Legislation

Legislation

Please note: SURS does not endorse specific pension reform legislation. Our goal is to update and educate SURS members concerning legislation that may affect their retirement benefits.

Senate

SB 0896
- Survivors Felony Forfeiture
Sponsor(s): Senator Pamela J. Althoff

SB 896 amends the General Assembly Retirement System, Downstate Policemen’s Pension Fund, Downstate Firefighters’ Pension Fund, Chicago Policemen’s Pension Fund, Chicago Firefighters’ Pension Fund, Illinois Municipal Retirement Fund, Chicago Municipal Pension Fund, Cook County Pension Fund, Cook County Forest Preserve District Pension Fund, Chicago Laborers’ Pension Fund, Chicago Park District Pension Fund, Metropolitan Water Reclamation District Pension Fund, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund and Judges Retirement System articles of the Illinois Pension Code.

SB 896 prohibits any benefits from being paid to a person who otherwise would receive a survivor benefit but is convicted of a felony relating to, arising out of, or in connection with the service of the employee from whom the benefit results. SB 896 applies to the survivors of individuals who first become participants in SURS after the effective date of the legislation.

SB 896 is identical to House Bill 250 of the 100th General Assembly, as introduced.

SB 896 takes effect immediately upon becoming law.

Status:

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SB 1714
- Investment Consultant Disclosures
Sponsor(s): Senator James F. Clayborne, Jr.

SB 1714 amends the General Provisions article of the Illinois Pension Code.

SB 1714 requires each consultant retained by the board of a retirement system, pension fund or investment board to disclose the following information by Jan. 1, 2018, and each Jan. 1 thereafter:

  • The total number of searches for investment services made by the consultant in the prior calendar year;

  • The total number of searches for investment services made by the consultant in the prior calendar year that included: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability;

  • The total number of searches for investment services made by the consultant in the prior calendar year in which the consultant recommended for selection: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability;

  • The total number of searches for investment services made by the consultant in the prior calendar year that resulted in the selection of: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability; and

  • The total dollar amount of investment made in the previous calendar year with: (i) a minority-owned business; (ii) a female-owned business; or (iii) a business owned by a person with a disability that was selected after a search for investment services performed by the consultant.

Beginning Jan. 1, 2018, the board of a retirement system, pension fund or investment board is prohibited from awarding a contract, oral or written, for consulting services without first requiring the consultant to make these disclosures.  These disclosures must be considered, within the bounds of financial and fiduciary prudence, prior to the awarding of a contract, oral or written, for consulting services.

SB 1714 also requires each consultant retained by the board of a retirement system, pension fund or investment board to disclose the following information by Jan. 1, 2018, and each Jan. 1 thereafter: all compensation and economic opportunity received in the last 24 months from investment advisors retained by the board of a retirement system, pension fund or investment board.  

Finally, SB 1714 requires each consultant to disclose the following information to the board of a retirement system, pension fund or investment board beginning Jan. 1, 2018: any compensation or economic opportunity received in the last 24 months from an investment advisor that is recommended for selection by the consultant.  The consultant must make this disclosure prior to the board selecting an investment advisor for appointment.  Beginning Jan. 1, 2018, the board of a retirement system, pension fund or investment board is prohibited from awarding a contract, oral or written, for consulting services without first requiring the consultant to make these disclosures.

SB 1714 takes effect immediately upon becoming law.

Status:

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SB 1798
- No Investments in Expatriate Corporations
Sponsor(s): Senator Michael E. Hastings

Senate Amendment #1 to SB 1798 amends the General Provisions article of the Illinois Pension Code to authorize the state-funded retirement systems to use shareholder activism prior to divestment to impact the behavior of expatriated entities.  

An expatriated entity is defined as “a foreign incorporated entity which is treated as an inverted domestic corporation under subsection (b) of Section 835 of the Homeland Security Act of 2002, 6 U.S.C. 395(b), or any subsidiary of such an entity.”

By April 1, 2018, the Illinois Investment Policy Board must make its best efforts to identify all expatriated entities and include those companies in the list of restricted companies distributed to each retirement system and the state treasurer.

To the extent the retirement system believes that shareholder activism would be more impactful than divestment, the retirement system has the authority to engage with an expatriated entity prior to divesting from it.  Methods of shareholder activism utilized by the retirement system may include, but are not limited to, bringing shareholder resolutions and proxy voting on shareholder resolutions. The retirement system must report on its shareholder activism and the outcome of such efforts to the Illinois Investment Policy Board by April 1 of each year.  However, if the engagement efforts of the retirement system are unsuccessful, then it must adhere to the normal procedures for divestment.

If a company ceases activity that designates it as an expatriated entity, then it is removed from the list of restricted companies (and is not subject to shareholder activism or divestment), unless it resumes such activities.

Senate Amendment #2 to SB 1798 clarifies that if the retirement system determines that its engagement efforts with an expatriated entity are unsuccessful, then it must adhere to the normal procedures for divestment.

As introduced, SB 1798 amends the General Provisions article of the Illinois Pension Code to prohibit the state-funded retirement systems from investing in expatriate corporations.  

An expatriate corporation is defined as a foreign incorporated entity to which all of the following apply: (1) it is publicly traded in the United States; (2) it is incorporated in a foreign tax haven; (3) less than 10 percent of the gross income of the foreign entity is derived from activities in the tax haven; (4) less than 10 percent of the employees of the foreign entity are permanently located in the tax haven; and (5) either of the following applies:

  • The foreign entity was established in connection with a transaction or series of related transactions pursuant to which: (i) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership; and (ii) immediately after the acquisition, more than 50 percent of the publicly traded stock, by vote or value, of the foreign entity is held by former shareholders of the domestic corporation or by former partners of the domestic partnership or related foreign partnership.  For purposes of item (ii), any stock sold in a public offering related to the transaction or a series of transactions is disregarded.
  • The foreign entity was established in connection with a transaction or series of related transactions pursuant to which (i) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership and (ii) the acquiring foreign entity is more than 50 percent owned, by vote or value, by domestic shareholders or partners.

By April 1, 2018, the Illinois Investment Policy Board must make its best efforts to identify all expatriate corporations and include those companies in the list of restricted companies distributed to each retirement system for this purpose.  If a company ceases activity that designates it as an expatriate corporation, then it must be removed from the list of restricted companies, and is subject to investment by the state-funded retirement systems, unless it resumes such activities.

As introduced, SB 1798 is identical to House Bill 3419 of the 100th General Assembly.

SB 1798 takes effect in accordance with the Effective Date of Laws Act.

Status:

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SB 1801
- Supplemental Defined Contribution Plan
Sponsor(s): Senator William E. Brady

SB 1801 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.

SB 1801 requires the SURS Board of Trustees to establish and maintain a defined contribution plan to address the retirement preparedness gap for participants in a defined benefit plan who are not on track to maintain their standard of living in retirement. The plan must be established within one year of the effective date of the legislation and must exist and serve in addition to other retirement, pension and benefit plans established under the Illinois Pension Code. All assets and income of the plan must be held in trust for the exclusive benefit of participants and their beneficiaries.

Each person who first became a participant of SURS before Jan. 1, 2011 (Tier I participants) and each person who first became a participant of SURS on or after Jan. 1, 2011 (Tier II participants) but prior to the creation of the supplemental defined contribution plan may voluntarily elect to enroll in the plan. Each person who becomes a Tier II participant after the creation of the supplemental defined contribution plan will be automatically enrolled in the plan at a contribution rate established by the Board, unless he or she opts out within 60 days after becoming a participant.

The supplemental defined contribution plan must be designed to enable participants to generate a stream of income to replace their pre-retirement income in retirement and must provide a variety of options for distributions to participants and their beneficiaries.

SB 1801 is identical to House Bill 3867 of the 100th General Assembly, as introduced.

SB 1801 takes effect immediately upon becoming law.

Status:

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SB 1820
- Partial and Full Accelerated Pension Benefit Payment Options
Sponsor(s): Senator Dan McConchie

SB 1820 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System Articles of the Illinois Pension Code.

Accelerated Pension Benefit Payment

SB 1820 authorizes an eligible person to irrevocably elect to receive an accelerated pension benefit payment, beginning Jan. 1, 2018.  The accelerated pension benefit payment consists of a one-time lump-sum payment equal to 70 percent of the net present value of the eligible person’s pension benefits in lieu of receiving any pension benefit from SURS.  The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receiving an accelerated pension benefit payment, a person’s credits and creditable service under SURS are terminated.  If the person subsequently returns to active service under SURS, then any benefits earned are based solely on the person’s credits and creditable service arising from the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS, and the terminated credits and creditable service cannot be reinstated.  A person who accepts an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits.

To be eligible for an accelerated pension benefit payment, a SURS member must have terminated service; met the age and service credit requirements for retirement; not have received a retirement annuity; not have a QILDRO in effect against him or her under SURS; not be a participant in the Self-Managed Plan; not have elected to receive a partial accelerated pension benefit payment; and have received counseling on asset management and the costs, benefits and risks of electing to receive the accelerated pension benefit payment in lieu of pension benefits.  

Partial Accelerated Pension Benefit Payment

SB 1820 authorizes an eligible person to make a written election to receive a partial accelerated pension benefit payment in exchange for a reduction in pension benefits, beginning Jan. 1, 2018.  In the written election, the eligible person must specify the percentage by which pension benefits are reduced.  However, an eligible person may not elect a percentage reduction of his or her pension benefits that would result in a partial accelerated pension benefit payment of less than $50,000. The partial accelerated pension benefit payment consists of a one-time lump-sum payment equal to 70 percent of the elected percentage of the net present value of the eligible person’s pension benefits.  A person who receives a partial accelerated pension benefit payment will have his or her pension benefits reduced by the percentage specified in the written election.  The percentage reduction in pension benefits cannot be modified after the partial accelerated pension benefit payment is received.  If a person who has received a partial accelerated pension benefit payment returns to active service, then any benefits earned must be reduced by the amount specified in the written election; the partial accelerated pension benefit payment may not be repaid to SURS; and the person is not eligible to elect or receive any additional partial accelerated pension benefit payment.

To be eligible for a partial accelerated pension benefit payment, a SURS member must have terminated service; met the age and service credit requirements for retirement; not have received a retirement annuity; not have a QILDRO in effect against him or her under SURS; not be a participant in the Self-Managed Plan; not have elected to receive an accelerated pension benefit payment; and have received counseling on asset management and the costs, benefits and risks of electing to receive a partial accelerated pension benefit payment in exchange for a reduction of pension benefits.

SB 1820 takes effect immediately upon becoming law.

Status:

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SB 2091
- No Investments in Businesses that Build a Border Wall
Sponsor(s): Senator Martin A. Sandoval

SB 2091 amends the General Provisions article of the Illinois Pension Code.

SB 2091 prohibits the state-funded retirement systems from investing in businesses that enter into a contract with the federal government for the purpose of building a wall along the border of Mexico and the United States of America. By May 1, 2017, the Illinois Investment Policy Board must make its best efforts to identify all companies that contract to build a border wall and include those companies in the list of restricted companies distributed to each retirement system for this purpose.

SB 2091 also makes similar changes under the Illinois Procurement Code.

SB 2091 is similar to House Bill 3061 of the 100th General Assembly, as introduced.

SB 2091 takes effect immediately upon becoming law.

Status:

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SB 2172
- Pension Reform
Sponsor(s): Senator Michael Connelly

SB 2172 amends the General Provisions, General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund and Judges Retirement System articles of the Illinois Pension Code.

Tier III Hybrid Plan

SB 2172 creates a Tier III hybrid plan for individuals who first become participants of SURS on or after six months after the effective date of the legislation (and who are not participants in the Self-Managed Plan).   Individuals who first become participants of SURS on or after six months after the effective date of the legislation (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.

For the defined benefit portion of the Tier III hybrid plan:

  • Final average salary (“FAS”) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning one year after retirement, calculated at one half of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the Tier III hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least one year of service with the same employer are equal to a rate set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Future benefits under the Tier III hybrid plan can be modified.  Benefit increases under the Tier III hybrid plan cannot take effect unless they are approved by a resolution or ordinance of the governing body of the unit of local government responsible for those employees.  

The actual employer (university or community college) must contribute an amount equal to the normal cost of the defined benefit portion of the Tier III hybrid plan, minus the employee contributions, plus 2 percent.  SURS must annually certify the amount of unfunded liability accrued in each employer’s account to be paid by the employer so that SURS becomes 90 percent funded by fiscal year 2045.  The actual employer must also contribute an amount equal to the employer portion of the defined contribution portion of the Tier III hybrid plan, as set on an individual employee basis.

Beginning November 1, 2019, SURS must annually determine the amount of the state contribution that would have been required for the next fiscal year if the Tier III hybrid plan had not taken effect, based on the law in effect on May 31, 2019.  Beginning in fiscal year 2021, an amount equal to the annual savings of the Tier III hybrid plan must be transferred from the General Revenue Fund to the Pension Stabilization Fund for distribution to the state-funded retirement systems until the earlier of fiscal year 2045 or until each system becomes 100 percent funded.

Accelerated Pension Benefit Payment Option

SB 2172 creates an accelerated pension benefit payment option for the first 10 percent of eligible SURS members each year.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, and annually thereafter, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to active service under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to active service.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits.

Voluntary Defined Contribution Plan

SB 2172 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of Tier I employees by July 1, 2018.  Under the defined contribution plan, a Tier 1 employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier 1 employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on the state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

SB 2172 makes three changes to the funding formula for SURS:  First, it requires the state contribution for fiscal year 2018 through fiscal year 2045 to be based on total payroll (which includes payroll that is not pensionable), but excluding payroll attributable to participants in the voluntary defined contribution plan.  Second, beginning in fiscal year 2018, it requires any increases or decreases attributable to changes in the System’s actuarial and investment assumptions to be phased in over a five-year period.  Third, it requires the fiscal year 2018 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

SB 2172 provides that, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than the increase in CPI-U for any year during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.  Earnings increases under contracts or collective bargaining agreements entered into, amended or renewed before the effective date of the legislation are excluded from this provision.  (Current law provides that if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than 6 percent during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.)

Additionally, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed $140,000, then the employer must pay a contribution to SURS for the portion of earnings in excess of that amount.  The employer contribution equals the amount of earnings in excess of $140,000 multiplied by the level percentage of payroll needed for SURS to become 90 percent funded by fiscal year 2045.

Effective Date

SB 2172 takes effect immediately upon becoming law.

Status:

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SB 2173
- Pension Reform
Sponsor(s): Senator Michael Connelly

SB 2173 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Chicago Teachers Retirement System articles of the Illinois Pension Code.

Tier I Offer and Consideration Pension Reform

SB 2173 requires each Tier I employee (i.e., each employee who first became a participant of SURS before Jan. 1, 2011, and who is not in the Self-Managed Plan) to elect one of two options:

  1. To accept a reduced and delayed automatic annual increase in retirement (the lesser of 3 percent or ½ of the increase in CPI-U, non-compounded, beginning the January on or after the earlier of age 67 or five years after retirement); or
  2. To keep the current Tier I automatic annual increase in retirement (3 percent compounded, beginning the January after retirement).

Each Tier I employee who elects to accept the reduced and delayed automatic annual increase in retirement will: receive a payment equal to 10 percent of his or her employee contributions made before the effective date of the election (which will not count towards his or her pension); pay reduced employee contributions moving forward (7.2 percent for regular employees and 8.55 percent for public safety employees); and have his or her future earnings increases count towards his or her pension.

Each Tier I employee who elects to keep the current Tier I automatic annual increase in retirement will not have his or her future earnings increases count towards his or her pension.

Generally, the election for Tier I employees will occur between Jan. 1, 2018, and March 31, 2018, and will become effective on July 1, 2018.  A Tier I employee who fails to make an election within the required time period is deemed to have chosen to keep the current Tier I automatic annual increase in retirement.

Retirees, Tier II employees (i.e., employees who first became participants of SURS on or after Jan. 1, 2011), and employees in the Self-Managed Plan are not required to make an election.

State Funding Changes

SB 2173 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

SB 2173 takes effect immediately upon becoming law.

Status:

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SB 2194
- Pension Reform
Sponsor(s): Senator Christine Radogno

SB 2194 amends the State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, and Chicago Teachers Retirement System articles of the Illinois Pension Code.  

Tier I Offer and Consideration Pension Reform

SB 2194 requires each Tier I employee (i.e., each employee who first became a participant of SURS before Jan. 1, 2011, and who is not in the Self-Managed Plan) to elect one of two options:

(1) To accept a reduced and delayed automatic annual increase in retirement (the lesser of 3 percent or ½ of the increase in CPI-U, non-compounded, beginning the January on or after the earlier of age 67 or five years after retirement); or

(2) To keep the current Tier I automatic annual increase in retirement (3 percent compounded, beginning the January after retirement).

Each Tier I employee who elects to accept the reduced and delayed automatic annual increase in retirement will: receive a payment equal to 10 percent of his or her employee contributions made before the effective date of the election (which will not count towards his or her pension); pay reduced employee contributions moving forward (7.2 percent for regular employees and 8.55 percent for public safety employees); and have his or her future earnings increases count towards his or her pension.

Each Tier I employee who elects to keep the current Tier I automatic annual increase in retirement will not have his or her future earnings increases count towards his or her pension.

Generally, the election for Tier I employees will occur between Jan. 1, 2018 and March 31, 2018, and will become effective on July 1, 2018.  A Tier I employee who fails to make an election within the required time period is deemed to have chosen to keep the current Tier I automatic annual increase in retirement.

Retirees, Tier II employees (i.e., employees who first became participants of SURS on or after Jan. 1, 2011), and employees in the Self-Managed Plan are not required to make an election.

State Funding Changes

SB 2194 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

SB 2194 takes effect immediately upon becoming law.

Status:

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SB 2195
- Pension Reform
Sponsor(s): Senator Christine Radogno

SB 2195 amends the State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, and Chicago Teachers Pension Fund articles of the Illinois Pension Code.

Tier III Hybrid Plan

SB 2195 creates a Tier III hybrid plan for individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan).   Individuals who first become participants of SURS on or after 6 months after the effective date of the legislation (and who are not participants in the Self-Managed Plan) can irrevocably elect to participate in Tier II within 30 days after becoming a participant.

For the defined benefit portion of the Tier III hybrid plan:

  • Final average salary (“FAS”) equals the average monthly (or annual) salary during the period of service in which earnings were the highest during the last 120 months (or 10 years) of service.
  • Pensionable earnings are capped at the federal Social Security Wage Base.
  • Age and service credits for retirement are the normal Social Security retirement age applicable to that member, but no earlier than age 67, with 10 years of service credit.
  • Retirement annuities are calculated using the following formula: 1.25 percent x each year of service credit x FAS.
  • Automatic annual increases are applied beginning 1 year after retirement, calculated at ½ of the percentage increase in the CPI-W.
  • Survivor benefits are equal to 66 2/3 percent of the member’s retirement annuity on the date of death, or 66 2/3 percent of the member’s earned annuity without an age reduction if the member was not retired on the date of death.
  • Employee contributions are equal to the lower of 6.2 percent of salary or the normal cost of benefits under the defined benefit portion of the plan.

For the defined contribution portion of the Tier III hybrid plan:

  • Employee contributions are equal to a minimum of 4 percent of salary.
  • Employer contributions for employees with at least 1 year of service with the same employer are equal to a rate set for individual employees, but no higher than 6 percent of salary and no lower than 2 percent of salary.
  • The participant vests in employer contributions when they are paid into his or her account.
  • The plan must provide a variety of investment options (including investments handled by the Illinois State Board of Investment) and a variety of options for payouts to retirees and their survivors.

Future benefits under the Tier III hybrid plan can be modified.  Benefit increases under the Tier III hybrid plan cannot take effect unless they are approved by a resolution or ordinance of the governing body of the unit of local government responsible for those employees.  

The actual employer (university or community college) must contribute an amount equal to the normal cost of the defined benefit portion of the Tier III hybrid plan, minus the employee contributions, plus 2 percent.  SURS must annually certify the amount of unfunded liability accrued in each employer’s account to be paid by the employer so that SURS becomes 90 percent funded by fiscal year 2045.  The actual employer must also contribute an amount equal to the employer portion of the defined contribution portion of the Tier III hybrid plan, as set on an individual employee basis.

Accelerated Pension Benefit Payment Option

SB 2195 creates an accelerated pension benefit payment option for the first 10 percent of eligible SURS members each year.  An eligible SURS member is a person who has terminated service; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; does not have a QILDRO in effect against him or her under SURS; and is not a participant in the Self-Managed Plan.  By January 1, 2018, and annually thereafter, SURS must calculate the net present value of pension benefits for each eligible person.  SURS must offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS.   The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended.  Upon receipt of an accelerated pension benefit payment, credits and creditable service under SURS are terminated.  If the member subsequently returns to participating employee status under SURS, then any subsequent pension benefits are based on the credits and creditable service accrued after the return to participating employee status.  The accelerated pension benefit payment cannot be repaid to SURS and previously terminated credits and creditable service cannot be reinstated under SURS.  A SURS member who receives an accelerated pension benefit payment will still receive any applicable retiree health insurance benefits.

Voluntary Defined Contribution Plan

SB 2195 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of Tier I employees by July 1, 2018.  Under the defined contribution plan, a Tier 1 employee could elect to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the defined contribution plan.  Participants in the defined contribution plan pay employee contributions at the same rate as other participants in SURS.  State contributions to the defined contribution plan are made at a uniform rate, no higher than the employer’s normal cost for Tier 1 employees in the defined benefit plan for that year and no lower than 3 percent of earnings. The rate of state contributions to the defined contribution plan is adjusted annually.  The defined contribution plan requires five years of service in order for the participant to vest in state contributions.  Failure to vest in state contributions results in the forfeiture of state contributions and any earnings on the state contributions. The defined contribution plan must provide a variety of options for investments and a variety of options for payouts to retirees and their survivors.  

State Funding Changes

SB 2195 makes three changes to the funding formula for SURS:  First, it requires the state contribution for fiscal year 2018 through fiscal year 2045 to be based on total payroll (which includes payroll that is not pensionable), but excluding payroll attributable to participants in the voluntary defined contribution plan.  Second, beginning in fiscal year 2018, it requires any increases or decreases attributable to changes in the System’s actuarial and investment assumptions to be phased-in over a five-year period.  Third, it requires the fiscal year 2018 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

SB 2195 provides that, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than the increase in CPI-U for any year during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.  Earnings increases under contracts or collective bargaining agreements entered into, amended or renewed before the effective date of the legislation are excluded from this provision.  (Current law provides that if a participant’s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than 6 percent during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS.)

Additionally, for academic years beginning on or after July 1, 2018, if a participant’s earnings exceed $140,000, then the employer must pay a contribution to SURS for the portion of earnings in excess of that amount.  The employer contribution equals the amount of earnings in excess of $140,000 multiplied by the level percentage of payroll needed for SURS to become 90 percent funded by fiscal year 2045.

Effective Date

SB 2195 takes effect immediately upon becoming law.

Status:

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SB 2197
- SURS Normal Cost Shift
Sponsor(s): Senator Kyle McCarter

SB 2197 amends the State Universities Retirement System article of the Illinois Pension Code.

SB 2197 requires the actual employer to pay the full employer’s normal cost of the benefits earned by its employees to SURS on a payroll-by-payroll basis. The employer normal cost rate is a percentage of earnings determined by SURS on a system-wide basis and certified by SURS to all employers for use in the applicable fiscal year.

SB 2197 requires SURS to certify the employer normal cost rate as soon as possible after the effective date of the legislation to employers for use in the remaining portion of the current fiscal year and by November 1st annually for use in the next fiscal year.

SB 2197 also requires SURS to recalculate and recertify the required State contribution for the current fiscal year based on the changes made by the legislation.

SB 2197 takes effect immediately upon becoming law.

Status:

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Appropriations

SB 2063
- Unbalanced Budget Response Act
Sponsor(s): Senator Christine Radogno

SB 2063 creates the Unbalanced Budget Response Act.

SB 2063 authorizes the governor to designate a contingency reserve to balance the budget. The contingency reserve may be comprised of amounts appropriated from funds held by the state treasurer to any agency for fiscal year 2017 and fiscal year 2018, including amounts appropriated under a statutory continuing appropriation. However, the governor cannot designate amounts to be set aside as a contingency reserve from amounts appropriated for: (1) payment of debt service; (2) general state aid for schools; or (3) grants for early childhood education.

Additionally, SB 2063 authorizes the governor to delay payments under any statutory continuing appropriation, except for payments of debt service, for fiscal year 2017 and fiscal year 2018. Any payment so delayed may be paid out of the next fiscal year’s appropriation.

SB 2063 is identical to House Bill 3868 of the 100th General Assembly.

SB 2063 takes effect immediately upon becoming law.

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SB 2164
- Governor’s Introduced FY 2018 Budget
Sponsor(s): Senator Christine Radogno

SB 2164 appropriates $1,461,685,000 for the annual required state contribution to SURS for fiscal year 2018. Of this amount, $1,321,685,000 is appropriated from the General Revenue Fund, and $140,000,000 is appropriated from the state Pensions Fund. The certified fiscal year 2018 state contribution to SURS is $1,753,685,000.

SB 2164 also appropriates $0 from the Education Assistance Fund for the state contribution to the College Insurance Program (“CIP”) for fiscal year 2018. The certified fiscal year 2018 state contribution to CIP is $4,133,336.

Payment of both the certified annual required state contribution to SURS ($1,753,685,000) and the certified state contribution to CIP ($4,133,336) are required under the state Pension Funds Continuing Appropriation Act.

SB 2164 is identical to House Bill 3926 of the 100th General Assembly, as introduced.

SB 2164 takes effect July 1, 2017, if Senate Bill 2063 of the 100th General Assembly (the Unbalanced Budget Response Act), as introduced in the Illinois Senate, becomes law.

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SB 2181
- FY 2017 and FY 2018 Budget Implementation Act
Sponsor(s): Senator William E. Brady

SB 2181 creates the Fiscal Year 2017 and Fiscal Year 2018 Budget Implementation Act.

As it relates to SURS, SB 2181 amends the State Finance Act and the Uniform Disposition of Unclaimed Property Act to authorize the use of money in the State Pensions Fund as part of the annual required state contribution to SURS for Fiscal Year 2018.

SB 2181 also amends the State Employees Group Insurance Act of 1971 and the State Pension Funds Continuing Appropriation Act to end the continuing appropriation of the annual certified State contribution for the College Insurance Program.

Finally, SB 2181 caps state general funds spending for fiscal year 2018 through fiscal year 2022 at $36 billion annually, except for: increases over amounts appropriated in fiscal year 2018 due to the certified state contributions to the five state-funded retirement systems; increases over amounts transferred in fiscal year 2018 pursuant to the General Obligation Bond Act; and increases over payments made in fiscal year 2018 necessary to cover state obligations of the State Employees Group Insurance Act of 1971. If the auditor general reports that state spending has exceeded the cap for the fiscal year, and if the General Assembly does not pass legislation to reduce state spending to a level at or below the cap, then, for the purposes of reducing state spending to a level at or below the cap, the governor may designate amounts to be set aside as a reserve from the amounts appropriated from the state general funds for all boards, commissions, agencies, institutions, authorities, colleges, universities, and bodies politic and corporate of the state. The amounts placed in reserves cannot be transferred, obligated, encumbered, expended or otherwise committed unless so authorized by law. Any public act authorizing the use of amounts placed in reserve by the governor is considered state spending, unless the public act authorizes the use of amounts placed in reserves in response to a fiscal emergency declared by the governor.

SB 2181 takes effect immediately upon becoming law.

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SB 2182
- FY 2017 and FY 2018 Budget
Sponsor(s): Senator William E. Brady

SB 2182 appropriates $1,481,426,000 from the General Revenue Fund to SURS as part of the annual required state contribution for fiscal year 2017. SB 2182 also appropriates $4,309,111 from the General Revenue Fund for the College Insurance Program for fiscal year 2017. These appropriations take effect immediately upon becoming law.

Public Acts 99-0523 and 99-0524 (The Fiscal Year 2016 and Fiscal Year 2017 Stopgap Budget) appropriated $190 million from the State Pensions Fund as part of the annual required state contribution to SURS for fiscal year 2017. When added to the amounts contained in SB 2182, the total appropriation for the annual required state contribution to SURS for fiscal year 2017 equals $1,671,426,000, which is the amount of the total certified state contribution for fiscal year 2017. $4,309,111 is the amount of the certified state contribution to the College Insurance Program for fiscal year 2017.

SB 2182 appropriates $1,461,685,000 to SURS as part of the annual required State contribution for Fiscal Year 2018. Of this amount, $1,306,685,000 is appropriated from the General Revenue Fund, and $155,000,000 is appropriated from the State Pensions Fund. SB 2182 also appropriates $3,307,000 from the General Revenue Fund for the College Insurance Program for Fiscal Year 2018. These appropriations take effect on July 1, 2017.

The certified State contribution to SURS for fiscal year 2018 is $1,753,685,000. Under current law, the difference between this amount and the amount contained in SB 2182 (or $292,000,000) would come from the General Revenue Fund under the State Pension Funds Continuing Appropriation Act. The certified state contribution to the College Insurance Program for fiscal year 2018 is $4,133,336. Under current law, the difference between this amount and the amount contained in SB 2182 (or $826,336) would come from the General Revenue Fund under the State Pension Funds Continuing Appropriation Act.

SB 2182 does not take effect unless Senate Bill 2178 of the 100th General Assembly (The Budget Management and Control Act), as introduced in the Illinois Senate, becomes law.

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