99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB1221

 

Introduced 2/11/2015, by Sen. Matt Murphy

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/16-158  from Ch. 108 1/2, par. 16-158

    Amends the Downstate Teacher Article of the Illinois Pension Code. In a provision relating to employer contributions based on certain increases in teacher salary, changes the threshold increase from 6% to an amount based on the consumer price index. Exempts increases under collective bargaining agreements in effect on February 1, 2015. Effective immediately.


LRB099 06186 RPS 26245 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY
STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

 

 

A BILL FOR

 

SB1221LRB099 06186 RPS 26245 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 16-158 as follows:
 
6    (40 ILCS 5/16-158)   (from Ch. 108 1/2, par. 16-158)
7    Sec. 16-158. Contributions by State and other employing
8units.
9    (a) The State shall make contributions to the System by
10means of appropriations from the Common School Fund and other
11State funds of amounts which, together with other employer
12contributions, employee contributions, investment income, and
13other income, will be sufficient to meet the cost of
14maintaining and administering the System on a 100% funded basis
15in accordance with actuarial recommendations by the end of
16State fiscal year 2044.
17    The Board shall determine the amount of State contributions
18required for each fiscal year on the basis of the actuarial
19tables and other assumptions adopted by the Board and the
20recommendations of the actuary, using the formula in subsection
21(b-3).
22    (a-1) Annually, on or before November 15 through November
2315, 2011, the Board shall certify to the Governor the amount of

 

 

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1the required State contribution for the coming fiscal year. The
2certification under this subsection (a-1) shall include a copy
3of the actuarial recommendations upon which it is based.
4    On or before May 1, 2004, the Board shall recalculate and
5recertify to the Governor the amount of the required State
6contribution to the System for State fiscal year 2005, taking
7into account the amounts appropriated to and received by the
8System under subsection (d) of Section 7.2 of the General
9Obligation Bond Act.
10    On or before July 1, 2005, the Board shall recalculate and
11recertify to the Governor the amount of the required State
12contribution to the System for State fiscal year 2006, taking
13into account the changes in required State contributions made
14by this amendatory Act of the 94th General Assembly.
15    On or before April 1, 2011, the Board shall recalculate and
16recertify to the Governor the amount of the required State
17contribution to the System for State fiscal year 2011, applying
18the changes made by Public Act 96-889 to the System's assets
19and liabilities as of June 30, 2009 as though Public Act 96-889
20was approved on that date.
21    (a-5) On or before November 1 of each year, beginning
22November 1, 2012, the Board shall submit to the State Actuary,
23the Governor, and the General Assembly a proposed certification
24of the amount of the required State contribution to the System
25for the next fiscal year, along with all of the actuarial
26assumptions, calculations, and data upon which that proposed

 

 

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1certification is based. On or before January 1 of each year,
2beginning January 1, 2013, the State Actuary shall issue a
3preliminary report concerning the proposed certification and
4identifying, if necessary, recommended changes in actuarial
5assumptions that the Board must consider before finalizing its
6certification of the required State contributions.
7    On or before January 15, 2013 and each January 15
8thereafter, the Board shall certify to the Governor and the
9General Assembly the amount of the required State contribution
10for the next fiscal year. The certification shall include a
11copy of the actuarial recommendations upon which it is based
12and shall specifically identify the System's projected State
13normal cost for that fiscal year. The Board's certification
14must note any deviations from the State Actuary's recommended
15changes, the reason or reasons for not following the State
16Actuary's recommended changes, and the fiscal impact of not
17following the State Actuary's recommended changes on the
18required State contribution.
19    (a-10) For purposes of Section (c-5) of Section 20 of the
20Budget Stabilization Act, on or before November 1 of each year
21beginning November 1, 2014, the Board shall determine the
22amount of the State contribution to the System that would have
23been required for the next fiscal year if this amendatory Act
24of the 98th General Assembly had not taken effect, using the
25best and most recent available data but based on the law in
26effect on May 31, 2014. The Board shall submit to the State

 

 

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1Actuary, the Governor, and the General Assembly a proposed
2certification, along with the relevant law, actuarial
3assumptions, calculations, and data upon which that
4certification is based. On or before January 1, 2015 and every
5January 1 thereafter, the State Actuary shall issue a
6preliminary report concerning the proposed certification and
7identifying, if necessary, recommended changes in actuarial
8assumptions that the Board must consider before finalizing its
9certification. On or before January 15, 2015 and every January
101 thereafter, the Board shall certify to the Governor and the
11General Assembly the amount of the State contribution to the
12System that would have been required for the next fiscal year
13if this amendatory Act of the 98th General Assembly had not
14taken effect, using the best and most recent available data but
15based on the law in effect on May 31, 2014. The Board's
16certification must note any deviations from the State Actuary's
17recommended changes, the reason or reasons for not following
18the State Actuary's recommended changes, and the impact of not
19following the State Actuary's recommended changes.
20    (b) Through State fiscal year 1995, the State contributions
21shall be paid to the System in accordance with Section 18-7 of
22the School Code.
23    (b-1) Beginning in State fiscal year 1996, on the 15th day
24of each month, or as soon thereafter as may be practicable, the
25Board shall submit vouchers for payment of State contributions
26to the System, in a total monthly amount of one-twelfth of the

 

 

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1required annual State contribution certified under subsection
2(a-1). From the effective date of this amendatory Act of the
393rd General Assembly through June 30, 2004, the Board shall
4not submit vouchers for the remainder of fiscal year 2004 in
5excess of the fiscal year 2004 certified contribution amount
6determined under this Section after taking into consideration
7the transfer to the System under subsection (a) of Section
86z-61 of the State Finance Act. These vouchers shall be paid by
9the State Comptroller and Treasurer by warrants drawn on the
10funds appropriated to the System for that fiscal year.
11    If in any month the amount remaining unexpended from all
12other appropriations to the System for the applicable fiscal
13year (including the appropriations to the System under Section
148.12 of the State Finance Act and Section 1 of the State
15Pension Funds Continuing Appropriation Act) is less than the
16amount lawfully vouchered under this subsection, the
17difference shall be paid from the Common School Fund under the
18continuing appropriation authority provided in Section 1.1 of
19the State Pension Funds Continuing Appropriation Act.
20    (b-2) Allocations from the Common School Fund apportioned
21to school districts not coming under this System shall not be
22diminished or affected by the provisions of this Article.
23    (b-3) For State fiscal years 2015 through 2044, the minimum
24contribution to the System to be made by the State for each
25fiscal year shall be an amount determined by the System to be
26equal to the sum of (1) the State's portion of the projected

 

 

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1normal cost for that fiscal year, plus (2) an amount sufficient
2to bring the total assets of the System up to 100% of the total
3actuarial liabilities of the System by the end of State fiscal
4year 2044. In making these determinations, the required State
5contribution shall be calculated each year as a level
6percentage of payroll over the years remaining to and including
7fiscal year 2044 and shall be determined under the projected
8unit cost method for fiscal year 2015 and under the entry age
9normal actuarial cost method for fiscal years 2016 through
102044.
11    For State fiscal years 2012 through 2014, the minimum
12contribution to the System to be made by the State for each
13fiscal year shall be an amount determined by the System to be
14sufficient to bring the total assets of the System up to 90% of
15the total actuarial liabilities of the System by the end of
16State fiscal year 2045. In making these determinations, the
17required State contribution shall be calculated each year as a
18level percentage of payroll over the years remaining to and
19including fiscal year 2045 and shall be determined under the
20projected unit credit actuarial cost method.
21    For State fiscal years 1996 through 2005, the State
22contribution to the System, as a percentage of the applicable
23employee payroll, shall be increased in equal annual increments
24so that by State fiscal year 2011, the State is contributing at
25the rate required under this Section; except that in the
26following specified State fiscal years, the State contribution

 

 

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1to the System shall not be less than the following indicated
2percentages of the applicable employee payroll, even if the
3indicated percentage will produce a State contribution in
4excess of the amount otherwise required under this subsection
5and subsection (a), and notwithstanding any contrary
6certification made under subsection (a-1) before the effective
7date of this amendatory Act of 1998: 10.02% in FY 1999; 10.77%
8in FY 2000; 11.47% in FY 2001; 12.16% in FY 2002; 12.86% in FY
92003; and 13.56% in FY 2004.
10    Notwithstanding any other provision of this Article, the
11total required State contribution for State fiscal year 2006 is
12$534,627,700.
13    Notwithstanding any other provision of this Article, the
14total required State contribution for State fiscal year 2007 is
15$738,014,500.
16    For each of State fiscal years 2008 through 2009, the State
17contribution to the System, as a percentage of the applicable
18employee payroll, shall be increased in equal annual increments
19from the required State contribution for State fiscal year
202007, so that by State fiscal year 2011, the State is
21contributing at the rate otherwise required under this Section.
22    Notwithstanding any other provision of this Article, the
23total required State contribution for State fiscal year 2010 is
24$2,089,268,000 and shall be made from the proceeds of bonds
25sold in fiscal year 2010 pursuant to Section 7.2 of the General
26Obligation Bond Act, less (i) the pro rata share of bond sale

 

 

SB1221- 8 -LRB099 06186 RPS 26245 b

1expenses determined by the System's share of total bond
2proceeds, (ii) any amounts received from the Common School Fund
3in fiscal year 2010, and (iii) any reduction in bond proceeds
4due to the issuance of discounted bonds, if applicable.
5    Notwithstanding any other provision of this Article, the
6total required State contribution for State fiscal year 2011 is
7the amount recertified by the System on or before April 1, 2011
8pursuant to subsection (a-1) of this Section and shall be made
9from the proceeds of bonds sold in fiscal year 2011 pursuant to
10Section 7.2 of the General Obligation Bond Act, less (i) the
11pro rata share of bond sale expenses determined by the System's
12share of total bond proceeds, (ii) any amounts received from
13the Common School Fund in fiscal year 2011, and (iii) any
14reduction in bond proceeds due to the issuance of discounted
15bonds, if applicable. This amount shall include, in addition to
16the amount certified by the System, an amount necessary to meet
17employer contributions required by the State as an employer
18under paragraph (e) of this Section, which may also be used by
19the System for contributions required by paragraph (a) of
20Section 16-127.
21    Beginning in State fiscal year 2045, the minimum State
22contribution for each fiscal year shall be the amount needed to
23maintain the total assets of the System at 100% of the total
24actuarial liabilities of the System.
25    Amounts received by the System pursuant to Section 25 of
26the Budget Stabilization Act or Section 8.12 of the State

 

 

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1Finance Act in any fiscal year do not reduce and do not
2constitute payment of any portion of the minimum State
3contribution required under this Article in that fiscal year.
4Such amounts shall not reduce, and shall not be included in the
5calculation of, the required State contributions under this
6Article in any future year until the System has reached a
7funding ratio of at least 100%. A reference in this Article to
8the "required State contribution" or any substantially similar
9term does not include or apply to any amounts payable to the
10System under Section 25 of the Budget Stabilization Act.
11    Notwithstanding any other provision of this Section, the
12required State contribution for State fiscal year 2005 and for
13fiscal year 2008 and each fiscal year thereafter through State
14fiscal year 2014, as calculated under this Section and
15certified under subsection (a-1), shall not exceed an amount
16equal to (i) the amount of the required State contribution that
17would have been calculated under this Section for that fiscal
18year if the System had not received any payments under
19subsection (d) of Section 7.2 of the General Obligation Bond
20Act, minus (ii) the portion of the State's total debt service
21payments for that fiscal year on the bonds issued in fiscal
22year 2003 for the purposes of that Section 7.2, as determined
23and certified by the Comptroller, that is the same as the
24System's portion of the total moneys distributed under
25subsection (d) of Section 7.2 of the General Obligation Bond
26Act. In determining this maximum for State fiscal years 2008

 

 

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1through 2010, however, the amount referred to in item (i) shall
2be increased, as a percentage of the applicable employee
3payroll, in equal increments calculated from the sum of the
4required State contribution for State fiscal year 2007 plus the
5applicable portion of the State's total debt service payments
6for fiscal year 2007 on the bonds issued in fiscal year 2003
7for the purposes of Section 7.2 of the General Obligation Bond
8Act, so that, by State fiscal year 2011, the State is
9contributing at the rate otherwise required under this Section.
10    (c) Payment of the required State contributions and of all
11pensions, retirement annuities, death benefits, refunds, and
12other benefits granted under or assumed by this System, and all
13expenses in connection with the administration and operation
14thereof, are obligations of the State.
15    If members are paid from special trust or federal funds
16which are administered by the employing unit, whether school
17district or other unit, the employing unit shall pay to the
18System from such funds the full accruing retirement costs based
19upon that service, which, beginning July 1, 2014, shall be at a
20rate, expressed as a percentage of salary, equal to the total
21minimum contribution to the System to be made by the State for
22that fiscal year, including both normal cost and unfunded
23liability components, expressed as a percentage of payroll, as
24determined by the System under subsection (b-3) of this
25Section. Employer contributions, based on salary paid to
26members from federal funds, may be forwarded by the

 

 

SB1221- 11 -LRB099 06186 RPS 26245 b

1distributing agency of the State of Illinois to the System
2prior to allocation, in an amount determined in accordance with
3guidelines established by such agency and the System. Any
4contribution for fiscal year 2015 collected as a result of the
5change made by this amendatory Act of the 98th General Assembly
6shall be considered a State contribution under subsection (b-3)
7of this Section.
8    (d) Effective July 1, 1986, any employer of a teacher as
9defined in paragraph (8) of Section 16-106 shall pay the
10employer's normal cost of benefits based upon the teacher's
11service, in addition to employee contributions, as determined
12by the System. Such employer contributions shall be forwarded
13monthly in accordance with guidelines established by the
14System.
15    However, with respect to benefits granted under Section
1616-133.4 or 16-133.5 to a teacher as defined in paragraph (8)
17of Section 16-106, the employer's contribution shall be 12%
18(rather than 20%) of the member's highest annual salary rate
19for each year of creditable service granted, and the employer
20shall also pay the required employee contribution on behalf of
21the teacher. For the purposes of Sections 16-133.4 and
2216-133.5, a teacher as defined in paragraph (8) of Section
2316-106 who is serving in that capacity while on leave of
24absence from another employer under this Article shall not be
25considered an employee of the employer from which the teacher
26is on leave.

 

 

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1    (e) Beginning July 1, 1998, every employer of a teacher
2shall pay to the System an employer contribution computed as
3follows:
4        (1) Beginning July 1, 1998 through June 30, 1999, the
5    employer contribution shall be equal to 0.3% of each
6    teacher's salary.
7        (2) Beginning July 1, 1999 and thereafter, the employer
8    contribution shall be equal to 0.58% of each teacher's
9    salary.
10The school district or other employing unit may pay these
11employer contributions out of any source of funding available
12for that purpose and shall forward the contributions to the
13System on the schedule established for the payment of member
14contributions.
15    These employer contributions are intended to offset a
16portion of the cost to the System of the increases in
17retirement benefits resulting from this amendatory Act of 1998.
18    Each employer of teachers is entitled to a credit against
19the contributions required under this subsection (e) with
20respect to salaries paid to teachers for the period January 1,
212002 through June 30, 2003, equal to the amount paid by that
22employer under subsection (a-5) of Section 6.6 of the State
23Employees Group Insurance Act of 1971 with respect to salaries
24paid to teachers for that period.
25    The additional 1% employee contribution required under
26Section 16-152 by this amendatory Act of 1998 is the

 

 

SB1221- 13 -LRB099 06186 RPS 26245 b

1responsibility of the teacher and not the teacher's employer,
2unless the employer agrees, through collective bargaining or
3otherwise, to make the contribution on behalf of the teacher.
4    If an employer is required by a contract in effect on May
51, 1998 between the employer and an employee organization to
6pay, on behalf of all its full-time employees covered by this
7Article, all mandatory employee contributions required under
8this Article, then the employer shall be excused from paying
9the employer contribution required under this subsection (e)
10for the balance of the term of that contract. The employer and
11the employee organization shall jointly certify to the System
12the existence of the contractual requirement, in such form as
13the System may prescribe. This exclusion shall cease upon the
14termination, extension, or renewal of the contract at any time
15after May 1, 1998.
16    (f) If the amount of a teacher's salary for any school year
17used to determine final average salary exceeds the member's
18annual full-time salary rate with the same employer for the
19previous school year by more than the percentage specified in
20this subsection 6%, the teacher's employer shall pay to the
21System, in addition to all other payments required under this
22Section and in accordance with guidelines established by the
23System, the present value of the increase in benefits resulting
24from the portion of the increase in salary that is in excess of
25the percentage specified in this subsection 6%. This present
26value shall be computed by the System on the basis of the

 

 

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1actuarial assumptions and tables used in the most recent
2actuarial valuation of the System that is available at the time
3of the computation. If a teacher's salary for the 2005-2006
4school year is used to determine final average salary under
5this subsection (f), then the changes made to this subsection
6(f) by Public Act 94-1057 shall apply in calculating whether
7the increase in his or her salary is in excess of the
8percentage specified in this subsection 6%.
9    For the purposes of this subsection, the specified
10percentage is 6% through June 30, 2015. Thereafter, the
11specified percentage shall be determined annually for the 12
12months beginning on July 1 of each year. The specified
13percentage shall be equal to the annual unadjusted percentage
14increase (but not less than zero) in the consumer price index-u
15for the 12 months ending with the September preceding that July
161, as determined annually by the Public Pension Division of the
17Department of Insurance; except that with respect to an
18employee covered by a collective bargaining agreement in effect
19on February 1, 2015, the specified rate shall remain at 6%
20until that agreement terminates or is amended or renewed.
21    For the purposes of this subsection, "consumer price
22index-u" means the index published by the Bureau of Labor
23Statistics of the United States Department of Labor that
24measures the average change in prices of goods and services
25purchased by all urban consumers, United States city average,
26all items, 1982-84 = 100.

 

 

SB1221- 15 -LRB099 06186 RPS 26245 b

1    For the purposes of this Section, change in employment
2under Section 10-21.12 of the School Code on or after June 1,
32005 shall constitute a change in employer. The System may
4require the employer to provide any pertinent information or
5documentation. The changes made to this subsection (f) by this
6amendatory Act of the 94th General Assembly apply without
7regard to whether the teacher was in service on or after its
8effective date.
9    Whenever it determines that a payment is or may be required
10under this subsection, the System shall calculate the amount of
11the payment and bill the employer for that amount. The bill
12shall specify the calculations used to determine the amount
13due. If the employer disputes the amount of the bill, it may,
14within 30 days after receipt of the bill, apply to the System
15in writing for a recalculation. The application must specify in
16detail the grounds of the dispute and, if the employer asserts
17that the calculation is subject to subsection (g) or (h) of
18this Section, must include an affidavit setting forth and
19attesting to all facts within the employer's knowledge that are
20pertinent to the applicability of that subsection. Upon
21receiving a timely application for recalculation, the System
22shall review the application and, if appropriate, recalculate
23the amount due.
24    The employer contributions required under this subsection
25(f) may be paid in the form of a lump sum within 90 days after
26receipt of the bill. If the employer contributions are not paid

 

 

SB1221- 16 -LRB099 06186 RPS 26245 b

1within 90 days after receipt of the bill, then interest will be
2charged at a rate equal to the System's annual actuarially
3assumed rate of return on investment compounded annually from
4the 91st day after receipt of the bill. Payments must be
5concluded within 3 years after the employer's receipt of the
6bill.
7    (g) This subsection (g) applies only to payments made or
8salary increases given on or after June 1, 2005 but before July
91, 2011. The changes made by Public Act 94-1057 shall not
10require the System to refund any payments received before July
1131, 2006 (the effective date of Public Act 94-1057).
12    When assessing payment for any amount due under subsection
13(f), the System shall exclude salary increases paid to teachers
14under contracts or collective bargaining agreements entered
15into, amended, or renewed before June 1, 2005.
16    When assessing payment for any amount due under subsection
17(f), the System shall exclude salary increases paid to a
18teacher at a time when the teacher is 10 or more years from
19retirement eligibility under Section 16-132 or 16-133.2.
20    When assessing payment for any amount due under subsection
21(f), the System shall exclude salary increases resulting from
22overload work, including summer school, when the school
23district has certified to the System, and the System has
24approved the certification, that (i) the overload work is for
25the sole purpose of classroom instruction in excess of the
26standard number of classes for a full-time teacher in a school

 

 

SB1221- 17 -LRB099 06186 RPS 26245 b

1district during a school year and (ii) the salary increases are
2equal to or less than the rate of pay for classroom instruction
3computed on the teacher's current salary and work schedule.
4    When assessing payment for any amount due under subsection
5(f), the System shall exclude a salary increase resulting from
6a promotion (i) for which the employee is required to hold a
7certificate or supervisory endorsement issued by the State
8Teacher Certification Board that is a different certification
9or supervisory endorsement than is required for the teacher's
10previous position and (ii) to a position that has existed and
11been filled by a member for no less than one complete academic
12year and the salary increase from the promotion is an increase
13that results in an amount no greater than the lesser of the
14average salary paid for other similar positions in the district
15requiring the same certification or the amount stipulated in
16the collective bargaining agreement for a similar position
17requiring the same certification.
18    When assessing payment for any amount due under subsection
19(f), the System shall exclude any payment to the teacher from
20the State of Illinois or the State Board of Education over
21which the employer does not have discretion, notwithstanding
22that the payment is included in the computation of final
23average salary.
24    (h) When assessing payment for any amount due under
25subsection (f), the System shall exclude any salary increase
26described in subsection (g) of this Section given on or after

 

 

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1July 1, 2011 but before July 1, 2014 under a contract or
2collective bargaining agreement entered into, amended, or
3renewed on or after June 1, 2005 but before July 1, 2011.
4Notwithstanding any other provision of this Section, any
5payments made or salary increases given after June 30, 2014
6shall be used in assessing payment for any amount due under
7subsection (f) of this Section.
8    (i) The System shall prepare a report and file copies of
9the report with the Governor and the General Assembly by
10January 1, 2007 that contains all of the following information:
11        (1) The number of recalculations required by the
12    changes made to this Section by Public Act 94-1057 for each
13    employer.
14        (2) The dollar amount by which each employer's
15    contribution to the System was changed due to
16    recalculations required by Public Act 94-1057.
17        (3) The total amount the System received from each
18    employer as a result of the changes made to this Section by
19    Public Act 94-4.
20        (4) The increase in the required State contribution
21    resulting from the changes made to this Section by Public
22    Act 94-1057.
23    (j) For purposes of determining the required State
24contribution to the System, the value of the System's assets
25shall be equal to the actuarial value of the System's assets,
26which shall be calculated as follows:

 

 

SB1221- 19 -LRB099 06186 RPS 26245 b

1    As of June 30, 2008, the actuarial value of the System's
2assets shall be equal to the market value of the assets as of
3that date. In determining the actuarial value of the System's
4assets for fiscal years after June 30, 2008, any actuarial
5gains or losses from investment return incurred in a fiscal
6year shall be recognized in equal annual amounts over the
75-year period following that fiscal year.
8    (k) For purposes of determining the required State
9contribution to the system for a particular year, the actuarial
10value of assets shall be assumed to earn a rate of return equal
11to the system's actuarially assumed rate of return.
12(Source: P.A. 97-694, eff. 6-18-12; 97-813, eff. 7-13-12;
1398-599, eff. 6-1-14; 98-674, eff. 6-30-14.)
 
14    Section 99. Effective date. This Act takes effect upon
15becoming law.