Bill Text: IL SB1647 | 2023-2024 | 103rd General Assembly | Introduced

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Bill Title: Amends the Downstate Teacher Article of the Illinois Pension Code. In a provision that requires the System to automatically enroll certain employees in the System's defined contribution benefit, provides an exception for employees whose school district provides an alternative qualifying plan. Provides that the alternative qualifying plan shall abide by the automatic enrollment procedures and automatic increase in contribution provisions applicable to the System's defined contribution benefit. Sets forth additional requirements for alternative qualifying plans. Requires a school district that has an alternative qualifying plan to file a letter of compliance, passed by resolution of the school board, with the System. Effective immediately.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced) 2023-02-15 - Added as Co-Sponsor Sen. Adriane Johnson [SB1647 Detail]

Download: Illinois-2023-SB1647-Introduced.html

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103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1647 Introduced 2/8/2023, by Sen. Robert F. Martwick SYNOPSIS AS INTRODUCED:
40 ILCS 5/16-204
40 ILCS 5/16-207 new
Amends the Downstate Teacher Article of the Illinois Pension Code. In a provision that requires the System to automatically enroll certain employees in the System's defined contribution benefit, provides an exception for employees whose school district provides an alternative qualifying plan. Provides that the alternative qualifying plan shall abide by the automatic enrollment procedures and automatic increase in contribution provisions applicable to the System's defined contribution benefit. Sets forth additional requirements for alternative qualifying plans. Requires a school district that has an alternative qualifying to file a letter of compliance, passed by resolution of the school board, with the System. Effective immediately.
LRB103 06030 RPS 51060 b
A BILL FOR
SB1647 LRB103 06030 RPS 51060 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 Section 16-204 and by adding Section 16-207 as
follows:
(40 ILCS 5/16-204)
Sec. 16-204. Optional defined contribution benefit.
(a) As soon as practicable after the effective date of
this amendatory Act of the 100th General Assembly, the System
shall offer a defined contribution benefit to active members
of the System. The defined contribution benefit shall be an
optional benefit to any member who chooses to participate. The
defined contribution benefit shall collect optional employee
and optional employer contributions into an account and shall
offer investment options to the participant. The benefit under
this Section shall be operated in full compliance with any
applicable State and federal laws, and the System shall
utilize generally accepted practices in creating and
maintaining the benefit for the best interest of the
participants. The System may use funds from the employee and
employer contributions to defray any and all costs of creating
and maintaining the benefit. In addition, the System may use

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funds provided under Section 16-158 of this Code to defray any
and all costs of creating and maintaining the benefit and then
shall reimburse those costs from funds received from the
employee and employer contributions under this Section. All
employers must comply with the reporting and administrative
functions established by the System and are required to
implement the benefits established under this Section. The
System shall produce an annual report on the participation in
the benefit and shall make the report public.
(b) As soon as is practicable on or after January 1, 2022,
the System shall automatically enroll any employee who first
becomes an active member or participant in the System, unless
the school district that employs the employee provides an
alternative qualifying plan under subsection (d) and Section
16-207. School districts electing to use an alternative
qualifying plan shall abide by the automatic enrollment
procedures provided in this subsection (b) and the automatic
increase of contributions provisions under subsection (c). A
member automatically enrolled under this Section shall have 3%
of his or her pre-tax gross compensation for each compensation
period deferred into his or her deferred compensation account,
unless the member otherwise instructs the System on forms
approved by the System. A member may elect, in a manner
provided for by the System, to not participate in the defined
contribution benefit or to increase or reduce the amount of
pre-tax gross compensation contributed, consistent with State

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or federal law. A member shall be automatically enrolled in
the benefit beginning the first day of the pay period
following the member's 30th day of employment. A member who
has been automatically enrolled in the benefit may elect,
within 90 days of enrollment, to withdraw from the benefit and
receive a refund of amounts deferred, plus or minus any
applicable earnings, investment fees, and administrative fees.
Any refunded amount shall be included in the member's gross
income for the taxable year in which the refund is issued.
(c) On or after January 1, 2023, the System may elect to
increase the automatic annual contributions under this
Section. The increase in the rate of contribution, however,
shall not exceed 2% of a member's pre-tax gross compensation
per year, and at no time shall any total contribution exceed
any contribution limits established by State or federal law.
(d) In this Section, "alternative qualifying plan" means a
defined contribution benefit plan that is subject to the
requirements of Article 1 of this Code, meets the qualifying
criteria specified in this subsection (d), and is sponsored by
a school district. Any school district may elect to offer an
alternative qualifying plan, instead of adopting the System's
defined contribution benefit plan. A school district's
alternative qualifying plan may automatically enroll employees
who first become active members or participants in the System
on or after June 1, 2023 into an alternative qualifying plan
only if the plan satisfies the following criteria:

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(1) the alternative qualifying plan only has a single
vendor for recordkeeping services;
(2) the alternative qualifying plan does not have any
annuities or separate accounts;
(3) the alternative qualifying plan permits employees
to transfer or roll over funds (i) without cost to the
employee and (ii) at the time instructed by the employee;
and
(4) the alternative qualifying plan requires that the
plan recordkeeper agree that, in performing services with
respect to the plan, the recordkeeper (i) must not use
information received as a result of providing services to
the plan or the plan's participants to solicit the plan's
participants for the purpose of cross-selling non-plan
products and services, unless in response to a request by
a plan participant; and (ii) shall not promote, recommend,
endorse, or solicit plan participants to purchase any
financial products or services outside of the plan.
(Source: P.A. 102-540, eff. 8-20-21.)
(40 ILCS 5/16-207 new)
Sec. 16-207. Alternative qualifying plan application and
documentation.
(a) The optional defined contribution benefit established
under Section 16-204 constitutes the default defined
contribution plan for members of the System. A school district

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may only elect to enroll employees into an alternative
qualifying plan if the school district's desired alternative
qualifying plan meets the criteria established in Section
16-204 and the school district files a letter of compliance,
passed by resolution of the school board, with the System.
(b) School districts must submit a copy of the passed
resolution to the System certifying that its alternative
qualifying plan meets the criteria established in Section
16-204.
(c) The school district must submit the resolution to the
System as soon as practicable after the school board passes
the resolution.
(d) The System shall maintain a record of all alternative
qualifying plans.
Section 99. Effective date. This Act takes effect upon
becoming law.