 30, 2018.

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