SB1646 103RD GENERAL ASSEMBLY

LRB103 27811 RPS 54189 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB1646

Introduced 2/8/2023, by Sen. Robert F. Martwick

SYNOPSIS AS INTRODUCED:

40 ILCS 5/15-202
40 ILCS 5/16-204
40 ILCS 5/24-104	from Ch. 108 1/2, par. 24-104
40 ILCS 5/24-107	from Ch. 108 1/2, par. 24-107
110 ILCS 95/2	from Ch. 144, par. 1702

Amends the State Universities and Downstate Teacher Articles of the Illinois Pension Code. Provides that in administering the optional deferred compensation plan, the System shall require that the deferred compensation plan recordkeeper agree that, in performing services with respect to the deferred compensation plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the deferred compensation plan or the participants in the deferred compensation plan to solicit the participants in the deferred compensation plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the deferred compensation plan; and (ii) will not promote, recommend, endorse, or solicit participants in the deferred compensation plan to purchase any financial products or services outside of the deferred compensation plan. Adds similar provisions with regard to the deferred compensation plan and local government deferred compensation plans under the Deferred Compensation Article. Amends the University Employees Custodial Accounts Act. Provides that in administering a defined contribution plan to provide retirement benefits, the governing board of any public institution of higher education shall require that the plan recordkeeper agree that, in performing services with respect to the plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the plan or the plan's participants to solicit the plan's participants for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the plan; and (ii) will not promote, recommend, endorse, or solicit participants in the plan to purchase any financial products or services outside of the plan.

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 changing Sections 15-202, 16-204, 24-104, and 24-107 as follows:

(40 ILCS 5/15-202)

Sec. 15-202. Optional deferred compensation plan.

(a) As soon as practicable after August 10, 2018 (the effective date of Public Act 100-769), the System shall offer a deferred compensation plan that is eligible under Section 457(b) of the Internal Revenue Code of 1986, as amended, to participating employees of the System employed by employers described in Section 15-106 of this Code that qualify as eligible employers under Section 457(e)(1)(A) of the Internal Revenue Code of 1986, as amended. Such eligible employers shall adopt the plan with an effective date no later than September 1, 2021. Participating employees may voluntarily elect to make elective deferrals to the eligible deferred compensation plan. Eligible employers may make optional employer contributions to the plan on behalf of participating employees, which contributions may be maintained, increased, reduced, or eliminated at the discretion of the employer from plan year to plan year. The plan shall collect voluntary employee and optional employer contributions into an account for each participant and shall offer investment options to the participant. The plan under this Section shall be operated in full compliance with any applicable State and federal laws, and the System shall utilize generally accepted practices in creating and maintaining the plan for the best interest of the participants. In administering the deferred compensation plan, the System shall require that the deferred compensation plan recordkeeper agree that, in performing services with respect to the deferred compensation plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the deferred compensation plan or the participants in the deferred compensation plan to solicit the participants in the deferred compensation plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the deferred compensation plan; and (ii) will not promote, recommend, endorse, or solicit participants in the deferred compensation plan to purchase any financial products or services outside of the deferred compensation plan. The System may use funds from the employee and employer contributions to defray any and all costs of creating and maintaining the plan. The System shall produce an annual report on the participation in the plan and shall make the report public.

(b) The System shall automatically enroll in the eligible deferred compensation plan any employee of an eligible employer who first becomes a participating employee of the System on or after July 1, 2023 under an eligible automatic contribution arrangement that is subject to Section 414(w) of the Internal Revenue Code of 1986, as amended, and the United States Department of Treasury regulations promulgated thereunder. An employee who is automatically enrolled under this subsection (b) shall have 3% of his or her compensation, as defined by the plan, for each pay period deferred on a pre-tax basis into his or her account, subject to any contribution limits applicable to the plan. The Board may increase the default percentage of compensation deferred under this subsection (b).

An employee shall have 30 days from the date on which the System provides the notice required under Section 414(w) of the Internal Revenue Code of 1986, as amended, to elect to not participate in the eligible deferred compensation plan or to elect to increase or reduce the initial amount of elective deferrals made to the plan. In the absence of such affirmative election, the employee shall be automatically enrolled in the plan on the first day of the calendar month, or as soon as administratively practicable thereafter, following the 30th day from the date on which the System provides the required notice. An employee who has been automatically enrolled in the plan under this subsection (b) may elect, within 90 days of enrollment, to withdraw from the plan and receive a refund of amounts deferred, adjusted by applicable earnings and fees. An employee making such an election shall forfeit all employer matching contributions, if any, made with respect to such refunded elective deferrals and such forfeited amounts shall be used to defray plan expenses. Any refunded elective deferrals shall be included in the employee's gross income for the taxable year in which the refund is issued.

(c) The System may provide for one or more automatic contribution arrangements, which shall comply with all applicable Internal Revenue Service rules and regulations, in conjunction with or in lieu of the eligible automatic contribution arrangement under subsection (b), for participating employees of eligible employers whose annual earnings are limited by application of subsection (b) of Section 15-111 of this Code. The amount of elective deferrals made for the employee each pay period under an automatic contribution arrangement shall equal the default percentage specified by resolution of the Board multiplied by the employee's compensation as defined by the plan, subject to any contribution limits applicable to the plan, and shall be made on a pre-tax basis. An employee subject to this subsection (c) shall have 30 days from the date on which the System provides written notice to the employee to elect to not participate in the eligible deferred compensation plan or to elect to increase or reduce the amount of initial elective deferrals made to the plan. In the absence of such affirmative election, the employee shall be automatically enrolled in the plan beginning the first day of the calendar month, or as soon as administratively practicable thereafter, following the 30th day from the date on which the System provides the required notice.

(d) The System may provide that the default percentage for any employee automatically enrolled in the eligible deferred compensation plan under subsection (b) or (c) be increased by a specified percentage each plan year after the plan year in which the employee is automatically enrolled in the plan. The amount of automatic annual increases in any plan year shall not exceed 1% of compensation as defined by the plan.

(e) The changes made to this Section by this amendatory Act of the 102nd General Assembly are corrections of existing law and are intended to be retroactive to the effective date of Public Act 100-769, notwithstanding Section 1-103.1 of this Code.

(Source: P.A. 102-540, eff. 8-20-21.)

(40 ILCS 5/16-204)

Sec. 16-204. Optional defined contribution benefit. As soon as practicable after the effective date of this amendatory Act of the 100th General Assembly, the System shall offer a defined contribution benefit to active members of the System. The defined contribution benefit shall be an optional benefit to any member who chooses to participate. The defined contribution benefit shall collect optional employee and optional employer contributions into an account and shall offer investment options to the participant. The benefit under this Section shall be operated in full compliance with any applicable State and federal laws, and the System shall utilize generally accepted practices in creating and maintaining the benefit for the best interest of the participants. In administering the defined contribution benefit, the System shall require that the defined contribution benefit recordkeeper agree that, in performing services with respect to the defined contribution benefit, the recordkeeper: (i) will not use information received as a result of providing services with respect to the defined contribution benefit or the participants in the defined contribution benefit to solicit the participants in the defined contribution benefit for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the defined contribution benefit; and (ii) will not promote, recommend, endorse, or solicit participants in the defined contribution benefit to purchase any financial products or services outside of the defined contribution benefit. The System may use funds from the employee and employer contributions to defray any and all costs of creating and maintaining the benefit. In addition, the System may use funds provided under Section 16-158 of this Code to defray any and all costs of creating and maintaining the benefit and then shall reimburse those costs from funds received from the employee and employer contributions under this Section. All employers must comply with the reporting and administrative functions established by the System and are required to implement the benefits established under this Section. The System shall produce an annual report on the participation in the benefit and shall make the report public.

As soon as is practicable on or after January 1, 2022, the System shall automatically enroll any employee who first becomes an active member or participant in the System. A member automatically enrolled under this Section shall have 3% of his or her pre-tax gross compensation for each compensation period deferred into his or her deferred compensation account, unless the member otherwise instructs the System on forms approved by the System. A member may elect, in a manner provided for by the System, to not participate in the defined contribution benefit or to increase or reduce the amount of pre-tax gross compensation contributed, consistent with State or federal law. A member shall be automatically enrolled in the benefit beginning the first day of the pay period following the member's 30th day of employment. A member who has been automatically enrolled in the benefit may elect, within 90 days of enrollment, to withdraw from the benefit and receive a refund of amounts deferred, plus or minus any applicable earnings, investment fees, and administrative fees. Any refunded amount shall be included in the member's gross income for the taxable year in which the refund is issued.

On or after January 1, 2023, the System may elect to increase the automatic annual contributions under this Section. The increase in the rate of contribution, however, shall not exceed 2% of a member's pre-tax gross compensation per year, and at no time shall any total contribution exceed any contribution limits established by State or federal law.

(Source: P.A. 102-540, eff. 8-20-21.)

(40 ILCS 5/24-104) (from Ch. 108 1/2, par. 24-104)

Sec. 24-104. State Employees Deferred Compensation Plan.

In this Section, "Plan" means the State Employees Deferred Compensation Plan.

The Illinois State Board of Investment created under Article 22A of this Act shall develop and establish a deferred compensation plan for employees of the State which shall be known as the State Employees Deferred Compensation Plan. The Plan shall provide for the Board to review proposed investment offerings and shall require that only investments determined to be acceptable by the Board may be used for investing compensation deferred.

The Plan shall include appropriate provisions pertaining to its day to day operation providing for methods of electing to defer income, methods of changing the amount of income to be deferred, methods of selecting from among investment options available under the plan and such other provisions as may be appropriate.

In administering the Plan, the Board shall require that the Plan recordkeeper agree that, in performing services with respect to the Plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the Plan or the Plan's participants to solicit the Plan's participants for the purpose of cross-selling non-Plan products and services, unless in response to a request by a Plan participant; and (ii) will not promote, recommend, endorse, or solicit Plan participants to purchase any financial products or services outside of the Plan.

The Plan shall provide for the preparation, and distribution from time to time to all eligible State employees, of pamphlets describing the Plan and outlining the options and opportunities available to State employees under the Plan.

The Plan established under this Section shall not be implemented or amended until the Board is satisfied that compensation deferred under the Plan is not subject to income tax for the year in which it is earned and that the taxation of such compensation will be deferred until the time of its distribution to the employee.

The Board shall also review and oversee the administration of the Plan.

(Source: P.A. 81-671.)

(40 ILCS 5/24-107) (from Ch. 108 1/2, par. 24-107)

Sec. 24-107. Local government plans.

(a) Any unit of local government or school district may establish for its employees a deferred compensation plan program. Participation shall be by written agreement between each employee and the legislative authority of the unit of local government or school district providing for the deferral of such compensation and the subsequent investment and administration of such funds.

(b) Any unit of local government may establish an employer-funded money purchase retirement plan for those of its full time employees who are not eligible to participate in any pension fund or retirement system established under Articles 2 through 18 of this Code. Contributions to the plan shall be made by the unit of local government only from general purpose funds not derived from real property taxes imposed by the unit, at a rate to be determined from time to time by the unit of local government. However, the rate of employer contribution shall be (i) the same for all employees participating in the plan, and (ii) not more than 10% of the employee's salary.

Any benefits accruing to the participants in a retirement plan established under this subsection shall be protected from impairment in accordance with Article XIII, Section 5 of the Illinois Constitution. However, the unit of local government establishing such a plan may terminate it at any time, unless it has otherwise contractually agreed with its participating employees.

(c) The agency or department designated by the unit of local government or school district to establish and administer a plan or program authorized under subsection (a) or (b) of this Section may invest the assets of the plan in investments deemed appropriate by the agency or department, including but not limited to life insurance or annuity contracts, and share or share certificate accounts of State or federal credit unions, the accounts of which are insured as required by the Illinois Credit Union Act or the Federal Credit Union Act, whichever is applicable. The payment of employer contributions to a retirement plan established under subsection (b), and investment and payment to a participant of deferred compensation and income or gain thereon, if any, shall not be construed to be prohibited uses of the general assets of the unit of local government or school district.

This Section does not limit the power or authority of any unit of local government, school district or any institution supported in whole or in part by public funds to establish and administer any other deferred compensation plans that may be authorized by law and deemed appropriate by the officials of such subdivisions or institutions.

(d) In administering the deferred compensation plans authorized under this Section, the governing board or administrators of the sponsoring unit of local government or school district shall require that the deferred compensation plan recordkeeper agree that, in performing services with respect to the deferred compensation plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the deferred compensation plan or the deferred compensation plan's participants to solicit the participants in the deferred compensation plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the deferred compensation plan; and (ii) will not promote, recommend, endorse, or solicit participants in the deferred compensation plan to purchase any financial products or services outside of the deferred compensation plan.

(Source: P.A. 87-794.)

Section 10. The University Employees Custodial Accounts Act is amended by changing Section 2 as follows:

(110 ILCS 95/2) (from Ch. 144, par. 1702)

Sec. 2. The governing board of any public institution of higher education has the power to establish a defined contribution plan to make payments to custodial accounts for investment in regulated investment company stock to provide retirement benefits as described in Section 403(b)(7) of the Internal Revenue Code for eligible employees of such institutions. Such payments shall be made with funds made available by deductions from or reductions in salary or wages of eligible employees who authorize in writing deductions or reductions for such purpose. Such stock shall be purchased only from persons authorized to sell such stock in this State.

In administering the defined contribution plan, the governing board of any public institution of higher education shall require that the defined contribution plan recordkeeper agree that, in performing services with respect to the defined contribution plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the defined contribution plan or the participants in the defined contribution plan to solicit the participants in the defined contribution plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the defined contribution plan; and (ii) will not promote, recommend, endorse, or solicit participants in the defined contribution plan to purchase any financial products or services outside of the defined contribution plan.

(Source: P.A. 83-261.)