Section 4404.10  Purpose

The purpose of this Part is to set forth the underlying calculations involved concerning the transfer of money among the prior pension fund, the current pension fund and the officers; and the associated requirements to transfer previously accumulated creditable service by an active member of an Article 3 police pension fund pursuant to Sections 3-110 and 3-110.7 of the Illinois Pension Code [40 ILCS 5/3-110 and 3-110.7].

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.20  Applicability

This Part applies to any active member of a pension fund established under Article 3 of the Illinois Pension Code, except that an active member may not transfer creditable service under this Part from a prior pension fund if the officer did not actively serve in the police department under the prior pension fund for at least 2 years, unless:

a)         The police officer did not actively serve in the police department under the prior pension fund for at least 2 years as a result of being laid off or otherwise involuntarily terminated for a reason other than the fault of the police officer; or

b)         The police officer was not actively serving in the police department of the prior pension fund on or after August 17, 1997.

(Source:  Amended at 24 Ill. Reg. 7287, effective April 26, 2000)

Section 4404.30  Definitions

            Active Member shall be defined as an officer that is in active service and a participant of a pension fund established pursuant to Article 3 of the Illinois Pension Code.

            Creditable Service shall be defined by Section 3-110 of the Illinois Pension Code [40 ILCS 5/3-110].

            Current Pension Fund shall be defined as the pension fund where the officer is presently a Participant.

            Date of Refund shall be defined as the date the officer received a refund from a pension fund pursuant to Section 3-124 of the Illinois Pension Code [40 ILCS 5/3-124].

            Date of Transfer shall be defined as the date the officer's application for transfer of creditable service time is received by the current pension fund. [40 ILCS 5/3-110.7(a)(1)].

            Director shall be defined as the Director of the Illinois Department of Insurance.

            Participant shall be defined as a participating member, or deferred pensioner or annuitant, of a pension fund as provided in Article 3 of the Illinois Pension Code under which the pension fund is established [40 ILCS 5/3-101].

            Pension Division shall be defined as the Public Pension Division of the Illinois Department of Insurance.

            Police Officer or Officer shall be defined by Section 3-106 of the Illinois Pension Code [40 ILCS 5/3-106].

            Prior Pension Fund shall be defined as the pension fund from which the officer may transfer previously accumulated creditable service to the current pension fund.

            Qualified Actuary shall be defined as either a member of the American Academy of Actuaries or an individual who has demonstrated to the satisfaction of the Director that he or she possesses the educational background necessary for the practice of actuarial science and who also possesses not less than 7 years of relevant actuarial experience.

            Refund shall be defined as the amount of contributions an officer received pursuant to Section 3-124 of the Illinois Pension Code [40 ILCS 5/3-124].

            True Cost shall be defined as the increase in the actuarial accrued liability or reserve amount, as applicable, calculated pursuant to Section 4404.50 of this Part and Section 3-110 of the Illinois Pension Code [40 ILCS 5/3-110], resulting from the transfer of creditable service from the prior pension fund to the current pension fund.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.40  Request and Rescission Notifications

Any police officer who is an active member of an Article 3 police pension fund must submit a written request to his or her current pension fund board of trustees identifying, by date and time frame, the accumulated creditable service to be transferred from the prior police pension funds and the prior pension funds. The police officer must also identify any creditable service time that the officer is required to reinstate pursuant to Section 3-110.7(b) of the Illinois Pension Code [40 ILCS 5/3-110.7(b)] in order for it to qualify as creditable service time to be transferred. When requesting to transfer accumulated creditable service, all accumulated creditable service with that prior pension fund must be transferred out of that prior pension fund.

(Source:  Amended at 40 Ill. Reg. 14751, effective October 17, 2016)

Section 4404.50  Method for Calculation of the True Cost

a)         The qualified actuary shall provide the current pension fund with the actuarial accrued liability assuming continuation of active status, and the amount of reserve for each possible status that may apply to the officer as set forth in subsection (b).  The actuarial accrued liability and reserve amounts shall be computed utilizing the actuarial cost method and the same assumptions that were used for determining the most recent actuarial valuation for the current pension fund.

b)         The possible status choices that may be considered, in addition to the requirement of remaining active as an officer until the completion of the transfer, are retirement, deferred retirement, disability, and withdrawal.  For each applicable status choice, the actuary shall provide the current pension fund with two actuarial accrued liability or reserve amounts. The first amount shall be the actuarial accrued liability or reserve computed using the combined years of service in the current fund and previous funds.  The second amount shall be the actuarial accrued liability or reserve computed using only the years of service in the current fund.  These amounts shall be computed as of the date the current pension fund receives the request for transfer of creditable service.  The benefit amounts used in computing the actuarial accrued liability or reserve amounts shall be consistent with the years of service used in each separate actuarial accrued liability or reserve amount calculation.  The true cost for each status shall be equal to the excess of the amount computed using the combined years of service in all funds over the amount computed using the years of service in the current pension fund.

c)         The method of calculating the true cost of transferring creditable service time shall be dependent on the anticipated status of the officer as determined by the current pension fund at the time of the service transfer or immediately thereafter.  It is the current pension fund's responsibility to determine the most likely status of the officer after the transfer of creditable service time.

d)         The current pension fund board of trustees shall determine the true cost for the requested period of creditable service time with information provided to the current pension fund by either:

1)         the Illinois Department of Insurance, upon the fund’s submission of the Information Request Form for an Officer’s Creditable Service Transfer.  The form is available on the Department’s Pension Division website portal at https://insurance.illinois.gov/Applications/Pension/Form.aspx.  The Department will return the information requested within 30 days after receipt of the request, if the Department's actuarial valuation was used for determining the most recent funding requirements of the current pension fund; or

2)         the qualified actuary who was retained by the municipality or pension fund to determine the most recent actuarial valuation used for determining the funding requirements of the current fund.

(Source:  Amended at 46 Ill. Reg. 6590, effective April 11, 2022)

Section 4404.60  Current Fund Notification Requirement

Within 30 days after receipt of the police officer's request, the current pension fund shall provide written notification to both the requesting officer and the prior pension funds verifying receipt of the request. The current pension fund shall obtain verification of the creditable service time on record with the prior pension fund, as well as the amount the prior pension fund will transfer to the current pension fund as calculated pursuant to Section 4404.73 of this Part and the amount the police officer is required to pay the prior pension fund in order to reinstate service as calculated pursuant to Section 4404.76 of this Part, if applicable.  At this time the current pension fund shall also provide written notification to the independent actuary or the Department of Insurance (DOI), as applicable, requesting the actuarial amounts to be used in the true cost determination.  The request form prescribed by Section 4404.50(d)(1) must accompany the notification if the DOI is requested to perform the actuarial calculations.

(Source:  Amended at 46 Ill. Reg. 6590, effective April 11, 2022)

Section 4404.70  Prior Fund Notification Requirement

Within 30 days after receipt of the current pension fund's notification, the prior pension funds shall provide written notification, to both the requesting officer and the current pension fund, verifying receipt of the notification required by Section 4404.60 of this Part.  The prior funds must also verify the creditable service time on record and identify the amount of money due to be transferred to the current fund on behalf of the officer as calculated pursuant to Section 4404.73 of this Part, specifically broken down into categories including employee contributions, employer contributions, and interest.  In the event that a refund has been taken, the prior pension fund must also notify the officer and the current pension fund of the amount of money that is owed to the prior pension fund in order to reinstate that service time as calculated pursuant to Section 4404.76 of this Part.  The prior fund's notification to the officer and the current pension fund must identify that portion of the amount owed for reinstatement that is attributable to the refund received by the officer and that portion of the amount that is attributable to the interest on the refund.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.73  Calculation of the Amount to be Transferred from the Prior Pension Fund to the Current Pension Fund

Upon receiving the notification from the current pension fund, as set forth in Section 4404.60 of this Part, the prior pension fund must notify the current pension fund of the amount of money that is to be transferred to the current pension fund upon the police officer's decision to transfer creditable service time.  That amount shall equal:

a)         The amounts actually contributed by, or on behalf of, the applicant to the fund as employee contributions, plus interest on those amounts at the rate of 6% per year, compounded annually, from the date of contribution to the date of transfer; and

b)         An amount representing employer contributions, which is equal to the total amount determined under subsection (a) of this Section.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.76  Calculation of the Amount Required to Reinstate Creditable Service if a Refund was Received

If the officer received a refund from the prior pension fund upon leaving that pension fund, the officer must pay the prior pension fund the amount of the refund plus interest on the refund amount at the rate of 6% per year, compounded annually, in order to reinstate the accumulated creditable service.  The interest shall be calculated from the date of refund to the date of transfer.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.80  Current Fund Payment Schedule, Determination of Creditable Service Time to be Credited and Notification to the Police Officer

Within 14 days after receipt of the prior pension funds notification, the current pension fund shall notify the requesting officer of:

a)         The additional contribution needed from the officer to transfer the designated creditable service time as required by Section 3-110 of the Illinois Pension Code [40 ILCS 5/3-110] should the officer elect to have all creditable service time earned in the prior fund credited to the current fund under 40 ILCS 5/3-110(d)(2), option (A).  The additional contribution should represent the true cost necessary to transfer the designated creditable service time minus the amount payable by the prior pension funds as calculated pursuant to Section 4404.73 of this Part, leaving a balance payable by the officer to satisfy the true cost of effectively transferring the designated creditable service time.  This additional contribution is in addition to any amount required to be paid by the officer to reinstate the prior creditable service when a refund had been received as calculated in Section 4404.76 of this Part. In addition, the current pension fund must:

1)         Specify the method of payment as either a lump sum or a schedule of payments, to include 6% annual interest on the declining balance, and any fees, not to exceed the 5 year statutory limit (see 40 ILCS 5/3-110(d)(3)), deemed acceptable by the current pension fund board of trustees and that payment must be made in full before the officer terminates service; and

2)         Notify the officer that once final authorization has been given pursuant to Section 4404.90 of this Part, the transfer cannot be reversed, and failure to satisfy the agreed to payment arrangement will result in a forfeiture of the employer paid portion and any accumulated interest on the designated creditable service time pursuant to Section 3-110.7 of the Illinois Pension Code [40 ILCS 5/3-110.7].

b)         The amount of creditable service time that will be credited to the current pension fund should the officer elect to have the creditable service time earned in the prior pension fund and credited to the current fund reduced in lieu of payment of an additional contribution.  The reduced amount of creditable service time to be credited to the current pension fund shall equal the portion of the creditable service time accumulated in the prior pension fund after applying to that creditable service time the ratio of the amount of monies transferred from the prior pension fund to the appropriate true cost amount as determined under Section 4404.50 of this Part.  If the ratio of the amount transferred from the prior pension fund to the appropriate true cost amount is greater than one, only the amount of actual creditable service time accumulated in the prior pension fund is credited to the current pension fund.  Any amount required to be paid by the officer to reinstate the prior creditable service when a refund had been received as calculated in Section 4404.76 of this Part must still be paid to the prior pension fund.

In addition, the current pension fund must notify the officer that, once final authorization has been given pursuant to Section 4404.90 of this Part, the transfer cannot be reversed.  Creditable service time transferred out of the prior pension fund and not credited to the current pension fund is lost.  It may not be transferred to another pension fund and may not be reinstated in the pension fund from which it was transferred.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.90  Final Authorization to Transfer or Withdraw

a)         Within 14 days after receiving notification from the current pension fund, which must include a payment schedule deemed acceptable to meet the additional amount due, if applicable, the officer must either:

1)         Provide an irrevocable written authorization to transfer creditable service time to the current pension fund and, if applicable, repay the prior fund any refund with interest; or

2)         Submit a written request to withdraw the initial application for transferring creditable service to the current pension fund; or

3)         If the officer fails to take action by the 15^th day, pursuant to either subsection (a)(1) or (a)(2) of this Section, the initial request to transfer the designated creditable service time will be automatically withdrawn.

b)         If an officer provides an irrevocable written authorization to transfer creditable service time, the officer must include in that letter whether the officer will:

1)         pay the additional contribution to have all creditable service time earned in the prior pension fund credited to the current pension fund; or

2)         have the creditable service time earned in the prior pension fund and credited to the current pension fund reduced in lieu of payment of an additional contribution.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.100  Transfer of Creditable Service Time

a)         Within 7 days after final authorization from the officer has been received by the current pension fund, the current pension fund must forward a copy of the final authorization to the prior pension funds.

b)         Within 30 days after the prior pension funds receive a copy of the officer's final authorization and the repayment of any refund with interest, if applicable, the prior pension fund must transfer the designated creditable service time to the current pension fund along with the payment of all monies required to be transferred pursuant to Section 4404.73 of this Part.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.110  Failure to Pay, or Death of the Officer

a)         In the event that the officer fails to pay the additional contributions required by the current pension fund to satisfy the effective transfer of the designated creditable service time deemed appropriate by the board of trustees and agreed to by the officer, if applicable, or the officer terminates service before the expiration of the statutory 5 year maximum:

1)         The officer will receive an amount equal to the amounts actually contributed by, or on behalf of, the applicant to the prior pension fund as employee contributions and, if applicable, the amount of interest paid by the officer to the prior pension fund to reinstate creditable service as calculated under Section 4404.76 of this Part within 30 days after failure to meet the terms of the agreed to payment schedule; and

2)         All partial payments made by the officer to the current fund.

b)         In the event that the officer dies in service before payment of additional contributions has been satisfied, if applicable, and prior to the 5 year statutory payment period maximum:

1)         The surviving spouse has up to 6 months after the officer's death to pay the remaining balance due to satisfy the payment schedule; or

2)         The surviving spouse shall be entitled to the same refund as specified in subsection (a) of this Section.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.120  Forfeiture

Transferred credit that is not granted due to failure to pay the additional contribution, if applicable, within the required time is lost. It may not be transferred to another pension fund and may not be reinstated in the pension fund from which it was transferred.  [40 ILCS 5/3-110(d)(5)]

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.130  Current Pension Fund Reporting Requirements

Within 30 days after the designated creditable service time has been transferred to the current pension fund, the current pension fund must file a report with the Pension Division.  The report must contain the following:

a)         The name and FEIN of the current pension fund to which creditable service time was transferred;

b)         The name and FEIN of the prior pension fund from which creditable service time was transferred;

c)         The name and Social Security Number of the officer for whom creditable service time was transferred;

d)         The beginning and ending dates for all periods of creditable service time transferred;

e)         The reduced creditable service time credited to the current pension fund, if applicable;

f)         The amount transferred from the prior pension fund, including a breakdown of the total to include:

1)         The formula and assumptions used to determine the amount representing the officer's contributions, including the amount itself;

2)         The formula and assumptions used to determine the amount of interest paid on the amounts in subsection (f)(1) of this Section, including the amount itself;

3)         The formula and assumptions used to determine the amount of interest paid by the officer to reinstate service, if any, including the amount itself;

4)         The amount designated as the employer contribution; and

5)         Any other assumptions used;

g)         The date that the designated creditable service time was transferred;

h)         The true cost of transferred creditable service time;

i)          If the actuarial accrued liability and reserve amounts used in determining the true cost of transferring creditable service time were calculated by a qualified actuary pursuant to Section 4404.50(d)(2) of this Part, an actuarial certification must be filed by the current pension fund and must contain a statement that the actuarial accrued liabilities, or reserves, were calculated by the undersigned actuary in compliance with Section 4404.50(a), (b) and (c) of this Part; and

j)          The current pension fund must provide a copy of the agreed to payment schedule, if applicable, which must identify:

1)         The total amount of contributions, including any fees or interest, needed from the officer to satisfy the effective transfer of the designated creditable service time;

2)         The payment schedule itself; and

3)         Any contributions paid by the officer.

(Source:  Amended at 35 Ill. Reg. 2120, effective January 24, 2011)

Section 4404.140  Failure to Comply

If any party fails to comply with the requirements of this Part, including either the substance or filing requirements contained herein, such party shall be subject to the penalty provisions of the Illinois Pension Code [40 ILCS 5/1A-113(d)] and 50 Ill. Adm. Code 4435.

Section 4404.ILLUSTRATION A   DOI Information Request for an Officer's Creditable Service Transfer (Repealed)

(Source:  Repealed at 46 Ill. Reg. 6590, effective April 11, 2022)

Section 4404.ILLUSTRATION B   DOI Information Request for a Chief of Police's Creditable Service Transfer (Repealed)

(Source:  Repealed at 24 Ill. Reg. 7287, effective April 26, 2000)