Bill Text: IL HB3276 | 2015-2016 | 99th General Assembly | Introduced

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Bill Title: Amends the General Assembly Article of the Illinois Pension Code. Requires the General Assembly Retirement System to establish a self-directed retirement plan. Provides that for persons who become a participant on or after the effective date of the amendatory Act, participation in the System shall be limited to participation in the self-directed retirement plan. Allows a Tier 1 or Tier 2 participant to make an irrevocable election to participate in the self-directed retirement plan instead of the defined benefit plan. Makes changes to the pensionable salary for active participants. Provides that upon a participant's first day of participation in the self-directed retirement plan, the participant becomes vested in his or her contributions to the self-directed retirement plan, the employer's contributions to the self-directed retirement plan, and the investment returns attributable to those contributions credited to his or her account. Provides a new funding formula for State contributions, with a 100% funding goal through 2045 (determined using the entry age normal actuarial cost method) and a 100% funding goal thereafter.

Sponsorship: Partisan Bill (Republican 1)

Status: (Introduced - Dead) 2015-02-26 - Referred to Rules Committee [HB3276 Detail]

Download: Illinois-2015-HB3276-Introduced.html

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99TH GENERAL ASSEMBLY State of Illinois 2015 and 2016 HB3276 Introduced , by Rep. Ron Sandack SYNOPSIS AS INTRODUCED:
40 ILCS 5/2-105.1
40 ILCS 5/2-124 from Ch. 108 1/2, par. 2-124
40 ILCS 5/2-134 from Ch. 108 1/2, par. 2-134
40 ILCS 5/2-167 new
Amends the General Assembly Article of the Illinois Pension Code. Requires the General Assembly Retirement System to establish a self-directed retirement plan. Provides that for persons who become a participant on or after the effective date of the amendatory Act, participation in the System shall be limited to participation in the self-directed retirement plan. Allows a Tier 1 or Tier 2 participant to make an irrevocable election to participate in the self-directed retirement plan instead of the defined benefit plan. Makes changes to the pensionable salary for active participants. Provides that upon a participant's first day of participation in the self-directed retirement plan, the participant becomes vested in his or her contributions to the self-directed retirement plan, the employer's contributions to the self-directed retirement plan, and the investment returns attributable to those contributions credited to his or her account. Provides a new funding formula for State contributions, with a 100% funding goal through 2045 (determined using the entry age normal actuarial cost method) and a 100% funding goal thereafter.
LRB099 02639 RPS 22645 b
FISCAL NOTE ACT MAY APPLY PENSION IMPACT NOTE ACT MAY APPLY
A BILL FOR
HB3276 LRB099 02639 RPS 22645 b
AN ACT concerning public employee benefits.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Pension Code is amended by changing
Sections 2-105.1, 2-124, and 2-134 and by adding Section 2-167
as follows:
(40 ILCS 5/2-105.1)
Sec. 2-105.1. Tier 1 participant; Tier 2 participant.
"Tier 1 participant": A participant who first became a
participant before January 1, 2011.
In the case of a Tier 1 participant who elects to
participate in the self-directed retirement plan under Section
2-167, that participant shall be deemed a Tier 1 participant
only with respect to service performed or established before
the effective date of that election.
"Tier 2 participant": A participant who first became a
participant on or after January 1, 2011 and before the
effective date of this amendatory Act of the 99th General
Assembly.
In the case of a Tier 2 participant who elects to
participate in the self-directed retirement plan under Section
2-167, that participant shall be deemed a Tier 2 participant
only with respect to service performed or established before

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the effective date of that election.
"Tier 3 participant": A participant who first becomes a
participant on or after the effective date of this amendatory
Act of the 99th General Assembly; or a Tier 1 or Tier 2
participant who elects to participate in the self-directed
retirement under Section 2-167 of this Code, but only with
respect to service performed or established on or after the
effective date of that election.
(Source: P.A. 98-599, eff. 6-1-14.)
(40 ILCS 5/2-124) (from Ch. 108 1/2, par. 2-124)
Sec. 2-124. Contributions by State.
(a) The State shall make contributions to the System by
appropriations of amounts which, together with the
contributions of participants, interest earned on investments,
and other income will meet the cost of maintaining and
administering the System on a 100% funded basis in accordance
with actuarial recommendations by the end of State fiscal year
2044.
(b) The Board shall determine the amount of State
contributions required for each fiscal year on the basis of the
actuarial tables and other assumptions adopted by the Board and
the prescribed rate of interest, using the formula in
subsection (c).
(c) For State fiscal years 2016 through 2045, the minimum
contribution to the System to be made by the State for each

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fiscal year shall be an amount determined by the System to be
sufficient to bring the total assets of the System up to 100%
of the total actuarial liabilities of the System by the end of
State fiscal year 2045. In making these determinations, the
required State contribution shall be calculated each year as a
level dollar amount over the years remaining to and including
fiscal year 2045 and shall be determined under the entry age
normal actuarial cost method. For State fiscal years 2015
through 2044, the minimum contribution to the System to be made
by the State for each fiscal year shall be an amount determined
by the System to be equal to the sum of (1) the State's portion
of the projected normal cost for that fiscal year, plus (2) an
amount sufficient to bring the total assets of the System up to
100% of the total actuarial liabilities of the System by the
end of State fiscal year 2044. In making these determinations,
the required State contribution shall be calculated each year
as a level percentage of payroll over the years remaining to
and including fiscal year 2044 and shall be determined under
the projected unit cost method for fiscal year 2015 and under
the entry age normal actuarial cost method for fiscal years
2016 through 2044.
For State fiscal years 2012 through 2015 2014, the minimum
contribution to the System to be made by the State for each
fiscal year shall be an amount determined by the System to be
sufficient to bring the total assets of the System up to 90% of
the total actuarial liabilities of the System by the end of

HB3276 - 4 - LRB099 02639 RPS 22645 b
State fiscal year 2045. In making these determinations, the
required State contribution shall be calculated each year as a
level percentage of payroll over the years remaining to and
including fiscal year 2045 and shall be determined under the
projected unit credit actuarial cost method.
For State fiscal years 1996 through 2005, the State
contribution to the System, as a percentage of the applicable
employee payroll, shall be increased in equal annual increments
so that by State fiscal year 2011, the State is contributing at
the rate required under this Section.
Notwithstanding any other provision of this Article, the
total required State contribution for State fiscal year 2006 is
$4,157,000.
Notwithstanding any other provision of this Article, the
total required State contribution for State fiscal year 2007 is
$5,220,300.
For each of State fiscal years 2008 through 2009, the State
contribution to the System, as a percentage of the applicable
employee payroll, shall be increased in equal annual increments
from the required State contribution for State fiscal year
2007, so that by State fiscal year 2011, the State is
contributing at the rate otherwise required under this Section.
Notwithstanding any other provision of this Article, the
total required State contribution for State fiscal year 2010 is
$10,454,000 and shall be made from the proceeds of bonds sold
in fiscal year 2010 pursuant to Section 7.2 of the General

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

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

HB3276 - 7 - LRB099 02639 RPS 22645 b
maximum for State fiscal years 2008 through 2010, however, the
amount referred to in item (i) shall be increased, as a
percentage of the applicable employee payroll, in equal
increments calculated from the sum of the required State
contribution for State fiscal year 2007 plus the applicable
portion of the State's total debt service payments for fiscal
year 2007 on the bonds issued in fiscal year 2003 for the
purposes of Section 7.2 of the General Obligation Bond Act, so
that, by State fiscal year 2011, the State is contributing at
the rate otherwise required under this Section.
(d) For purposes of determining the required State
contribution to the System, the value of the System's assets
shall be equal to the actuarial value of the System's assets,
which shall be calculated as follows:
As of June 30, 2008, the actuarial value of the System's
assets shall be equal to the market value of the assets as of
that date. In determining the actuarial value of the System's
assets for fiscal years after June 30, 2008, any actuarial
gains or losses from investment return incurred in a fiscal
year shall be recognized in equal annual amounts over the
5-year period following that fiscal year.
(e) For purposes of determining the required State
contribution to the system for a particular year, the actuarial
value of assets shall be assumed to earn a rate of return equal
to the system's actuarially assumed rate of return.
(Source: P.A. 97-813, eff. 7-13-12; 98-599, eff. 6-1-14.)

HB3276 - 8 - LRB099 02639 RPS 22645 b
(40 ILCS 5/2-134) (from Ch. 108 1/2, par. 2-134)
Sec. 2-134. To certify required State contributions and
submit vouchers.
(a) The Board shall certify to the Governor on or before
December 15 of each year until December 15, 2011 the amount of
the required State contribution to the System for the next
fiscal year and shall specifically identify the System's
projected State normal cost for that fiscal year. The
certification shall include a copy of the actuarial
recommendations upon which it is based and shall specifically
identify the System's projected State normal cost for that
fiscal year.
On or before November 1 of each year, beginning November 1,
2012, the Board shall submit to the State Actuary, the
Governor, and the General Assembly a proposed certification of
the amount of the required State contribution to the System for
the next fiscal year, along with all of the actuarial
assumptions, calculations, and data upon which that proposed
certification is based. On or before January 1 of each year
beginning January 1, 2013, the State Actuary shall issue a
preliminary report concerning the proposed certification and
identifying, if necessary, recommended changes in actuarial
assumptions that the Board must consider before finalizing its
certification of the required State contributions. On or before
January 15, 2013 and every January 15 thereafter, the Board

HB3276 - 9 - LRB099 02639 RPS 22645 b
shall certify to the Governor and the General Assembly the
amount of the required State contribution for the next fiscal
year. The Board's certification must note any deviations from
the State Actuary's recommended changes, the reason or reasons
for not following the State Actuary's recommended changes, and
the fiscal impact of not following the State Actuary's
recommended changes on the required State contribution.
On or before May 1, 2004, the Board shall recalculate and
recertify to the Governor the amount of the required State
contribution to the System for State fiscal year 2005, taking
into account the amounts appropriated to and received by the
System under subsection (d) of Section 7.2 of the General
Obligation Bond Act.
On or before July 1, 2005, the Board shall recalculate and
recertify to the Governor the amount of the required State
contribution to the System for State fiscal year 2006, taking
into account the changes in required State contributions made
by this amendatory Act of the 94th General Assembly.
On or before April 1, 2011, the Board shall recalculate and
recertify to the Governor the amount of the required State
contribution to the System for State fiscal year 2011, applying
the changes made by Public Act 96-889 to the System's assets
and liabilities as of June 30, 2009 as though Public Act 96-889
was approved on that date.
(a-5) For purposes of Section (c-5) of Section 20 of the
Budget Stabilization Act, on or before November 1 of each year

HB3276 - 10 - LRB099 02639 RPS 22645 b
beginning November 1, 2014, the Board shall determine the
amount of the State contribution to the System that would have
been required for the next fiscal year if this amendatory Act
of the 98th General Assembly had not taken effect, using the
best and most recent available data but based on the law in
effect on May 31, 2014. The Board shall submit to the State
Actuary, the Governor, and the General Assembly a proposed
certification, along with the relevant law, actuarial
assumptions, calculations, and data upon which that
certification is based. On or before January 1, 2015 and every
January 1 thereafter, the State Actuary shall issue a
preliminary report concerning the proposed certification and
identifying, if necessary, recommended changes in actuarial
assumptions that the Board must consider before finalizing its
certification. On or before January 15, 2015 and every January
1 thereafter, the Board shall certify to the Governor and the
General Assembly the amount of the State contribution to the
System that would have been required for the next fiscal year
if this amendatory Act of the 98th General Assembly had not
taken effect, using the best and most recent available data but
based on the law in effect on May 31, 2014. The Board's
certification must note any deviations from the State Actuary's
recommended changes, the reason or reasons for not following
the State Actuary's recommended changes, and the impact of not
following the State Actuary's recommended changes.
(a-6) As soon as practical after the effective date of this

HB3276 - 11 - LRB099 02639 RPS 22645 b
amendatory Act of the 99th General Assembly, the State Actuary
and the Board shall recalculate and recertify to the Governor
and the General Assembly the amount of the State contribution
to the System for State fiscal year 2016, taking into account
the changes in required State contributions made by this
amendatory Act of the 99th General Assembly.
(b) Beginning in State fiscal year 1996, on or as soon as
possible after the 15th day of each month the Board shall
submit vouchers for payment of State contributions to the
System, in a total monthly amount of one-twelfth of the
required annual State contribution certified under subsection
(a). From the effective date of this amendatory Act of the 93rd
General Assembly through June 30, 2004, the Board shall not
submit vouchers for the remainder of fiscal year 2004 in excess
of the fiscal year 2004 certified contribution amount
determined under this Section after taking into consideration
the transfer to the System under subsection (d) of Section
6z-61 of the State Finance Act. These vouchers shall be paid by
the State Comptroller and Treasurer by warrants drawn on the
funds appropriated to the System for that fiscal year. If in
any month the amount remaining unexpended from all other
appropriations to the System for the applicable fiscal year
(including the appropriations to the System under Section 8.12
of the State Finance Act and Section 1 of the State Pension
Funds Continuing Appropriation Act) is less than the amount
lawfully vouchered under this Section, the difference shall be

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paid from the General Revenue Fund under the continuing
appropriation authority provided in Section 1.1 of the State
Pension Funds Continuing Appropriation Act.
(c) The full amount of any annual appropriation for the
System for State fiscal year 1995 shall be transferred and made
available to the System at the beginning of that fiscal year at
the request of the Board. Any excess funds remaining at the end
of any fiscal year from appropriations shall be retained by the
System as a general reserve to meet the System's accrued
liabilities.
(Source: P.A. 97-694, eff. 6-18-12; 98-599, eff. 6-1-14.)
(40 ILCS 5/2-167 new)
Sec. 2-167. Self-directed retirement plan.
(a) For the purposes of this Section:
"Active participant" means a participant who is in
active service in the System.
"Consumer price index-u" means the index published by
the Bureau of Labor Statistics of the United States
Department of Labor that measures the average change in
prices of goods and services purchased by all urban
consumers, United States city average, all items, 1982-84 =
100.
"Defined benefit plan" means the retirement plan
available under this Article to Tier 1 or Tier 2
participants who have not made the election authorized

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under this Section.
"Employer" means the State.
"Pensionable salary" means the amount of salary used by
the System to calculate the amount of an individual's
retirement annuity.
(b) On and after the effective date of this amendatory Act
of the 99th General Assembly, a Tier 3 participant's
participation in the System shall be limited to participation
in the self-directed retirement plan established under
subsection (d) of this Section.
An active Tier 1 or Tier 2 participant of this System may
elect to cease accruing benefits in the defined benefit plan
and begin accruing benefits for future service in the
self-directed retirement plan established under subsection
(d). The election to participate in the self-directed
retirement plan is voluntary and irrevocable.
For an active Tier 1 or Tier 2 participant who elects to
participate in the self-directed retirement plan, all service
credit under the System (including service under any
participating system if the participant elects to use the
reciprocal provisions of Article 20) shall be considered for
purposes of vesting in the benefits provided prior to the
effective date of this Section, but only service earned and
contributions made before that effective date shall be
considered in determining the amount of those benefits. In lieu
of receiving any such benefits, an active Tier 1 or Tier 2

HB3276 - 14 - LRB099 02639 RPS 22645 b
participant who elects to participate in the self-directed
retirement plan may elect to have an account balance
established in his or her self-directed retirement plan account
in an amount equal to the amount of the contribution refund
that the participant would be eligible to receive if he or she
withdrew from service on the effective date of this Section and
elected a refund of contributions, except that this
hypothetical refund shall include interest at the effective
rate for the respective years. The System shall make these
transfers of assets to the self-directed plan as tax-free
transfers in accordance with Internal Revenue Service
guidelines.
(c) The pensionable salary of an active participant shall
be equal to the average final monthly salary of the
participant. For a participant who first becomes a participant
of this System on or after the effective date of this
amendatory Act of the 99th General Assembly, the average final
monthly salary determined by dividing the total salary of the
participant during the 96 consecutive months of service within
the last 120 months of service in which the total compensation
was the highest by the number of months of service in that
period; however, the highest salary for annuity purposes may
not exceed $106,800, except that that amount shall annually
thereafter be increased by the lesser of (i) 3% of that amount,
including all previous adjustments, or (ii) the annual
unadjusted percentage increase (but not less than zero) in the

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consumer price index-u for the 12 months ending with the
September preceding each November 1. The new amount resulting
from each annual adjustment shall be determined by the Public
Pension Division of the Department of Insurance and made
available to the Board by November 1 of each year.
(d) As soon as practicable after the effective date of this
amendatory Act of the 99th General Assembly, the System shall
establish a self-directed retirement plan that allows Tier 3
participants the opportunity to accumulate assets for
retirement through a combination of employee and employer
contributions that may be invested in mutual funds, collective
investment funds, or other investment products and used to
purchase annuity contracts, either fixed or variable or a
combination thereof. The plan must be qualified under the
Internal Revenue Code of 1986.
At any time after withdrawal from service, a participant in
the self-directed plan shall be entitled to a benefit that is
based on the account values attributable to his or her
participant contributions and the employer contributions, as
well as any investment returns attributable to those
contributions. Upon a participant's first day of participation
in the self-directed retirement plan, the participant becomes
vested in his or her contributions to the self-directed
retirement plan, the employer's contributions to the
self-directed retirement plan, and the investment returns
attributable to those contributions credited to his or her

HB3276 - 16 - LRB099 02639 RPS 22645 b
account.
(e) All persons who begin to participate in this System on
or after the effective date of this amendatory Act of the 99th
General Assembly and any active Tier 1 or Tier 2 participant
who makes the election provided in subsection (b) shall
participate in the self-directed retirement plan established
under subsection (d) and, in lieu of the contributions
otherwise provided for in this Article, shall contribute 8% of
salary to the plan. The employer of each of those participants
shall contribute 7% of salary to that plan on behalf of the
participant.
(f) The provisions of this amendatory Act of the 99th
General Assembly apply notwithstanding any other law,
including Section 1-160 of this Code. If there is a conflict
between the provisions of this amendatory Act of the 99th
General Assembly and any other law, the provisions of this
Section shall control.