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.

Senate

SB 1012
- Tier III Defined Contribution Plan
Sponsor(s): Senator Dale A. Righter

Senate Amendment #2 to SB 1012 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.

SA #2 to SB 1012 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 up to 1 percent of earnings to cover the cost of any defined disability benefits offered under the defined contribution plan). 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 employers, must solicit proposals to provide administrative services and funding vehicles for the Tier III defined contribution plan from insurance and annuity companies and 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.

SA #2 takes effect immediately upon becoming law.

Senate Amendment #1 to SB 1012 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.

SA #1 to SB 1012 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018. Tier I participants and Tier II participants may make a voluntary, irrevocable election to become Tier III participants, stopping participation in the defined benefit plan and starting participation in the defined contribution plan for future service. Additionally, all persons who first become participants in SURS on or after July 1, 2018, must participate in the Tier III defined contribution plan.

Tier III participants 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, to the member’s individual account in the defined contribution plan. Participants in the Tier III defined contribution plan will receive any applicable retiree health insurance benefits upon retirement.

Tier III employee contributions to the defined contribution plan are set at a rate determined by the participant, but not less than 3 percent of earnings and not more than a percentage of earnings determined by the board in accordance with the requirements of state and federal law. State contributions to the defined contribution plan are set at a uniform rate, but not higher than 7.6 percent of earnings and not lower than 3 percent of earnings. The state must adjust this rate annually. Tier III participants must have five years of service in the defined contribution plan to vest in state contributions. Failure to vest results in the forfeiture of state contributions and any earnings thereon. Disability benefits may be provided under the Tier III defined contribution plan, and Tier III employee contributions to the defined contribution plan may be reduced by an amount to cover the cost of offering such disability benefits.

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 members and their survivors; and, to the extent permitted 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.

The Tier III defined contribution plan contained in SA #1 to SB 1012 is identical to the Tier III defined contribution plan contained in House Bill 2405 of the 100th General Assembly.

SA #1 SB 1012 takes effect immediately upon becoming law.

Status:

Click Here

SB 1345
- Public Act 100-0023 Trailer Bill – Tier Clarification
Sponsor(s): Senator Donne E. Trotter and Representative Robert Martwick

SB 1345 clarifies that individuals who first become members of SURS on or after January 1, 2011, and prior to the implementation date of the Optional Hybrid Plan will participate in SURS as Tier II members.

Public Act 100-0023 (effective July 6, 2017) closed Tier II for individuals who first become members of SURS on or after January 6, 2018.   As a result, under Public Act 100-0023, individuals who first become members of SURS on or after January 6, 2018 would not have a benefit “Tier” assigned to them, meaning that the retirement benefits for those members would not be clearly defined in statute.  SB 1345 provides that individuals who first become members of SURS on or after January 6, 2018, and until the implementation date of the Optional Hybrid Plan will participate in SURS as Tier II members.  

SB 1345 takes effect immediately upon becoming law.

Became Public Act 100-0563 effective December 8, 2017.

Status:

Click here

SB 1714
- Investment Consultant Disclosures
Sponsor(s): Senator James F. Clayborne, Jr. and Representative Arthur Turner

SB 1714 amends the General Provisions article of the Illinois Pension Code.

SB 1714 requires each consultant retained by the board of a retirement system, pension fund or investment board to disclose the following information by Jan. 1, 2018, and each Jan. 1 thereafter:

  • The total number of searches for investment services made by the consultant in the prior calendar year;

  • The total number of searches for investment services made by the consultant in the prior calendar year that included: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability;

  • The total number of searches for investment services made by the consultant in the prior calendar year in which the consultant recommended for selection: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability;

  • The total number of searches for investment services made by the consultant in the prior calendar year that resulted in the selection of: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability; and

  • The total dollar amount of investment made in the previous calendar year with: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability that was selected after a search for investment services performed by the consultant.

Beginning Jan. 1, 2018, the board of a retirement system, pension fund or investment board is prohibited from awarding a contract, oral or written, for consulting services without first requiring the consultant to make these disclosures.  These disclosures must be considered, within the bounds of financial and fiduciary prudence, prior to the awarding of a contract, oral or written, for consulting services.

SB 1714 also requires each consultant retained by the board of a retirement system, pension fund or investment board to disclose the following information by Jan. 1, 2018, and each Jan. 1 thereafter: all compensation and economic opportunity received in the last 24 months from investment advisors retained by the board of a retirement system, pension fund or investment board.  

Finally, SB 1714 requires each consultant to disclose the following information to the board of a retirement system, pension fund or investment board beginning Jan. 1, 2018: any compensation or economic opportunity received in the last 24 months from an investment advisor that is recommended for selection by the consultant.  The consultant must make this disclosure prior to the board selecting an investment advisor for appointment.  Beginning Jan. 1, 2018, the board of a retirement system, pension fund or investment board is prohibited from awarding a contract, oral or written, for consulting services without first requiring the consultant to make these disclosures.

SB 1714 takes effect immediately upon becoming law.

Became Public Act 100-0542 effective November 8, 2017.

Status:

Click Here

SB 1798
- No Investments in Expatriate Corporations
Sponsor(s): Senator Michael E. Hastings

Senate Amendment #1 to SB 1798 amends the General Provisions article of the Illinois Pension Code to authorize the state-funded retirement systems to use shareholder activism prior to divestment to impact the behavior of expatriated entities.  

An expatriated entity is defined as “a foreign incorporated entity which is treated as an inverted domestic corporation under subsection (b) of Section 835 of the Homeland Security Act of 2002, 6 U.S.C. 395(b), or any subsidiary of such an entity.”

By April 1, 2018, the Illinois Investment Policy Board must make its best efforts to identify all expatriated entities and include those companies in the list of restricted companies distributed to each retirement system and the state treasurer.

To the extent the retirement system believes that shareholder activism would be more impactful than divestment, the retirement system has the authority to engage with an expatriated entity prior to divesting from it.  Methods of shareholder activism utilized by the retirement system may include, but are not limited to, bringing shareholder resolutions and proxy voting on shareholder resolutions. The retirement system must report on its shareholder activism and the outcome of such efforts to the Illinois Investment Policy Board by April 1 of each year.  However, if the engagement efforts of the retirement system are unsuccessful, then it must adhere to the normal procedures for divestment.

If a company ceases activity that designates it as an expatriated entity, then it is removed from the list of restricted companies (and is not subject to shareholder activism or divestment), unless it resumes such activities.

Senate Amendment #2 to SB 1798 clarifies that if the retirement system determines that its engagement efforts with an expatriated entity are unsuccessful, then it must adhere to the normal procedures for divestment.

As introduced, SB 1798 amends the General Provisions article of the Illinois Pension Code to prohibit the state-funded retirement systems from investing in expatriate corporations.  

An expatriate corporation is defined as a foreign incorporated entity to which all of the following apply: (1) it is publicly traded in the United States; (2) it is incorporated in a foreign tax haven; (3) less than 10 percent of the gross income of the foreign entity is derived from activities in the tax haven; (4) less than 10 percent of the employees of the foreign entity are permanently located in the tax haven; and (5) either of the following applies:

  • The foreign entity was established in connection with a transaction or series of related transactions pursuant to which: (i) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership; and (ii) immediately after the acquisition, more than 50 percent of the publicly traded stock, by vote or value, of the foreign entity is held by former shareholders of the domestic corporation or by former partners of the domestic partnership or related foreign partnership.  For purposes of item (ii), any stock sold in a public offering related to the transaction or a series of transactions is disregarded.
  • The foreign entity was established in connection with a transaction or series of related transactions pursuant to which (i) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership and (ii) the acquiring foreign entity is more than 50 percent owned, by vote or value, by domestic shareholders or partners.

By April 1, 2018, the Illinois Investment Policy Board must make its best efforts to identify all expatriate corporations and include those companies in the list of restricted companies distributed to each retirement system for this purpose.  If a company ceases activity that designates it as an expatriate corporation, then it must be removed from the list of restricted companies, and is subject to investment by the state-funded retirement systems, unless it resumes such activities.

As introduced, SB 1798 is identical to House Bill 3419 of the 100th General Assembly.

SB 1798 takes effect in accordance with the Effective Date of Laws Act.

Status:

Click Here

SB 1801
- Supplemental Defined Contribution Plan
Sponsor(s): Senator William E. Brady

SB 1801 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.

SB 1801 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.

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

SB 1801 takes effect immediately upon becoming law.

Status:

Click Here

SB 1820
- Partial and Full Accelerated Pension Benefit Payment Options
Sponsor(s): Senator Dan McConchie

SB 1820 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.

Accelerated Pension Benefit Payment

SB 1820 authorizes an eligible person to irrevocably elect to receive an accelerated pension benefit payment, beginning Jan. 1, 2018.  The accelerated pension benefit payment consists of a one-time lump-sum payment equal to 70 percent of the net present value of the eligible person’s 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 receiving an accelerated pension benefit payment, a person’s credits and creditable service under SURS are terminated.  If the person subsequently returns to active service under SURS, then any benefits earned are based solely on the person’s credits and creditable service arising from the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS, and the terminated credits and creditable service cannot be reinstated.  A person who accepts an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits.

To be eligible for an accelerated pension benefit payment, a SURS member must have terminated service; met the age and service credit requirements for retirement; not have received a retirement annuity; not have a QILDRO in effect against him or her under SURS; not be a participant in the Self-Managed Plan; not have elected to receive a partial accelerated pension benefit payment; and have received counseling on asset management and the costs, benefits and risks of electing to receive the accelerated pension benefit payment in lieu of pension benefits.  

Partial Accelerated Pension Benefit Payment

SB 1820 authorizes an eligible person to make a written election to receive a partial accelerated pension benefit payment in exchange for a reduction in pension benefits, beginning Jan. 1, 2018.  In the written election, the eligible person must specify the percentage by which pension benefits are reduced.  However, an eligible person may not elect a percentage reduction of his or her pension benefits that would result in a partial accelerated pension benefit payment of less than $50,000. The partial accelerated pension benefit payment consists of a one-time lump-sum payment equal to 70 percent of the elected percentage of the net present value of the eligible person’s pension benefits.  A person who receives a partial accelerated pension benefit payment will have his or her pension benefits reduced by the percentage specified in the written election.  The percentage reduction in pension benefits cannot be modified after the partial accelerated pension benefit payment is received.  If a person who has received a partial accelerated pension benefit payment returns to active service, then any benefits earned must be reduced by the amount specified in the written election; the partial accelerated pension benefit payment may not be repaid to SURS; and the person is not eligible to elect or receive any additional partial accelerated pension benefit payment.

To be eligible for a partial accelerated pension benefit payment, a SURS member must have terminated service; met the age and service credit requirements for retirement; not have received a retirement annuity; not have a QILDRO in effect against him or her under SURS; not be a participant in the Self-Managed Plan; not have elected to receive an accelerated pension benefit payment; and have received counseling on asset management and the costs, benefits and risks of electing to receive a partial accelerated pension benefit payment in exchange for a reduction of pension benefits.

SB 1820 takes effect immediately upon becoming law.

Status:

Click Here

SB 2091
- No Investments in Businesses that Build a Border Wall
Sponsor(s): Senator Martin A. Sandoval

SB 2091 amends the General Provisions article of the Illinois Pension Code.

SB 2091 prohibits the state-funded retirement systems from investing in businesses that enter into a contract with the federal government for the purpose of building a wall along the border of Mexico and the United States of America. By May 1, 2017, the Illinois Investment Policy Board must make its best efforts to identify all companies that contract to build a border wall and include those companies in the list of restricted companies distributed to each retirement system for this purpose.

SB 2091 also makes similar changes under the Illinois Procurement Code.

SB 2091 is similar to House Bill 3061 of the 100th General Assembly, as introduced.

SB 2091 takes effect immediately upon becoming law.

Status:

Click Here

SB 2172
- Pension Reform
Sponsor(s): Senator Michael Connelly

SB 2172 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

SB 2172 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 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 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

SB 2172 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

SB 2172 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

SB 2172 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 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

SB 2172 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

SB 2172 takes effect immediately upon becoming law.

Status:

Click Here

SB 2173
- Pension Reform
Sponsor(s): Senator Michael Connelly

SB 2173 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Chicago Teachers Retirement System articles of the Illinois Pension Code.

Tier I Offer and Consideration Pension Reform

SB 2173 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

SB 2173 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

SB 2173 takes effect immediately upon becoming law.

Status:

Click Here

SB 2194
- Pension Reform
Sponsor(s): Senator Christine Radogno

SB 2194 amends the State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, and Chicago Teachers Retirement System articles of the Illinois Pension Code.  

Tier I Offer and Consideration Pension Reform

SB 2194 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

SB 2194 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

SB 2194 takes effect immediately upon becoming law.

Status:

Click Here

SB 2195
- Pension Reform
Sponsor(s): Senator Christine Radogno

SB 2195 amends the 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

SB 2195 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 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.

Accelerated Pension Benefit Payment Option

SB 2195 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 participating employee status under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to participating employee status.  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

SB 2195 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

SB 2195 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 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

SB 2195 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

SB 2195 takes effect immediately upon becoming law.

Status:

Click Here

SB 2197
- SURS Normal Cost Shift
Sponsor(s): Senator Kyle McCarter

SB 2197 amends the State Universities Retirement System article of the Illinois Pension Code.

SB 2197 requires the actual employer to pay the full employer’s normal cost of the benefits earned by its employees to SURS on a payroll-by-payroll basis. The employer normal cost rate is a percentage of earnings determined by SURS on a system-wide basis and certified by SURS to all employers for use in the applicable fiscal year.

SB 2197 requires SURS to certify the employer normal cost rate as soon as possible after the effective date of the legislation to employers for use in the remaining portion of the current fiscal year and by November 1st annually for use in the next fiscal year.

SB 2197 also requires SURS to recalculate and recertify the required State contribution for the current fiscal year based on the changes made by the legislation.

SB 2197 takes effect immediately upon becoming law.

Status:

Click Here

SR 0113
- Oppose Tax on Retirement Income
Sponsor(s): Senator Thomas Cullerton

SR 113 resolves that the Illinois Senate believes that the Illinois Income Tax Act should not be amended to permit taxing retirement income.

Status:

Click Here

SR 0545
- Oppose Pension Cost Shift to Local Employers
Sponsor(s): Senator Sue Rezin

SR 545 resolves that the Illinois Senate believes that an educational pension cost shift is financially wrong and would only serve to shift pension burdens from the state to the status of an unfunded mandate.

Status: Senate Referred to Assignments Committee on May 26, 2017.

Status:

Click Here

Pages

Subscribe to Legislation