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STATE UNIVERSITIES RETIREMENT SYSTEM

Executive Director: William E. Mabe

Chairperson:  Lindsay Anderson

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

HB0073
- State Retiree Healthcare Reform
Sponsor: Naomi Jakobsson

HB 73 reforms state retiree health insurance in a similar fashion to SB 1313. There is no CIP or TRIP reform included in the amendment.  The proposal provides that CMS shall determine the state's contribution to the program and deletes the formula that determines annuitant premiums.

Current law allows members to earn a 5% premium reimbursement per year of service up to a maximum of 100%.  Therefore premiums are determine by a members years of service.

The bill states that premiums shall be the same for all annuitants, but CMS will factor in a number of variables when determining the premiums to be paid by annuitants and shall be based on sliding scale that takes into account the following variables:

  • Length of Service;
  • Ability to pay;
  • Pension income;
  • Medicare eligibility;
  • Whether or not an individual has made an election under Section 15-135.1 to forfeit certain pension benefit increases (flat formula of 2.2% per year of service) in exchange for fully State paid premiums

HB 73 also stipulates that CMS shall structure the length of service variable so that individuals that become annuitants before the effective date of this Act makes lesser contributions than individuals that become annuitants after the effective date of this Act. CMS shall also structure the pension income variable so that individuals with higher pension income shall pay higher premiums

Status:

Assigned to House Rules Committee

HB0096
- Creation of New Retiree Healthcare Plan for new employees, pension reform, funding reform
Sponsor: Andre M. Thapedi

HB 96 eliminates access to the current retiree healthcare program offered under the State Group Insurance Plan for new employees hired on or after the effective date of this Act. Such employees and potential survivors and dependents of such employees shall participate in a new retiree healthcare plan created for such individuals.

The benefits and premiums of this new plan will be determined by the Director of CMS and the premium rates may be based in part on age and eligibility for federal Medicare coverage. CMS shall also structure the premium rates to establish an actuarially sound reserve for this new program.

Employees subject to this new plan shall contribute 0.5% of pay towards the plan with an equal match from the employer. Up to 75% of the total insurance rate shall be paid from the State Universities Health Insurance Security fund. Beneficiaries premium payments shall be deducted their SURS benefit payments. If the beneficiary’s portion of the premium exceeds their monthly benefits payment, then the excess shall be paid by either the beneficiary, or the last employer of the retired employee which the premium is based upon.

Those employees participating in a healthcare plan established by a Collective Bargaining Agreement (CBA) shall continue to receive such insurance through that CBA until the CBA expires, then upon expiration, shall participate in this new plan.

SURS certifies the estimated employer/employee contribution revenue for a given fiscal year.

Employers may offer additional, supplemental insurance plans.

Eliminates eligibility to participate in SURS for new employees

HB 96 provides that SURS covered employers shall establish a tax sheltered annuity plan (403(b)) to new hires, and such employees are prohibited from participating in SURS.

SURS members can elect to opt out of SURS and into an employer sponsored Tax Sheltered annuity Plan

HB 96 provides that SURS members can opt out of SURS and into an employer sponsored plan, but must make such election within 5 years of the effective date of this Act.

Funding Reform

HB 96 provides that beginning in Fiscal Year 14, SURS-covered employers shall be required to contribute 50% of the annual certified contribution. Then in Fiscal Year 15, the employers shall be required to pay the total annual certified amount, or 101% of the previous fiscal year certified contribution, whichever is less. If the employers pay 101% of the previous fiscal year’s certified contribution, then the State shall pay the difference between the actual certified amount and the amount contributed by the employers.

College Insurance Program funding

HB 96 eliminates the state’s contribution to the College Insurance Program (CIP) as well as the CIP Continuing Appropriations Act. Consequently, state funding to CIP will no longer occur and funding will rely solely on employee contributions, employer contributions, and premium payments.

Status:

Assigned to House Rules Committee

HB0206
- Fiscal Year 2014 State Contribution to SURS
Sponsor: Michael J. Madigan

HB 206 appropriates $1,509,766,000 to SURS, which represents the fiscal year 2014 certified state contribution to SURS.

Status:

Signed into law on June 5, 2013 becoming Public Act 98-17

HB1266
- Increase funding target for state retirement systems
Sponsor: Joe Sosnowski

HB 1266 increases the funding target from 90% to 100%, so that the state must maintain a funding schedule to cover the employer’s normal cost plus an amount to amortize the unfunded liability so that the state retirement systems are 100% funded by 2045.

Status:

Assigned to House Rules Committee

HB1277
- Mandate Entry Age Normal actuarial cost method
Sponsor: Darlene J. Senger

HB 1277 changes the actuarial cost method for the 5 state retirements from “projected unit credit” actuarial cost method, to “entry-age normal” actuarial cost method. The impact this change will have on the liabilities should be minimal, and this method is the most common accurate actuarial cost method as used in the public retirement systems.

Status:

Passed House Personnel and Pensions Committee on March 21, 2013, placed on 2nd Reading

HB1283
- Required Actuarial Experience Study
Sponsor: Darlene J. Senger

HB 1283 provides that the 5 State Retirement Systems shall conduct an actuarial experience study at least once every 3 years, as opposed to current law which requires such studies to occur at least once every 5 years.

Status:

Assigned to House Rules Committee

HB1296
- Prohibited investments with Firearm manufacturing companies
Sponsor: Christian L Mitchell

HB 1296 has an immediate effective date and requires all systems and funds under the Pension Code to identify the amount of direct or indirect holdings with firearm manufacturing companies. The information shall be compiled into a list no later than 90 days following the effective date. The Systems shall exercise due diligence in compiling the list, and the list is to be updated on an annual basis. On an annual basis, the System must notify the company that has been placed on such list, and the company must either cease the manufacturing of firearms within 90 days of receiving the list, or the System must divest from such company that continues to manufacture firearms within one year.

HB 1296 also provides that the firearm manufacturing companies list shall include all companies matching the defined term of “firearm manufacturing company”, and that the Systems shall be prohibited from investing with a company on the list.

HB 1296 provides that the Systems shall submit the list required under this legislation and subsequent updated lists to the Illinois Department of Financial and Professional Regulation. The systems shall also submit the correspondence with the firearm manufacturing companies and the amount that has been divested from such companies.

HB 1296 defines "Firearm manufacturing company" as a company that is licensed pursuant to 27 C.F.R. 478.41 as a manufacturer of destructive devices, ammunition for destructive devices, armor piercing ammunition, firearms other than destructive devices, or ammunition for firearms other than destructive devices or armor piercing ammunition.

Status:

Failed to pass the House on April 18, 2013

HB2226
- Prohibits SURS participants from accruing any service credit with a labor union
Sponsor: Dwight Kay

HB 2226 applies to all pension code regulated systems that allow for participants of such systems to accrue service credit with that system for subsequent employment with a labor union.  HB 2226 impacts SURS so that SURS members currently accruing credit with a union can no longer accrue SURS service credit with that union after the effective date of the bill, which has an immediate effective date.  A similar law was passed last year, but only applied to new hires of such unions.  This law “grandfathered” SURS members that were employed with the unions prior to that effective date.

Status:

Assigned to House Rules Committee

HB2248
- Prohibited investments with Firearm manufacturing companies
Sponsor: Kathleen Willis

HB 2248 has an immediate effective date and requires all systems and funds under the Pension Code to identify the amount of direct or indirect holdings with firearm manufacturing companies.  The information shall be compiled into a list no later than 90 days following the effective date.  The Systems shall exercise due diligence in compiling the list, and the list is to be updated on an annual basis.  On an annual basis, the System must notify the company that has been placed on such list, and the company must either cease the manufacturing of firearms within 90 days of receiving the list, or the System must divest from such company that continues to manufacture firearms within one year.

HB 2248 also provides that the firearm manufacturing companies list shall include all companies matching the defined term of “firearm manufacturing company”, and that the Systems shall be prohibited from investing with a company on the list.

HB 2248 provides that the Systems shall submit the list required under this legislation and subsequent updated lists to the Illinois Department of Financial and Professional Regulation.  The systems shall also submit the correspondence with the firearm manufacturing companies and the amount that has been divested from such companies.

HB 2248 defines "Firearm manufacturing company" as a company that is licensed pursuant to 27 C.F.R. 478.41 as a manufacturer of destructive devices, ammunition for destructive devices, armor piercing ammunition, firearms other than destructive devices, or ammunition for firearms other than destructive devices or armor piercing ammunition.

Status:

Assigned to House Rules Committee

HB2620
- Retirement Systems’ Contractual Relationship with Follow-on funds and closed-end funds
Sponsor: Al Riley

HB 2620 provides that an Illinois public pension fund’s contractual relationship with “follow-on funds” and “closed-end funds” shall not be subject to the provisions prescribed under Section 113.14 of Article 1 of the Illinois Pension Code (General Provisions).  The provisions under that section of Statute provide that contracts for investment services shall be awarded by the board using a competitive process similar to the procurement of professional and artistic services under the Illinois Procurement Code.

Status:

Signed into law on August, 16 2013 becoming Public Act 98-433

HB2725
- Reform to Automatic Annual Increases for Tier 1 members and survivors
Sponsor: Robert Rita

HB 2725 reforms automatic annual increases for Tier 1 members, survivors of Tier 1 members, and disability retirement annuitants so that such individuals shall receive an automatic annual increase equal to the lesser of 3% of ½ the increase in the Consumer Price Index (CPI) of the originally granted annuity.  Such individuals currently receive an automatic annual increase equal to 3% with compounding interest.

Status:

Assigned to House Rules Committee

HB2876
- Softening of prohibition of contingency and placement fees
Sponsor: Daniel J. Burke

Public Act 96-0006 prohibited retirement systems regulated under the pension fund from conducting transactions involving contingency and placement fees.

HB 2876 provides that such prohibition shall not apply if:

  • The solicitor meets the definition of investment adviser as defined in 40 ILCS 5/1-101.4 and is in compliance with Rule 206(4)-3 of the federal investment advisers act of 1940; or
  • The placement agent is registered as a broker or dealer pursuant to either the federal Securities and Exchange Act of 1934 or the Illinois Securities Law of 1953.
Status:

Assigned to the House Rules Committee

HB2993
- (as amended by House Amendment #1) - SURS Technical Corrections and Administrative Bill, Incorporate Tier 2 into the SURS article of statute
Sponsor: Elaine Nekritz

HB 2993 brings the Tier 2 retirement plan into the SURS article.  The Tier 2 plan currently resides in the General Provisions Article of the Pension Code and impacts most of the other retirement systems under the pension code.  Due to nuances of the SURS plan, this has caused some issues as certain things aren't clear in meshing into the SURS statute.  By bringing Tier 2 into the SURS article of statute, the intent of the Tier 2 plan is clarified as it relates to SURS along with the elimination of potential frivolous litigation.  Below are a couple items that have been clarified and reflect SURS interpretation and administration:

  • Clarify that the Tier 2 final average earnings period applies to Tier 2 alternative formula members.  It is SURS current interpretation that the Tier 2 final average earnings period applies to Tier 2 alternative formula members, but the current statute isn’t clear.
  • Clarify that a Tier 2 portable plan survivor does not receive Tier 2 survivor’s benefits.  Such survivor shall receive the portable plan survivor’s benefits (funded by reducing retirement annuity at retirement).
  • Clarify that Tier 2 survivor’s benefits payable to multiple eligible survivors are to be split pro-rata.
  • Clarifies that Tier 2 alternative formula eligible members are only eligible for the enhanced benefit formula as provided under Rule 4 if they work the minimum 20 year requirement to be eligible for such benefit formula calculation.

HB 2993 corrects cross-references to 40 ILCS 5/1-160 as now such cross references are no longer correct.  Such references have been replaced with references in the SURS article or in some cases removed altogether.

Other Changes

HB 2993 updates an outdated Section reference contained in Section 15-102 to include all sections under the SURS article.

HB 2993 eliminates Rule 5 for calculating benefits as such rule was created by the legislature in response to an appellate court decision (Mattis v SURS).   The member that rule 5 was created for (Brian Mattis) passed away several years.  No one is eligible for benefits under Rule 5, so this bill would strike Rule 5 and all such references to Rule 5 in the SURS article of Statute. 

HB 2993 strikes out the old process for selecting board members. 

HB 2993 HB dclarifies that Trustee election balloting may be conducting by phone or electronic ballot.

HB 2993 addresses minor issues identified by auditors, and codifies that the board can delegate certain duties and roles performed by staff.  These duties include:

  • To receive, record, and deposit payments made to the System.

Codify in accordance with the by-laws that the Secretary is the only individual certifying warrants, checks, or drafts.  Current statute includes chairperson.

Status:

Signed into law on July 17, 2013 becoming Public Act 98-92

HB3264
- Unused Leave and Service Credit Reform
Sponsor: Pam Roth

HB 3264 applies to the State Universities’ Retirement System, Teachers’ Retirement System, and the State Employees’ Retirement System by prohibiting unused sick days and vacation days from being used to establish service credit.  HB 3264 shall only apply to participants that first become participants on or after the effective date of this Act.

Status:

Assigned to House Rules committee

HB3265
- Employer penalty payments for pay increases during Final Rate of Earnings Period that exceeds the increase in the Consumer Price Index
Sponsor: Pam Roth

HB 3265 restructures the 6% rule and sunsets the current parameters of the rule effective July 1, 2013. Beginning on July 1, 2013, employers shall pay the actuarial present value of the increase in benefits resulting from an increase in earnings that exceed the increase in the CPI-U that is payable to a participant during his or her final rate of earnings period. However, pay increases prescribed under an employment contract or collective bargaining agreement in effect before the effective date of this Act shall not be subject to this penalty contribution. Upon calculating that payment, SURS shall bill the employer that amount and the employer must pay the contribution within 90 days, or shall be liable for compounding interest payments at a rate equal to the prescribed rate of interest.

Status:

Assigned to House Rules Committee

HB3372
- Prohibition of non-public employers and new employees participating in SURS
Sponsor: Darlene J. Senger

HB 3372 provides that employers that are not defined as an employer under the SURS article shall be excluded from enrolling new employees in SURS. Those employees of such employers that are already SURS participants shall remain participants. SURS is given the authority to determine whether or not a person is an employee and is eligible to participate in SURS.

Status:

Assigned to House Rules Committee

HB3665
- Felony convictions and pension forfeiture
Sponsor: Darlene J. Senger

HB 3665 amends the general provisions of the Illinois Pension Code by providing that if a member of a retirement system is convicted of certain crimes, then that member’s retirement annuity is to be forfeit.  Such crimes shall include the following: Intimidation of a public official, official misconduct, bribery, kickbacks, deception related to certification of disadvantaged business enterprises, and theft of governmental property.

HB 3665 also provides that if a member of a retirement system is convicted of a felony, then his or her pension is to be suspended for the length of that member’s incarceration, but shall be reinstated upon the conclusion of that incarceration period.

Status:

Assigned to the House Rules committee

HB3667
- Prohibition of non-public employers and new employees participating in SURS
Sponsor: Dwight Kay

HB 3667 provides that employers that are not defined as an employer under the SURS article shall be excluded from enrolling new employees in SURS. Those employees of such employers that are already SURS participants shall remain participants. SURS is given the authority to determine whether or not a person is an employee and is eligible to participate in SURS.

Status:

Assigned to the House Rules Committee

HB3760
- Return To Employment Offset
Sponsor: Jack D. Franks

HB 3760 provides that if an annuitant of any retirement system regulated under the Illinois Pension code begins employment on or after the effective date in a position eligible to accrue service credit with a retirement system regulated under the code, then that annuitant’s monthly retirement annuity is to be offset by an amount equal to his or her monthly compensation payable for that covered position.  However, such offset will not apply to the portion of the monthly retirement annuity that is less than $2,000 and such offset will not apply if an annuitant suspends his or her annuity during that employment.

HB 3760 also provides that once that employed annuitant meets the minimum vesting requirements for a retirement annuity with that additional retirement system, then that member may elect to stop contributing and accruing credit under the additional retirement system.

Status:

Assigned to the House Rules Committee

HB3769
- Retirement Systems’ Divestment in funds that trade off market derivatives
Sponsor: André M. Thapedi

HB 3769 prohibits a retirement system regulated under the Illinois Pension Code from investing in funds that trade derivatives in off markets or non-open markets. If a system has exposure to such funds that trade such securities, then that system must divest from such fund within one year after the effective date.

Status:

Assigned to the House Rules Committee

HB4476
- Technical Correction to the Optional Defined Contribution Plan
Sponsor: Jeanne M Ives

HB 4476 amends language that the sponsor suggests allows the System to terminate the optional defined contribution plan created by Public Act 98-599.

Status:

Assigned to the House Rules Committee

HB5557
- Benefit and Funding Reforms
Sponsor: Thomas Morrison

HB 5557 is identical to HB 3549.                                  

Status:

Assigned to the House Rules Committee

HB5816
- (as amended by House Amendment #3) – Retirement System felony provisions
Sponsor: Darlene J. Senger

HB 5816 amends the general provisions of the Illinois Pension Code by providing that if a member of a retirement system is convicted of or pleads guilty to a Class X or Class 1 felony, then that member's retirement annuity is to be suspended for the length of that member's incarceration, but may be reinstated upon the conclusion of that incarceration period.

HB 5816 further provides that if a member is convicted of a job-related felony, then that member's retirement annuity is to be forfeit.  Such crimes shall include but are not limited to the following: Intimidation of a public official, official misconduct, bribery, kickbacks, deception related to certification of disadvantaged business enterprises, and theft of governmental property.  A member pleading guilty or convicted of such job-related felonies shall be entitled to refund of employee contributions only if denial of such refund jeopardizes qualified plan status.

Under current law, a SURS member that is convicted of a job-related felony forfeits his or her benefits, but is entitled to a refund of employee contributions.

Status:

Passed the House Personnel and Pensions Committee on March 27, 2014 with a vote of 8-0-1

HB5817
- Actuarial Valuation Requirements
Sponsor: Darlene J. Senger

HB 5817 provides that the 5 state retirement systems shall conduct an actuarial experience study at least once every 3 years, as opposed to current law which requires such studies to occur at least once every 5 years.

Status:

Assigned to the House Rules Committee

HB5818
- Actuarial Valuation Requirements
Sponsor: Darlene J. Senger

HB 5818 provides if a law is passed that shifts the SURS/TRS pension cost to a local taxing body, then the voters residing in that district must approve by referendum in order for that shift to occur.

Status:

Assigned to the House Rules Committee

HB5826
- National Guard Creditable Service
Sponsor: Norine Hammond

HB 5826 provides that all forms of service in any state’s National Guard may be included in the SURS benefit subject to the current provisions related to military service.

Status:

Assigned to the House Rules Committee

HB6066
- (as amended by House Amendment #1) – Fiscal Year 2015 State Contribution to SURS
Sponsor: Greg Harris

HB 6066 appropriates $1,544,200,000 to SURS, which represents the fiscal year 2015 certified state contribution to SURS.

Status:

Passed the House on May 15, 2014 with a vote of 60-55-0

HB6096
- (as amended by House Amendment #1) – Fiscal Year 2015 State Contribution to SURS
Sponsor: Michael J. Madigan

HB 6096 appropriates $1,544,200,000 to SURS and represents the fiscal year 2015 certified contribution. In addition, $4,459,547 is appropriated for the College Insurance Program (CIP) and represents the certified contribution to CIP.

Status:

Signed into law on June 30, 2014 becoming Public Act 98-680

HB6124
- Fiscal Year 2015 State Contribution to SURS
Sponsor: Michael J. Madigan

HB 6124 appropriates $1,544,200,000 to SURS, which represents the fiscal year 2015 certified state contribution to SURS.

Status:

Assigned the House Rules Committee

HB6225
- Technical Correction to Public Act 98-599
Sponsor: Chad Hays

When Public Act 98-599 altered the SURS retirement plan, there was a drafting error associated with the provision that alters the annuitization factors used to calculate the money purchase benefit. The law provides that the money purchase annuitization factors be altered so that rather than equal the system’s prescribed rate of interest (7.75%), beginning July 1, 2014, such rate would equal the 30 US treasury bond rate plus 75 basis points. The public act provided a clause to mitigate the impact of the decrease in such rate by providing that those eligible to retire under money purchase as of the effective date of the bill be provided an amount equal to the benefit amount he or should would have received during the fiscal year preceding June 1, 2014, also known as the minimum money purchase annuity. Due to the language of this provision, this minimum money purchase annuity is tied to Fiscal Year 2013, and not to Fiscal Year 2014 as was intended. HB 6225 amends the SURS article of the pension code so that the minimum money purchase annuity is tied to the money purchase annuity that would have been calculated as if the member retires on June 30, 2014.

Status:

Assigned to House Rules committee

HJRCA11
- Repeals the Pension Diminishment Clause of the Illinois Constitution
Sponsor: Joe Sosnowski

HJRCA 11 proposes to amend the Illinois Constitution by repealing the Pension Diminishment Clause as found in Article 13, Section 5 of the Constitution. This of course, would require voter approval in the next general election. The Pension Diminishment clause states the following:

Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

Status:

Assigned to House Rules Committee

Senate

SB0001
- Comprehensive Pension Reform to 4 of the 5 State Retirement Systems including SURS
Sponsor: Michael J. Madigan

Sponsors – Speaker Madigan (D), President Cullerton (D), Senator Radogno (R), and Representative Durkin (R)

SB 1 provides benefit and funding reform to 4 of the 5 State Retirement Systems, but the following summary is specific to SURS.

Automatic Annual Increase (AAI)

Current and future Tier 1 retirees will receive automatic annual increases starting January 1, 2015, that will be 3% of the lesser of (i) the total annuity payable at the time of the increase, including previously granted increases or (ii) $1,000 multiplied by the number of years of creditable service upon which the annuity is based. The 2015 AAI for retirements that are effective in calendar year 2014 will be subject to pro-rating under the new AAI formula.

The $1,000 multiplier will be adjusted for inflation (CPI-u) each year thereafter. The CPI-u adjustment to the $1,000 multiplier shall be equal to the annual unadjusted percentage increase in the CPI-u for the 12 months ending with the preceding September. These adjustments will be cumulative and compounded and the first adjustment will occur with the AAI effective January 1, 2016.

Tier 1 members who retire on or after July 1, 2014, will not be eligible to receive the following automatic annual increases based on their ages as of June 1, 2014:

  • Age 50 or over - will not receive their 2nd automatic annual increase;
  • Age 47 to under age 50 - will not receive their 2nd, 4th or 6th automatic annual increase;
  • Age 44 to under age 47 - will not receive their 2nd, 4th, 6th or 8th automatic annual increase;
  • Age 43 and under - will not receive their 2nd, 4th, 6th, 8th or 10th automatic annual increase.

The changes to the AAI do not apply to the Tier 2 retirement and survivor AAIs, the Tier 1 survivor AAIs, and the Tier 1/Tier 2 disability benefit and disability retirement annuity AAIs.

Retirement Age

Retirement age eligibility is delayed as follows for Tier 1 members who begin receiving an annuity on or after July 1, 2014:

  • Members age 46 and older on June 1, 2014 are not subject to any delay in retirement eligibility;
  • Members age 45 on June 1, 2014 are subject to a 4 month delay in retirement eligibility;
  • Members age 44 on June 1, 2014 are subject to a 8 month delay in retirement eligibility;
  • Members age 43 on June 1, 2014 are subject to a 12 month delay in retirement eligibility;
  • Members age 42 on June 1, 2014 are subject to a 16 month delay in retirement eligibility;
  • Members age 41 on June 1, 2014 are subject to a 20 month delay in retirement eligibility;
  • Members age 40 on June 1, 2014 are subject to a 24 month delay in retirement eligibility;
  • Members age 39 on June 1, 2014 are subject to a 28 month delay in retirement eligibility;
  • Members age 38 on June 1, 2014 are subject to a 32 month delay in retirement eligibility;
  • Members age 37 on June 1, 2014 are subject to a 36 month delay in retirement eligibility;
  • Members age 36 on June 1, 2014 are subject to a 40 month delay in retirement eligibility;
  • Members age 35 on June 1, 2014 are subject to a 44 month delay in retirement eligibility;
  • Members age 34 on June 1, 2014 are subject to a 48 month delay in retirement eligibility;
  • Members age 33 on June 1, 2014 are subject to a 52 month delay in retirement eligibility;
  • Members age 32 on June 1, 2014 are subject to a 56 month delay in retirement eligibility; and
  • Members age 31 or younger on June 1, 2014 are subject to a 60 month delay in retirement eligibility.

It is unclear at this time whether the retirement age delay applies to retirement eligibility under the “30 and Out” eligibility criterion. SURS will seek future legislative clarification on this issue.

Pensionable Earnings limitation

Pensionable earnings for Tier 1 members shall not exceed the Tier 2 earnings limitation (as adjusted for inflation). For reference, the FY2015 Tier 2 earnings limitation is $110,631.26.

Tier 1 participants who are receiving earnings exceeding the Tier 2 earnings limitation as of June 1, 2014, are grandfathered and pensionable earnings will be limited to the participant’s annualized rate of earnings as of June 1, 2014, or the annualized rate of earnings immediately preceding the expiration, renewal or amendment of an employment contract or collective bargaining agreement that is in effect on June 1, 2014.

Tier 1 Employee Contribution Decrease

Beginning July 1, 2014, Tier 1 employee contributions are decreased by 1% of earnings. This is accomplished by reducing the employee “normal” contribution rate by 0.5% of earnings, and eliminating the 0.5% employee contribution rate for the AAI. Tier 2 and SMP employee contribution rates remain unchanged.

Money Purchase Formula Changes

Beginning in FY 2015 (July 1, 2014), the annuity factors used to calculate money purchase benefits shall change to a new effective rate of interest.

The new effective rate of interest shall be equal to the 30-year US Treasury bond rate plus 75 basis points. The new effective rate of interest shall apply prospectively towards crediting interest to money purchase plan accounts, Portable plan lump sum retirements and refunds, purchases of service credit, etc.

Changes to the money purchase annuity conversion factors are applied prospectively, but members who retire on or after July 1, 2014, are eligible to receive the money purchase benefit they were eligible to receive had they retired during the fiscal year preceding June 1, 2014 or the money purchase benefit they are eligible to receive under the new formula, whichever is greater. The member must have been retirement eligible during the aforementioned fiscal year for this provision to apply.

Optional Defined Contribution Plan

An optional defined contribution plan (DC plan) will be made available to active Tier 1 employees. The plan is to be implemented by July 1, 2015, unless the plan is not qualified under the Internal Revenue Code. If the plan is not qualified by July 1, 2015, the plan shall be implemented upon being determined a qualified plan. No more than 5% of the active Tier 1 membership may elect to participate in the plan.

Contrary to media reports, this is not a 401(k) plan, but will most likely be a 401(a) defined contribution money purchase plan like the Self-Managed Plan. Accordingly, the employee will not be permitted to choose how much salary to contribute. Tier 1 employees participating in the DC plan will contribute at the same rate as other Tier 1 participants under the Traditional and Portable plans (DB plan). The DC plan participants will fund the cost of administration of the plan through deductions from the employee contributions to their accounts. Disability benefits may be provided, but employee contributions will fund the cost.

Employer contributions shall be a minimum of 3% of pay and no greater than the employer’s normal cost for Tier I members in the DB plan. The State of Illinois will adjust the employer contribution rate annually.

Tier 1 members electing to participate in the DC plan will cease accruing benefits under the DB plan. Service credit for DB plan benefit sizing will cease to accrue. However, service credit earned under the DC plan will be used for vesting purposes in the DB plan. Interest crediting for purposes of the money purchase formula (Rule 2) will cease. No service purchases for the DB plans will be permitted.

Unused Sick and Vacation Time — New Hires

Persons who first become SURS participants June 1, 2014, are not eligible to convert unused sick and/or vacation days into service credit or have unused sick and/or vacation days used to enhance pensionable earnings under the Final Rate of Earnings.

Prohibition of Non-Public Employers

Employers that are not defined as an employer under the SURS article shall be excluded from enrolling new employees in SURS. Those employees of such employers that are already SURS participants shall remain participants. The SURS Board of Trustees is given the authority to determine whether a person is an employee. In case of doubt as to whether an individual is an “employee,” the decision of the Board of Trustees is final.

State Funding

The State shall be required to adhere to a funding schedule that provides an annual contribution, beginning in FY 2015, equal to normal cost plus an amount that is sufficient to fund 100% of each system’s liabilities by FY 2044. Normal cost contributions shall be determined under the entry age normal cost method beginning in FY 2016. In FY 2045 and each fiscal year thereafter, the State shall contribute an annual amount to maintain a funding status of 100%.

Additional Pension Stabilization Fund Contributions

Beginning in FY 2019, the 5 state retirement systems shall receive additional payments as debt service payments on existing Pension Obligation Bonds expire. The Pension Stabilization Fund will receive dedicated revenues that will be proportionately distributed to each system based on the systems proportional share of the State’s total unfunded liabilities. In FY 2019, the Pension Stabilization Fund will receive $364 million. Beginning FY 2020, the Pension Stabilization Fund will receive $1 billion a year. The transfers will terminate at the end of FY 2045 or when each of the retirement systems has achieved 100% funding, whichever occurs first. The systems shall not include these contributions or interest accrued on these contributions in calculations to determine required contributions until the system is 100% funded or FY 2045, whichever occurs first.

Additional supplemental payments

Beginning in FY 2016, the 5 state retirement systems shall receive additional payments equal to 10% of the difference of what contributions would have been required had the reform not been enacted and required contributions under the reform. The systems shall not include these contributions or interest accrued on these contributions in calculations to determine required contributions until the system is 100% funded or FY 2045, whichever occurs first.

Example: if the reforms are enacted and SURS certifies a $1 billion contribution, but would have certified a $1.5 billion contribution without the reforms, the State would be required to make an additional supplemental contribution equal to $50 million.

Funding Guarantee

Beginning July 1, 2014, the State is obligated to contribute an amount not less than the normal cost plus the portion of the unfunded liability assigned to that year by law. If the State fails to make a required payment, the Board of Trustees shall bring a mandamus action in the Illinois Supreme Court to compel the State to make the required payment. For purposes of this Section, the State waives its sovereign immunity. This payment mechanism will also apply to “Pension Stabilization Fund” payments. However, all such payments are subordinate to bonded debt obligations.

Status:

Passed both the House and Senate on December 3, 2013, signed by the Governor on December 5, 2013 becoming Public Act 98-599.

SB0452
- (as amended by House Amendments #2 and #3) – Disclosure of information to retirement systems for contractual services
Sponsor: James F. Clayborne, Jr.

SB 452 provides that beginning January 1, 2015, no contract for investment or consulting services or commitment to a private market fund shall be awarded by a retirement system unless such entity first discloses the following:

  1. The number and percentage of it's senior staff who are minority, female, or disabled.
  2. The number of contracts for services that the applying entity has with a minority owned business, female owned business, or business owned by a person with a disability.
  3. The number of contracts for services that the applying entity has with businesses other than a minority owned business, female owned business, business owned by a person with a disability, if more than 50% of the services under that contract are performed by a minority person, a female, or a person with a disability.

SB 452 further provides that a retirement system must consider such information (within the bounds of financial and fiduciary prudence) before awarding a contract for investment services, consulting services, or commitment to a private market firm. 

In addition, SB 452 provides that if an investment firm meeting the system’s criteria responds to an RFP for investment services and meets the definition of a minority owned business, then that firm shall be allowed to present to the board before a final decision is made for that RFP.

Beginning January 1, 2015, the Illinois Student Assistance Commission is subject to the same reporting and disclosure requirements for investments with minority, female, and disabled owned businesses.

Finally, SB 452 codifies that the boards of the Illinois retirement systems shall establish goals for utilization of investment managers that meet the definition of minority owned business, female owned business, and disabled person owned business.  The systems will set a goal for each category.

Status:

Passed the House on May 29, 2014 with a vote 108-6-1

SB1223
- State Pension Contribution Reform
Sponsor: Matt Murphy

SB 1223 impacts SURS and the other state retirement systems by restructuring the appropriation process as it relates the state’s contribution to it’s retirement systems.

SB 1223 provides that beginning in FY 2014, the first appropriation made each fiscal year shall be directed to the State Retirement Systems, essentially making such contribution non-discretionary. The Commission of Government Forecasting and Accountability (rather than the Trustees of each system) shall certify the annual contribution based upon generally accepted and accounting principles. This appropriated item takes precedence over all other state governmental expenditure items.

SB 1223 also provides that if COGFA recertifies the annual contribution and such contribution increases as a result, then the monthly contribution shall increase accordingly. However, if a recertification results in the annual contribution decreasing, then the state shall still provide the full originally certified contribution. However, if there is no unfunded liability to finance during such a year that a recertification occurs and the recertification provides that the contribution is to be reduced, then the appropriated amount exceeding the recertified contribution shall be re-distributed to other state governmental budget items.

Finally, SB 1223 provides that if the state is delinquent on their monthly pension contribution, then the Comptroller shall freeze all state expenditures until the full monthly contribution is paid.

Status:

Assigned to the Senate Assignments Committee

SB1224
- Unused Leave and Service Credit Reform
Sponsor: Matt Murphy

SB 1224 amends several articles under the Illinois Pension Code (IMRF, Cook County Pension Fund, SERS, SURS, TRS, and Chicago Teachers’ Pension Fund) by prohibiting payment for unused sick days and unused vacation days from being included in final average salary.  SB 1224 also prohibits unused sick days and vacation days from being used to establish service credit.  SB 1224 shall only apply to participants that first become participants on or after the effective date of this Act.

Status:

Passed the Senate on March 21, 2013, assigned to House Rules committee

SB1899
- Retirement Systems’ Contractual Relationship with Follow-on funds and closed-end funds
Sponsor: Daniel Biss

SB 1899 provides that an Illinois public pension fund’s contractual relationship with “follow-on funds” and “closed-end funds” shall not be subject to the provisions prescribed under Section 113.14 of Article 1 of the Illinois Pension Code (General Provisions).  The provisions under that section of Statute provide that contracts for investment services shall be awarded by the board using a competitive process similar to the procurement of professional and artistic services under the Illinois Procurement Code. 

Status:

Assigned to Senate Assignments Committee

SB2005
- (as amended by Senate Amendment #1) – Technical Correction to Public Act 98-599
Sponsor: Chapin Rose

When Public Act 98-599 altered the SURS retirement plan, there was a drafting error associated with the provision that alters the annuitization factors used to calculate the money purchase benefit. The law provides that the money purchase annuitization factors be altered so that rather than equal the system’s prescribed rate of interest (7.75%), beginning July 1, 2014, such rate would equal the 30 US treasury bond rate plus 75 basis points. The public act provided a clause to mitigate the impact of the decrease in such rate by providing that those eligible to retire under money purchase as of the effective date of the bill be provided an amount equal to the benefit amount he or should would have received during the fiscal year preceding June 1, 2014, also known as the minimum money purchase annuity. Due to the language of this provision, this minimum money purchase annuity is tied to Fiscal Year 2013, and not to Fiscal Year 2014 as was intended. SB 2005 amends the SURS article of the pension code so that the minimum money purchase annuity is tied to the money purchase annuity that would have been calculated as if the member retires on June 30, 2014.

Status:

Assigned to Senate Rules Committee

SB2203
- Funding and Actuarial Calculation Changes
Sponsor: Kirk W. Dillard

SB 2203 provides that the State shall be required to adhere to a funding schedule that provides an annual contribution sufficient to cover the employer’s normal cost plus an annual amount to amortize the unfunded liability so that SURS is 100% funded by 2043. Then, in Fiscal Year 2044 and each fiscal year thereafter, the State shall contribute an annual amount to maintain a funding status of 100%.

SB 2203 also provides that the Systems must incorporate any recommendations made by the state actuary into their final calculation of the state’s contribution to the system.

Status:

Assigned to the Senate Assignments Committee

SB2642
- Increase Supplemental Payments to the 5 State Retirement Systems
Sponsor: Dale A. Righter

SB 2642 provides that the supplemental payments that begin in Fiscal Year 2016 that are payable to the 5 state retirement systems shall be increased so that such contributions are equal to 90% of the difference of what contributions would have been required had the reform provided under Public Act 98-599 not been enacted and the required contributions under the reform.

Example: if the reforms are enacted and SURS certifies a $1.4 billion contribution, but would have certified a $1.6 billion contribution without the reforms, the State would be required to make an additional supplemental contribution equal to $180 million.

Supplement Contribution History

Public Act 98-599 provides that the additional supplemental payments beginning in FY 2016 payable to the 5 state retirement systems shall be equal to 10% of the difference of what contributions would have been required had the reform not been enacted and required contributions under the reform. The systems shall not include these contributions or interest accrued on these contributions in calculations to determine required contributions until the system is 100% funded or FY 2044, whichever occurs first.

Status:

Assigned to the Senate Assignments Committee

SB2887
- (as amended by Senate Amendment #1) – SURS return to employment exemption
Sponsor: Daniel Biss

SB 2887 provides that such provisions of Public Act 97-968 shall not apply to SURS annuitants that are receiving a SURS annualized retirement annuity less than $10,000.  For review, PA 97-968 tightens up the SURS return to work provisions so that if a SURS-covered employer employs a SURS annuitant under certain conditions, the SURS-covered employer is to a pay a penalty to SURS.

Status:

Passed the Senate on April 1, 2014 with a vote 39-8-1

SB3486
- Retirement Systems utilization of Minority and Female Owned Businesses
Sponsor: Iris Y. Martinez

SB 3486 provides that all retirement systems regulated under the Illinois Pension Code will be subject to new provisions beginning January 1, 2015.  Such provisions include:

Senate Confirmation for executive director, chief investment officer, and chief financial officer

SB 3486 provides that effective January 1, 2015, every person appointed as executive director, chief investment officer, chief financial officer or equivalent position shall be subject to Senate confirmation and shall be appointed to serve for a term of no more than 4 years.

Codify goals for asset classes managed by minority and female investment firms

Each retirement system under the Pension Code shall adopt goals so that 20% of each asset class is managed by minority or female owned businesses.  Failure to meet set goals shall result in the executive director, chief financial officer, and chief investment officer to be capped at 60% of their annual bonus for the year in which the failure occurred.  Such individuals named shall be placed on the watch list and if the system consistently fails to meet the goals, then the Senate shall consider such results when the time for re-appointment occurs.

Establish goals for retirement systems utilization of Illinois based minority owned and female owned businesses

Sets annual goals regarding utilization of Illinois based financial service businesses (including those that are minority or female owned) and must present an annual report regarding such goals.

Minority and female business inclusion training for Illinois retirement systems

SB 3486 provides that trustees, executive directors, chief investment officers, and chief financial officers shall receive 10 hours of minority and female investment inclusion training with oversight from the Senate Pensions and Investment Committee.

Status:

Passed the Senate Licensed Activities and Pension Committee on March 27, 2014 with a vote of 7-0-2

SB3549
- Benefit and Funding Reform
Sponsor: Kyle McCarter

SB 3549 provides that no active participant of a state retirement system may accrue service under a defined benefit plan after January 1, 2015.  Beginning in that same year, no automatic annual increases shall be payable to any member of the system.  SB 3549 increases retirement ages for members not yet eligible to retire as of January 1, 2015 in accordance with a schedule determined by the Illinois Department of Insurance.  The schedule shall be adopted by administrative rule and must provide that such members to whom the schedule applies must not be eligible to retire at an age younger than age 59.  This schedule must also provide that for members entering the system on or after January 1, 2015 must not be eligible to retire at an age younger than the social security retirement age.

SB 3549 provides that members removed from the defined benefit plan shall accrue prospective service under a self-managed plan, making employee contributions at 8% of earnings, and receiving an employer match of 7% of earnings.  These members shall also be subject to an annual limitation of earnings equal to $110K as of the effective date, and beginning on January 1, 2017, that amount shall increase at a rate equal to 3% or ½ the increase in the CPI-U, whichever is less.

SB 3549 alters the funding schedule so that the state shall make annual contributions as a level percent of payroll so that the system reach 100% funded status by 2047 and is to be determined under the projected unit credit method.

Status:

Assigned to the Senate Assignments Committee

SB3555
- Benefit and Funding Reform
Sponsor: Jim Oberweis

SB 3555 provides that no active participant of a state retirement system may accrue service under a defined benefit plan after January 1, 2015.  Beginning in that same year, no automatic annual increases shall be payable to any member of the system.  SB 3555 increases retirement ages for members not yet eligible to retire as of January 1, 2015 in accordance with a schedule determined by the Illinois Department of Insurance.  The schedule shall be adopted by administrative rule and must provide that such members to whom the schedule applies must not be eligible to retire at an age younger than age 59.  This schedule must also provide that for members entering the system on or after January 1, 2015 must not be eligible to retire at an age younger than the social security retirement age.

SB 3555 provides that members removed from the defined benefit plan shall accrue prospective service under a self-managed plan, making employee contributions at 8% of earnings, and receiving an employer match of 7% of earnings.  These members shall also be subject to an annual limitation of earnings equal to $110K as of the effective date, and beginning on January 1, 2017, that amount shall increase at a rate equal to 3% or ½ the increase in the CPI-U, whichever is less.

SB 3555 alters the funding schedule so that beginning in FY 2015, the covered employers are to make the full annual SURS contribution at a rate as a level percent of payroll to get the system to 90% funded status by 2045.

Status:

Assigned to the Senate Assignments Committee

SB3630
- Fiscal Year 2015 State Contribution to SURS
Sponsor: John J. Cullerton

SB 3630 appropriates $1,544,200,000 to SURS, which represents the fiscal year 2015 certified state contribution to SURS.

Status:

Assigned the Senate Assignments Committee

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