HB3004 103RD GENERAL ASSEMBLY

LRB103 30209 RPS 56637 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB3004

Introduced 2/16/2023, by Rep. Janet Yang Rohr

SYNOPSIS AS INTRODUCED:

40 ILCS 5/4-105e new
40 ILCS 5/4-109	from Ch. 108 1/2, par. 4-109
40 ILCS 5/4-109.1	from Ch. 108 1/2, par. 4-109.1
40 ILCS 5/4-109.4 new
30 ILCS 805/8.47 new

Amends the Downstate Firefighter Article of the Pension Code. Provides for a Deferred Retirement Option Plan, under which a firefighter who is at least age 50 with 20 years of service may continue in active service for up to 3 years while having his or her retirement pension paid into a special account, to be distributed to the firefighter upon retirement. Bases the retirement pension on the firefighter's service and salary at the time of joining the DROP plan. Requires termination of service at the end of the DROP plan participation period. Amends the State Mandates Act to require implementation without reimbursement. Effective immediately.

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT 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 4-105e and 4-109.4 and changing Sections 4-109 and 4-109.1 as follows:

(40 ILCS 5/4-105e new)

Sec. 4-105e. Deferred Retirement Option Plan. "Deferred Retirement Option Plan" or "DROP plan" means the Deferred Retirement Option Plan established under Section 4-109.3.

(40 ILCS 5/4-109) (from Ch. 108 1/2, par. 4-109)

Sec. 4-109. Pension.

(a) A firefighter age 50 or more with 20 or more years of creditable service, who is no longer in service as a firefighter, shall receive a monthly pension of 1/2 the monthly salary attached to the rank held by him or her in the fire service at the date of retirement.

The monthly pension shall be increased by 1/12 of 2.5% of such monthly salary for each additional month over 20 years of service through 30 years of service, to a maximum of 75% of such monthly salary.

The changes made to this subsection (a) by this amendatory Act of the 91st General Assembly apply to all pensions that become payable under this subsection on or after January 1, 1999. All pensions payable under this subsection that began on or after January 1, 1999 and before the effective date of this amendatory Act shall be recalculated, and the amount of the increase accruing for that period shall be payable to the pensioner in a lump sum.

For a firefighter who retires at the conclusion of participation in the DROP plan, calculation of the amount of the retirement pension shall be based on the firefighter's salary and accumulated service on the date he or she began participation in the DROP plan and shall include any annual increases that would have accrued under Section 4-109.1 if the firefighter had retired on that date.

(b) A firefighter who retires or is separated from service having at least 10 but less than 20 years of creditable service, who is not entitled to receive a disability pension, and who did not apply for a refund of contributions at his or her last separation from service shall receive a monthly pension upon attainment of age 60 based on the monthly salary attached to his or her rank in the fire service on the date of retirement or separation from service according to the following schedule:

For 10 years of service, 15% of salary;

For 11 years of service, 17.6% of salary;

For 12 years of service, 20.4% of salary;

For 13 years of service, 23.4% of salary;

For 14 years of service, 26.6% of salary;

For 15 years of service, 30% of salary;

For 16 years of service, 33.6% of salary;

For 17 years of service, 37.4% of salary;

For 18 years of service, 41.4% of salary;

For 19 years of service, 45.6% of salary.

(c) Notwithstanding any other provision of this Article, the provisions of this subsection (c) apply to a person who first becomes a firefighter under this Article on or after January 1, 2011.

A firefighter age 55 or more who has 10 or more years of service in that capacity shall be entitled at his option to receive a monthly pension for his service as a firefighter computed by multiplying 2.5% for each year of such service by his or her final average salary.

The pension of a firefighter who is retiring after attaining age 50 with 10 or more years of creditable service shall be reduced by one-half of 1% for each month that the firefighter's age is under age 55.

The maximum pension under this subsection (c) shall be 75% of final average salary.

For the purposes of this subsection (c), "final average salary" means the greater of: (i) the average monthly salary obtained by dividing the total salary of the firefighter during the 48 consecutive months of service within the last 60 months of service in which the total salary was the highest by the number of months of service in that period; or (ii) the average monthly salary obtained by dividing the total salary of the firefighter during the 96 consecutive months of service within the last 120 months of service in which the total salary was the highest by the number of months of service in that period.

Beginning on January 1, 2011, for all purposes under this Code (including without limitation the calculation of benefits and employee contributions), the annual salary based on the plan year of a member or participant to whom this Section applies shall not exceed $106,800; however, 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, including all previous adjustments.

For a firefighter who retires at the conclusion of participation in the DROP plan, calculation of the amount of the retirement pension shall be based on the firefighter's salary and accumulated service on the date he or she began participation in the DROP plan and shall include any annual increases that would have accrued under Section 4-109.1 if the firefighter had retired on that date.

Nothing in this amendatory Act of the 101st General Assembly shall cause or otherwise result in any retroactive adjustment of any employee contributions.

(Source: P.A. 101-610, eff. 1-1-20.)

(40 ILCS 5/4-109.1) (from Ch. 108 1/2, par. 4-109.1)

Sec. 4-109.1. Increase in pension.

(a) Except as provided in subsection (e), the monthly pension of a firefighter who retires after July 1, 1971 and prior to January 1, 1986, shall, upon either the first of the month following the first anniversary of the date of retirement if 60 years of age or over at retirement date, or upon the first day of the month following attainment of age 60 if it occurs after the first anniversary of retirement, be increased by 2% of the originally granted monthly pension and by an additional 2% in each January thereafter. Effective January 1976, the rate of the annual increase shall be 3% of the originally granted monthly pension.

(b) The monthly pension of a firefighter who retired from service with 20 or more years of service, on or before July 1, 1971, shall be increased, in January of the year following the year of attaining age 65 or in January 1972, if then over age 65, by 2% of the originally granted monthly pension, for each year the firefighter received pension payments. In each January thereafter, he or she shall receive an additional increase of 2% of the original monthly pension. Effective January 1976, the rate of the annual increase shall be 3%.

(c) The monthly pension of a firefighter who is receiving a disability pension under this Article shall be increased, in January of the year following the year the firefighter attains age 60, or in January 1974, if then over age 60, by 2% of the originally granted monthly pension for each year he or she received pension payments. In each January thereafter, the firefighter shall receive an additional increase of 2% of the original monthly pension. Effective January 1976, the rate of the annual increase shall be 3%.

(c-1) On January 1, 1998, every child's disability benefit payable on that date under Section 4-110 or 4-110.1 shall be increased by an amount equal to 1/12 of 3% of the amount of the benefit, multiplied by the number of months for which the benefit has been payable. On each January 1 thereafter, every child's disability benefit payable under Section 4-110 or 4-110.1 shall be increased by 3% of the amount of the benefit then being paid, including any previous increases received under this Article. These increases are not subject to any limitation on the maximum benefit amount included in Section 4-110 or 4-110.1.

(c-2) On July 1, 2004, every pension payable to or on behalf of a minor or disabled surviving child that is payable on that date under Section 4-114 shall be increased by an amount equal to 1/12 of 3% of the amount of the pension, multiplied by the number of months for which the benefit has been payable. On July 1, 2005, July 1, 2006, July 1, 2007, and July 1, 2008, every pension payable to or on behalf of a minor or disabled surviving child that is payable under Section 4-114 shall be increased by 3% of the amount of the pension then being paid, including any previous increases received under this Article. These increases are not subject to any limitation on the maximum benefit amount included in Section 4-114.

(d) The monthly pension of a firefighter who retires after January 1, 1986, shall, upon either the first of the month following the first anniversary of the date of retirement if 55 years of age or over, or upon the first day of the month following attainment of age 55 if it occurs after the first anniversary of retirement, be increased by 1/12 of 3% of the originally granted monthly pension for each full month that has elapsed since the pension began, and by an additional 3% in each January thereafter.

The changes made to this subsection (d) by this amendatory Act of the 91st General Assembly apply to all initial increases that become payable under this subsection on or after January 1, 1999. All initial increases that became payable under this subsection on or after January 1, 1999 and before the effective date of this amendatory Act shall be recalculated and the additional amount accruing for that period, if any, shall be payable to the pensioner in a lump sum.

For the purpose of calculating eligibility for increases under this Section, the date of retirement of a firefighter who retires at the conclusion of participation in the DROP plan shall be deemed to be the date he or she began participation in the DROP plan.

(e) Notwithstanding the provisions of subsection (a), upon the first day of the month following (1) the first anniversary of the date of retirement, or (2) the attainment of age 55, or (3) July 1, 1987, whichever occurs latest, the monthly pension of a firefighter who retired on or after January 1, 1977 and on or before January 1, 1986 and did not receive an increase under subsection (a) before July 1, 1987, shall be increased by 3% of the originally granted monthly pension for each full year that has elapsed since the pension began, and by an additional 3% in each January thereafter. The increases provided under this subsection are in lieu of the increases provided in subsection (a).

(f) In July 2009, the monthly pension of a firefighter who retired before July 1, 1977 shall be recalculated and increased to reflect the amount that the firefighter would have received in July 2009 had the firefighter been receiving a 3% compounded increase for each year he or she received pension payments after January 1, 1986, plus any increases in pension received for each year prior to January 1, 1986. In each January thereafter, he or she shall receive an additional increase of 3% of the amount of the pension then being paid. The changes made to this Section by this amendatory Act of the 96th General Assembly apply without regard to whether the firefighter was in service on or after its effective date.

(g) Notwithstanding any other provision of this Article, the monthly pension of a person who first becomes a firefighter under this Article on or after January 1, 2011 shall be increased on the January 1 occurring either on or after the attainment of age 60 or the first anniversary of the pension start date, whichever is later. Each annual increase shall be calculated at 3% or one-half 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, whichever is less, of the originally granted pension. If the annual unadjusted percentage change in the consumer price index-u for a 12-month period ending in September is zero or, when compared with the preceding period, decreases, then the pension shall not be increased.

For the purposes of this subsection (g), "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. 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 boards of the pension funds.

For the purpose of calculating eligibility for increases under this Section, the date of retirement of a firefighter who retires at the conclusion of participation in the DROP plan shall be deemed to be the date he or she began participation in the DROP plan.

(Source: P.A. 96-775, eff. 8-28-09; 96-1495, eff. 1-1-11.)

(40 ILCS 5/4-109.4 new)

Sec. 4-109.4. Deferred Retirement Option Plan.

(a) The Deferred Retirement Option Plan created by this Section shall first become available to eligible firefighters on January 1, 2024.

(b) To be eligible to participate in the DROP plan, a firefighter must (i) be in active service, (ii) have attained age 50, and (iii) have at least 20 years of creditable service in the fund. A firefighter may participate in the DROP plan only once.

(c) An election to participate in the DROP plan must be made within 3 years after becoming eligible under subsection (b).

The election to participate in the DROP plan shall be made in writing on forms provided for that purpose by the Board and shall be filed with the Board. The application must indicate the date upon which participation in the DROP plan is to begin, which shall be the first day of a calendar month and not less than 30 days nor more than 90 days after the date of filing the application.

As a part of the application, the firefighter must file with the Board and with his or her employer an irrevocable letter of resignation from employment, effective on the date of termination of the firefighter's participation in the DROP plan (unless that termination results from acceptance of a disability benefit).

(d) A firefighter's participation in the DROP plan shall commence on the date specified in the application and shall end upon (i) termination of service, (ii) death of the firefighter, (iii) disability for which the firefighter receives a benefit under Section 4-110, 4-110.1, or 4-111, or (iv) expiration of 3 years from the date the firefighter's participation in the DROP plan began, whichever occurs first.

(e) A firefighter who is participating in the DROP plan shall be considered an active firefighter for the purposes of this Article, including Section 4-121, but shall be subject to the special conditions of the DROP plan.

A firefighter shall continue to make the contributions that are required for active firefighters during his or her participation in the DROP plan. These contributions shall be accumulated in the firefighter's DROP account and shall be treated as being "picked up" within the meaning of Section 4-118.2 of this Code and Section 414(h)(2) of the Internal Revenue Code of 1986, as amended.

A firefighter who is participating in the DROP plan shall not receive service credit for the period of that participation, and the salary earned during that period shall be disregarded in calculating the firefighter's benefits under this Article.

(f) A firefighter who participates in the DROP plan may terminate service at any time during participation in the DROP plan. A firefighter who participates in the DROP plan must terminate service on the last day of participation in the DROP plan, unless participation in the DROP plan is ended due to acceptance of a disability benefit.

(g) A firefighter who is participating in the DROP plan remains eligible to apply for a disability benefit under Section 4-110, 4-110.1, or 4-111, but participation in the DROP plan ceases upon acceptance of the disability benefit. If participation in the DROP plan is ended due to acceptance of a disability benefit, (1) the disabled firefighter shall be credited with employee contributions and creditable service for the period of participation in the DROP plan, (2) the firefighter's letter of resignation from service that is required to be filed at the time of application to participate in the DROP plan is void, and (3) the amounts in the disabled firefighter's DROP account are forfeited to the fund.

(h) The fund shall maintain a separate DROP account for the benefit of each firefighter who becomes a participant in the DROP plan. The fund shall pay into the firefighter's DROP account:

(1) for each month of the firefighter's participation in the DROP plan, an amount equal to the monthly retirement pension that the firefighter would have been eligible to receive if the firefighter had terminated service and taken a retirement pension on the date his or her participation in the DROP plan began, including any increases in pension for which the firefighter would have been eligible under Section 4-109.1;

(2) the employee contributions paid by the firefighter during the period of participation in the DROP plan; and

(3) interest on the balance in the DROP account, at the rate of 7% per annum, paid and compounded monthly, throughout the period of participation in the DROP plan. The DROP account shall cease earning interest when the firefighter's participation in the DROP plan ends.

(i) In addition to the retirement pension under Section 4-109, a firefighter who terminates service and retires at the conclusion of his or her participation in the DROP plan shall receive, upon retirement, a DROP benefit equal to the balance in the firefighter's DROP account at the time of retirement.

At the time of application for a retirement pension, the firefighter shall elect to receive the DROP benefit in the form of either a lump sum or an actuarially equivalent annuity for life. If a lump sum payment is elected, it may be rolled over into an individual retirement account or a qualified retirement plan. A DROP benefit payable in the form of an annuity shall be in a fixed amount not subject to annual or other increases. A DROP benefit shall be treated as a retirement benefit for the purposes of Section 1-119.

(j) If a firefighter receiving a DROP benefit in the form of an annuity re-enters service, the DROP benefit annuity payments shall be suspended until the firefighter's subsequent retirement.

(k) If a firefighter dies while participating in the DROP plan, the DROP benefit shall be paid as a lump sum to the surviving spouse or other survivor of the firefighter entitled to a pension under Section 4-114 or, if there is no such survivor, then to the deceased firefighter's estate.

(l) If a retired firefighter dies while receiving a DROP benefit in the form of an annuity, and the DROP account balance at the time of retirement exceeds the total amount of DROP benefit annuity payments received, the excess shall be refunded to the surviving spouse or other survivor of the firefighter entitled to a pension under Section 4-114 or, if there is no such survivor, then to the deceased firefighter's estate.

Section 90. The State Mandates Act is amended by adding Section 8.47 as follows:

(30 ILCS 805/8.47 new)

Sec. 8.47. Exempt mandate. Notwithstanding Sections 6 and 8 of this Act, no reimbursement by the State is required for the implementation of any mandate created by this amendatory Act of the 103rd General Assembly.

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