Full Text of HB5666 97th General Assembly
HB5666 97TH GENERAL ASSEMBLY |
| | 97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012 HB5666 Introduced 2/16/2012, by Rep. Mike Fortner SYNOPSIS AS INTRODUCED: |
| 40 ILCS 5/7-130.1 new | | 40 ILCS 5/7-130.2 new | | 40 ILCS 5/7-140.5 new | | 40 ILCS 5/7-173 | from Ch. 108 1/2, par. 7-173 | 40 ILCS 5/7-173.3 new | | 30 ILCS 805/8.36 new | |
40 ILCS 5/7-173 | from Ch. 108 1/2, par. 7-173 |
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Amends the Illinois Municipal Retirement Fund (IMRF) Article of the Illinois Pension Code. Allows persons who first become participants on or after January 1, 2011 to elect to participate in a self-managed program of retirement benefits instead of the program of reformed retirement benefits currently offered. Provides that a self-managed plan shall authorize a participant to accumulate assets for retirement through a combination of employer and employee contributions that may be invested at the participant's direction in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts. Requires the Fund to make the self-managed plan available within 6 months after the effective date of the amendatory Act. Amends the State Mandates Act to require implementation without reimbursement. Effective immediately.
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| | FISCAL NOTE ACT MAY APPLY | PENSION IMPACT NOTE ACT MAY APPLY | STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT |
| | 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,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Pension Code is amended by adding | 5 | | Sections 7-130.1, 7-130.2, 7-140.5, and 7-173.3 and changing | 6 | | Section 7-173 as follows: | 7 | | (40 ILCS 5/7-130.1 new)
| 8 | | Sec. 7-130.1. Reformed benefit package. "Reformed benefit
| 9 | | package" means the benefit retirement program maintained by the | 10 | | Fund for persons who first become participants of the Fund on | 11 | | or after January 1, 2011. It
includes the following benefits | 12 | | for those persons: retirement annuities payable directly from | 13 | | the Fund; surviving spouse annuities payable directly from the | 14 | | Fund; child annuities payable directly from the Fund; | 15 | | contribution refunds; and separation benefits. | 16 | | (40 ILCS 5/7-130.2 new)
| 17 | | Sec. 7-130.2. Self-managed plan. "Self-managed plan" means | 18 | | the defined
contribution retirement program maintained by the | 19 | | Fund, as described in
Section 7-173.3. The self-managed plan | 20 | | does not
include retirement, surviving spouse, or child | 21 | | annuities
payable directly from the Fund, contribution | 22 | | refunds, or separation benefits. |
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| 1 | | (40 ILCS 5/7-140.5 new)
| 2 | | Sec. 7-140.5. Retirement program elections. | 3 | | (a) For the purposes of this Article: | 4 | | "Currently eligible participant"
means a person who first | 5 | | became or becomes a participant under this Article on or after | 6 | | January 1, 2011 and is a participant under this Article before | 7 | | the day on which the Fund first offers the
self-managed plan as | 8 | | an alternative to the reformed benefit package. | 9 | | "Eligible participant" means either a currently eligible | 10 | | participant or a newly eligible
participant of the Fund | 11 | | "Newly
eligible participant" means a person who first | 12 | | becomes a participant
under this Article on or after the date | 13 | | on which the Fund first offers the self-managed plan as an | 14 | | alternative to the reformed benefit package.
| 15 | | (b) When the Fund offers to participants under this Article | 16 | | a
self-managed plan as an alternative to the reformed benefit | 17 | | package, each eligible participant shall be
given the choice to | 18 | | elect which retirement program he or she wishes to
participate | 19 | | in with respect to all periods of covered employment occurring | 20 | | on,
before, and after the effective date of the participant's | 21 | | election. The retirement
program election made by an eligible | 22 | | participant must be made in writing, in the
manner prescribed | 23 | | by the Fund, and within the time period described in
this | 24 | | Section. | 25 | | If an eligible participant elects the self-managed plan, |
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| 1 | | then that election is irrevocable. If an eligible participant | 2 | | who elected to participate or participated by default in the | 3 | | reformed benefit plan terminates employment under this | 4 | | Article, then the participant, upon his or her subsequent
| 5 | | re-employment under this Article, may make an election under | 6 | | this Section. | 7 | | An eligible participant who fails to make an election under | 8 | | this Section shall, by default,
participate in the reformed | 9 | | benefit package.
| 10 | | (c) An eligible participant may elect to
participate in the | 11 | | reformed benefit package
or the self-managed plan. An eligible | 12 | | participant must make this election within one year
after the | 13 | | effective date of the adoption of the self-managed plan under | 14 | | Section 7-173.3 or 60 days after first becoming a participant | 15 | | under this Article, whichever is later, or, in the case of a | 16 | | currently eligible participant who terminates employment under | 17 | | this Article, within one year after his or her re-employment | 18 | | under this Article.
| 19 | | (d) If the eligible participant elects to participate in | 20 | | the self-managed plan, the Fund shall fund his or her account | 21 | | as stated in subsection (f) of Section 7-173.3.
| 22 | | (e) An eligible participant shall be provided with written | 23 | | information prepared
or prescribed by the Fund that describes | 24 | | the participant's retirement program
choices. The eligible | 25 | | participant shall be offered an opportunity to
receive | 26 | | counseling from the Fund before making his or her election. |
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| 1 | | This
counseling may consist of videotaped materials, group | 2 | | presentations, individual
consultation with an employee or | 3 | | authorized representative of the Fund in
person or by telephone | 4 | | or other electronic means, or any combination of these
methods.
| 5 | | (40 ILCS 5/7-173) (from Ch. 108 1/2, par. 7-173)
| 6 | | Sec. 7-173. Contributions by employees.
| 7 | | (a) Each participating employee shall make contributions | 8 | | to the fund as
follows:
| 9 | | 1. For retirement annuity purposes, normal | 10 | | contributions of 3 3/4%
of earnings.
| 11 | | 2. Additional contributions of such percentages of | 12 | | each payment of
earnings, as shall be elected by the | 13 | | employee for retirement annuity
purposes, but not in excess | 14 | | of 10%. The selected rate shall be
applicable to all | 15 | | earnings paid following receipt by the Board of written | 16 | | notice of election to
make such contributions. Additional | 17 | | contributions at the selected rate
shall be made | 18 | | concurrently with normal contributions.
| 19 | | 3. Survivor contributions, by each participating | 20 | | employee, of 3/4%
of each payment of earnings. | 21 | | Notwithstanding this item 3, in the case of an employee who | 22 | | participates in the self-managed plan under Section | 23 | | 7-173.3, contributions for a survivor's annuity shall | 24 | | instead be used to finance the benefits available under | 25 | | Section 1-173.3.
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| 1 | | (b) Each employee shall make contributions for Federal
| 2 | | Social Security taxes, for periods during which he is a covered
| 3 | | employee, as required by the Social Security Enabling Act and | 4 | | State and federal law. For
participating employees, such | 5 | | contributions shall be in addition to
those required under | 6 | | paragraph (a) of this Section.
| 7 | | (c) Contributions shall be deducted from each | 8 | | corresponding payment
of earnings paid to each employee and | 9 | | shall be remitted to the board by
the participating | 10 | | municipality or participating instrumentality making
such | 11 | | payment. The remittance, together with a report of the earnings
| 12 | | and contributions shall be made as directed by the board. For | 13 | | township
treasurers and employees of township treasurers | 14 | | qualifying as employees
hereunder, the contributions herein | 15 | | required as deductions from salary
shall be withheld by the | 16 | | school township trustees from funds available
for the payment | 17 | | of the compensation of such treasurers and employees as
| 18 | | provided in the School Code and remitted to the board.
| 19 | | (d) An employee who has made additional contributions under
| 20 | | paragraph (a)2 of this Section may upon retirement or at any | 21 | | time prior
thereto, elect to withdraw the total of such | 22 | | additional contributions
including interest credited thereon | 23 | | to the end of the preceding calendar
year.
| 24 | | (e) Failure to make the deductions for employee | 25 | | contributions
provided in paragraph (c) of this Section shall | 26 | | not relieve the employee
from liability for such contributions. |
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| 1 | | The amount of such liability may
be deducted, with interest | 2 | | charged under Section 7-209, from any
annuities or benefits | 3 | | payable hereunder to the employee or any other
person receiving | 4 | | an annuity or benefit by reason of such employee's
| 5 | | participation.
| 6 | | (f) A participating employee who has at least 40 years of | 7 | | creditable
service in the Fund may elect to cease making the | 8 | | contributions required
under this Section. The status of the | 9 | | employee under this Article shall be
unaffected by this | 10 | | election, except that the employee shall not receive any
| 11 | | additional creditable service for the periods of employment | 12 | | following the
election. An election under this subsection | 13 | | relieves the employer from
making additional employer | 14 | | contributions in relation to that employee.
| 15 | | (Source: P.A. 96-1084, eff. 7-16-10; 96-1258, eff. 7-23-10; | 16 | | 97-333, eff. 8-12-11.)
| 17 | | (40 ILCS 5/7-173.3 new)
| 18 | | Sec. 7-173.3. Self-managed plan. | 19 | | (a) The General Assembly finds that the Illinois Municipal | 20 | | Retirement Fund should have the flexibility to provide a | 21 | | defined contribution
(self-managed) plan for eligible | 22 | | participants.
Accordingly, the Illinois Municipal Retirement | 23 | | Fund is hereby authorized to
establish and administer a | 24 | | self-managed plan, which shall offer participants the | 25 | | opportunity to accumulate assets for retirement through a
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| 1 | | combination of participant and employer contributions that may | 2 | | be invested in
mutual funds, collective investment funds, or | 3 | | other investment products and
used to purchase annuity | 4 | | contracts that are fixed, variable, or a combination of fixed | 5 | | and variable. The plan must be qualified under the Internal | 6 | | Revenue Code of 1986. | 7 | | (b) The Board shall
adopt the self-managed plan established | 8 | | under this Section for eligible participants under this | 9 | | Article. The adoption of the self-managed
plan makes available | 10 | | to the eligible participants under this Article the elections
| 11 | | described in Section 7-140.5.
| 12 | | The Illinois Municipal Retirement Fund shall be the plan | 13 | | sponsor for the
self-managed plan and shall prepare a plan | 14 | | document and adopt any rules
and procedures that are considered | 15 | | necessary or desirable for the administration
of the | 16 | | self-managed plan. Consistent with its fiduciary duty to the
| 17 | | participants and beneficiaries of the self-managed plan, the | 18 | | Board of Trustees
of the Fund may delegate aspects of plan | 19 | | administration as it sees fit to
companies authorized to do | 20 | | business in this State.
| 21 | | (c) The Fund shall solicit proposals to provide
| 22 | | administrative services and funding vehicles for the | 23 | | self-managed plan from
insurance and annuity companies and | 24 | | mutual fund companies, banks, trust
companies, or other | 25 | | financial institutions authorized to do business in this
State. | 26 | | In reviewing the proposals received and approving and |
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| 1 | | contracting with
no fewer than 2 and no more than 7 companies, | 2 | | the Board of Trustees of the Fund shall
consider, among other | 3 | | things, the following criteria:
| 4 | | (1) the nature and extent of the benefits that would be | 5 | | provided
to the participants;
| 6 | | (2) the reasonableness of the benefits in relation to | 7 | | the premium
charged;
| 8 | | (3) the suitability of the benefits to the needs and
| 9 | | interests of the participants and the employers; and | 10 | | (4) the ability of the company to provide benefits | 11 | | under the contract and
the financial stability of the | 12 | | company.
| 13 | | The System shall periodically review
each approved | 14 | | company. A company may continue to provide administrative
| 15 | | services and funding vehicles for the self-managed plan only so | 16 | | long as
it continues to be an approved company under contract | 17 | | with the Board.
| 18 | | In addition to the companies approved by the Fund under | 19 | | this subsection (c), the Fund may offer its participants an | 20 | | investment fund managed by the Illinois State Board of | 21 | | Investment.
| 22 | | (d) Participants in the program
must be allowed to direct | 23 | | the transfer of their account balances among the
various | 24 | | investment options offered, subject to applicable contractual
| 25 | | provisions.
The participant shall not be deemed a fiduciary by | 26 | | reason of providing such
investment direction. A person who is |
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| 1 | | a fiduciary shall not be liable for any
loss resulting from | 2 | | that investment direction and shall not be deemed to have
| 3 | | breached any fiduciary duty by acting in accordance with that | 4 | | direction.
Neither the Fund nor the employer shall guarantee | 5 | | any of the investments in the
participant's account balances.
| 6 | | (e) Eligible participants, as defined in Section 7-140.5, | 7 | | must make a written election to participate in the
self-managed | 8 | | plan in accordance with the
provisions of Section 7-140.5 and | 9 | | the procedures established by the Fund.
Participation in the | 10 | | self-managed plan shall begin
on the first day of the month | 11 | | immediately following the month in which the
participant's | 12 | | election is filed with the Fund, but not sooner than the | 13 | | effective date of
the self-managed
plan. The Fund shall make | 14 | | the self-managed plan available under this Article within 6 | 15 | | months after the effective date of this amendatory Act of the | 16 | | 97th General Assembly. A member's participation in the reformed | 17 | | benefit package under this Article shall terminate on the date | 18 | | that
participation in the self-managed plan begins.
| 19 | | A member who has elected to participate in the self-managed | 20 | | plan under
this Section must continue participation while he or | 21 | | she remains a participant under this Article, and may not | 22 | | participate in the reformed benefit package.
| 23 | | Participation in the self-managed plan under this Section | 24 | | shall constitute
participation in the Illinois Municipal | 25 | | Retirement Fund.
| 26 | | A participant under this Section shall be entitled to the |
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| 1 | | benefits of
Article 20 of this Code.
| 2 | | (f) If, at the time a participant
elects to participate in | 3 | | the self-managed plan, the participant has rights and credits
| 4 | | in the Fund due to previous participation in the reformed | 5 | | benefit package,
the Fund shall establish for the participant | 6 | | an opening account balance in the
self-managed plan, equal to | 7 | | (1) the amount of the separation benefit that the participant
| 8 | | would be eligible to receive if the participant terminated
| 9 | | employment on that date and elected a separation benefit and | 10 | | (2) an amount, representing employer contributions, equal to | 11 | | the amount of employee contributions, plus interest. The | 12 | | interest used in this subsection (f) shall be calculated using | 13 | | the actual annual rates of return that the Fund has earned | 14 | | during the time period corresponding to the actual investment | 15 | | of the contributions being transferred. The Fund shall transfer | 16 | | assets from the reformed benefit
package to the self-managed | 17 | | plan, as a tax-free transfer in
accordance with Internal | 18 | | Revenue Service guidelines, for purposes of funding
the | 19 | | participant's opening account balance.
| 20 | | (g) Notwithstanding any other provision
of this Article, a | 21 | | participant may not purchase or receive service or service
| 22 | | credit applicable to the reformed benefit package
under this | 23 | | Article for any period during which the employee was a | 24 | | participant
in the self-managed plan established under this | 25 | | Section.
| 26 | | (h) The self-managed plan shall be funded by contributions
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| 1 | | from participants in the self-managed plan and employer
| 2 | | contributions as provided in this Section.
| 3 | | The contribution rate for participants in the self-managed | 4 | | plan
under this Section shall be equal to the member | 5 | | contribution rate for other
participants in the Fund, as | 6 | | provided in Section 7-173. This required
contribution shall be | 7 | | made as an employer pick-up under Section 414(h) of the
| 8 | | Internal Revenue Code of 1986 or any successor Section thereof. | 9 | | Any participant in the Fund's reformed benefit package before | 10 | | his or her
election to participate in the self-managed plan | 11 | | shall continue to have the
employer pick up the contributions | 12 | | required under Section 7-173. However, the
amounts picked up | 13 | | after the election of the self-managed plan shall be remitted
| 14 | | to and treated as assets of the self-managed plan. In no event | 15 | | shall a participant have the option of receiving these amounts | 16 | | in cash. Participants may make
additional contributions to the
| 17 | | self-managed plan in accordance with procedures prescribed by | 18 | | the Fund, to
the extent permitted under rules adopted by the | 19 | | Fund.
| 20 | | The program shall provide for employer contributions to be | 21 | | credited to each self-managed plan participant
in an amount | 22 | | equal to the employee contributions, notwithstanding Section | 23 | | 7-172.
| 24 | | Each employer shall make contributions by appropriations | 25 | | to the
Fund for participants in
the self-managed plan under | 26 | | this Section.
The amount required shall
be certified by the |
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| 1 | | Board of Trustees of the Fund and paid by the employer in
| 2 | | accordance with Section 7-172. The Fund shall not be obligated | 3 | | to remit the
required employer contributions to any of the | 4 | | insurance and annuity
companies, mutual fund
companies, banks, | 5 | | trust companies, financial institutions, or other sponsors
of | 6 | | any of the funding vehicles offered under the self-managed plan
| 7 | | until it has received the required employer contributions from | 8 | | the employer
| 9 | | (i) A participant in the
self-managed plan becomes vested | 10 | | in the employer contributions credited to his
or her accounts | 11 | | in the self-managed plan on the earliest to occur of the
| 12 | | following: (1) attainment of 5 years of service credit; (2) the | 13 | | death of the participating member while employed under this | 14 | | Article, if the member has completed at
least 1.5 years of | 15 | | service; or (3) the member's election to retire and
apply the | 16 | | reciprocal provisions of Article 20 of this Code.
| 17 | | A participant in the self-managed plan who receives a | 18 | | distribution of his or
her vested amounts from the self-managed | 19 | | plan
while not yet eligible for retirement under this Article
| 20 | | (and Article 20, if applicable) shall forfeit all service | 21 | | credit
and accrued rights in the Fund; if he or she | 22 | | subsequently becomes a participant under this Article again, he | 23 | | or she
shall be considered a new
participant. If a former | 24 | | participant again becomes a participant (or
becomes employed by | 25 | | a participating system under Article 20 of this Code) and
| 26 | | continues as such for at least 2 years, all rights, service |
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| 1 | | credits, and
previous status as a participant shall be restored | 2 | | upon repayment of the amount
of the distribution, with interest | 3 | | at the actuarially assumed rate from the date of distribution | 4 | | until the date of payment.
| 5 | | (j) If a participant in the self-managed plan who is vested | 6 | | in employer
contributions terminates employment, the | 7 | | participant shall be entitled to a
benefit that is based on the
| 8 | | account values attributable to both employer and
employee | 9 | | contributions and any
investment return thereon.
| 10 | | If a participant in the self-managed plan who is not vested | 11 | | in employer contributions terminates
employment, the | 12 | | participant shall be entitled to a benefit based solely on the
| 13 | | account values attributable to the participant's contributions | 14 | | and any investment
return thereon, and the employer | 15 | | contributions and any investment return
thereon shall be | 16 | | forfeited. Any employer contributions that are forfeited
shall | 17 | | be held in escrow by the
company investing those contributions | 18 | | and shall be used, as directed by the
Fund, for future | 19 | | allocations of employer contributions or for the restoration
of | 20 | | amounts previously forfeited by former participants who again | 21 | | become
participating members.
| 22 | | Section 90. The State Mandates Act is amended by adding | 23 | | Section 8.36 as follows: | 24 | | (30 ILCS 805/8.36 new) |
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| 1 | | Sec. 8.36. Exempt mandate. Notwithstanding Sections 6 and 8 | 2 | | of this Act, no reimbursement by the State is required for the | 3 | | implementation of any mandate created by this amendatory Act of | 4 | | the 97th General Assembly.
| 5 | | Section 99. Effective date. This Act takes effect upon | 6 | | becoming law.
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