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.

House

HB 4055
- Pension Reform
Sponsor(s): Representative Mark Batinick

HB 4055 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.   

Optional Hybrid Plan

HB 4055 creates an optional 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 optional 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 optional 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 optional hybrid plan can be modified.  Benefit increases under the optional 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 optional 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 optional 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 optional hybrid plan had not taken effect, based on the law in effect on May 31, 2019.   Beginning in fiscal year 2021, the an amount equal to the annual savings of the optional 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

HB 4055 creates an accelerated pension benefit payment option.  Eligible SURS members may elect the accelerated pension benefit payment option between January 1, 2018 and July 1, 2018.  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, 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

HB 4055 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

HB 4055 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 in the state contribution 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

HB 4055 provides that, beginning in fiscal year 2019, if a contract or collective bargaining agreement entered into, amended, or renewed on or after the effective date of the legislation provides for earnings to exceed the salaries provided under the preceding contract or collective bargaining agreement, then the employer must pay the current value of the projected amount of the resulting increase in benefits, reflecting whether the participants are Tier I or Tier II members, to SURS.

Effective Date

HB 4055 takes effect immediately upon becoming law.

Status:

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HB 4057
- Pension Reform
Sponsor(s): Representative Jeanne M. Ives

HB 4057 amends the General Provisions, General Assembly Retirement System, Illinois Municipal Retirement Fund, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Judges Retirement System articles of the Illinois Pension Code.   

Restrictions on Pensionable Earnings and Service Credit

HB 4057 prohibits payments for unused sick or vacation time from counting towards the final rate of earnings of individuals who first become participants in SURS on or after the effective date of the legislation.  HB 4057 also prohibits individuals who first become participants in SURS on or after the effective date of the legislation from receiving service credit for unused sick leave.

Employee Non-Participation in SURS

HB 4057 establishes that a person is not required to participate in SURS.  An active employee may terminate his or her participation in SURS (including active participation in the Tier III Plan, if applicable) by notifying SURS in writing.  An active employee terminating participation in SURS is entitled to a refund of his or her contributions (other than contributions to the Self-Managed Plan or the Tier III Plan) minus the benefits received prior to the termination of participation.

Tier III Defined Contribution Plan

HB 4057 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  SURS must utilize the framework of the Self-Managed Plan and must endeavor to adapt the benefits and structure of the Self-Managed Plan to the Tier III plan.  Tier I participants and Tier II participants may make a voluntary, irrevocable election to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III defined contribution plan.  Additionally, all persons who first become participants in SURS on or after July 1, 2018, must participate in the Tier III defined contribution plan.  Participants in the Tier III defined contribution plan will receive any applicable retiree health insurance benefits upon retirement.

A Tier I or Tier II member who elects to participate in the Tier III defined contribution plan may irrevocably elect to terminate all participation in the defined benefit plan. Upon such election, SURS must transfer an amount equal to the amount of the contribution refund that the member would be eligible to receive, including interest at the effective rate for the respective years, to the member’s individual account in the defined contribution plan.  

Participant contributions to the Tier III defined contribution plan are at the rate of 8 percent of earnings.  State contributions to the Tier III defined contribution plan are at the rate of 7.6 percent of earnings (minus an amount to cover the cost of any defined disability benefits offered under the defined contribution plan).  (Participant contributions to the Tier III defined contribution plan are also reduced by an amount to cover the cost of any defined disability benefits.)  Tier III participants must have one year of service credit in the defined contribution plan to vest in state contributions.  Failure to vest results in the forfeiture of state contributions and any earnings thereon.  

The Tier III defined contribution plan must offer a variety of options for investments, including investments handled by SURS as well as private sector investment options; provide a variety of options for payouts to inactive participants and their survivors; and, to the extent authorized under federal law and as authorized by SURS, allow former participants to transfer or roll over employee and vested state contributions, and the earnings thereon, from the Tier III defined contribution plan into other qualified retirement plans.

Accelerated Pension Benefit Payment Option

HB 4057 creates an accelerated pension benefit payment option.  Eligible SURS members may elect the accelerated pension benefit payment option between January 1, 2018, and July 1, 2018.  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, 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. 

Employer Funding Changes

HB 4057 provides that, beginning in fiscal year 2019, if a contract or collective bargaining agreement entered into, amended or renewed on or after the effective date of the legislation provides for earnings to exceed the salaries provided under the preceding contract or collective bargaining agreement, then the employer must pay the current value of the projected amount of the resulting increase in benefits, reflecting whether the participants are Tier I or Tier II members, to SURS.

Effective Date

HB 4057 takes effect immediately upon becoming law.

Status:

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HB 4060
- Pension Reform
Sponsor(s): Representative Allen Skillicorn

HB 4060 amends the General Provisions, 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.   

Tier III Defined Contribution Plan

HB 4060 requires SURS to prepare and implement a Tier III defined contribution plan by July 1, 2018.  SURS must utilize the framework of the Self-Managed Plan and must endeavor to adapt the benefits and structure of the Self-Managed Plan to the Tier III plan.  Tier I participants and Tier II participants may make a voluntary, irrevocable election to stop accruing benefits in the defined benefit plan and start accruing benefits for future service in the Tier III defined contribution plan.  Additionally, all persons who first become participants in SURS on or after July 1, 2018, must participate in the Tier III defined contribution plan.  Participants in the Tier III defined contribution plan will receive any applicable retiree health insurance benefits.

A Tier I or Tier II member who elects to participate in the Tier III defined contribution plan may irrevocably elect to terminate all participation in the defined benefit plan. Upon such election, SURS must transfer an amount equal to the amount of the contribution refund that the member would be eligible to receive, including interest at the effective rate for the respective years, to the member’s individual account in the defined contribution plan.  

Participant contributions to the Tier III defined contribution plan are at the rate of 8 percent of earnings.  State contributions to the Tier III defined contribution plan are at the rate of 7.6 percent of earnings (minus an amount to cover the cost of any defined disability benefits offered under the defined contribution plan).  (Participant contributions to the Tier III defined contribution plan are also reduced by an amount to cover the cost of any defined disability benefits.)  Tier III participants must have five years of service credit in the defined contribution plan to vest in state contributions.  Failure to vest results in the forfeiture of state contributions and any earnings thereon.  

The Tier III defined contribution plan must offer a variety of options for investments, including investments handled by SURS as well as private sector investment options; provide a variety of options for payouts to inactive participants and their survivors; and, to the extent authorized under federal law and as authorized by SURS, allow former participants to transfer or roll over employee and vested state contributions, and the earnings thereon, from the Tier III defined contribution plan into other qualified retirement plans.

SURS, in consultation with the employers, must solicit proposals to provide administrative services and funding vehicles for the Tier III defined contribution plan from insurance and annuity companies, mutual fund companies, banks, trust companies or other financial institutions authorized to do business in Illinois.  SURS must contract with no fewer than two and no more than seven companies to provide administrative services and funding vehicles for the Tier III defined contribution plan.  Each approved company must be periodically reviewed by SURS in consultation with the employers.

Accelerated Pension Benefit Payment Option

HB 4060 creates an accelerated pension benefit payment option for up to 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. 

Effective Date

HB 4060 takes effect immediately upon becoming law.

Status:

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HB 4064
- Pension Reform
Sponsor(s): Representative Jim Durkin

HB 4064 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System and Chicago Teachers Pension Fund articles of the Illinois Pension Code. 

Tier I Offer and Consideration Pension Reform

HB 4064 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

HB 4064 requires the fiscal year 2019 state contribution to be recertified based on changes made by the legislation.

Effective Date

HB 4064 takes effect immediately upon becoming law.

Status:

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HB 4065
- Pension Reform
Sponsor(s): Representative Jim Durkin

HB 4065 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.   

Optional Hybrid Plan

HB 4065 creates an optional 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 optional 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 optional 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 optional hybrid plan can be modified.  Benefit increases under the optional 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.  

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 optional hybrid plan and the changes in employer contributions 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 optional 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

HB 4065 makes an accelerated pension benefit payment option available to eligible SURS participants between January 1, 2018 and July 1, 2018.  An eligible SURS participant is a person who is no longer a participating employee; has accrued the necessary service credit for retirement; has not received a retirement annuity from SURS; is not a party to pending divorce proceeding and 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, SURS must calculate the net present value of pension benefits for each eligible participant.  SURS must offer each eligible participant 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 acceptance of an accelerated pension benefit payment, the participant forfeits all accrued rights and credits in SURS.  If the participant 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 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

HB 4065 requires SURS to provide a voluntary defined contribution plan for up to 5 percent of eligible Tier I employees by July 1, 2018.  Only individuals who are Tier I employees of SURS on the effective date of the legislation are eligible to participate in the defined contribution plan.  Under the defined contribution plan, a Tier I 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 I 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 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

HB 4065 makes four 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, it requires a change in an actuarial or investment assumption that first applies in fiscal year 2018 or thereafter to be implemented in equal annual amounts over a five-year period beginning in the fiscal year in which the change first applies.  Third, it requires a change in an actuarial or investment assumption that first applied in fiscal year 2014, 2015, 2016 or 2017 to be phased-in over the years remaining in the five-year period from the fiscal year in which the change first applied, beginning in fiscal year 2018.  [For example, 80 percent of the cost of the changes that impacted the fiscal year 2017 state contribution would be implemented in equal annual amounts over the following fiscal years: 2018, 2019, 2020 and 2021.]  Fourth, it requires the fiscal year 2018 state contribution to be recertified based on changes made by the legislation.

Employer Funding Changes

Beginning in fiscal year 2019, HB 4065 requires the actual employer (university or community college) to contribute an annual amount equal to: 

(1) The normal cost of the defined benefit portion of the optional hybrid plan or the defined benefit plan (as applicable), minus the employee contributions, plus 2 percent (for its Tier III employees and Tier III employees who elect to participate in Tier II); plus 

(2) The amount required for that fiscal year to amortize any unfunded actuarial accrued liability attributable to the employer’s account (for the defined benefits attributable to its Tier III employees and Tier III employees who elect to participate in Tier II), determined as a level percentage of payroll over a 30-year rolling amortization period; plus 

(3) The total amount of earnings in excess of $140,000 for each employee multiplied by the level percentage of payroll used in the fiscal year in which the academic year began, as determined by SURS, to be sufficient for SURS to become 90 percent funded by the end of state fiscal year 2045.

HB 4065 requires SURS to create and maintain individual employer accounts for this purpose.

HB 4065 also requires the employer to pay the present value of benefits resulting from earnings increases above CPI-U during the final rate of earnings period to SURS, for academic years beginning on or after July 1, 2018.  Earnings increases under contracts or collective bargaining agreements entered into, amended or renewed before the effective date of the legislation are excluded from this requirement.  (Current law requires an employer to pay the present value of benefits resulting from earnings increases above 6 percent during the final rate of earnings period to SURS.)

Effective Date

HB 4065 takes effect immediately upon becoming law.

Status:

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HJRCA 18
- Repeal Pension Rights
Sponsor(s): Representative Joe Sosnowski

HJRCA 18 repeals Article 13, Section 5 of the Illinois Constitution (commonly referred to as the Pension Protection Clause). Article 13, Section 5 of the Illinois Constitution states: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

HJRCA 18 takes effect upon being declared adopted in accordance with Section 7 of the Illinois Constitutional Amendment Act.

Status:

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HR 0027
- Oppose Pension Cost Shift to Local Employers
Sponsor(s): Representative David McSweeney

HR 27 resolves that the Illinois House of Representatives believes that an educational pension cost shift is financially wrong and would only serve to shift pension burdens from the state to the status of an unfunded mandate.

Status:

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HR 0029
- Oppose Tax on Retirement Income
Sponsor(s): Representative David McSweeney

HR 29 resolves that the Illinois House of Representatives believes that the Illinois Income Tax Act should not be amended to permit taxing retirement income.

Status:

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HR 0038
- Oppose Pension Cost Shift to Local Employers
Sponsor(s): Representative Allen Skillicorn

House Amendment #1 to HR 38 resolves that the normal cost of pensions for Illinois educators is the responsibility of the State and that the current budget crisis should not be used as a reason to shift the financial responsibility for State pension costs to local taxpayers.

HR 38 resolves that the normal cost of pensions for Illinois educators is the responsibility of the state and the General Assembly should not use the current budget crisis as a reason to shift its financial responsibility for state pension costs to local taxpayers.

Status:

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HR 0076
- Urge Repeal of Federal Government Pension Offset and Windfall Elimination Provision
Sponsor(s): Representative Mary E. Flowers

HR 76 resolves that the Illinois House of Representatives urges the U.S. Congress to introduce and pass legislation that eliminates both the Government Pension Offset and the Windfall Elimination Provision.

HR 76 further resolves that suitable copies of the resolution be delivered to President Donald Trump, U.S. Senate Majority Leader Mitch McConnell, U.S. Senate Minority Leader Chuck Schumer, U.S. Speaker of the House Paul Ryan, U.S. House of Representatives Minority Leader Nancy Pelosi, and all members of the Illinois Congressional Delegation.

Status:

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HR 0542
- Urge Solution to Windfall Elimination Provision Problems
Sponsor(s): Representative Mary E. Flowers

HR 542 resolves that the Illinois House of Representatives urges President Trump and the United States Congress to continue to work to find a solution to the problems created by the Windfall Elimination Provision.

HR 542 further resolves that suitable copies of the resolution be delivered to President Donald Trump, U.S. Senate Majority Leader Mitch McConnell, U.S. Senate Minority Leader Chuck Schumer, U.S. Speaker of the House Paul Ryan, U.S. House of Representatives Minority Leader Nancy Pelosi, and all members of the Illinois Congressional Delegation.

Status:

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Appropriations

SB 0004
- State Pension Obligation Acceleration Bonds
Sponsor(s): Senator Donne E. Trotter

***As it passed the Senate, SB 4 amends the General Obligation Bond Act to authorize the State to issue $7 billion worth of State General Obligation Restructuring Bonds for the purpose of paying vouchers (bills) incurred by the State prior to July 1, 2017. As it passed the Senate, SB 4 does NOT include any language authorizing the issuance of State Pension Obligation Acceleration Bonds.***

Senate Amendment #1 to SB 4 adds language amending the Illinois State Finance Authority Act. It authorizes the Illinois Finance Authority to issue up to $250 million in State Pension Obligation Acceleration Bonds if the amount appropriated for accelerated pension benefit payments is less than the amount required for those payments. It further creates a continuing appropriation for the payment of principal and interest due on State Pension Obligation Acceleration Bonds. Senate Amendment #2 to SB 4 is identical to Senate Amendment #1 to SB 4. Senate Amendment #3 to SB 4 makes a technical change. Senate Amendment #4 removes Senate Bill 11 of the 100th General Assembly and adds Senate Bill 16 of the 100th General Assembly to the list of bills that must become law in order for the legislation to take effect. Senate Amendment #5 to SB 4 adds an immediate effective date that is not contingent upon the enactment of any other legislation.

As introduced, SB 4 amends the General Obligation Bond Act to authorize the State to issue $7 billion worth of State General Obligation Restructuring Bonds for the purpose of paying vouchers (bills) incurred by the State prior to July 1, 2017.

As introduced, SB 4 takes effect immediately upon becoming law, but does not take effect at all unless Senate Bills 1-3 and 5-13 of the 100th General Assembly also become law.

Status:

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SB 0006
- Fiscal Year 2018 Budget
Sponsor(s): Senator Heather A. Steans and Representative Gregory Harris

SB 6 appropriates $1,587,985,000 for the FY 2018 state contribution to SURS.  Of this amount, $1,372,985,000 comes from the General Revenue Fund and $215,000,000 comes from the State Pensions Fund.  The certified state contribution to SURS for FY 2018 is $1,753,685,000.  (Please note: SB 42 requires recertification of the FY 2018 state contribution by November 1, 2017.)

SB 6 also appropriates $4,133,336 for the FY 2018 state contribution to the College Insurance Program (CIP), which provides health insurance to community college retirees.  This amount is equal to the certified contribution for FY 2018.

SB 6 takes effect immediately upon becoming law.

Status:

Public Act 100-0021 (Effective July 6, 2017).

Senate

SB 0011
- Pension Reform
Sponsor(s): Senator John J. Cullerton

***Senate Bill 11 was called for a vote on Feb. 8, 2017.  It received 18 “yes” votes, 29 “no” votes and 10 “present” votes.  It needed 30 “yes” votes to pass the Senate.***

SB 11 amends the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Retirement System and Judges Retirement System Articles of the Illinois Pension Code.  (The changes to the State Employees Retirement System pertain to state funding and an accelerated pension benefit payment option, and the changes to the Judges Retirement System Article only pertain to state funding.)

Benefit Changes

SB 11 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 of 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.

SB 11 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.

SB 11 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 11 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 and fiscal year 2019 state contributions to be recertified based on changes made by the legislation.

Employer Funding Changes
 
SB 11 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.

SB 11 takes effect immediately upon becoming law, but it does not take effect unless Senate Bills 1-10 and 12-13 of the 100th General Assembly also become law.

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SB 0016
- Pension Reform
Sponsor(s): Senator John J. Cullerton

SB 16 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.   

Optional Hybrid Plan

SB 16 creates an optional 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 optional 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 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 optional 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 optional hybrid plan can be modified.  Benefit increases under the optional 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 optional 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 optional 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 optional hybrid plan had not taken effect, based on the law in effect on May 31, 2019.  Beginning in fiscal year 2021, the an amount equal to the annual savings of the optional 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.

Tier I Offer and Consideration Pension Reform

SB 16 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.

Accelerated Pension Benefit Payment Option

SB 16 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 16 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 16 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 and fiscal year 2019 state contributions to be recertified based on changes made by the legislation.

Employer Funding Changes

SB 16 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 16 takes effect immediately upon becoming law.

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