SB2362 94TH GENERAL ASSEMBLY

LRB094 17149 AMC 52437 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB2362

Introduced 1/18/2006, by Sen. Iris Y. Martinez

SYNOPSIS AS INTRODUCED:

40 ILCS 5/7-142	from Ch. 108 1/2, par. 7-142
40 ILCS 5/7-173	from Ch. 108 1/2, par. 7-173
40 ILCS 5/7-173.3 new

Amends the IMRF Article of the Illinois Pension Code. Increases the regular retirement formula to 1.96% of final earnings for the first 15 years of service and 2.28% of final earnings for each additional year of service for service earned on or after January 1, 2007. For service earned before January 1, 2007, authorizes augmentation of the old retirement formula by payment of a specified contribution. Increases the normal employee contribution rate by 0.5% of earnings, beginning January 1, 2007. Effective immediately.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT in relation to 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 changing Sections 7-142 and 7-173 and adding Section 7-173.3 as follows:

(40 ILCS 5/7-142) (from Ch. 108 1/2, par. 7-142)

Sec. 7-142. Retirement annuities - Amount.

(a) The amount of a retirement annuity shall be the sum of the following, determined in accordance with the actuarial tables in effect at the time of the grant of the annuity:

1. For employees with 8 or more years of service, an annuity computed pursuant to subparagraphs a or b of this subparagraph 1, whichever is the higher, and for employees with less than 8 years of service the annuity computed pursuant to subparagraph a:

a. The monthly annuity which can be provided from the total accumulated normal, municipality and prior service credits, as of the attained age of the employee on the date the annuity begins provided that such annuity shall not exceed 75% of the final rate of earnings of the employee.

b.(i) The monthly annuity amount determined as follows:

(i) For creditable service earned before January 1, 2007 that has not been augmented under Section 7-173.3, by multiplying (a) 1 2/3% for annuitants with not more than 15 years or (b) 1 2/3% of the employee's final rate of earnings for each of the first 15 years of creditable service and 2% for each year in excess of 15 years, with any remaining fraction of a year for annuitants with more than 15 years by the number of years plus fractional years, prorated on the a basis of months of creditable service and multiply the product thereof by the employee's final rate of earnings.

For creditable service earned on or after January 1, 2007 and creditable service earned before that date that has been augmented under Section 7-173.3, 1.96% of the employee's final rate of earnings for each of the first 15 years of creditable service and 2.28% for each year in excess of 15 years, with any remaining fraction of a year prorated on the basis of months.

(ii) For the sole purpose of computing the formula (and not for the purposes of the limitations hereinafter stated) $125 shall be considered the final rate of earnings in all cases where the final rate of earnings is less than such amount.

(iii) The monthly annuity computed in accordance with this subparagraph b, shall not exceed an amount equal to 75% of the final rate of earnings.

(iv) For employees who have less than 35 years of service, the annuity computed in accordance with this subparagraph b (as reduced by application of subparagraph (iii) above) shall be reduced by 0.25% thereof (0.5% if service was terminated before January 1, 1988) for each month or fraction thereof (1) that the employee's age is less than 60 years, or (2) if the employee has at least 30 years of service credit, that the employee's service credit is less than 35 years, whichever is less, on the date the annuity begins.

2. The annuity which can be provided from the total accumulated additional credits as of the attained age of the employee on the date the annuity begins.

(b) If payment of an annuity begins prior to the earliest age at which the employee will become eligible for an old age insurance benefit under the Federal Social Security Act, he may elect that the annuity payments from this fund shall exceed those payable after his attaining such age by an amount, computed as determined by rules of the Board, but not in excess of his estimated Social Security Benefit, determined as of the effective date of the annuity, provided that in no case shall the total annuity payments made by this fund exceed in actuarial value the annuity which would have been payable had no such election been made.

(c) The retirement annuity shall be increased each year by 2%, not compounded, of the monthly amount of annuity, taking into consideration any adjustment under paragraph (b) of this Section. This increase shall be effective each January 1 and computed from the effective date of the retirement annuity, the first increase being .167% of the monthly amount times the number of months from the effective date to January 1. Beginning January 1, 1984 and thereafter, the retirement annuity shall be increased by 3% each year, not compounded. This increase shall not be applicable to annuitants who are not in service on or after September 8, 1971.

(Source: P.A. 91-357, eff. 7-29-99.)

(40 ILCS 5/7-173) (from Ch. 108 1/2, par. 7-173)

Sec. 7-173. Contributions by employees.

(a) Each participating employee shall make contributions to the fund as follows:

1. For retirement annuity purposes, normal contributions of 3 3/4% of earnings for service before January 1, 2007 and 4.25% of earnings for service on or after January 1, 2007.

2. Additional contributions of such percentages of each payment of earnings, as shall be elected by the employee for retirement annuity purposes, but not in excess of 10%. The selected rate shall be applicable to all earnings beginning on the first day of the second month following receipt by the Board of written notice of election to make such contributions. Additional contributions at the selected rate shall be made concurrently with normal contributions.

3. Survivor contributions, by each participating employee, of 3/4% of each payment of earnings.

(b) Each employee shall make contributions to the fund for federal Social Security taxes, for periods during which he is a covered employee, as required by the Social Security Enabling Act. For participating employees, such contributions shall be in addition to those required under paragraph (a) of this Section.

(c) Contributions shall be deducted from each corresponding payment of earnings paid to each employee and shall be remitted to the board by the participating municipality or participating instrumentality making such payment. The remittance, together with a report of the earnings and contributions shall be made as directed by the board. For township treasurers and employees of township treasurers qualifying as employees hereunder, the contributions herein required as deductions from salary shall be withheld by the school township trustees from funds available for the payment of the compensation of such treasurers and employees as provided in the School Code and remitted to the board.

(d) An employee who has made additional contributions under paragraph (a)2 of this Section may upon retirement or at any time prior thereto, elect to withdraw the total of such additional contributions including interest credited thereon to the end of the preceding calendar year.

(e) Failure to make the deductions for employee contributions provided in paragraph (c) of this Section shall not relieve the employee from liability for such contributions. The amount of such liability may be deducted, with interest charged under Section 7-209, from any annuities or benefits payable hereunder to the employee or any other person receiving an annuity or benefit by reason of such employee's participation.

(f) A participating employee who has at least 40 years of creditable service in the Fund may elect to cease making the contributions required under this Section. The status of the employee under this Article shall be unaffected by this election, except that the employee shall not receive any additional creditable service for the periods of employment following the election. An election under this subsection relieves the employer from making additional employer contributions in relation to that employee.

(Source: P.A. 87-1265.)

(40 ILCS 5/7-173.3 new)

Sec. 7-173.3. Optional contribution for augmented retirement rate.

(a) A member of the Fund may qualify for the augmented rate under subdivision (a)1.b.(i) of Section 7-142 for all years of creditable service earned before January 1, 2007 by making the optional contribution specified in subsection (b) of this Section. A member may not elect to qualify for the augmented rate for only a portion of his or her creditable service earned before January 1, 2007.

(b) The contribution shall be an amount equal to 1.79% of the member's salary rate during the 12 consecutive months immediately prior to but not including the year in which the application occurs, multiplied by the number of years of creditable service earned by the member before January 1, 2007.

The contribution required by this subsection shall be paid in one of the following ways or in a combination of the following ways that does not extend over more than 5 years:

(i) in a lump sum on or before the date of retirement;

(ii) in substantially equal installments over a period of time not to exceed 5 years, as a deduction from salary;

(iii) in substantially equal monthly installments over a 24-month period, by reducing the annuitant's monthly benefit over a 24-month period by the amount of the otherwise applicable contribution. For federal and Illinois tax purposes, the monthly amount by which the annuitant's benefit is reduced shall not be treated as a contribution by the annuitant, but rather as a reduction of the annuitant's monthly benefit.

(c) If the member fails to make the full contribution under this Section in a timely fashion, the payments made under this Section shall be refunded to the member, without interest. If the member dies before making the full contribution, the payments made under this Section, together with regular interest thereon, shall be refunded to the member's designated beneficiary.

(d) For purposes of this Section and the retirement formula in Section 7-142, optional creditable service established by a member shall be deemed to have been earned at the time of the employment or other qualifying event upon which the service is based, rather than at the time the credit was established in this Fund.

(e) The contributions required under this Section are the responsibility of the employee and not the employer. However, an employer may specifically agree, through collective bargaining or otherwise, to make the contributions required by this Section on behalf of its employees.

Section 99. Effective date. This Act takes effect upon becoming law.