99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB2775

 

Introduced 2/17/2016, by Sen. Pamela J. Althoff

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/3-125  from Ch. 108 1/2, par. 3-125
40 ILCS 5/4-118  from Ch. 108 1/2, par. 4-118

    Amends the Downstate Police and Fire Articles of the Illinois Pension Code in relation to employer contributions. Changes the funding formula by: (1) reducing the target funding ratio from 90% to 85%; (2) extending the amortization period to 2055; (3) changing the actuarial method from projected unit credit to entry age normal; and (4) deleting the "level percentage of payroll" calculation from the funding requirement. Also delays by 4 years the enforcement of late payments by intercepting State funds. Effective immediately.


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FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB2775LRB099 18749 EFG 43133 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
5Sections 3-125 and 4-118 as follows:
 
6    (40 ILCS 5/3-125)  (from Ch. 108 1/2, par. 3-125)
7    Sec. 3-125. Financing.
8    (a) The city council or the board of trustees of the
9municipality shall annually levy a tax upon all the taxable
10property of the municipality at the rate on the dollar which
11will produce an amount which, when added to the deductions from
12the salaries or wages of police officers, and revenues
13available from other sources, will equal a sum sufficient to
14meet the annual requirements of the police pension fund.
15    Through 2016, the The annual requirements to be provided by
16such tax levy are equal to (1) the normal cost of the pension
17fund for the year involved, plus (2) an amount sufficient to
18bring the total assets of the pension fund up to 90% of the
19total actuarial liabilities of the pension fund by the end of
20municipal fiscal year 2040, as annually updated and determined
21by an enrolled actuary employed by the Illinois Department of
22Insurance or by an enrolled actuary retained by the pension
23fund or the municipality. In making these determinations, the

 

 

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1required minimum employer contribution shall be calculated
2each year as a level percentage of payroll over the years
3remaining up to and including fiscal year 2040 and shall be
4determined under the projected unit credit actuarial cost
5method.
6    Beginning in 2017, the annual requirements to be provided
7by the tax levy under this subsection shall be an amount equal
8to (1) the normal cost of the pension fund for the year
9involved, plus (2) an amount sufficient to amortize 85% of the
10unfunded accrued liability of the pension fund by 2055, as
11annually updated and determined by an enrolled actuary employed
12by the Illinois Department of Insurance or by an enrolled
13actuary retained by the pension fund or the municipality. In
14making these determinations, the required minimum employer
15contribution shall be determined under the entry age normal
16actuarial cost method.
17    The tax shall be levied and collected in the same manner as
18the general taxes of the municipality, and in addition to all
19other taxes now or hereafter authorized to be levied upon all
20property within the municipality, and shall be in addition to
21the amount authorized to be levied for general purposes as
22provided by Section 8-3-1 of the Illinois Municipal Code,
23approved May 29, 1961, as amended. The tax shall be forwarded
24directly to the treasurer of the board within 30 business days
25after receipt by the county.
26    (b) For purposes of determining the required employer

 

 

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1contribution to a pension fund, the value of the pension fund's
2assets shall be equal to the actuarial value of the pension
3fund's assets, which shall be calculated as follows:
4        (1) On March 30, 2011, the actuarial value of a pension
5    fund's assets shall be equal to the market value of the
6    assets as of that date.
7        (2) In determining the actuarial value of the System's
8    assets for fiscal years after March 30, 2011, any actuarial
9    gains or losses from investment return incurred in a fiscal
10    year shall be recognized in equal annual amounts over the
11    5-year period following that fiscal year.
12    (c) If a participating municipality fails to transmit to
13the fund contributions required of it under this Article for
14more than 90 days after the payment of those contributions is
15due, the fund may, after giving notice to the municipality,
16certify to the State Comptroller the amounts of the delinquent
17payments in accordance with any applicable rules of the
18Comptroller, and the Comptroller must, beginning in fiscal year
192020 2016, deduct and remit to the fund the certified amounts
20or a portion of those amounts from the following proportions of
21payments of State funds to the municipality:
22        (1) in fiscal year 2020 2016, one-third of the total
23    amount of any payments of State funds to the municipality;
24        (2) in fiscal year 2021 2017, two-thirds of the total
25    amount of any payments of State funds to the municipality;
26    and

 

 

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1        (3) in fiscal year 2022 2018 and each fiscal year
2    thereafter, the total amount of any payments of State funds
3    to the municipality.
4    The State Comptroller may not deduct from any payments of
5State funds to the municipality more than the amount of
6delinquent payments certified to the State Comptroller by the
7fund.
8    (d) The police pension fund shall consist of the following
9moneys which shall be set apart by the treasurer of the
10municipality:
11        (1) All moneys derived from the taxes levied hereunder;
12        (2) Contributions by police officers under Section
13    3-125.1;
14        (3) All moneys accumulated by the municipality under
15    any previous legislation establishing a fund for the
16    benefit of disabled or retired police officers;
17        (4) Donations, gifts or other transfers authorized by
18    this Article.
19    (e) The Commission on Government Forecasting and
20Accountability shall conduct a study of all funds established
21under this Article and shall report its findings to the General
22Assembly on or before January 1, 2013. To the fullest extent
23possible, the study shall include, but not be limited to, the
24following:
25        (1) fund balances;
26        (2) historical employer contribution rates for each

 

 

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1    fund;
2        (3) the actuarial formulas used as a basis for employer
3    contributions, including the actual assumed rate of return
4    for each year, for each fund;
5        (4) available contribution funding sources;
6        (5) the impact of any revenue limitations caused by
7    PTELL and employer home rule or non-home rule status; and
8        (6) existing statutory funding compliance procedures
9    and funding enforcement mechanisms for all municipal
10    pension funds.
11(Source: P.A. 99-8, eff. 7-9-15.)
 
12    (40 ILCS 5/4-118)  (from Ch. 108 1/2, par. 4-118)
13    Sec. 4-118. Financing.
14    (a) The city council or the board of trustees of the
15municipality shall annually levy a tax upon all the taxable
16property of the municipality at the rate on the dollar which
17will produce an amount which, when added to the deductions from
18the salaries or wages of firefighters and revenues available
19from other sources, will equal a sum sufficient to meet the
20annual actuarial requirements of the pension fund, as
21determined by an enrolled actuary employed by the Illinois
22Department of Insurance or by an enrolled actuary retained by
23the pension fund or municipality.
24    Through 2016, for For the purposes of this Section, the
25annual actuarial requirements of the pension fund are equal to

 

 

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1(1) the normal cost of the pension fund, or 17.5% of the
2salaries and wages to be paid to firefighters for the year
3involved, whichever is greater, plus (2) an annual amount
4sufficient to bring the total assets of the pension fund up to
590% of the total actuarial liabilities of the pension fund by
6the end of municipal fiscal year 2040, as annually updated and
7determined by an enrolled actuary employed by the Illinois
8Department of Insurance or by an enrolled actuary retained by
9the pension fund or the municipality. In making these
10determinations, the required minimum employer contribution
11shall be calculated each year as a level percentage of payroll
12over the years remaining up to and including fiscal year 2040
13and shall be determined under the projected unit credit
14actuarial cost method.
15    Beginning in 2017, for the purposes of this Section, the
16annual actuarial requirements of the pension fund are equal to
17(1) the normal cost of the pension fund, or 17.5% of the
18salaries and wages to be paid to firefighters for the year
19involved, whichever is greater, plus (2) an amount sufficient
20to amortize 85% of the unfunded accrued liability of the
21pension fund by 2055, as annually updated and determined by an
22enrolled actuary employed by the Illinois Department of
23Insurance or by an enrolled actuary retained by the pension
24fund or the municipality. In making these determinations, the
25required minimum employer contribution shall be determined
26under the entry age normal actuarial cost method.

 

 

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1    The amount to be applied towards the amortization of the
2unfunded accrued liability in any year shall not be less than
3the annual amount required to amortize the unfunded accrued
4liability, including interest, as a level percentage of payroll
5over the number of years remaining in the 40 year amortization
6period.
7    (a-5) For purposes of determining the required employer
8contribution to a pension fund, the value of the pension fund's
9assets shall be equal to the actuarial value of the pension
10fund's assets, which shall be calculated as follows:
11        (1) On March 30, 2011, the actuarial value of a pension
12    fund's assets shall be equal to the market value of the
13    assets as of that date.
14        (2) In determining the actuarial value of the pension
15    fund's assets for fiscal years after March 30, 2011, any
16    actuarial gains or losses from investment return incurred
17    in a fiscal year shall be recognized in equal annual
18    amounts over the 5-year period following that fiscal year.
19    (b) The tax shall be levied and collected in the same
20manner as the general taxes of the municipality, and shall be
21in addition to all other taxes now or hereafter authorized to
22be levied upon all property within the municipality, and in
23addition to the amount authorized to be levied for general
24purposes, under Section 8-3-1 of the Illinois Municipal Code or
25under Section 14 of the Fire Protection District Act. The tax
26shall be forwarded directly to the treasurer of the board

 

 

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1within 30 business days of receipt by the county (or, in the
2case of amounts added to the tax levy under subsection (f),
3used by the municipality to pay the employer contributions
4required under subsection (b-1) of Section 15-155 of this
5Code).
6    (b-5) If a participating municipality fails to transmit to
7the fund contributions required of it under this Article for
8more than 90 days after the payment of those contributions is
9due, the fund may, after giving notice to the municipality,
10certify to the State Comptroller the amounts of the delinquent
11payments in accordance with any applicable rules of the
12Comptroller, and the Comptroller must, beginning in fiscal year
132020 2016, deduct and remit to the fund the certified amounts
14or a portion of those amounts from the following proportions of
15payments of State funds to the municipality:
16        (1) in fiscal year 2020 2016, one-third of the total
17    amount of any payments of State funds to the municipality;
18        (2) in fiscal year 2021 2017, two-thirds of the total
19    amount of any payments of State funds to the municipality;
20    and
21        (3) in fiscal year 2022 2018 and each fiscal year
22    thereafter, the total amount of any payments of State funds
23    to the municipality.
24    The State Comptroller may not deduct from any payments of
25State funds to the municipality more than the amount of
26delinquent payments certified to the State Comptroller by the

 

 

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1fund.
2    (c) The board shall make available to the membership and
3the general public for inspection and copying at reasonable
4times the most recent Actuarial Valuation Balance Sheet and Tax
5Levy Requirement issued to the fund by the Department of
6Insurance.
7    (d) The firefighters' pension fund shall consist of the
8following moneys which shall be set apart by the treasurer of
9the municipality: (1) all moneys derived from the taxes levied
10hereunder; (2) contributions by firefighters as provided under
11Section 4-118.1; (3) all rewards in money, fees, gifts, and
12emoluments that may be paid or given for or on account of
13extraordinary service by the fire department or any member
14thereof, except when allowed to be retained by competitive
15awards; and (4) any money, real estate or personal property
16received by the board.
17    (e) For the purposes of this Section, "enrolled actuary"
18means an actuary: (1) who is a member of the Society of
19Actuaries or the American Academy of Actuaries; and (2) who is
20enrolled under Subtitle C of Title III of the Employee
21Retirement Income Security Act of 1974, or who has been engaged
22in providing actuarial services to one or more public
23retirement systems for a period of at least 3 years as of July
241, 1983.
25    (f) The corporate authorities of a municipality that
26employs a person who is described in subdivision (d) of Section

 

 

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14-106 may add to the tax levy otherwise provided for in this
2Section an amount equal to the projected cost of the employer
3contributions required to be paid by the municipality to the
4State Universities Retirement System under subsection (b-1) of
5Section 15-155 of this Code.
6    (g) The Commission on Government Forecasting and
7Accountability shall conduct a study of all funds established
8under this Article and shall report its findings to the General
9Assembly on or before January 1, 2013. To the fullest extent
10possible, the study shall include, but not be limited to, the
11following:
12        (1) fund balances;
13        (2) historical employer contribution rates for each
14    fund;
15        (3) the actuarial formulas used as a basis for employer
16    contributions, including the actual assumed rate of return
17    for each year, for each fund;
18        (4) available contribution funding sources;
19        (5) the impact of any revenue limitations caused by
20    PTELL and employer home rule or non-home rule status; and
21        (6) existing statutory funding compliance procedures
22    and funding enforcement mechanisms for all municipal
23    pension funds.
24(Source: P.A. 99-8, eff. 7-9-15.)
 
25    Section 99. Effective date. This Act takes effect upon
26becoming law.