Legislation

Legislation

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

House

HB 0199
- No Investments in Ford Motor Company
Sponsor(s): Representative Mary E. Flowers

HB 199 amends the General Provisions Article of the Illinois Pension Code to prohibit the state-funded retirement systems from investing in Ford Motor Company and its subsidiaries.

Specifically, HB 199 requires the Illinois Investment Policy Board to make its best efforts to identify all subsidiaries of Ford Motor Company and include those companies in the list of restricted companies distributed to each retirement system by July 1, 2020. These efforts must include the following, as appropriate in the Illinois Investment Policy Board’s judgment: (1) reviewing and relying on publicly available information; (2) contacting asset managers contracted by the retirement systems that invest in Ford Motor Company; and (3) contacting other institutional investors that have divested from or engaged with Ford Motor Company.

Generally, each retirement system must sell, redeem, divest, or withdraw all direct holdings of restricted companies from its assets under management in an orderly and fiduciarily responsible manner within 12 months after the company’s most recent appearance on the list of restricted companies, and the retirement system cannot acquire securities of the restricted companies. These provisions do not apply to the retirement system’s indirect holdings or private market funds. For those investments, the Illinois Investment Policy Board must submit letters to the managers requesting that they consider removing the companies from the fund or create a similar actively managed fund having indirect holdings devoid of the companies. If the manager creates a similar fund, the retirement system must replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. A retirement system may cease divesting from companies if clear and convincing evidence shows that the value of investments in such companies becomes equal to or less than 0.5% of the market value of all assets under management by the retirement system, upon providing a written notice to the Illinois Investment Policy Board in advance of the cessation of the divestment.

HB 199 takes effect in accordance with the Effective Date of Laws Act.

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HB 0280
- No Investments in Companies that Contract to Build Border Wall
Sponsor(s): Representative Will Guzzardi

HB 280 amends the General Provisions Article of the Illinois Pension Code to prohibit the state-funded retirement systems from investing in companies that contract to build a border wall. The term “contract to build a border wall” means entering into a contract with the federal government for construction pursuant to Section 4 of Executive Order 13767 of the President of the United States.

Specifically, HB 280 requires the Illinois Investment Policy Board to 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 within six months after the effective date of the legislation. These efforts must include the following, as appropriate in the Illinois Investment Policy Board’s judgment: (1) reviewing and relying on publicly available information regarding companies that contract to build a border wall, including information provided by nonprofit organizations, research firms, and government entities; (2) contacting asset managers contracted by the retirement systems that invest in companies that contract to build a border wall; (3) contacting other institutional investors that have divested from or engaged with companies that contract to build a border wall; and (4) retaining an independent research firm to identify companies that contract to build a border wall.

Generally, each retirement system must sell, redeem, divest, or withdraw all direct holdings of restricted companies from its assets under management in an orderly and fiduciarily responsible manner within 12 months after the company’s most recent appearance on the list of restricted companies, and the retirement system cannot acquire securities of the restricted companies. These provisions do not apply to the retirement system’s indirect holdings or private market funds. For those investments, the Illinois Investment Policy Board must submit letters to the managers requesting that they consider removing the companies from the fund or create a similar actively managed fund having indirect holdings devoid of the companies. If the manager creates a similar fund, the retirement system must replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. A retirement system may cease divesting from companies if clear and convincing evidence shows that the value of investments in such companies becomes equal to or less than 0.5% of the market value of all assets under management by the retirement system, upon providing a written notice to the Illinois Investment Policy Board in advance of the cessation of the divestment.

HB 280 takes effect immediately upon becoming law.

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HB 0329
- University Student Athlete Employees
Sponsor(s): Representative Thaddeus Jones

HB 329 amends the University of Illinois Act, the Southern Illinois University Management Act, the Chicago State University Law, the Eastern Illinois University Law, the Governors State University Law, the Illinois State University Law, the Northeastern Illinois University Law, the Northern Illinois University Law and the Western Illinois University Law.

HB 329 requires each university to classify a student athlete of any of the top three financially profitable intercollegiate athletic programs at the university as an employee of the university. The university must pay the student athlete a minimum of $25,000 per academic year, but the work hours and work schedule of the student athlete are at the discretion of the university. Additionally, HB 329 allows the university to classify a student athlete of any of the other intercollegiate athletic programs of the university as an employee of the university, and allows the pay, work hours, and work schedule of the student athlete to be determined by the university.

Section 15-107 of the Illinois Pension Code defines an employee for purposes of participation in SURS. Generally, Section 15-107 requires employment to be “permanent and continuous” in order for an employee to participate in SURS. Public Acts 99-830 and 99-897 (effective January 1, 2017) prospectively gave the SURS Board of Trustees the ability to determine whether a person is an employee covered under SURS. SURS is currently developing administrative rules to assist in determining whether a person is an employee eligible to participate in SURS.

HB 329 takes effect on July 1, 2019.

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HB 0350
- Repeal 3% Rule and Re-Enact 6% Rule
Sponsor(s): Representative Kathleen Willis

HB 350 amends the State Universities Retirement System and Teachers’ Retirement System Articles of the Illinois Pension Code to repeal the 3% rule and re-enact the 6% rule.

Specifically, HB 350 repeals the requirement that employers pay the present value of the resulting increase in benefits attributable to the portion of any salary increases in excess of 3% during the participant’s final rate of earnings period. Instead, HB 350 requires employers to pay the present value of the resulting increase in benefits attributable to the portion of any salary increases in excess of 6% during the participant’s final rate of earnings period. (The 3% rule became effective for academic years on or after July 1, 2018, with the exception of salary increases under contracts and collective bargaining agreements entered into, amended, or renewed before June 4, 2018.)

For members who first became members of SURS (or a reciprocal retirement system) before January 1, 2011 (Tier I members), the final rate of earnings is the four consecutive academic years of employment in which earnings are the highest (or the final 48 months of employment for certain employees). For members who first become members of SURS on or after January 1, 2011 (Tier II members), the final rate of earnings is the eight consecutive academic years of employment out of the last 10 academic years of employment in which earnings are the highest (or the 96 consecutive months of employment out of the last 120 months of employment in which earnings are the highest for certain employees).

HB 350 is identical to SB 60 of the 101st General Assembly.

HB 350 takes effect immediately upon becoming law.

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HB 0902
- Cannabis Legalization Equity Act
Sponsor(s): Representative Carol Ammons

HB 902 creates the Cannabis Legalization Equity Act to legalize the use of cannabis for individuals aged 21 or older and provide for its taxation in a manner similar to alcohol.

As it relates to SURS, HB 902 requires proceeds from the excise tax imposed on the sale or transfer of cannabis to be transferred from the Cannabis Excise Tax Fund to the state-funded retirement systems every three months as follows: (1) 2.5% to the State Employees’ Retirement System; (2) 2.5% to the State Universities Retirement System; and (3) 2.5% to the Teachers’ Retirement System.

HB 902 takes effect immediately upon becoming law.

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HB 1576
- Downstate Police and Firefighter Pension Funds Consolidation
Sponsor(s): Representative Ryan Spain

HB 1576 requires certain downstate policemen’s pension funds and certain downstate firefighters’ pension funds to transfer their investment assets and authority to the Downstate Police Pension Investment Board and the Downstate Firefighter Pension Investment Board, respectively.

As it relates to SURS, HB 1576 increases the amount of the annual compliance fee paid by each pension fund to the Illinois Department of Insurance from $8,000 to $16,000 (except for Downstate Policemen’s Pension Funds and Downstate Firefighters’ Pension Funds, whose annual compliance fee increases from the lesser of: (1) 2 basis points to 4 basis points of total assets under management or (2) $8,000 to $16,000).

HB 1576 also establishes that certain penalties for non-compliance with the Illinois Pension Code apply to governmental units and pension funds (currently, governmental units) that are subject to any law establishing a pension fund or retirement system for the benefit of employees of the governmental unit.

HB 1576 takes effect immediately upon becoming law.

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HB 1605
- Climate Change Risk Minimization Policy
Sponsor(s): Representative Camille Y. Lilly

HB 1605 amends the General Provisions Article of the Illinois Pension Code to require every pension fund (except for downstate police and firefighters’ pension funds) to develop a climate change risk minimization policy by December 31, 2020.

HB 1605 requires the climate change risk minimization policy to consider the financial risk to the investments held by the pension fund in the event of different levels of climate change, as defined by the United Nations Framework Convention on Climate Change. The initial development of the policy must use the National Association of Insurance Commissioners’ Insurer Climate Risk Disclosure Survey as a model. The policy must consider the scope of the financial risk and the financial impact of climate-related events, including, but not limited to, severe drought, coastal flooding, and more intense hurricanes, on the holdings of the pension fund. The policy must explain what sources of data, which must include, but not be limited to, insurance company projections, the United Nations Framework Convention on Climate Change, and the United States Environmental Protection Agency, were used in making long-term projections on the climate and the potential long-term financial impact to the holdings of the pension fund from increased climate change.

HB 1605 establishes that, to the extent the pension fund determines, based on insurance company projections and other official sources of data, that increased climate change is a significant financial risk to the long-term value of the pension fund, the pension fund may determine a policy for all corporate equities held by the pension fund on voting for shareholder resolutions and directors to advance corporate policies that minimize the long-term risk to the pension fund’s assets from increased climate change, including, but not limited to, voting for shareholder resolutions that commit companies to internal policies that reduce the company’s carbon emissions.

HB 1605 requires the climate change risk minimization policy to be updated annually and published on the pension fund’s website. Previous versions of the policy must be kept on the pension fund’s website for a period of five years.

HB 1605 takes effect immediately upon becoming law.

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HB 1625
- Voluntary Tier III Plan + Opt-Out + No Credit for Unused Vacation/Sick Leave
Sponsor(s): Representative Allen Skillicorn

HB 1625 amends multiple articles of the Illinois Pension Code to create a voluntary Tier III plan for Tier I and Tier II members under the General Assembly Retirement System, State Employees’ Retirement System, State Universities Retirement System, Teachers’ Retirement System, and Judges’ Retirement System.

HB 1625 requires SURS to prepare and implement a Tier III plan by July 1, 2020. The Tier III plan must be a plan that aggregates state and employee contributions in individual participant accounts that are used for payouts after retirement. Employee contributions to the Tier III plan must be 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 SURS Board of Trustees. State contributions to the Tier III plan must be at a uniform rate, expressed as a percentage of earnings and adjusted by the state each year, no higher than 7.6 percent of earnings and no lower than 3 percent of earnings. The Tier III plan requires five years of participation before vesting in state contributions. If the participant fails to vest, then state contributions, and the earnings thereon, are forfeited. If the Tier III plan provides for participants to be eligible for defined disability benefits, then SURS must reduce employee contributions by an amount to cover the cost of offering those benefits. The Tier III plan must provide a variety of options for investments, which must include investments handled by SURS, as well as private sector investment options, and it must offer a variety of payout options to participants who are no longer active in SURS and their survivors. To the extent authorized under federal law and as authorized by SURS, the Tier III plan must allow former participants to transfer or roll over employee and vested state contributions, and the earnings thereon, from the Tier III plan into other qualified retirement plans. SURS must reduce employee contributions by an amount to cover the cost of offering benefits and any applicable administrative fees.

HB 1625 allows active Tier I and Tier II participants of SURS to elect to participate in the Tier III plan for future service. The election to stop accruing benefits in the defined benefit plan and begin accruing benefits in the Tier III plan for future service must be made in writing to SURS. An active Tier I or Tier II participant who makes this election is prohibited from purchasing service credit on or after the date of the election and cannot receive interest accruals to his or her money purchase benefit on or after the date of the election. The election to participate in the Tier III plan for future service is voluntary and irrevocable. Service credit under the Tier III plan may be used for determining retirement eligibility under the defined benefit plan.

HB 1625 also allows a Tier I or Tier II participant who elects to participate in the Tier III plan to irrevocably elect to terminate all participation in the defined benefit plan. Upon such election, SURS must transfer an amount to the member’s individual account equal to the amount of contribution refund that the member would be eligible to receive if he or she terminated employment on that date and elected a refund of contributions, including interest at the effective rate for the respective years. The transfer must be made as a tax-free transfer in accordance with Internal Revenue Service guidelines for purposes of funding the amount credited to the member’s individual account.

HB 1625 prohibits an individual from participating in the Tier III plan until it has attained qualified plan status and received all necessary approvals from the U.S. Internal Revenue Service. HB 1625 requires SURS to report on its progress in implementing the Tier III plan, including available details of the Tier III plan and its plans for informing eligible Tier I and Tier II participants about the Tier III plan, to the governor and the General Assembly by January 15, 2020.

Additionally, HB 1625 establishes that, beginning on the effective date of the legislation, a person is not required to participate in SURS. HB 1625 allows an active employee to terminate his or her participation in SURS (including active participation in the Tier III plan, if applicable) by notifying SURS in writing. An active employee who terminates participation in SURS will be entitled to a refund of his or her contributions (except for any contributions made to the Self-Managed Plan or the Tier III plan), minus any benefits received prior to termination of participation.

Finally, HB 1625 prohibits payments for unused vacation and sick leave from counting towards pensionable earnings for individuals who first begin participation in SURS on or after the effective date of the legislation. HB 1625 further prohibits unused sick leave from counting toward service credit for individuals who first begin participation in SURS on or after the effective date of the legislation.

HB 1625 takes effect immediately upon becoming law.

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HB 2029
- Vested Inactive Buyout – Health Insurance Preservation
Sponsor(s): Representative Robert Martwick

HB 2029 amends the State Employees Group Insurance Act of 1971 to ensure that members who take the Vested Inactive Buyout under the State Employees’ Retirement System (SERS), State Universities Retirement System (SURS), and Teachers’ Retirement System (TRS) preserve any applicable retiree and survivor health insurance benefits upon receipt of the buyout payment.

Public Act 100-0587 created two buyout options for eligible members of the three state-funded retirement systems (SERS, SURS, and TRS): (1) a buyout of pension benefits for vested, inactive members; and (2) a partial buyout of automatic annual increases for Tier I members at retirement. The Vested, Inactive Buyout (or VIB) is a lump-sum payment equal to 60 percent of the present value of the member’s pension benefits, in exchange for the member forfeiting all accrued rights and credits under the System. The Tier I AAI Buyout (or AAI Buyout) is a lump-sum payment equal to 70 percent of the difference between the present value of Tier I automatic annual increases and the present value of reduced and delayed automatic annual increases, in exchange for the member receiving reduced and delayed automatic annual increases on retirement and survivor annuities.

Public Act 100-0587 amended the definition of an “annuitant” under the State Employees Group Insurance Program to ensure that members who take the Vested Inactive Buyout will receive health insurance benefits upon meeting the age and service credit requirements for retirement, if they are eligible to participate in the State Employees Group Insurance Program. However, Public Act 100-0587 failed to amend the definitions of “survivor” under the State Employees Group Insurance Program, “community college benefit recipient” under the College Insurance Program, and “TRS benefit recipient” under the Teachers Retiree Health Insurance Program to clarify that survivors of members in the State Employees Group Insurance Program, as well as members and survivors who are eligible to participate in the College Insurance Program and the Teachers Retiree Health Insurance Program, will receive health insurance benefits after the member meets the age and service credit requirements for retirement.

HB 2029 amends the definitions of “survivor” under the State Employees Group Insurance Program, “community college benefit recipient” under the College Insurance Program, and “TRS benefit recipient” under the Teachers Retiree Health Insurance Program to ensure that all members who elect the Vested Inactive Buyout, as well as their eligible survivors, will receive any applicable health insurance benefits upon the member meeting the age and service credit requirements for retirement.

HB 2029 takes effect immediately upon becoming law.

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HB 2054
- Hydraulic Fracturing Tax Revenues Fund Pensions
Sponsor(s): Representative Charles Meier

HB 2054 amends the Illinois Hydraulic Fracturing Tax Act to require all moneys received by the Illinois Department of Revenue under the Act to be used only for the payment of pension obligations of the state of Illinois.

HB 2054 takes effect immediately upon becoming law.

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HB 2101
- Racial Bias, Discrimination, and Harassment Omnibus
Sponsor(s): Representative Nicholas K. Smith

HB 2101amends the State Officials and Employees Ethics Act. It establishes that all persons have a right to work in an environment free from racial discrimination and harassment. All persons subject to the Act are prohibited from racially discriminating against or harassing any person, regardless of any employment relationship or lack thereof. Any person who violates the prohibition on racial discrimination and harassment is subject to a fine of up to $5,000 per offense and is subject to discipline or discharge by the appropriate ultimate jurisdictional authority. Each violation is a separate offense.

HB 2101 requires each officer, member, and employee to complete, at least annually, beginning in 2020, a racial bias, discrimination, and harassment training program. A person who fills a vacancy in an elective or appointed position must complete his or her initial racial bias, discrimination, and harassment training program within 30 days after commencement of his or her office or employment. The training must include, at a minimum, the following: (1) the definitions and descriptions of racial bias, discrimination, and harassment utilizing examples; (2) details on how an individual can report an allegation of racial discrimination or harassment, including options for making a confidential report to a supervisor, ethics officer, inspector general, or the Department of Human Rights; (3) the definition and description of retaliation for reporting racial discrimination and harassment allegations utilizing examples, including the availability of whistleblower protections under the Act, the Whistleblower Act, and the Illinois Human Rights Act; and (4) the consequences of a violation of the prohibition on racial discrimination or harassment and the consequences for knowingly making a false report. Proof of completion of the racial bias, discrimination, and harassment training must be submitted to the applicable ethics officer. Each ultimate jurisdictional authority must submit to the applicable Ethics Commission, at least annually, or more frequently as required by that commission, a report that summarizes the racial bias, discrimination, and harassment training program that was completed during the previous year, and lays out the plan for the training program in the coming year. The report must include the names of individuals that failed to complete the required training program.

HB 2101 requires personnel policies to be updated within 30 days of the effective date of the legislation to include at a minimum: (1) a prohibition on racial discrimination and harassment; (2) details on how an individual can report an allegation of racial discrimination and harassment, including options for making a confidential report to a supervisor, ethics officer, inspector general, or the Department of Human Rights; (3) a prohibition on retaliation for reporting racial discrimination and harassment allegations, including the availability of whistleblower protections under the Act, the Whistleblower Act, and the Illinois Human Rights Act; and (4) the consequences of a violation of the prohibition on racial discrimination and harassment and the consequences for knowingly making a false report.

HB 2101 amends the Lobbyist Registration Act. It establishes that all persons have the right to work in an environment free from racial discrimination and harassment. All persons subject to the Act must refrain from racial discrimination and harassment of any person. Beginning January 1, 2020, each natural person required to register as a lobbyist must complete, at least annually, a racial bias, discrimination, and harassment training program provided by the secretary of state. A natural person registered under the Act must complete the training program no later than 30 days after registration or renewal. By January 1, 2020, each natural person and entity must have a written racial discrimination and harassment policy that must include, at a minimum: (1) a prohibition on racial discrimination and harassment; (2) details on how an individual can report an allegation of racial discrimination and harassment, including options for making a confidential report to a supervisor, ethics officer, inspector general; or the Department of Human Rights; (3) a prohibition on retaliation for reporting racial discrimination and harassment allegations, including the availability of whistleblower protections under the State Officials and Employee Ethics Act, the Whistleblower Act, and the Illinois Human Rights Act; and (4) the consequences of a violation of the prohibition on racial discrimination and harassment and the consequences for knowingly making a false report. A registrant must confirm that it has a racial discrimination and harassment policy, that such policy must be made available to any individual within two business days upon written request (including electronic requests), that any person may contact the authorized agent of the registrant to report allegations of racial discrimination and harassment, and that the registrant recognized that the inspector general has jurisdiction to review any allegations of racial discrimination and harassment alleged against the registrant or lobbyists hired by the registrant. Any natural person or lobbying entity who intentionally violates the prohibition on racial discrimination and harassment and these requirements is guilty of a business offense and subject to a fine of up to $5,000.

HB 2101 amends the Illinois Human Rights Act to create a hotline to report racial discrimination and harassment. It also makes other changes.

HB 2101 takes effect immediately upon becoming law.

HB 2101 is identical to HB 2547 of the 101st General Assembly.

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HB 2394
- New Revenues Fund State Pension Obligations
Sponsor(s): Representative Charles Meier

HB 2394 amends the State Budget Law of the Civil Administrative Code of Illinois to require the state to allocate any new and additional revenue sources to fund its pension obligations.

Specifically, HB 2394 requires the state of Illinois to allocate any new and additional revenue sources that exceed the fiscal year 2019 revenue forecasts reported by the Commission on Government Forecasting and Accountability in 2018 towards the payment of current and continuing pension obligations. New and additional revenue sources include, but are not limited to, any new tax, fee, or surcharge that is enacted by the General Assembly on or after the effective date of the legislation.

HB 2394 takes effect immediately upon becoming law.

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HB 2440
- SURS Technical Corrections Bill
Sponsor(s): Representative Robert Martwick

HB 2440 is an initiative of SURS that makes three technical changes under Article 15 of the Illinois Pension Code.

First, HB 2440 amends the definition of an “employee” under Section 15-107 to mirror a change to the definition of an “employer” under Section 15-106 by Public Act 100-0611 (which allowed certain legacy employees within the newly created Department of Innovation and Technology to continue to participate in SURS). In this manner, HB 2440 ensures consistency between the definitions of “employee” and “employer” under SURS.

Second, HB 2440 amends the definition of “basic compensation” under Section 15-110 to account for the creation of the optional, supplemental defined contribution plan (457 plan) in SURS under Public Act 100-0769. By treating employee contributions to the optional, supplemental defined contribution plan (457 plan) as part of basic compensation, HB 2440 maintains consistency with the treatment of employee contributions to the state’s Deferred Compensation Plan (457 plan) which are also treated as part of basic compensation. In this manner, HB 2440 ensures that employees are not penalized for making contributions to the optional, supplemental defined contribution plan in SURS.

Third, HB 2440 corrects a drafting error in Section 15-145. Under Section 15-131, an unmarried disabled child is considered a “survivor” for benefit purposes if his or her mental or physical disability began prior to the age of 18. The same section provides that an unmarried, non-disabled child is considered a “survivor” for benefit purposes if he or she is less than 18 years of age or is less than 22 years of age and a full-time student. Under current law, the language in Section 15-145 conflicts with the definition of a “survivor” under Section 15-131. By correcting the drafting error in Section 15-145, HB 2440 maintains consistency between the section and the definition of a “survivor” under SURS and reflects SURS’ longstanding interpretation and administration of survivor benefits under the Illinois Pension Code.

HB 2440 takes effect immediately upon becoming law.

HB 2440 is identical to SB 1265 of the 101st General Assembly.

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HB 2441
- State Serial Long Term Pension Obligation Bonds
Sponsor(s): Representative Robert Martwick

HB 2441 authorizes the issuance of $105.620 billion in State Serial Long Term Pension Obligation Bonds to bring the funded status of the state pension systems up to 90 percent of assets to liabilities. (Currently, SURS is approximately funded at 40 percent of assets to liabilities.)

Specifically, HB 2441 amends the General Obligation Bond Act to authorize the issuance of $105.620 billion in State Serial Long Term Pension Obligation Bonds. The term of the bonds cannot exceed 30 years. Proceeds from the State Serial Long Term Pension Obligation Bonds must be deposited directly into the State Serial Long Term Pension Obligation Bond Fund to make payments to the state pension systems on a pro-rated basis in an amount sufficient to bring the assets of each individual system up to 90 percent of liabilities.

HB 2441 requires the State Employees’ Retirement System, State Universities Retirement System and Teachers’ Retirement System to each establish a designated investment fund for 36 percent of the bond proceeds it receives from the issuance of State Serial Long Term Pension Obligation Bonds. Each designated investment fund must be used solely for the purpose of taking advantage of interest arbitrage from the bond proceeds and for making debt service contributions related to the State Serial Long Term Pension Obligation Bonds.

HB 2441 amends the State Pension Funds Continuing Appropriation Act to provide that if for any reason the aggregate appropriations made available are insufficient to meet the levels required for payment of principal and interest due on State Serial Long Term Pension Obligation Bonds, then there is a continuing appropriation of all amounts necessary for those purposes.

HB 2441 takes effect immediately upon becoming law.

HB 2441 is similar to SB 178 of the 101st General Assembly.

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HB 2452
- Tier I Social Security Benefit Buyout Option
Sponsor(s): Representative Robert Martwick

HB 2452 creates a voluntary buyout option whereby an eligible SURS member receives 50 percent of the difference between the present value of his or her Tier I retirement benefits and estimated Social Security benefits in exchange for a retirement annuity equal to estimated Social Security benefits with reduced and delayed automatic annual increases.

Specifically, HB 2452 creates a Tier I Social Security Benefit Buyout Option, which must be implemented upon a date established by the SURS Board of Trustees by board resolution as soon as possible after the effective date of the legislation. The board is authorized to adopt any rules, including emergency rules, to implement the Tier I Social Security Benefit Buyout Option.

The Tier I Social Security Benefit Buyout Option amount is a lump-sum payment equal to 50 percent of the difference between: (1) the present value of the Tier I member’s retirement annuity, including automatic annual increases to that retirement annuity; and (2) the amount of the old-age insurance payments under the federal Old-Age, Survivors, and Disability Insurance program administered by the Social Security Administration, including the value of reduced and delayed automatic annual increases, that the eligible member would have been entitled to, as determined by the SURS Board of Trustees, if he or she had been eligible for Social Security with respect to his or her position.

In exchange for the Tier I Social Security Benefit Buyout Option, the member must receive a retirement annuity that is equal to the amount of the insurance payment under the federal Old-Age, Survivors, and Disability Insurance program that he or she would have been entitled to, as determined by the SURS Board of Trustees, had he or she been participating in Social Security with respect to his or her employment under SURS. Furthermore, the retirement annuity is subject to automatic annual increases on the January 1 occurring on the later of age 67 or one year after retirement, calculated as the annual unadjusted percentage increase (but not less than zero) in the consumer price index-w (CPI-W). If the annual unadjusted percentage change in CPI-W is zero or there is a decrease, then the retirement annuity must not be increased. (Currently, the Tier I automatic annual increase on a retirement annuity is 3 percent compounded annually, beginning the January 1 after retirement.)

The Tier I Social Security Benefit Buyout Option must be deposited into a tax qualified retirement plan or account identified by the eligible SURS member at the time of the election. The election to receive the Tier I Social Security Benefit Buyout Option is irrevocable, and the buyout amount cannot be repaid to SURS.

To be eligible for the Tier I Social Security Benefit Buyout Option, the SURS member must: (1) be a Tier I member (i.e., first became a participant in SURS or a reciprocal retirement system before January 1, 2011); (2) have submitted an application for retirement annuity from SURS; (3) not have a Qualified Illinois Domestic Relations Order (QILDRO) in effect against him or her; (4) meet the age and service requirements for receiving a retirement annuity from SURS; (5) not have received a retirement annuity from SURS; (6) not have made the election to receive the Vested Inactive Buyout or the Tier 1 Automatic Annual Increase (AAI) Buyout under SURS; and (7) not be a participant in the Self-Managed Plan.

Upon receipt of the member’s irrevocable election to receive the Tier I Social Security Benefit Buyout Option, SURS must submit a voucher to the comptroller for payment of the buyout amount. The comptroller must transfer the amount of the voucher to SURS, and SURS must transfer the amount into the member’s eligible retirement plan or qualified account.

HB 2452 takes effect immediately upon becoming law.

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