Illinois General Assembly - Full Text of HB5535
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Full Text of HB5535  98th General Assembly

HB5535 98TH GENERAL ASSEMBLY

  
  

 


 
98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5535

 

Introduced , by Rep. Ron Sandack

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/2-124  from Ch. 108 1/2, par. 2-124
40 ILCS 5/2-167 new

    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's retirement age matrix to proportionally discount the increase in statutory retirement age based on proximity to the currently established retirement age. Provides a new funding formula for State contributions, with a 100% funding goal through 2045 (determined using the projected unit credit actuarial cost method) and a 100% funding goal thereafter. Contains a nonacceleration provision.


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FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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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 2-124 and by adding Section 2-167 as follows:
 
6    (40 ILCS 5/2-124)  (from Ch. 108 1/2, par. 2-124)
7    (Text of Section after amendment by P.A. 98-599)
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% funded basis in accordance
14with actuarial recommendations by the end of State fiscal year
152044.
16    (b) The Board shall determine the amount of State
17contributions required for each fiscal year on the basis of the
18actuarial tables and other assumptions adopted by the Board and
19the prescribed rate of interest, using the formula in
20subsection (c).
21    (c) For State fiscal years 2016 through 2045, the minimum
22contribution to the System to be made by the State for each
23fiscal year shall be an amount determined by the System to be

 

 

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1sufficient to bring the total assets of the System up to 100%
2of the total actuarial liabilities of the System by the end of
3State fiscal year 2045. In making these determinations, the
4required State contribution shall be calculated each year as a
5level dollar amount over the years remaining to and including
6fiscal year 2045 and shall be determined under the projected
7unit credit actuarial cost method.
8    For State fiscal years 2015 through 2044, the minimum
9contribution to the System to be made by the State for each
10fiscal year shall be an amount determined by the System to be
11equal to the sum of (1) the State's portion of the projected
12normal cost for that fiscal year, plus (2) an amount sufficient
13to bring the total assets of the System up to 100% of the total
14actuarial liabilities of the System by the end of State fiscal
15year 2044. In making these determinations, the required State
16contribution shall be calculated each year as a level
17percentage of payroll over the years remaining to and including
18fiscal year 2044 and shall be determined under the projected
19unit cost method for fiscal year 2015 and under the entry age
20normal actuarial cost method for fiscal years 2016 through
212044.
22    For State fiscal years 2012 through 2015 2014, the minimum
23contribution to the System to be made by the State for each
24fiscal year shall be an amount determined by the System to be
25sufficient to bring the total assets of the System up to 90% of
26the total actuarial liabilities of the System by the end of

 

 

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1State fiscal year 2045. In making these determinations, the
2required State contribution shall be calculated each year as a
3level percentage of payroll over the years remaining to and
4including fiscal year 2045 and shall be determined under the
5projected unit credit actuarial cost method.
6    For State fiscal years 1996 through 2005, the State
7contribution to the System, as a percentage of the applicable
8employee payroll, shall be increased in equal annual increments
9so that by State fiscal year 2011, the State is contributing at
10the rate required under this Section.
11    Notwithstanding any other provision of this Article, the
12total required State contribution for State fiscal year 2006 is
13$4,157,000.
14    Notwithstanding any other provision of this Article, the
15total required State contribution for State fiscal year 2007 is
16$5,220,300.
17    For each of State fiscal years 2008 through 2009, the State
18contribution to the System, as a percentage of the applicable
19employee payroll, shall be increased in equal annual increments
20from the required State contribution for State fiscal year
212007, so that by State fiscal year 2011, the State is
22contributing at the rate otherwise required under this Section.
23    Notwithstanding any other provision of this Article, the
24total required State contribution for State fiscal year 2010 is
25$10,454,000 and shall be made from the proceeds of bonds sold
26in fiscal year 2010 pursuant to Section 7.2 of the General

 

 

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1Obligation Bond Act, less (i) the pro rata share of bond sale
2expenses determined by the System's share of total bond
3proceeds, (ii) any amounts received from the General Revenue
4Fund in fiscal year 2010, and (iii) any reduction in bond
5proceeds due to the issuance of discounted bonds, if
6applicable.
7    Notwithstanding any other provision of this Article, the
8total required State contribution for State fiscal year 2011 is
9the amount recertified by the System on or before April 1, 2011
10pursuant to Section 2-134 and shall be made from the proceeds
11of bonds sold in fiscal year 2011 pursuant to Section 7.2 of
12the General Obligation Bond Act, less (i) the pro rata share of
13bond sale expenses determined by the System's share of total
14bond proceeds, (ii) any amounts received from the General
15Revenue Fund in fiscal year 2011, and (iii) any reduction in
16bond proceeds due to the issuance of discounted bonds, if
17applicable.
18    Beginning in State fiscal year 2046, the minimum State
19contribution for each fiscal year shall be the amount needed to
20maintain the total assets of the System at 100% of the total
21actuarial liabilities of the System.
22    Beginning in State fiscal year 2045, 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.
26    Amounts received by the System pursuant to Section 25 of

 

 

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1the Budget Stabilization Act or Section 8.12 of the State
2Finance Act in any fiscal year do not reduce and do not
3constitute payment of any portion of the minimum State
4contribution required under this Article in that fiscal year.
5Such amounts shall not reduce, and shall not be included in the
6calculation of, the required State contributions under this
7Article in any future year until the System has reached a
8funding ratio of at least 90% 100%. A reference in this Article
9to the "required State contribution" or any substantially
10similar term does not include or apply to any amounts payable
11to the System under Section 25 of the Budget Stabilization Act.
12    Notwithstanding any other provision of this Section, the
13required State contribution for State fiscal year 2005 and for
14fiscal year 2008 and each fiscal year thereafter through State
15fiscal year 2014, as calculated under this Section and
16certified under Section 2-134, shall not exceed an amount equal
17to (i) the amount of the required State contribution that would
18have been calculated under this Section for that fiscal year if
19the System had not received any payments under subsection (d)
20of Section 7.2 of the General Obligation Bond Act, minus (ii)
21the portion of the State's total debt service payments for that
22fiscal year on the bonds issued in fiscal year 2003 for the
23purposes of that Section 7.2, as determined and certified by
24the Comptroller, that is the same as the System's portion of
25the total moneys distributed under subsection (d) of Section
267.2 of the General Obligation Bond Act. In determining this

 

 

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1maximum for State fiscal years 2008 through 2010, however, the
2amount referred to in item (i) shall be increased, as a
3percentage of the applicable employee payroll, in equal
4increments calculated from the sum of the required State
5contribution for State fiscal year 2007 plus the applicable
6portion of the State's total debt service payments for fiscal
7year 2007 on the bonds issued in fiscal year 2003 for the
8purposes of Section 7.2 of the General Obligation Bond Act, so
9that, by State fiscal year 2011, the State is contributing at
10the rate otherwise required under this Section.
11    (d) For purposes of determining the required State
12contribution to the System, the value of the System's assets
13shall be equal to the actuarial value of the System's assets,
14which shall be calculated as follows:
15    As of June 30, 2008, the actuarial value of the System's
16assets shall be equal to the market value of the assets as of
17that date. In determining the actuarial value of the System's
18assets for fiscal years after June 30, 2008, any actuarial
19gains or losses from investment return incurred in a fiscal
20year shall be recognized in equal annual amounts over the
215-year period following that fiscal year.
22    (e) For purposes of determining the required State
23contribution to the system for a particular year, the actuarial
24value of assets shall be assumed to earn a rate of return equal
25to the system's actuarially assumed rate of return.
26(Source: P.A. 97-813, eff. 7-13-12; 98-599, eff. 6-1-14.)
 

 

 

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1    (40 ILCS 5/2-167 new)
2    Sec. 2-167. Self-directed retirement plan; end of service
3credit.
4    (a) For the purposes of this Section:
5        "Active participant" means a participant in the System
6    who does not receive an annuity from the System.
7        "Automatic increase in retirement annuity" means an
8    automatic increase in retirement annuity that is granted
9    under this Article.
10        "Consumer price index-u" means the index published by
11    the Bureau of Labor Statistics of the United States
12    Department of Labor that measures the average change in
13    prices of goods and services purchased by all urban
14    consumers, United States city average, all items, 1982-84 =
15    100.
16        "Employer" means the State.
17        "Pensionable salary" means the amount of salary,
18    compensation, or earnings used by the System to calculate
19    the amount of an individual's retirement annuity.
20    (b) On and after the effective date of this amendatory Act
21of the 98th General Assembly, an active participant's
22participation in the System shall be limited to participation
23in a self-directed retirement plan established under
24subsection (f) of this Section.
25    All service credit under the System (including service

 

 

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1under any participating system if the participant elects to use
2the reciprocal provisions of Article 20) shall be considered
3for purposes of vesting in the benefits provided prior to the
4effective date of this Section, but only service earned and
5contributions made before that effective date shall be
6considered in determining the amount of those benefits. In lieu
7of receiving any such benefits, an active participant may elect
8to have an account balance established in his or her
9self-directed plan account in an amount equal to the amount of
10the contribution refund that the participant would be eligible
11to receive if he or she withdrew from service on the effective
12date of this Section and elected a refund of contributions,
13except that this hypothetical refund shall include interest at
14the effective rate for the respective years. The System shall
15make these transfers of assets to the self-directed plan as
16tax-free transfers in accordance with Internal Revenue Service
17guidelines.
18    (c) The pensionable salary of an active participant shall
19not exceed the pensionable salary of that participant as of the
20effective date of this amendatory Act of the 98th General
21Assembly.
22    (d) An annuitant shall not receive an automatic increase in
23retirement annuity on or after the effective date of this
24amendatory Act of the 98th General Assembly unless, according
25to the most recent actuarial valuations, the total assets of
26the System are equal to or greater than 100% of the total

 

 

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1actuarial liabilities of the System.
2    (e) The retirement age of active participants who are
3ineligible to retire as of the effective date of this
4amendatory Act of the 98th General Assembly shall be increased
5according to a schedule developed, as soon as practicable after
6the effective date of this amendatory Act of the 98th General
7Assembly, by the Public Pension Division of the Department of
8Insurance. The schedule of retirement ages adopted by
9administrative rule of the Division shall, at a minimum, ensure
10(i) that persons who first become active participants on or
11after the effective date of this amendatory Act of the 98th
12General Assembly are not eligible to retire until reaching the
13Social Security Normal Retirement Age and (ii) that persons who
14are active participants but ineligible to retire as of the
15effective date of this amendatory Act of the 98th General
16Assembly remain ineligible to retire until reaching age 59. The
17Division's schedule shall also provide for the adjustment of
18retirement ages using a matrix (i) that takes into account the
19current statutory retirement age for various classes of persons
20and service credit accrued by those persons as of the effective
21date of this amendatory Act of the 98th General Assembly and
22(ii) that proportionally discounts the increase in statutory
23retirement age based on proximity to the currently established
24retirement age. The minimum retirement age established under
25this subsection (e) shall not apply to active participants with
26respect to participation in a self-directed retirement plan

 

 

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1established under subsection (f) of this Section.
2    (f) As soon as practicable after the effective date of this
3amendatory Act of the 98th General Assembly, the System shall
4establish a self-directed retirement plan that allows
5individuals who are active participants and individuals who
6become active participants on or after the effective date of
7this amendatory Act of the 98th General Assembly the
8opportunity to accumulate assets for retirement through a
9combination of employee and employer contributions that may be
10invested in mutual funds, collective investment funds, or other
11investment products and used to purchase annuity contracts,
12either fixed or variable or a combination thereof. The plan
13must be qualified under the Internal Revenue Code of 1986.
14    At any time after withdrawal from service, a participant in
15the self-directed plan shall be entitled to a benefit that is
16based on the account values attributable to his or her
17participant contributions and the vested percentage of
18employer contributions, as well as any investment returns
19attributable to those contributions. A participant becomes
20vested in the employer's contributions credited to his or her
21account according to the following schedule:
22        (1) if the participant has completed less than 2 years
23    of service under the System (including service under any
24    participating system if the participant elects to use the
25    reciprocal provisions of Article 20), 0%;
26        (2) if the participant has completed at least 2 but

 

 

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1    less than 3 years of such service, 25%;
2        (3) if the participant has completed at least 3 but
3    less than 4 years of such service, 50%;
4        (4) if the participant has completed at least 4 but
5    less than 5 years of such service, 75%; and
6        (5) if the participant has completed at least 5 years
7    of such service, 100%.
8At the time of taking a benefit under the self-directed plan,
9any employer contributions that have not vested, and the
10investment returns attributable to those unvested employer
11contributions, shall be forfeited. Employer contributions that
12are forfeited shall be held in escrow by the company investing
13those contributions and shall be used, as directed by the
14System, for future allocations of employer contributions.
15    (g) Each active participant in the System shall participate
16in the self-directed retirement plan established under
17subsection (f) and, in lieu of the contributions otherwise
18provided for in this Article, shall contribute 8% of his or her
19salary, earnings, or compensation, whichever is applicable, to
20the plan. The employer of each of those active participants
21shall contribute 7% of salary to that plan on behalf of the
22participant.
23    (h) The provisions of this amendatory Act of the 98th
24General Assembly apply notwithstanding any other law,
25including Section 1-160 of this Code. If there is a conflict
26between the provisions of this amendatory Act of the 98th

 

 

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1General Assembly and any other law, the provisions of this
2Section shall control.
 
3    Section 95. No acceleration or delay. Where this Act makes
4changes in a statute that is represented in this Act by text
5that is not yet or no longer in effect (for example, a Section
6represented by multiple versions), the use of that text does
7not accelerate or delay the taking effect of (i) the changes
8made by this Act or (ii) provisions derived from any other
9Public Act.