Illinois General Assembly - Full Text of HB0421
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Full Text of HB0421  100th General Assembly

HB0421 100TH GENERAL ASSEMBLY

  
  

 


 
100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB0421

 

Introduced , by Rep. Grant Wehrli

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/2-124  from Ch. 108 1/2, par. 2-124
40 ILCS 5/2-167 new

    Amends the General Assembly Article of the Illinois Pension Code. Requires the General Assembly Retirement System to establish a self-directed retirement plan. Provides that on and after the effective date of the amendatory Act, an active participant's participation in the System shall be limited to participation in the self-directed retirement plan. Provides that an annuitant shall not receive an automatic increase in retirement annuity on or after the effective date of the amendatory Act unless, according to the most recent actuarial valuations, the total assets of the System are equal to or greater than 100% of the total actuarial liabilities of the System. Establishes a schedule for vesting in the self-directed retirement plan. Requires the Public Pension Division of the Department of Insurance to develop a schedule that, subject to certain requirements, increases the retirement age of active participants who are ineligible to retire as of the effective date of the amendatory Act. Provides that the Division's schedule shall also provide for the adjustment of retirement ages using a matrix that (i) takes into account the current statutory retirement age for various classes of persons and service credit accrued by those persons and (ii) proportionally discounts the increase in statutory retirement ages based on proximity to the currently established retirement age. Provides a new funding formula for State contributions, with a 100% funding goal through 2045 (determined using the projected unit credit actuarial cost method) and a 100% funding goal thereafter.


LRB100 04236 RPS 14242 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0421LRB100 04236 RPS 14242 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 2-124 and by adding Section 2-167 as follows:
 
6    (40 ILCS 5/2-124)  (from Ch. 108 1/2, par. 2-124)
7    (Text of Section WITHOUT the changes made by P.A. 98-599,
8which has been held unconstitutional)
9    Sec. 2-124. Contributions by State.
10    (a) The State shall make contributions to the System by
11appropriations of amounts which, together with the
12contributions of participants, interest earned on investments,
13and other income will meet the cost of maintaining and
14administering the System on a 100% 90% funded basis in
15accordance with actuarial recommendations.
16    (b) The Board shall determine the amount of State
17contributions required for each fiscal year on the basis of the
18actuarial tables and other assumptions adopted by the Board and
19the prescribed rate of interest, using the formula in
20subsection (c).
21    (c) For State fiscal years 2018 through 2045, the minimum
22contribution to the System to be made by the State for each
23fiscal year shall be an amount determined by the System to be

 

 

HB0421- 2 -LRB100 04236 RPS 14242 b

1sufficient to bring the total assets of the System up to 100%
2of the total actuarial liabilities of the System by the end of
3State fiscal year 2045. In making these determinations, the
4required State contribution shall be calculated each year as a
5level dollar amount over the years remaining to and including
6fiscal year 2045 and shall be determined under the projected
7unit credit actuarial cost method.
8    For State fiscal years 2012 through 2017 2045, the minimum
9contribution to the System to be made by the State for each
10fiscal year shall be an amount determined by the System to be
11sufficient to bring the total assets of the System up to 90% of
12the total actuarial liabilities of the System by the end of
13State fiscal year 2045. In making these determinations, the
14required State contribution shall be calculated each year as a
15level percentage of payroll over the years remaining to and
16including fiscal year 2045 and shall be determined under the
17projected unit credit actuarial cost method.
18    For State fiscal years 1996 through 2005, the State
19contribution to the System, as a percentage of the applicable
20employee payroll, shall be increased in equal annual increments
21so that by State fiscal year 2011, the State is contributing at
22the rate required under this Section.
23    Notwithstanding any other provision of this Article, the
24total required State contribution for State fiscal year 2006 is
25$4,157,000.
26    Notwithstanding any other provision of this Article, the

 

 

HB0421- 3 -LRB100 04236 RPS 14242 b

1total required State contribution for State fiscal year 2007 is
2$5,220,300.
3    For each of State fiscal years 2008 through 2009, the State
4contribution to the System, as a percentage of the applicable
5employee payroll, shall be increased in equal annual increments
6from the required State contribution for State fiscal year
72007, so that by State fiscal year 2011, the State is
8contributing at the rate otherwise required under this Section.
9    Notwithstanding any other provision of this Article, the
10total required State contribution for State fiscal year 2010 is
11$10,454,000 and shall be made from the proceeds of bonds sold
12in fiscal year 2010 pursuant to Section 7.2 of the General
13Obligation Bond Act, less (i) the pro rata share of bond sale
14expenses determined by the System's share of total bond
15proceeds, (ii) any amounts received from the General Revenue
16Fund in fiscal year 2010, and (iii) any reduction in bond
17proceeds due to the issuance of discounted bonds, if
18applicable.
19    Notwithstanding any other provision of this Article, the
20total required State contribution for State fiscal year 2011 is
21the amount recertified by the System on or before April 1, 2011
22pursuant to Section 2-134 and shall be made from the proceeds
23of bonds sold in fiscal year 2011 pursuant to Section 7.2 of
24the General Obligation Bond Act, less (i) the pro rata share of
25bond sale expenses determined by the System's share of total
26bond proceeds, (ii) any amounts received from the General

 

 

HB0421- 4 -LRB100 04236 RPS 14242 b

1Revenue Fund in fiscal year 2011, and (iii) any reduction in
2bond proceeds due to the issuance of discounted bonds, if
3applicable.
4    Beginning in State fiscal year 2046, the minimum State
5contribution for each fiscal year shall be the amount needed to
6maintain the total assets of the System at 100% of the total
7actuarial liabilities of the System. Beginning in State fiscal
8year 2046, the minimum State contribution for each fiscal year
9shall be the amount needed to maintain the total assets of the
10System at 90% of the total actuarial liabilities of the System.
11    Amounts received by the System pursuant to Section 25 of
12the Budget Stabilization Act or Section 8.12 of the State
13Finance Act in any fiscal year do not reduce and do not
14constitute payment of any portion of the minimum State
15contribution required under this Article in that fiscal year.
16Such amounts shall not reduce, and shall not be included in the
17calculation of, the required State contributions under this
18Article in any future year until the System has reached a
19funding ratio of at least 90%. A reference in this Article to
20the "required State contribution" or any substantially similar
21term does not include or apply to any amounts payable to the
22System under Section 25 of the Budget Stabilization Act.
23    Notwithstanding any other provision of this Section, the
24required State contribution for State fiscal year 2005 and for
25fiscal year 2008 and each fiscal year thereafter, as calculated
26under this Section and certified under Section 2-134, shall not

 

 

HB0421- 5 -LRB100 04236 RPS 14242 b

1exceed an amount equal to (i) the amount of the required State
2contribution that would have been calculated under this Section
3for that fiscal year if the System had not received any
4payments under subsection (d) of Section 7.2 of the General
5Obligation Bond Act, minus (ii) the portion of the State's
6total debt service payments for that fiscal year on the bonds
7issued in fiscal year 2003 for the purposes of that Section
87.2, as determined and certified by the Comptroller, that is
9the same as the System's portion of the total moneys
10distributed under subsection (d) of Section 7.2 of the General
11Obligation Bond Act. In determining this maximum for State
12fiscal years 2008 through 2010, however, the amount referred to
13in item (i) shall be increased, as a percentage of the
14applicable employee payroll, in equal increments calculated
15from the sum of the required State contribution for State
16fiscal year 2007 plus the applicable portion of the State's
17total debt service payments for fiscal year 2007 on the bonds
18issued in fiscal year 2003 for the purposes of Section 7.2 of
19the General Obligation Bond Act, so that, by State fiscal year
202011, the State is contributing at the rate otherwise required
21under this Section.
22    (d) For purposes of determining the required State
23contribution to the System, the value of the System's assets
24shall be equal to the actuarial value of the System's assets,
25which shall be calculated as follows:
26    As of June 30, 2008, the actuarial value of the System's

 

 

HB0421- 6 -LRB100 04236 RPS 14242 b

1assets shall be equal to the market value of the assets as of
2that date. In determining the actuarial value of the System's
3assets for fiscal years after June 30, 2008, any actuarial
4gains or losses from investment return incurred in a fiscal
5year shall be recognized in equal annual amounts over the
65-year period following that fiscal year.
7    (e) For purposes of determining the required State
8contribution to the system for a particular year, the actuarial
9value of assets shall be assumed to earn a rate of return equal
10to the system's actuarially assumed rate of return.
11(Source: P.A. 96-43, eff. 7-15-09; 96-1497, eff. 1-14-11;
1296-1511, eff. 1-27-11; 96-1554, eff. 3-18-11; 97-813, eff.
137-13-12.)
 
14    (40 ILCS 5/2-167 new)
15    Sec. 2-167. Self-directed retirement plan; end of service
16credit.
17    (a) For the purposes of this Section:
18        "Active participant" means a participant in the System
19    who does not receive an annuity from the System.
20        "Automatic increase in retirement annuity" means an
21    automatic increase in retirement annuity that is granted
22    under this Article.
23        "Employer" means the State.
24        "Pensionable salary" means the amount of salary,
25    compensation, or earnings used by the System to calculate

 

 

HB0421- 7 -LRB100 04236 RPS 14242 b

1    the amount of an individual's retirement annuity.
2    (b) On and after the effective date of this amendatory Act
3of the 100th General Assembly, an active participant's
4participation in the System shall be limited to participation
5in a self-directed retirement plan established under
6subsection (f) of this Section.
7    All service credit under the System (including service
8under any participating system if the participant elects to use
9the reciprocal provisions of Article 20) shall be considered
10for purposes of vesting in the benefits provided prior to the
11effective date of this Section, but only service credit earned
12and contributions made before that effective date shall be
13considered in determining the amount of those benefits. In lieu
14of receiving any such benefits, an active participant may elect
15to have an account balance established in his or her
16self-directed plan account in an amount equal to the amount of
17the contribution refund that the participant would be eligible
18to receive if he or she withdrew from service on the effective
19date of this Section and elected a refund of contributions,
20except that this hypothetical refund shall include interest at
21the effective rate for the respective years. The System shall
22make these transfers of assets to the self-directed plan as
23tax-free transfers in accordance with Internal Revenue Service
24guidelines.
25    (c) The pensionable salary of an active participant shall
26not exceed the pensionable salary of that participant as of the

 

 

HB0421- 8 -LRB100 04236 RPS 14242 b

1effective date of this amendatory Act of the 100th General
2Assembly.
3    (d) An annuitant shall not receive an automatic increase in
4retirement annuity on or after the effective date of this
5amendatory Act of the 100th General Assembly unless, according
6to the most recent actuarial valuations, the total assets of
7the System are equal to or greater than 100% of the total
8actuarial liabilities of the System.
9    (e) The retirement age of active participants who are
10ineligible to retire as of the effective date of this
11amendatory Act of the 100th General Assembly shall be increased
12according to a schedule developed, as soon as practicable after
13the effective date of this amendatory Act of the 100th General
14Assembly, by the Public Pension Division of the Department of
15Insurance. The schedule of retirement ages adopted by
16administrative rule of the Division shall, at a minimum, ensure
17(i) that persons who first become active participants on or
18after the effective date of this amendatory Act of the 100th
19General Assembly are not eligible to retire until reaching the
20Social Security Normal Retirement Age and (ii) that persons who
21are active participants but ineligible to retire as of the
22effective date of this amendatory Act of the 100th General
23Assembly remain ineligible to retire until reaching age 59. The
24Division's schedule shall also provide for the adjustment of
25retirement ages using a matrix (i) that takes into account the
26current statutory retirement age for various classes of persons

 

 

HB0421- 9 -LRB100 04236 RPS 14242 b

1and service credit accrued by those persons as of the effective
2date of this amendatory Act of the 100th General Assembly and
3(ii) that proportionally discounts the increase in statutory
4retirement age based on proximity to the currently established
5retirement age. The minimum retirement age established under
6this subsection (e) shall not apply to active participants with
7respect to participation in a self-directed retirement plan
8established under subsection (f) of this Section.
9    (f) As soon as practicable after the effective date of this
10amendatory Act of the 100th General Assembly, the System shall
11establish a self-directed retirement plan that allows
12individuals who are active participants and individuals who
13become active participants on or after the effective date of
14this amendatory Act of the 100th General Assembly the
15opportunity to accumulate assets for retirement through a
16combination of employee and employer contributions that may be
17invested in mutual funds, collective investment funds, or other
18investment products and used to purchase annuity contracts,
19either fixed or variable or a combination thereof. The plan
20must be qualified under the Internal Revenue Code of 1986.
21    At any time after withdrawal from service, a participant in
22the self-directed plan shall be entitled to a benefit that is
23based on the account values attributable to his or her
24participant contributions and the vested percentage of
25employer contributions, as well as any investment returns
26attributable to those contributions. A participant becomes

 

 

HB0421- 10 -LRB100 04236 RPS 14242 b

1vested in the employer's contributions credited to his or her
2account according to the following schedule:
3        (1) if the participant has completed less than 2 years
4    of service under the System (including service under any
5    participating system if the participant elects to use the
6    reciprocal provisions of Article 20), 0%;
7        (2) if the participant has completed at least 2 but
8    less than 3 years of such service, 25%;
9        (3) if the participant has completed at least 3 but
10    less than 4 years of such service, 50%;
11        (4) if the participant has completed at least 4 but
12    less than 5 years of such service, 75%; and
13        (5) if the participant has completed at least 5 years
14    of such service, 100%.
15    At the time of taking a benefit under the self-directed
16plan, any employer contributions that have not vested, and the
17investment returns attributable to the employer contributions
18that have not vested, shall be forfeited. Employer
19contributions that are forfeited shall be held in escrow by the
20company investing those contributions and shall be used, as
21directed by the System, for future allocations of employer
22contributions.
23    (g) Each active participant in the System shall participate
24in the self-directed retirement plan established under
25subsection (f) and, in lieu of the contributions otherwise
26provided for in this Article, shall contribute 8% of his or her

 

 

HB0421- 11 -LRB100 04236 RPS 14242 b

1salary, earnings, or compensation, whichever is applicable, to
2the plan. The employer of each of those active participants
3shall contribute 7% of salary to that plan on behalf of the
4participant.
5    (h) The provisions of this amendatory Act of the 100th
6General Assembly apply notwithstanding any other law,
7including Section 1-160 of this Code. If there is a conflict
8between the provisions of this amendatory Act of the 100th
9General Assembly and any other law, the provisions of this
10Section shall control.