101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3644

 

Introduced , by Rep. Grant Wehrli

 

SYNOPSIS AS INTRODUCED:
 
See Index

    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 on and after the effective date of the amendatory Act, an active participant's participation in the System shall be limited to participation in the self-directed retirement plan. Provides that an annuitant shall not receive an automatic increase in retirement annuity on or after the effective date of the amendatory Act unless, according to the most recent actuarial valuations, the total assets of the System are equal to or greater than 100% of the total actuarial liabilities of the System. Establishes a schedule for vesting in the self-directed retirement plan. Requires the Public Pension Division of the Department of Insurance to develop a schedule that, subject to certain requirements, increases the retirement age of active participants who are ineligible to retire as of the effective date of the amendatory Act. Provides that the Division's schedule shall also provide for the adjustment of retirement ages using a matrix that (i) takes into account the current statutory retirement age for various classes of persons and service credit accrued by those persons and (ii) proportionally discounts the increase in statutory retirement ages based on proximity to the currently established retirement age. Provides a new funding formula for State contributions beginning fiscal year 2021, with a 100% funding goal through 2045 (determined using the projected unit credit actuarial cost method) and a 100% funding goal thereafter. Requires the System to recertify the fiscal year 2021 contribution.


LRB101 07764 RPS 52813 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3644LRB101 07764 RPS 52813 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 2-124 and 2-134 and by adding Section 2-167 as
6follows:
 
7    (40 ILCS 5/2-124)  (from Ch. 108 1/2, par. 2-124)
8    Sec. 2-124. Contributions by State.
9    (a) The State shall make contributions to the System by
10appropriations of amounts which, together with the
11contributions of participants, interest earned on investments,
12and other income will meet the cost of maintaining and
13administering the System on a 100% 90% funded basis in
14accordance with actuarial recommendations.
15    (b) The Board shall determine the amount of State
16contributions required for each fiscal year on the basis of the
17actuarial tables and other assumptions adopted by the Board and
18the prescribed rate of interest, using the formula in
19subsection (c).
20    (c) For State fiscal years 2021 through 2045, the minimum
21contribution to the System to be made by the State for each
22fiscal year shall be an amount determined by the System to be
23sufficient to bring the total assets of the System up to 100%

 

 

HB3644- 2 -LRB101 07764 RPS 52813 b

1of the total actuarial liabilities of the System by the end of
2State fiscal year 2045. In making these determinations, the
3required State contribution shall be calculated each year as a
4level dollar amount over the years remaining to and including
5fiscal year 2045 and shall be determined under the projected
6unit credit actuarial cost method.
7    For State fiscal years 2012 through 2020 2045, the minimum
8contribution to the System to be made by the State for each
9fiscal year shall be an amount determined by the System to be
10sufficient to bring the total assets of the System up to 90% of
11the total actuarial liabilities of the System by the end of
12State fiscal year 2045. In making these determinations, the
13required State contribution shall be calculated each year as a
14level percentage of payroll over the years remaining to and
15including fiscal year 2045 and shall be determined under the
16projected unit credit actuarial cost method.
17    A change in an actuarial or investment assumption that
18increases or decreases the required State contribution and
19first applies in State fiscal year 2018 or thereafter shall be
20implemented in equal annual amounts over a 5-year period
21beginning in the State fiscal year in which the actuarial
22change first applies to the required State contribution.
23    A change in an actuarial or investment assumption that
24increases or decreases the required State contribution and
25first applied to the State contribution in fiscal year 2014,
262015, 2016, or 2017 shall be implemented:

 

 

HB3644- 3 -LRB101 07764 RPS 52813 b

1        (i) as already applied in State fiscal years before
2    2018; and
3        (ii) in the portion of the 5-year period beginning in
4    the State fiscal year in which the actuarial change first
5    applied that occurs in State fiscal year 2018 or
6    thereafter, by calculating the change in equal annual
7    amounts over that 5-year period and then implementing it at
8    the resulting annual rate in each of the remaining fiscal
9    years in that 5-year period.
10    For State fiscal years 1996 through 2005, the State
11contribution to the System, as a percentage of the applicable
12employee payroll, shall be increased in equal annual increments
13so that by State fiscal year 2011, the State is contributing at
14the rate required under this Section.
15    Notwithstanding any other provision of this Article, the
16total required State contribution for State fiscal year 2006 is
17$4,157,000.
18    Notwithstanding any other provision of this Article, the
19total required State contribution for State fiscal year 2007 is
20$5,220,300.
21    For each of State fiscal years 2008 through 2009, the State
22contribution to the System, as a percentage of the applicable
23employee payroll, shall be increased in equal annual increments
24from the required State contribution for State fiscal year
252007, so that by State fiscal year 2011, the State is
26contributing at the rate otherwise required under this Section.

 

 

HB3644- 4 -LRB101 07764 RPS 52813 b

1    Notwithstanding any other provision of this Article, the
2total required State contribution for State fiscal year 2010 is
3$10,454,000 and shall be made from the proceeds of bonds sold
4in fiscal year 2010 pursuant to Section 7.2 of the General
5Obligation Bond Act, less (i) the pro rata share of bond sale
6expenses determined by the System's share of total bond
7proceeds, (ii) any amounts received from the General Revenue
8Fund in fiscal year 2010, and (iii) any reduction in bond
9proceeds due to the issuance of discounted bonds, if
10applicable.
11    Notwithstanding any other provision of this Article, the
12total required State contribution for State fiscal year 2011 is
13the amount recertified by the System on or before April 1, 2011
14pursuant to Section 2-134 and shall be made from the proceeds
15of bonds sold in fiscal year 2011 pursuant to Section 7.2 of
16the General Obligation Bond Act, less (i) the pro rata share of
17bond sale expenses determined by the System's share of total
18bond proceeds, (ii) any amounts received from the General
19Revenue Fund in fiscal year 2011, and (iii) any reduction in
20bond proceeds due to the issuance of discounted bonds, if
21applicable.
22    Beginning in State fiscal year 2046, the minimum State
23contribution for each fiscal year shall be the amount needed to
24maintain the total assets of the System at 100% of the total
25actuarial liabilities of the System. Beginning in State fiscal
26year 2046, the minimum State contribution for each fiscal year

 

 

HB3644- 5 -LRB101 07764 RPS 52813 b

1shall be the amount needed to maintain the total assets of the
2System at 90% of the total actuarial liabilities of the System.
3    Amounts received by the System pursuant to Section 25 of
4the Budget Stabilization Act or Section 8.12 of the State
5Finance Act in any fiscal year do not reduce and do not
6constitute payment of any portion of the minimum State
7contribution required under this Article in that fiscal year.
8Such amounts shall not reduce, and shall not be included in the
9calculation of, the required State contributions under this
10Article in any future year until the System has reached a
11funding ratio of at least 90%. A reference in this Article to
12the "required State contribution" or any substantially similar
13term does not include or apply to any amounts payable to the
14System under Section 25 of the Budget Stabilization Act.
15    Notwithstanding any other provision of this Section, the
16required State contribution for State fiscal year 2005 and for
17fiscal year 2008 and each fiscal year thereafter, as calculated
18under this Section and certified under Section 2-134, shall not
19exceed an amount equal to (i) the amount of the required State
20contribution that would have been calculated under this Section
21for that fiscal year if the System had not received any
22payments under subsection (d) of Section 7.2 of the General
23Obligation Bond Act, minus (ii) the portion of the State's
24total debt service payments for that fiscal year on the bonds
25issued in fiscal year 2003 for the purposes of that Section
267.2, as determined and certified by the Comptroller, that is

 

 

HB3644- 6 -LRB101 07764 RPS 52813 b

1the same as the System's portion of the total moneys
2distributed under subsection (d) of Section 7.2 of the General
3Obligation Bond Act. In determining this maximum for State
4fiscal years 2008 through 2010, however, the amount referred to
5in item (i) shall be increased, as a percentage of the
6applicable employee payroll, in equal increments calculated
7from the sum of the required State contribution for State
8fiscal year 2007 plus the applicable portion of the State's
9total debt service payments for fiscal year 2007 on the bonds
10issued in fiscal year 2003 for the purposes of Section 7.2 of
11the General Obligation Bond Act, so that, by State fiscal year
122011, the State is contributing at the rate otherwise required
13under this Section.
14    (d) For purposes of determining the required State
15contribution to the System, the value of the System's assets
16shall be equal to the actuarial value of the System's assets,
17which shall be calculated as follows:
18    As of June 30, 2008, the actuarial value of the System's
19assets shall be equal to the market value of the assets as of
20that date. In determining the actuarial value of the System's
21assets for fiscal years after June 30, 2008, any actuarial
22gains or losses from investment return incurred in a fiscal
23year shall be recognized in equal annual amounts over the
245-year period following that fiscal year.
25    (e) For purposes of determining the required State
26contribution to the system for a particular year, the actuarial

 

 

HB3644- 7 -LRB101 07764 RPS 52813 b

1value of assets shall be assumed to earn a rate of return equal
2to the system's actuarially assumed rate of return.
3(Source: P.A. 100-23, eff. 7-6-17.)
 
4    (40 ILCS 5/2-134)   (from Ch. 108 1/2, par. 2-134)
5    Sec. 2-134. To certify required State contributions and
6submit vouchers.
7    (a) The Board shall certify to the Governor on or before
8December 15 of each year until December 15, 2011 the amount of
9the required State contribution to the System for the next
10fiscal year and shall specifically identify the System's
11projected State normal cost for that fiscal year. The
12certification shall include a copy of the actuarial
13recommendations upon which it is based and shall specifically
14identify the System's projected State normal cost for that
15fiscal year.
16    On or before November 1 of each year, beginning November 1,
172012, the Board shall submit to the State Actuary, the
18Governor, and the General Assembly a proposed certification of
19the amount of the required State contribution to the System for
20the next fiscal year, along with all of the actuarial
21assumptions, calculations, and data upon which that proposed
22certification is based. On or before January 1 of each year
23beginning January 1, 2013, the State Actuary shall issue a
24preliminary report concerning the proposed certification and
25identifying, if necessary, recommended changes in actuarial

 

 

HB3644- 8 -LRB101 07764 RPS 52813 b

1assumptions that the Board must consider before finalizing its
2certification of the required State contributions. On or before
3January 15, 2013 and every January 15 thereafter, the Board
4shall certify to the Governor and the General Assembly the
5amount of the required State contribution for the next fiscal
6year. The Board's certification must note any deviations from
7the State Actuary's recommended changes, the reason or reasons
8for not following the State Actuary's recommended changes, and
9the fiscal impact of not following the State Actuary's
10recommended changes on the required State contribution.
11    On or before May 1, 2004, the Board shall recalculate and
12recertify to the Governor the amount of the required State
13contribution to the System for State fiscal year 2005, taking
14into account the amounts appropriated to and received by the
15System under subsection (d) of Section 7.2 of the General
16Obligation Bond Act.
17    On or before July 1, 2005, the Board shall recalculate and
18recertify to the Governor the amount of the required State
19contribution to the System for State fiscal year 2006, taking
20into account the changes in required State contributions made
21by this amendatory Act of the 94th General Assembly.
22    On or before April 1, 2011, the Board shall recalculate and
23recertify to the Governor the amount of the required State
24contribution to the System for State fiscal year 2011, applying
25the changes made by Public Act 96-889 to the System's assets
26and liabilities as of June 30, 2009 as though Public Act 96-889

 

 

HB3644- 9 -LRB101 07764 RPS 52813 b

1was approved on that date.
2    By November 1, 2017, the Board shall recalculate and
3recertify to the State Actuary, the Governor, and the General
4Assembly the amount of the State contribution to the System for
5State fiscal year 2018, taking into account the changes in
6required State contributions made by this amendatory Act of the
7100th General Assembly. The State Actuary shall review the
8assumptions and valuations underlying the Board's revised
9certification and issue a preliminary report concerning the
10proposed recertification and identifying, if necessary,
11recommended changes in actuarial assumptions that the Board
12must consider before finalizing its certification of the
13required State contributions. The Board's final 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    As soon as practical after the effective date of this
20amendatory Act of the 101st General Assembly, the Board shall
21recalculate and recertify to the State Actuary, the Governor,
22and the General Assembly the amount of the State contribution
23to the System for State fiscal year 2021, taking into account
24the changes in required State contributions made by this
25amendatory Act of the 101st General Assembly. The State Actuary
26shall review the assumptions and valuations underlying the

 

 

HB3644- 10 -LRB101 07764 RPS 52813 b

1Board's revised certification and issue a preliminary report
2concerning the proposed recertification and identifying, if
3necessary, recommended changes in actuarial assumptions that
4the Board must consider before finalizing its certification of
5the required State contributions. The Board's final
6certification must note any deviations from the State Actuary's
7recommended changes, the reason or reasons for not following
8the State Actuary's recommended changes, and the fiscal impact
9of not following the State Actuary's recommended changes on the
10required State contribution.
11    (b) Beginning in State fiscal year 1996, on or as soon as
12possible after the 15th day of each month the Board shall
13submit vouchers for payment of State contributions to the
14System, in a total monthly amount of one-twelfth of the
15required annual State contribution certified under subsection
16(a). From the effective date of this amendatory Act of the 93rd
17General Assembly through June 30, 2004, the Board shall not
18submit vouchers for the remainder of fiscal year 2004 in excess
19of the fiscal year 2004 certified contribution amount
20determined under this Section after taking into consideration
21the transfer to the System under subsection (d) of Section
226z-61 of the State Finance Act. These vouchers shall be paid by
23the State Comptroller and Treasurer by warrants drawn on the
24funds appropriated to the System for that fiscal year. If in
25any month the amount remaining unexpended from all other
26appropriations to the System for the applicable fiscal year

 

 

HB3644- 11 -LRB101 07764 RPS 52813 b

1(including the appropriations to the System under Section 8.12
2of the State Finance Act and Section 1 of the State Pension
3Funds Continuing Appropriation Act) is less than the amount
4lawfully vouchered under this Section, the difference shall be
5paid from the General Revenue Fund under the continuing
6appropriation authority provided in Section 1.1 of the State
7Pension Funds Continuing Appropriation Act.
8    (c) The full amount of any annual appropriation for the
9System for State fiscal year 1995 shall be transferred and made
10available to the System at the beginning of that fiscal year at
11the request of the Board. Any excess funds remaining at the end
12of any fiscal year from appropriations shall be retained by the
13System as a general reserve to meet the System's accrued
14liabilities.
15(Source: P.A. 100-23, eff. 7-6-17.)
 
16    (40 ILCS 5/2-167 new)
17    Sec. 2-167. Self-directed retirement plan; end of service
18credit.
19    (a) For the purposes of this Section:
20    "Active participant" means a participant in the System who
21does not receive an annuity from the System.
22    "Automatic increase in retirement annuity" means an
23automatic increase in retirement annuity that is granted under
24this Article.
25    "Employer" means the State.

 

 

HB3644- 12 -LRB101 07764 RPS 52813 b

1    "Pensionable salary" means the amount of salary,
2compensation, or earnings used by the System to calculate the
3amount of an individual's retirement annuity.
4    (b) On and after the effective date of this amendatory Act
5of the 101st General Assembly, an active participant's
6participation in the System shall be limited to participation
7in a self-directed retirement plan established under
8subsection (f) of this Section.
9    All service credit under the System (including service
10under any participating system if the participant elects to use
11the reciprocal provisions of Article 20) shall be considered
12for purposes of vesting in the benefits provided prior to the
13effective date of this Section, but only service credit earned
14and contributions made before that effective date shall be
15considered in determining the amount of those benefits. In lieu
16of receiving any such benefits, an active participant may elect
17to have an account balance established in his or her
18self-directed plan account in an amount equal to the amount of
19the contribution refund that the participant would be eligible
20to receive if he or she withdrew from service on the effective
21date of this Section and elected a refund of contributions,
22except that this hypothetical refund shall include interest at
23the effective rate for the respective years. The System shall
24make these transfers of assets to the self-directed plan as
25tax-free transfers in accordance with Internal Revenue Service
26guidelines.

 

 

HB3644- 13 -LRB101 07764 RPS 52813 b

1    (c) The pensionable salary of an active participant shall
2not exceed the pensionable salary of that participant as of the
3effective date of this amendatory Act of the 101st General
4Assembly.
5    (d) An annuitant shall not receive an automatic increase in
6retirement annuity on or after the effective date of this
7amendatory Act of the 101st General Assembly unless, according
8to the most recent actuarial valuations, the total assets of
9the System are equal to or greater than 100% of the total
10actuarial liabilities of the System.
11    (e) The retirement age of active participants who are
12ineligible to retire as of the effective date of this
13amendatory Act of the 101st General Assembly shall be increased
14according to a schedule developed, as soon as practicable after
15the effective date of this amendatory Act of the 101st General
16Assembly, by the Public Pension Division of the Department of
17Insurance. The schedule of retirement ages adopted by
18administrative rule of the Division shall, at a minimum, ensure
19(i) that persons who first become active participants on or
20after the effective date of this amendatory Act of the 101st
21General Assembly are not eligible to retire until reaching the
22Social Security Normal Retirement Age and (ii) that persons who
23are active participants but ineligible to retire as of the
24effective date of this amendatory Act of the 101st General
25Assembly remain ineligible to retire until reaching age 59. The
26Division's schedule shall also provide for the adjustment of

 

 

HB3644- 14 -LRB101 07764 RPS 52813 b

1retirement ages using a matrix (i) that takes into account the
2current statutory retirement age for various classes of persons
3and service credit accrued by those persons as of the effective
4date of this amendatory Act of the 101st General Assembly and
5(ii) that proportionally discounts the increase in statutory
6retirement age based on proximity to the currently established
7retirement age. The minimum retirement age established under
8this subsection (e) shall not apply to active participants with
9respect to participation in a self-directed retirement plan
10established under subsection (f) of this Section.
11    (f) As soon as practicable after the effective date of this
12amendatory Act of the 101st General Assembly, the System shall
13establish a self-directed retirement plan that allows
14individuals who are active participants and individuals who
15become active participants on or after the effective date of
16this amendatory Act of the 101st General Assembly the
17opportunity to accumulate assets for retirement through a
18combination of employee and employer contributions that may be
19invested in mutual funds, collective investment funds, or other
20investment products and used to purchase annuity contracts,
21either fixed or variable or a combination thereof. The plan
22must be qualified under the Internal Revenue Code of 1986.
23    At any time after withdrawal from service, a participant in
24the self-directed plan shall be entitled to a benefit that is
25based on the account values attributable to his or her
26participant contributions and the vested percentage of

 

 

HB3644- 15 -LRB101 07764 RPS 52813 b

1employer contributions, as well as any investment returns
2attributable to those contributions. A participant becomes
3vested in the employer's contributions credited to his or her
4account according to the following schedule:
5        (1) if the participant has completed less than 2 years
6    of service under the System (including service under any
7    participating system if the participant elects to use the
8    reciprocal provisions of Article 20), 0%;
9        (2) if the participant has completed at least 2 but
10    less than 3 years of such service, 25%;
11        (3) if the participant has completed at least 3 but
12    less than 4 years of such service, 50%;
13        (4) if the participant has completed at least 4 but
14    less than 5 years of such service, 75%; and
15        (5) if the participant has completed at least 5 years
16    of such service, 100%.
17    At the time of taking a benefit under the self-directed
18plan, any employer contributions that have not vested, and the
19investment returns attributable to the employer contributions
20that have not vested, shall be forfeited. Employer
21contributions that are forfeited shall be held in escrow by the
22company investing those contributions and shall be used, as
23directed by the System, for future allocations of employer
24contributions.
25    (g) Each active participant in the System shall participate
26in the self-directed retirement plan established under

 

 

HB3644- 16 -LRB101 07764 RPS 52813 b

1subsection (f) and, in lieu of the contributions otherwise
2provided for in this Article, shall contribute 8% of his or her
3salary, earnings, or compensation, whichever is applicable, to
4the plan. The employer of each of those active participants
5shall contribute 7% of salary to that plan on behalf of the
6participant.
7    (h) The provisions of this amendatory Act of the 101st
8General Assembly apply notwithstanding any other law. If there
9is a conflict between the provisions of this amendatory Act of
10the 101st General Assembly and any other law, the provisions of
11this Section shall control.

 

 

HB3644- 17 -LRB101 07764 RPS 52813 b

1 INDEX
2 Statutes amended in order of appearance
3    40 ILCS 5/2-124from Ch. 108 1/2, par. 2-124
4    40 ILCS 5/2-134from Ch. 108 1/2, par. 2-134
5    40 ILCS 5/2-167 new