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 2707
- Smoothing of Changes in Actuarial Assumptions
Sponsor(s): Representative Grant Wehrli

House Amendment #1 to HB 2707 requires any change in the actuarial assumptions that increases or decreases the required State contribution, including a change in assumed investment returns or mortality rates, that first applies in State Fiscal Year 2016 or thereafter, to be phased-in over a 3-year period beginning in the State Fiscal Year in which the actuarial change first applies or Fiscal Year 2018, whichever is later. The State contribution must be recertified for Fiscal Year 2018.

As introduced, HB 2707 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.

HB 2707 requires any change in the actuarial assumptions that increases or decreases the required State contribution, including a change in assumed investment returns or mortality rates, that first applies in State Fiscal Year 2016 or thereafter, to be phased-in over a 5-year period beginning in the State Fiscal Year in which the actuarial change first applies or Fiscal Year 2018, whichever is later.

HB 2707 also requires recertification of the State contribution for Fiscal Year 2018.

HB 2707 takes effect immediately upon becoming law.

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HB 2758
- Overtime Pay Not Included in Pensions
Sponsor(s): Representative Joe Sosnowski

HB 2758 amends the General Provisions article of the Illinois Pension Code.

HB 2758 prohibits pay to a participant in any pension fund or retirement system under the Illinois Pension Code for overtime performed on or after July 1, 2017, from being considered as pensionable salary, earnings or compensation.

HB 2758 takes effect in accordance with the effective date of laws act.

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HB 2759
- Pension Suspended During Reemployment
Sponsor(s): Representative Joe Sosnowski

HB 2759 amends the General Provisions article of the Illinois Pension Code.

HB 2759 provides that a retirement annuity must be suspended during employment for any person who first becomes a member or participant of a pension fund or retirement system on or after Jan. 1, 2018, is receiving a retirement annuity under that system or fund, and becomes a member or participant under any other system or fund based on full-time employment. Upon termination of employment, such person’s retirement annuity resumes and may be recalculated if applicable.

HB 2759 takes effect immediately upon becoming law.

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HB 2760
- Self-Managed Plan Transfers to In-Plan Roth Accounts
Sponsor(s): Representative Joe Sosnowski

HB 2760 amends the State Universities Retirement System article of the Illinois Pension Code.

HB 2760 requires all employees under the Self-Managed Plan to be provided options to establish, contribute to, and transfer any guaranteed or vested portion of their accounts, on any day, into qualified in-plan Roth accounts, without distribution.

HB 2760 takes effect immediately upon becoming law.

Status:

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HB 2902
- Pension Buyout Act + SURS Tier III
Sponsor(s): Representative Mike Fortner

HB 2902 creates the Pension Buyout Act and amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code.

Pension Buyout Option

HB 2902 authorizes the Illinois Department of Central Management Services to enter into contracts with approved vendors to provide lump-sum payments to eligible retirees pursuant to a pension buyout option.  A pension buyout option is a plan that authorizes an eligible retiree to relinquish all service credit, rights and benefits under SURS in exchange for a lump-sum payment equal to the present value of his or her retirement annuity.  An eligible retiree may elect to receive a pension buyout payment at any time after he or she has elected to retire and has terminated service.  An eligible retiree who receives a pension buyout payment will still receive any applicable retiree health insurance benefits.

An eligible retiree is a person who has elected to receive a retirement annuity, is eligible to receive a retirement annuity, has terminated service, is not subject to a QILDRO under SURS, is not a participant in the Self-Managed Plan or the Tier III plan, and has received a minimum amount of certified financial planning services, at no cost to the eligible retiree.

Tier III Plan

HB 2902 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  Active Tier I and Tier II members may voluntarily, irrevocably elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III plan.  A participant in the Tier III plan pays employee contributions 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. An employer is not required to make employer contributions to the Tier III plan, but if the employer elects to contribute, then the rate of the employer contributions must be equal to the rate of the individual employee’s contributions.  The Tier III plan will require five years of participation to vest in the employer contributions.  Failure to vest will result in the forfeiture of the employer contributions and the earnings thereon.  The Tier III plan must provide a variety of options for investments and a variety of options for payouts to participants who are no longer active in SURS and their survivors.  Tier III participants will still receive any applicable retiree health insurance benefits.

HB 2902 allows a Tier I or Tier II member who elects to participate in the Tier III plan to irrevocably elect to terminate all participation in the defined benefit plan.  Upon that election, SURS must transfer an amount equal to the contribution refund, including regular interest for the respective years, into the member’s individual account.  

HB 2902 takes effect immediately upon becoming law.

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HB 2903
- Pension Buyout Act + SURS Tier III
Sponsor(s): Representative Mike Fortner

HB 2903 creates the Pension Buyout Act and amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code.

Pension Buyout Option

HB 2903 authorizes the Illinois Department of Central Management Services to enter into contracts with approved vendors to provide lump-sum payments to eligible persons pursuant to a pension buyout option.  A pension buyout option is a plan that authorizes an eligible person to relinquish all service credit, rights and benefits under SURS in exchange for a lump-sum payment equal to the present value of his or her retirement annuity.  An eligible person may elect to receive a pension buyout payment at any time after he or she has terminated service.  An eligible person who receives a pension buyout payment will still receive any applicable retiree health insurance benefits.

An eligible person is a person who has accrued the service credit necessary to receive a retirement annuity; has not received a retirement annuity; has terminated service; is not subject to a QILDRO under SURS; is not a participant in the Self-Managed Plan or the Tier III Plan; and has received a minimum amount of certified financial planning services provided by the approved vendor, at no cost to the eligible person.

Tier III Plan

HB 2903 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  Active Tier I and Tier II members may voluntarily, irrevocably elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III plan.  A participant in the Tier III plan pays employee contributions 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.  An employer is not required to make employer contributions to the Tier III plan, but if the employer elects to contribute, then the rate of the employer contributions must be equal to the rate of the individual employee’s contributions.  The Tier III plan will require five years of participation to vest in the employer contributions.  Failure to vest will result in the forfeiture of the employer contributions and the earnings thereon.  The Tier III plan must provide a variety of options for investments and a variety of options for payouts to participants who are no longer active in SURS and their survivors.  Tier III participants will still receive any applicable retiree health insurance benefits.

HB 2903 allows a Tier I or Tier II member who elects to participate in the Tier III plan to irrevocably elect to terminate all participation in the defined benefit plan.  Upon that election, SURS must transfer an amount equal to the contribution refund, including regular interest for the respective years, into the member’s individual account.  

As it relates to SURS, HB 2903 is identical to House Bill 2902 with the following difference: HB 2903 allows eligible persons (instead of eligible retirees) to elect the pension buyout option.

HB 2903 takes effect immediately upon becoming law.

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HB 3055
- Tax on Retirement Income
Sponsor(s): Representative David Harris

HB 3055 amends the Illinois Income Tax Act.

HB 3055 taxes retirement income in excess of $75,000 if the taxpayer is younger than 65 years of age during the taxable year and retirement income in excess of $100,000 if the taxpayer is 65 years of age or older during the taxable year (including the taxable year in which the taxpayer turns 65 years of age).

HB 3055 is similar to House Bill 3140 of the 100th General Assembly.

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HB 3061
- No Investments in Companies that Build a Border Wall
Sponsor(s): Representative Will Guzzardi

HB 3061 amends the General Provisions article of the Illinois Pension Code.

HB 3061 prohibits the state-funded retirement systems from investing in companies that contract to build a border wall. “Contracting to build a border wall” is defined as 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. By July 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.

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

HB 3061 takes effect immediately upon becoming law.

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HB 3069
- Alternative Retirement Plan - Local Control of Benefits
Sponsor(s): Representative Thomas Morrison

HB 3069 amends the Downstate Policemen’s Pension Fund, Downstate Firefighters’ Pension Fund, Chicago Policemen’s Pension Fund, Chicago Firefighters’ Pension Fund, Illinois Municipal Retirement Fund, Chicago Municipal Pension Fund, Cook County Pension Fund, Cook County Forest Preserve District Pension Fund, Chicago Laborers’ Pension Fund, Chicago Park District Pension Fund, Metropolitan Water Reclamation District Pension Fund, State Universities Retirement System, Teachers Retirement System, and Chicago Teachers Retirement System articles of the Illinois Pension Code.

HB 3069 authorizes the board of trustees of a community college district that is an employer covered under SURS to provide an alternative retirement plan, either in addition to or in lieu of the existing retirement plans under SURS, for its eligible new employees. The alternative retirement plan applies only to persons who have not participated in the existing plans under SURS. Participants in an alternative retirement plan are deemed to be participants in SURS.

The alternative retirement plan may include a defined benefit component, defined contribution component, or both, and may include disability or survivor benefits and any other benefits that are permitted under federal law. The alternative retirement plan is not required to provide any minimum level of benefits and does not need to provide any benefits at all, other than mandatory Social Security coverage if applicable. Service credit under the alternative retirement plan cannot be transferred to any other pension fund or retirement system and cannot be used under the Retirement Systems Reciprocal Act. The alternative retirement plan does not need to comply with any mandatory provisions of the existing retirement plans.

Providing an alternative retirement plan does not release the community college district from the obligation of continuing to participate in SURS with regard to participants in the existing retirement plans. The alternative retirement plan provided by the community college district must be funded with contributions from that community college district and its employees who participate in the alternate retirement plan. In no event may the community college district in any way diminish or impair the rights or benefits of participants in the existing retirement plan.

HB 3069 is identical to House Bill 669 of the 100th General Assembly, as introduced.

HB 3069 takes effect in accordance with the Effective Date of Laws Act.

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HB 3140
- Tax on Retirement Income
Sponsor(s): Representative David Harris

HB 3140 amends the Illinois Income Tax Act.

HB 3140 taxes retirement income in excess of $80,000 if the taxpayer is younger than 65 years of age during the taxable year and retirement income in excess of $100,000 if the taxpayer is 65 years of age or older during the taxable year (including the taxable year in which the taxpayer turns 65 years of age).

HB 3140 is similar to House Bill 3055 of the 100th General Assembly.

HB 3140 takes effect immediately upon becoming law.

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HB 3175
- Employers Pay Present Value of Salary Increases above CPI-U
Sponsor(s): Representative Nick Sauer

HB 3175 amends the State Universities Retirement System and Teachers Retirement System Articles of the Illinois Pension Code.

HB 3175 provides that, for academic years beginning on or after July 1, 2017, 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 exempt from this requirement.

Under current law, 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 for any year during the final rate of earnings period, then the participant’s employer must pay the present value of the resulting increase in benefits to SURS.

HB 3175 is identical to House Bill 671 of the 100th General Assembly, as introduced.

HB 3175 takes effect immediately upon becoming law.

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HB 3258
- Retiree Health Insurance Benefits Without Annuity
Sponsor(s): Representative Sara Wojcicki Jimenez

HB 3258 amends the State Employees Group Insurance Act of 1971 to allow members of the Portable Defined Benefit Plan and the Self-Managed Plan who take lump-sum distributions of their retirement benefits to receive retiree health insurance benefits. Under current law, members of the Portable Defined Benefit Plan and the Self-Managed Plan must annuitize their retirement benefits to receive retiree health insurance benefits.

HB 3258 takes effect immediately upon becoming law.

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HB 3342
- FY 2019 Budget Implementation
Sponsor(s): Representative Gregory Harris and Senator Heather A. Steans

HB 3342 creates the FY2019 Budget Implementation Act.  It authorizes the use of money in the State Pensions Fund as part of the annual required state contribution to SURS for FY 2019. It also amends the State Employees’ Retirement System, State Universities Retirement System and Teachers’ Retirement System articles of the Illinois Pension Code to provide two types of accelerated pension benefit payment options under each System: (1) an accelerated pension benefit payment in lieu of a pension benefit for vested inactives and (2) an accelerated pension benefit payment for Tier I members who accept a reduced and delayed automatic annual increase in retirement annuities and survivors annuities. The SURS Board of Trustees must establish an implementation date for each accelerated pension benefit payment option by board resolution.  The board must endeavor to make the options available as soon as possible after the effective date of the legislation.  The SURS Board of Trustees must adopt any rules, including emergency rules, necessary to implement the accelerated pension benefit payments.  

Accelerated Pension Benefit Payment In Lieu Of Pension Benefit for Vested Inactives

Beginning on the implementation date established by the SURS Board of Trustees, SURS must offer each eligible person the opportunity to irrevocably elect to receive an amount determined by SURS to be equal to 60 percent of the present value of his or her pension benefits in lieu of receiving any pension benefit from SURS. The term “pension benefit” means the benefits under SURS, or the General Provisions Article of the Illinois Pension Code as it relates to the benefits under SURS, including any anticipated annual increases, that an eligible person is entitled to upon attainment of the applicable retirement age.  It also includes any applicable survivors benefits, disability benefits or disability retirement annuity benefits.

SURS must calculate, using actuarial tables and other assumptions adopted by the SURS Board of Trustees, the present value of pension benefits for each eligible person upon his or her request in writing to the System.  SURS cannot perform more than one calculation per eligible member in a state fiscal year.  The offer must specify the dollar amount that the eligible person will receive if he or she so elects and must expire when a subsequent offer is made to the eligible person.  SURS must make a good faith effort to contact every eligible person to notify him or her of the election and the amount of the accelerated pension benefit payment.

To be eligible for the accelerated pension benefit payment, the person must: (1) have terminated service; (2) have accrued sufficient service credit necessary for retirement (i.e., five years for Tier I members and 10 years for Tier II members); (3) have not received a retirement annuity under SURS; (4) have not made the election as a Tier I member to accept a reduced and delayed automatic annual increase in retirement in exchange for an accelerated pension benefit payment; and (5) not be a participant in the SURS Self-Managed Plan.  The accelerated pension benefit payment must be deposited into a tax qualified retirement plan or account identified by the eligible person at the time of the election. 

An eligible person may irrevocably elect to receive an accelerated pension benefit payment in lieu of any pension benefit from SURS between the implementation date established by the SURS Board of Trustees and June 30, 2021.  A person who elects to receive an accelerated pension benefit payment cannot elect to proceed under the Retirement Systems Reciprocal Act with respect to service under SURS.  Upon payment of an accelerated pension benefit payment from SURS, the person forfeits all accrued rights and credits in SURS and no other benefit can be paid from SURS based on those forfeited rights and credits.  However, an eligible person who receives an accelerated pension benefit payment may still be eligible for any applicable retiree health insurance benefits. 

If a person who has received an accelerated pension benefit payment from SURS returns to participation under SURS, any benefits under SURS earned as a result of that return to participation must be based solely on his or her credits and creditable service arising from the return to participation.  Upon return to participation, the person must be considered a new employee subject to all of the qualifying conditions for participation and eligibility for benefits applicable to new employees.  The accelerated pension benefit payment cannot be repaid to SURS, and the forfeited rights and credits cannot under any circumstances be reinstated.

Accelerated Pension Benefit Payment for Tier I Members Who Accept Reduced and Delayed Automatic Annual Increases in Retirement Annuities and Survivor Annuities

Beginning on the implementation date established by the SURS Board of Trustees and until June 30, 2021, SURS must implement an accelerated pension benefit payment option.  SURS must calculate, using actuarial tables and other assumptions adopted by the board, an accelerated pension benefit payment amount for an eligible person upon his or her request in writing to SURS and must offer that eligible person the opportunity to irrevocably elect to have his or her automatic annual increases in retirement annuity, as well as in any survivor annuity, reduced and delayed in exchange for the accelerated pension benefit payment.  SURS cannot perform more than one calculation per eligible person in a state fiscal year.  The election must be made before any retirement annuity is paid to the eligible person, and the eligible survivor, spouse, or contingent annuitant, as applicable, must consent to the election.

The accelerated pension benefit payment is a lump-sum payment equal to 70 percent of the difference of: (1) the present value of the Tier I automatic annual increases in the retirement annuity and survivor annuity; and (2) the present value of the reduced and delayed automatic annual increases in the retirement annuity and survivor annuity.  

The reduced and delayed automatic annual increase in retirement annuity is calculated at 1.5 percent of the originally granted retirement annuity and begins on the January 1 occurring on or after the later of age 67 or the first anniversary of the annuity start date.  (Currently, a Tier I retiree receives a compounding automatic annual increase in his or her retirement annuity equal to 3 percent of the annuity, beginning on the January 1 occurring after retirement, prorated for the first year.)  

The reduced and delayed automatic annual increase in survivor annuity is calculated at 1.5 percent of the survivor’s original annuity benefit payable and begins on the January 1 occurring on or after the date the annuity begins or the January 1 occurring after the first anniversary of the annuity benefit start date.  (Currently, a survivor of a Tier I retiree receives a compounding automatic annual increase in his or her annuity benefit equal to 3 percent of his or her annuity benefit, beginning on the January 1 occurring on or after the date the annuity benefit begins.)

To be eligible for the accelerated pension benefit, the person must: (1) be a Tier I member; (2) have submitted an application for a retirement annuity from SURS; (3) meet the age and service credit requirements necessary for retirement under SURS (i.e., be any age with 30 years of service credit, age 55 with eight years of service credit, age 62 with five years of service credit, or meet the special vesting for the Police/Fire formula); (4) have not received a retirement  annuity under SURS; (5) have not made the election to receive an accelerated pension benefit payment in lieu of any pension benefit from SURS; and (6) not be a participant in the SURS Self-Managed Plan.  The accelerated pension benefit payment must be deposited into a tax qualified retirement plan or account identified by the eligible person at the time of election. 

An eligible person may make the election to receive an accelerated pension benefit payment in exchange for a reduced and delayed automatic annual increase in retirement annuity and survivor annuity from SURS between the implementation date established by the SURS Board of Trustees and June 30, 2021.  If an annuitant who has received an accelerated pension benefit payment from SURS returns to participation under SURS then the calculation of any future automatic annual increase in retirement annuity must be calculated at the reduced and delayed rate.  The accelerated pension benefit payment cannot be repaid to SURS.

Funding and Payment of Accelerated Pension Benefit Payments

HB 3342 amends the General Obligation Bond Act to authorize the issuance of $1 billion in State Pension Obligation Acceleration Bonds for the purpose of making accelerated pension benefit payments under SERS, SURS and TRS.  The proceeds of the bonds, minus the amounts for bond sale expenses, must be deposited directly into the State Pension Obligation Acceleration Bond Fund, and the comptroller and treasurer must, as soon as practical, make accelerated pension benefit payments under SERS, SURS and TRS.  The State Pension Obligation Acceleration Bond Fund is created as an unappropriated fund outside of the state treasury that can only be used for the purpose of making accelerated pension benefit payments under SERS, SURS and TRS, or for the payment of principal and interest due on State Pension Obligation Acceleration Bonds.  There is a continuing appropriation of all amounts necessary for these purposes.

SURS must submit vouchers to the state comptroller for payment of accelerated pension benefit payments.  The state comptroller shall pay the amounts of the vouchers from the State Pension Obligation Acceleration Bond Fund to SURS, and SURS must deposit the amounts into the applicable tax qualified plans or accounts.

HB 3342 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 the payment of principal and interest due on State Pension Obligation Acceleration Bonds, there is a continuing appropriation of all amounts necessary for those purposes.

6% Rule Changed to 3% (Except for Certain Contracts and Collective Bargaining Agreements)

Effective for academic years beginning on or after July 1, 2018, and for earnings paid to a participant under a contract or collective bargaining agreement entered into, amended, or renewed on or after the effective date of the legislation, the legislation reduces the 6% rule to 3%, requiring the employer to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 3% during the participant’s final rate of earnings period.  

However, for earnings paid to a participant under a contract or collective bargaining agreement entered into, amended, or renewed before the effective date of the legislation, the employer will continue to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% during the participant’s final rate of earnings period. 

Ends the 6% Rule and 3% Rule for Tier II Hybrid Plan Members and Tier II Defined Benefit Members Who First Participate in SURS after Implementation of the Optional Hybrid Plan

HB 3342 provides that the 6% rule and the 3% rule do not apply to Tier II hybrid plan members and Tier II defined benefit members who first participate under SURS on or after the implementation date of the Optional Hybrid Plan.  

FY 2019 Recertification

HB 3342 requires the SURS Board of Trustees, between June 15, 2019, and June 30, 2019, to recalculate and recertify the FY 2019 state contribution, taking into account the changes made by the legislation.  The recertification must be based on the actuarial assumptions used to certify the original FY 2019 state contribution.  The last monthly voucher for FY 2019 must be paid by the comptroller after the recertification is submitted to the governor, comptroller and General Assembly.

Effective Date

HB 3342 takes effect immediately upon becoming law. 

Became Public Act 100-0587 effective June 4, 2018

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HB 3419
- No Investments in Expatriated Entities
Sponsor(s): Representative Jaime M. Andrade, Jr. and Senator Michael E. Hastings

HB 3419 prohibits the state-funded retirement systems from investing in 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.

HB 3419 takes effect in accordance with the Effective Date of Laws Act.

Became Public Act 100-0551 effective January 1, 2018.

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HB 3475
- 30-Year Rolling Discount Rate
Sponsor(s): Representative Peter Breen

HB 3475 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.

HB 3745 requires the discount rate to be the actual 30-year rolling rate of return experienced by the System, beginning in fiscal year 2019.

HB 3475 takes effect immediately upon becoming law.

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