HB2978 102ND GENERAL ASSEMBLY

LRB102 14896 RPS 20249 b

102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB2978

Introduced 2/19/2021, by Rep. Thomas Morrison

SYNOPSIS AS INTRODUCED:

40 ILCS 5/2-105.3 new
40 ILCS 5/2-167 new
40 ILCS 5/2-105.1 rep.

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 for persons who become participants on or after the effective date of the amendatory Act, participation in the System shall be limited to participation in the self-directed retirement plan. Allows a Tier 1 or Tier 2 participant to make an irrevocable election to participate in the self-directed retirement plan instead of the defined benefit plan. Makes changes to the pensionable salary for active participants. Provides that upon a participant's first day of participation in the self-directed retirement plan, the participant becomes vested in his or her contributions to the self-directed retirement plan, the employer's contributions to the self-directed retirement plan, and the investment returns attributable to those contributions credited to his or her account. Makes other changes.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Pension Code is amended by adding Sections 2-105.3 and 2-167 as follows:

(40 ILCS 5/2-105.3 new)

Sec. 2-105.3. Tier 1 participant; Tier 2 participant; Tier 3 participant. "Tier 1 participant": A participant who first became a participant before January 1, 2011.

In the case of a Tier 1 participant who elects to participate in the self-directed retirement plan under Section 2-167, that participant shall be deemed a Tier 1 participant only with respect to service performed or established before the effective date of that election.

"Tier 2 participant": A participant who first became a participant on or after January 1, 2011 and before the effective date of this amendatory Act of the 102nd General Assembly.

In the case of a Tier 2 participant who elects to participate in the self-directed retirement plan under Section 2-167, that participant shall be deemed a Tier 2 participant only with respect to service performed or established before the effective date of that election.

"Tier 3 participant": A participant who first becomes a participant on or after the effective date of this amendatory Act of the 102nd General Assembly; or a Tier 1 or Tier 2 participant who elects to participate in the self-directed retirement under Section 2-167 of this Code, but only with respect to service performed or established on or after the effective date of that election.

(40 ILCS 5/2-167 new)

Sec. 2-167. Self-directed retirement plan.

(a) For the purposes of this Section:

"Active participant" means a participant who is in active service in the System.

"Consumer price index-u" means the index published by the Bureau of Labor Statistics of the United States Department of Labor that measures the average change in prices of goods and services purchased by all urban consumers, United States city average, all items, 1982-84 = 100.

"Defined benefit plan" means the retirement plan available under this Article to Tier 1 or Tier 2 participants who have not made the election authorized under this Section.

"Employer" means the State.

"Pensionable salary" means the amount of salary used by the System to calculate the amount of an individual's retirement annuity.

(b) On and after the effective date of this amendatory Act of the 102nd General Assembly, a Tier 3 participant's participation in the System shall be limited to participation in the self-directed retirement plan established under subsection (d) of this Section.

An active Tier 1 or Tier 2 participant of this System may elect to cease accruing benefits in the defined benefit plan and begin accruing benefits for future service in the self-directed retirement plan established under subsection (d). The election to participate in the self-directed retirement plan is voluntary and irrevocable.

For an active Tier 1 or Tier 2 participant who elects to participate in the self-directed retirement plan, all service credit under the System (including service under any participating system if the participant elects to use the reciprocal provisions of Article 20) shall be considered for purposes of vesting in the benefits provided prior to the effective date of this Section, but only service earned and contributions made before that effective date shall be considered in determining the amount of those benefits. In lieu of receiving any such benefits, an active Tier 1 or Tier 2 participant who elects to participate in the self-directed retirement plan may elect to have an account balance established in his or her self-directed retirement plan account in an amount equal to the amount of the contribution refund that the participant would be eligible to receive if he or she withdrew from service on the effective date of this Section and elected a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The System shall make these transfers of assets to the self-directed plan as tax-free transfers in accordance with Internal Revenue Service guidelines.

(c) The pensionable salary of an active participant shall be equal to the average final monthly salary of the participant. For a participant who first becomes a participant of this System on or after the effective date of this amendatory Act of the 102nd General Assembly, the average final monthly salary determined by dividing the total salary of the participant during the 96 consecutive months of service within the last 120 months of service in which the total compensation was the highest by the number of months of service in that period; however, the highest salary for annuity purposes may not exceed $106,800, except that that amount shall annually thereafter be increased by the lesser of (i) 3% of that amount, including all previous adjustments, or (ii) the annual unadjusted percentage increase (but not less than zero) in the consumer price index-u for the 12 months ending with the September preceding each November 1. The new amount resulting from each annual adjustment shall be determined by the Public Pension Division of the Department of Insurance and made available to the Board by November 1 of each year.

(d) As soon as practicable after the effective date of this amendatory Act of the 102nd General Assembly, the System shall establish a self-directed retirement plan that allows Tier 3 participants the opportunity to accumulate assets for retirement through a combination of employee and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination thereof. The plan must be qualified under the Internal Revenue Code of 1986.

At any time after withdrawal from service, a participant in the self-directed plan shall be entitled to a benefit that is based on the account values attributable to his or her participant contributions and the employer contributions, as well as any investment returns attributable to those contributions. Upon a participant's first day of participation in the self-directed retirement plan, the participant becomes vested in his or her contributions to the self-directed retirement plan, the employer's contributions to the self-directed retirement plan, and the investment returns attributable to those contributions credited to his or her account.

(e) All persons who begin to participate in this System on or after the effective date of this amendatory Act of the 102nd General Assembly and any active Tier 1 or Tier 2 participant who makes the election provided in subsection (b) shall participate in the self-directed retirement plan established under subsection (d) and, in lieu of the contributions otherwise provided for in this Article, shall contribute 8% of salary to the plan. The employer of each of those participants shall contribute 7% of salary to that plan on behalf of the participant.

(f) The provisions of this amendatory Act of the 102nd General Assembly apply notwithstanding any other law. If there is a conflict between the provisions of this amendatory Act of the 102nd General Assembly and any other law, the provisions of this Section shall control.

(40 ILCS 5/2-105.1 rep.)

Section 10. The Illinois Pension Code is amended by repealing Section 2-105.1.