SB 2404 — PEN CD-REFORM STATE SYSTEMS

Eligibility information shall be communicated to the Department of Central Management Services in a format acceptable to the Department.

(d) Coverage.

The health benefit coverage provided under this Section shall be a program of health, dental, and vision benefits.

The program of health benefits under this Section may include any or all of the benefit limitations, including but not limited to a reduction in benefits based on eligibility for federal medicare benefits, that are provided under subsection (a) of Section 6 of this Act for other health benefit programs under this Act.

(e) Insurance rates and premiums.

The Director shall determine the insurance rates and premiums for community college benefit recipients and community college dependent beneficiaries.

Rates and premiums may be based in part on age and eligibility for federal Medicare coverage.

The Director shall also determine premiums that will allow for the establishment of an actuarially sound reserve for this program.

The cost of health benefits under the program shall be paid as follows:

(1) For a community college benefit recipient, costs shall be an amount equal to the difference between the SB2404 Engrossed - 5 - LRB098 09018 EFG 39154 b projected costs of health benefits under the program and projected contributions from community college districts, active contributors, and other income of the program.

Other income of the program shall exclude contributions made by the State to retire unpaid claims of the program up to 75% of the total insurance rate shall be paid from the Community College Health Insurance Security Fund.

(2) The balance of the rate of insurance, including the entire premium for any coverage for community college dependent beneficiaries that has been elected, shall be paid by deductions authorized by the community college benefit recipient to be withheld from his or her monthly annuity or benefit payment from the State Universities Retirement System;

except that (i) if the balance of the cost of coverage exceeds the amount of the monthly annuity or benefit payment, the difference shall be paid directly to the State Universities Retirement System by the community college benefit recipient, and (ii) all or part of the balance of the cost of coverage may, at the option of the board of trustees of the community college district, be paid to the State Universities Retirement System by the board of the community college district from which the community college benefit recipient retired.

The State Universities Retirement System shall promptly deposit all moneys withheld by or paid to it under this subdivision (e)(2) into the Community College Health Insurance SB2404 Engrossed - 6 - LRB098 09018 EFG 39154 b Security Fund.

These moneys shall not be considered assets of the State Universities Retirement System.

(f) Financing.

All revenues arising from the administration of the health benefit program established under this Section shall be deposited into the Community College Health Insurance Security Fund, which is hereby created as a nonappropriated trust fund to be held outside the State Treasury, with the State Treasurer as custodian.

Any interest earned on moneys in the Community College Health Insurance Security Fund shall be deposited into the Fund.

Moneys in the Community College Health Insurance Security Fund shall be used only to pay the costs of the health benefit program established under this Section, including associated administrative costs and the establishment of a program reserve.

Beginning January 1, 1999, the Department of Central Management Services may make expenditures from the Community College Health Insurance Security Fund for those costs.

(g) Contract for benefits.

The Director shall by contract, self-insurance, or otherwise make available the program of health benefits for community college benefit recipients and their community college dependent beneficiaries that is provided for in this Section.

The contract or other arrangement for the provision of these health benefits shall be on terms deemed by the Director to be in the best interest of the State of Illinois and the community college benefit recipients based on, but not limited to, such criteria as administrative cost, SB2404 Engrossed - 7 - LRB098 09018 EFG 39154 b service capabilities of the carrier or other contractor, and the costs of the benefits.

(h) Continuation of program.

It is the intention of the General Assembly that the program of health benefits provided under this Section be maintained on an ongoing, affordable basis.

The program of health benefits provided under this Section may be amended by the State and is not intended to be a pension or retirement benefit subject to protection under Article XIII, Section 5 of the Illinois Constitution.

(i) Other health benefit plans.

A health benefit plan provided by a community college district (other than a community college district subject to Article VII of the Public Community College Act) under the terms of a collective bargaining agreement in effect on or prior to the effective date of this amendatory Act of 1997 shall continue in force according to the terms of that agreement, unless otherwise mutually agreed by the parties to that agreement and the affected retiree.

A community college benefit recipient or community college dependent beneficiary whose coverage under such a plan expires shall be eligible to begin participating in the program established under this Section without any interruption or delay in coverage or limitation as to pre-existing medical conditions.

This Act does not prohibit any community college district from offering additional health benefits for its retirees or their dependents or survivors.

SB2404 Engrossed - 8 - LRB098 09018 EFG 39154 b (Source:

P.A.

90-497, eff.

8-18-97;

90-655, eff.

7-30-98.) (5 ILCS 375/6.10) Sec.

6.10.

Contributions to the Community College Health Insurance Security Fund.

(a) Beginning January 1, 1999, every active contributor of the State Universities Retirement System (established under Article 15 of the Illinois Pension Code) who (1) is a full-time employee of a community college district (other than a community college district subject to Article VII of the Public Community College Act) or an association of community college boards and (2) is not an employee as defined in Section 3 of this Act shall make contributions toward the cost of community college annuitant and survivor health benefits at the rate of 0.50% of salary.

Beginning July 1, 2014, the contribution rate under this subsection (a) shall be 0.93% of salary.

These contributions shall be deducted by the employer and paid to the State Universities Retirement System as service agent for the Department of Central Management Services.

The System may use the same processes for collecting the contributions required by this subsection that it uses to collect the contributions received from those employees under Section 15-157 of the Illinois Pension Code.

An employer may agree to pick up or pay the contributions required under this subsection on behalf of the employee;

such contributions shall be deemed to have been paid by the employee.

SB2404 Engrossed - 9 - LRB098 09018 EFG 39154 b The State Universities Retirement System shall promptly deposit all moneys collected under this subsection (a) into the Community College Health Insurance Security Fund created in Section 6.9 of this Act.

The moneys collected under this Section shall be used only for the purposes authorized in Section 6.9 of this Act and shall not be considered to be assets of the State Universities Retirement System.

Contributions made under this Section are not transferable to other pension funds or retirement systems and are not refundable upon termination of service.

(b) Beginning January 1, 1999, every community college district (other than a community college district subject to Article VII of the Public Community College Act) or association of community college boards that is an employer under the State Universities Retirement System shall contribute toward the cost of the community college health benefits provided under Section 6.9 of this Act an amount equal to 0.50% of the salary paid to its full-time employees who participate in the State Universities Retirement System and are not members as defined in Section 3 of this Act.

Beginning July 1, 2014, the contribution rate under this subsection (b) shall be 0.93% of salary.

These contributions shall be paid by the employer to the State Universities Retirement System as service agent for the Department of Central Management Services.

The System may use the same processes for collecting the contributions required by SB2404 Engrossed - 10 - LRB098 09018 EFG 39154 b this subsection that it uses to collect the contributions received from those employers under Section 15-155 of the Illinois Pension Code.

The State Universities Retirement System shall promptly deposit all moneys collected under this subsection (b) into the Community College Health Insurance Security Fund created in Section 6.9 of this Act.

The moneys collected under this Section shall be used only for the purposes authorized in Section 6.9 of this Act and shall not be considered to be assets of the State Universities Retirement System.

Contributions made under this Section are not transferable to other pension funds or retirement systems and are not refundable upon termination of service.

The Department of Healthcare and Family Services, or any successor agency designated to procure healthcare contracts pursuant to this Act, is authorized to establish funds, separate accounts provided by any bank or banks as defined by the Illinois Banking Act, or separate accounts provided by any savings and loan association or associations as defined by the Illinois Savings and Loan Act of 1985 to be held by the Director, outside the State treasury, for the purpose of receiving the transfer of moneys from the Community College Health Insurance Security Fund.

The Department may promulgate rules further defining the methodology for the transfers.

Any interest earned by moneys in the funds or accounts shall inure to the Community College Health Insurance Security Fund.

The SB2404 Engrossed - 11 - LRB098 09018 EFG 39154 b transferred moneys, and interest accrued thereon, shall be used exclusively for transfers to administrative service organizations or their financial institutions for payments of claims to claimants and providers under the self-insurance health plan.

The transferred moneys, and interest accrued thereon, shall not be used for any other purpose including, but not limited to, reimbursement of administration fees due the administrative service organization pursuant to its contract or contracts with the Department.

(c) On or before November 15 of each year, the Board of Trustees of the State Universities Retirement System shall certify to the Governor, the Director of Central Management Services, and the State Comptroller its estimate of the total amount of contributions to be paid under subsection (a) of this Section for the next fiscal year.

Beginning in fiscal year 2008, the amount certified shall be decreased or increased each year by the amount that the actual active employee contributions either fell short of or exceeded the estimate used by the Board in making the certification for the previous fiscal year.

The State Universities Retirement System shall calculate the amount of actual active employee contributions in fiscal years 1999 through 2005.

Based upon this calculation, the fiscal year 2008 certification shall include an amount equal to the cumulative amount that the actual active employee contributions either fell short of or exceeded the estimate used by the Board in making the certification for those fiscal SB2404 Engrossed - 12 - LRB098 09018 EFG 39154 b years.

The certification shall include a detailed explanation of the methods and information that the Board relied upon in preparing its estimate.

As soon as possible after the effective date of this Section, the Board shall submit its estimate for fiscal year 1999.

(d) Beginning in fiscal year 1999, on the first day of each month, or as soon thereafter as may be practical, the State Treasurer and the State Comptroller shall transfer from the General Revenue Fund to the Community College Health Insurance Security Fund 1/12 of the annual amount appropriated for that fiscal year to the State Comptroller for deposit into the Community College Health Insurance Security Fund under Section 1.4 of the State Pension Funds Continuing Appropriation Act.

(e) Except where otherwise specified in this Section, the definitions that apply to Article 15 of the Illinois Pension Code apply to this Section.

(Source:

P.A.

94-839, eff.

6-6-06;

95-632, eff.

9-25-07.) (5 ILCS 375/6.10A new) Sec.

6.10A.

City colleges;

optional participation in program of health benefits.

Notwithstanding any other provision of this Act, the Department of Central Management Services shall adopt rules authorizing optional participation in the program of health benefits for community college benefit recipients and community college dependent beneficiaries by any person who is otherwise ineligible to participate in that SB2404 Engrossed - 13 - LRB098 09018 EFG 39154 b program solely as a result of that or another person's employment with a community college district subject to Article VII of the Public Community College Act.

(5 ILCS 375/6.16 new) Sec.

6.16.

Health benefit election for Tier I employees and Tier I retirees.

(a) For purposes of this Section:

"Eligible Tier I employee" means, except as provided in subsection (g) of this Section, an individual who makes or is deemed to have made an election under paragraph (1) of subsection (a) of Section 2-110.3, 14-106.5, 15-132.9, or 16-122.9 of the Illinois Pension Code.

"Eligible Tier I retiree" means, except as provided in subsection (g) of this Section, an individual who makes or is deemed to have made an election under paragraph (1) of subsection (a-5) of Section 2-110.3, 14-106.5, 15-132.9, or 16-122.9 of the Illinois Pension Code.

"Program of health benefits" means (i) a health plan, as defined in subsection (o) of Section 3 of this Act, that is designed and contracted for by the Director under this Act or any successor Act or (ii) if administration of that health plan is transferred to a trust established by the State or an independent Board in order to provide health benefits to a class of a persons that includes eligible Tier I retirees, then the plan of health benefits provided through that trust.

SB2404 Engrossed - 14 - LRB098 09018 EFG 39154 b (b) As adequate and legal consideration for making an election under paragraph (1) of subsection (a) or (a-5) of Section 2-110.3, 14-106.5, 15-132.9, or 16-122.9 of the Illinois Pension Code, as the case may be, each eligible Tier I employee and each eligible Tier I retiree shall receive a vested and enforceable contractual right to participate in a program of health benefits while he or she qualifies as an annuitant or retired employee.

That right also extends to such a person's dependents and survivors who are eligible under the applicable program of health benefits.

(c) Notwithstanding subsection (b), eligible Tier I employees and eligible Tier I retirees may be required to make contributions toward the cost of coverage under a program of health benefits.

(d) The vested and enforceable contractual right to a program of health benefits is not offered as, and shall not be considered, a pension or retirement benefit under Article XIII, Section 5 of the Illinois Constitution, the Illinois Pension Code, or any subsequent or successor enactment providing pension benefits.

(e) Notwithstanding any other provision of law, except subsection (g) of this Section, a Tier I employee or Tier I retiree who has made an election under paragraph (2) of subsection (a) or (a-5) of Section 2-110.3, 14-106.5, 15-132.9, or 16-122.9 of the Illinois Pension Code, as the case may be, shall not be entitled to participate in any program of health SB2404 Engrossed - 15 - LRB098 09018 EFG 39154 b benefits under this Act as an annuitant or retired employee receiving a retirement annuity, regardless of any contrary election pursuant to any of those Sections under any other retirement system.

Notwithstanding any other provision of law, except subsection (g) of this Section, a Tier I employee who is not entitled to participate in the program of health benefits as an annuitant or retired employee receiving a retirement annuity, due to an election under paragraph (2) of subsection (a) or (a-5) of Section 2-110.3, 14-106.5, 15-132.9, or 16-122.9 of the Illinois Pension Code, as the case may be, shall not be required to make contributions toward the program of health benefits while he or she is an employee or active contributor.

However, an active employee may be required to make contributions toward health benefits he or she receives during active service.

(f) The Department shall coordinate with each retirement system administering an election in accordance with this amendatory Act of the 98th General Assembly to provide information concerning the impact of the election of health benefits.

Each System shall include information prepared by the Department in the required election packet.

The Department shall make information available to Tier I employees and Tier I retirees through video materials, group presentations, consultation by telephone or other electronic means, or any combination of these methods.

The information in the election SB2404 Engrossed - 16 - LRB098 09018 EFG 39154 b packet shall include a notice that states:

"YOU ARE HEREBY ADVISED THAT THE PROGRAM OF HEALTH BENEFITS OFFERED IS FOR ACCESS TO A GROUP HEALTHCARE PLAN ADMINISTERED BY THE DEPARTMENT, AND YOU MAY BE REQUIRED TO PAY FOR THE FULL COST OF COVERAGE PROVIDED BY THE PLAN, INCLUDING ALL PREMIUM, DEDUCTIBLE, AND COPAY AMOUNTS." (g) Nothing in this Section shall be construed as applying to a person who is eligible to make or who made the election under Section 15-135.1 of the Illinois Pension Code.

Section 15.

The Governor's Office of Management and Budget Act is amended by changing Sections 7 and 8 as follows:

(20 ILCS 3005/7) (from Ch.

127, par.

417) Sec.

7.

All statements and estimates of expenditures submitted to the Office in connection with the preparation of a State budget, and any other estimates of expenditures, supporting requests for appropriations, shall be formulated according to the various functions and activities for which the respective department, office or institution of the State government (including the elective officers in the executive department and including the University of Illinois and the judicial department) is responsible.

All such statements and estimates of expenditures relating to a particular function or activity shall be further formulated or subject to analysis in accordance with the following classification of objects:

SB2404 Engrossed - 17 - LRB098 09018 EFG 39154 b (1) Personal services (2) State contribution for employee group insurance (3) Contractual services (4) Travel (5) Commodities (6) Equipment (7) Permanent improvements (8) Land (9) Electronic Data Processing (10) Telecommunication services (11) Operation of Automotive Equipment (12) Contingencies (13) Reserve (14) Interest (15) Awards and Grants (16) Debt Retirement (17) Non-cost Charges.

(18) State retirement contribution for annual normal cost (19) State retirement contribution for unfunded accrued liability.

(Source:

P.A.

93-25, eff.

6-20-03.) (20 ILCS 3005/8) (from Ch.

127, par.

418) Sec.

8.

When used in connection with a State budget or expenditure or estimate, items (1) through (16) in the classification of objects stated in Section 7 shall have the SB2404 Engrossed - 18 - LRB098 09018 EFG 39154 b meanings ascribed to those items in Sections 14 through 24.7, respectively, of the State Finance Act.

"An Act in relation to State finance", approved June 10, 1919, as amended.

When used in connection with a State budget or expenditure or estimate, items (18) and (19) in the classification of objects stated in Section 7 shall have the meanings ascribed to those items in Sections 24.12 and 24.13, respectively, of the State Finance Act.

(Source:

P.A.

82-325.) Section 20.

The State Finance Act is amended by changing Section 13 and by adding Sections 24.12 and 24.13 as follows:

(30 ILCS 105/13) (from Ch.

127, par.

149) Sec.

13.

The objects and purposes for which appropriations are made are classified and standardized by items as follows:

(1) Personal services;

(2) State contribution for employee group insurance;

(3) Contractual services;

(4) Travel;

(5) Commodities;

(6) Equipment;

(7) Permanent improvements;

(8) Land;

(9) Electronic Data Processing;

(10) Operation of automotive equipment;

SB2404 Engrossed - 19 - LRB098 09018 EFG 39154 b (11) Telecommunications services;

(12) Contingencies;

(13) Reserve;

(14) Interest;

(15) Awards and Grants;

(16) Debt Retirement;

(17) Non-Cost Charges;

(18) State retirement contribution for annual normal cost;

(19) State retirement contribution for unfunded accrued liability;

(20) (18) Purchase Contract for Real Estate.

When an appropriation is made to an officer, department, institution, board, commission or other agency, or to a private association or corporation, in one or more of the items above specified, such appropriation shall be construed in accordance with the definitions and limitations specified in this Act, unless the appropriation act otherwise provides.

An appropriation for a purpose other than one specified and defined in this Act may be made only as an additional, separate and distinct item, specifically stating the object and purpose thereof.

(Source:

P.A.

84-263;

84-264.) (30 ILCS 105/24.12 new) Sec.

24.12.

"State retirement contribution for annual normal cost" defined.

The term "State retirement contribution SB2404 Engrossed - 20 - LRB098 09018 EFG 39154 b for annual normal cost" means the portion of the total required State contribution to a retirement system for a fiscal year that represents the State's portion of the System's projected normal cost for that fiscal year, as determined and certified by the board of trustees of the retirement system in conformance with the applicable provisions of the Illinois Pension Code.

(30 ILCS 105/24.13 new) Sec.

24.13.

"State retirement contribution for unfunded accrued liability" defined.

The term "State retirement contribution for unfunded accrued liability" means the portion of the total required State contribution to a retirement system for a fiscal year that is not included in the State retirement contribution for annual normal cost.

Section 25.

(b) For each fiscal year when the General Assembly's SB2404 Engrossed - 21 - LRB098 09018 EFG 39154 b appropriations and transfers or diversions as required by law from general funds do not exceed 99% of the estimated general funds revenues pursuant to subsection (a) of Section 10, the Comptroller shall transfer from the General Revenue Fund as provided by this Section a total amount equal to 0.5% of the estimated general funds revenues to the Pension Stabilization Fund.

(c) For each fiscal year through FiscalState Yearfiscal 2013year 2019, when the General Assembly's appropriations and transfers or diversions as required by law from general funds do not exceed 98% of the estimated general funds revenues pursuant to subsection (b) of SB2404 - 2 - LRB098 09018 EFG 39154 b Section 10, the Comptroller shall transfer from the General Revenue Fund as provided by this Section a total amount equal to 1.0% of the estimated general funds revenues to the Pension Stabilization Fund.

(c-5)(c-10) In FiscalState Yearfiscal 2016year 2020 and each fiscal year thereafter, the State Comptroller shall order transferred and the State Treasurer shall transfer the$1,000,000,000 following amounts from the General Revenue Fund to the Pension Stabilization Fund:Fund.

(c-15) The transfers made pursuant to subsection (c-10) of this Section shall continue through State fiscal year 2045 or until each of the designated retirement systems, as defined in FiscalSection Year25, 2016,has $441,429,372;achieved the funding ratio prescribed by law for that retirement system, whichever occurs first.

in(d) FiscalThe YearComptroller 2017,shall $150,545,372;transfer 1/12 of the total amount to be transferred each fiscal year under this Section into the SB2404 Engrossed - 22 - LRB098 09018 EFG 39154 b Pension Stabilization Fund on the first day of each month of that fiscal year or as soon thereafter as possible;

in Fiscal Year 2018, $179,267,872;

in Fiscal Year 2019, $211,777,872;

in Fiscal Year 2020, $1,123,333,372;

in Fiscal Year 2021, $1,084,470,872;

in Fiscal Year 2022, $1,048,083,372;

in Fiscal Year 2023, $1,014,170,872;

in Fiscal Year 2024, $957,733,372;

in Fiscal Year 2025, $905,683,372;

in Fiscal Year 2026, $882,458,372;

in Fiscal Year 2027, $861,783,372;

in Fiscal Year 2028, $818,658,372;

in Fiscal Year 2029, $779,358,372;

in Fiscal Year 2030, $718,883,372;

in Fiscal Year 2031, $663,508,372;

in Fiscal Year 2032, $638,233,372;

in Fiscal Year 2033, $641,783,372;

SB2404 - 3 - LRB098 09018 EFG 39154 b in Fiscal Year 2034, $1,797,883,372;

in Fiscal Year 2035, $1,797,883,372;

in Fiscal Year 2036, $1,797,883,372;

in Fiscal Year 2037, $1,797,883,372;

in Fiscal Year 2038, $1,797,883,372;

in Fiscal Year 2039, $1,797,883,372;

in Fiscal Year 2040, $1,797,883,372;

in Fiscal Year 2041, $1,797,883,372;

in Fiscal Year 2042, $1,797,883,372;

in Fiscal Year 2043, $1,797,883,372;

in Fiscal Year 2044, $1,797,883,372;

and in Fiscal Year 2045, $1,797,883,372.

(c-10) The transfers made pursuant to subsection (c-5) of this Section shall continue until Fiscal Year 2045 or until each of the designated retirement systems, as defined in Section 25, has achieved a funding ratio of at least 100%, whichever occurs first.

(d) The Comptroller shall transfer 1/12 of the total amount to be transferred each fiscal year under this Section into the Pension Stabilization Fund on the first day of each month of that fiscal year or as soon thereafter as possible;

Until FiscalState Yearfiscal 2014,year 2020, before Before the final transfer for a fiscal year is made, the Comptroller shall reconcile the SB2404 - 4 - LRB098 09018 EFG 39154 b estimated general funds revenues used in calculating the other transfers under this Section for that fiscal year with the actual general funds revenues for that fiscal year.

SB2404 Engrossed - 23 - LRB098 09018 EFG 39154 b (2) the Teachers' Retirement System of the State of Illinois;

(b) As soon as may be practical after any money is deposited into the Pension Stabilization Fund, the State SB2404 - 5 - LRB098 09018 EFG 39154 b Comptroller shall apportion the deposited amount among the designated retirement systems and the State Comptroller and State Treasurer shall pay the apportioned amounts to the designated retirement systems.

(c) At the request of the State Comptroller, the Governor's Office of Management and Budget shall determine the individual and total actuarial reserve deficiencies of the designated SB2404 Engrossed - 24 - LRB098 09018 EFG 39154 b retirement systems.

(d) Payments to the designated retirement systems under this Section shall be in addition to, and not in lieu of, any SB2404 - 6 - LRB098 09018 EFG 39154 b State contributions required under Section 2-124, 14-131, 15-155, 16-158, or 18-131 of the Illinois Pension Code.

Payments to the designated retirement systems under this Section, transferred after the effective date of this amendatory Act of the 98th General Assembly, do not reduce and do not constitute payment of any portion of the required State contribution under Article 2, 14, 15, 16, or 18 of the Illinois Pension Code in that fiscal year.

Such amounts shall not reduce, and shall not be included in the calculation of, the required State contribution under Article 2, 14, 15, 16, or 18 of the Illinois Pension Code in any future year, until the designated retirement system has received payment of contributions pursuant to this Act.

6-6-06.) Section 15.30.

The Illinois Pension Code is amended by addingchanging Sections 2-105.1,2-108, 2-105.2,2-119.1, 14-103.40,2-125, 14-103.41,2-126, 15-107.1,2-134, 15-107.2,2-162, 16-106.4,7-109, 16-106.5,14-103.10, 14-114, 14-132, 14-133, 14-135.08, 14-152.1, 15-106, 15-107, 15-111, 15-136, 15-156, 15-157, 15-163, SB2404 Engrossed - 25 - LRB098 09018 EFG 39154 b 15-165, 15-198, 16-106, 16-121, 16-133, 16-133.1, 16-133.6, 16-136.1, 16-152, and 16-158.216-203 and changingby adding Sections 1-103.3,1-161, 2-124,1-162, 2-125,2-105.1, 2-126,2-105.2, 14-131,2-107.9, 14-132,2-110.3, 14-133,14-103.40, 15-136,14-103.41, 15-155,14-103.42, 15-156,14-106.5, 15-157,15-108.1, 16-133,15-108.2, 16-152,15-112.1, 15-132.9, 16-107.1, 16-107.2, 16-121.1, 16-122.9, 16-133.6, and 16-15816-158.2 as follows:

(40 ILCS 5/1-103.3)5/1-161 new) Sec.

1-103.3.1-161.

ApplicationTier ofII 1994Task amendment;Force.

funding(a) standard.Definitions.

(a)As Theused provisionsin of Public Act 88-593 this amendatorySection: Act of 1994 that change the method of calculating, certifying, and paying the required State contributions to the retirement systems established under Articles 2, 14, 15, 16, and 18 shall first apply to the State contributions required for State fiscal year 1996.

(b)"Tier (Blank)II Themember" Generalmeans Assembly declares that a fundingpublic ratioemployee (thewho, ratioon ofor aafter retirementJanuary system's1, total2011, assetsbecame toa itsmember totalor actuarialparticipant liabilities) of 90% is an appropriate goal for State-funded retirement systems in Illinois, and it finds that a funding ratio of 90% is now the generally-recognized norm throughout the nation for public employee retirement systemssystem SB2404or -pension 7fund -established LRB098under 09018this EFGCode. 39154 b that are considered to be financially secure and funded in an appropriate and responsible manner.

(c)"Tier EveryII 5Task years,Force" beginningor in"Task 1999,Force" themeans Commission on Government Forecasting and Accountability, in consultation with the affectedTier retirementII systemsTask andForce thecreated Governor'sby Office of Management and Budget (formerly Bureau of the Budget), shall consider and determine whether the funding goals 90% funding ratio adopted in Articles 2, 14, 15, 16, and 18 of this CodeSection. continue subsection (b) continues to represent an appropriate funding goals goal for those State-funded retirement systems in Illinois, and it shall report its findings and recommendations on this subject to the Governor and the General Assembly.

(Source:(b) The Tier II Task Force is hereby created.

P.A.The Task Force shall be composed of 16 members, appointed as follows:

93-1067,(1) eff.Two members of the House of Representatives appointed by the Speaker of the House, one of whom shall serve as co-chair;

1-15-05.)(2) (40Two ILCSmembers 5/2-105.1of new)the Sec.House of Representatives appointed by the Minority Leader of the House;

(3) Two members of the Senate appointed by the President of the Senate, one of whom shall serve as co-chair;

(4) Two members of the Senate appointed by the Minority SB2404 Engrossed - 26 - LRB098 09018 EFG 39154 b Leader of the Senate;

and (5) Eight members, appointed by the co-chairs of the Task Force, who are Board members of the public employee unions representing Tier II members, no more than two of which may be appointed from any individual public employee union.

(c) The Task Force shall have the following responsibilities:

(1) to examine the impact of Public Acts 96-889 and 96-1495 on the retirement security of Tier II members;

(2) to study the impact of Public Acts 96-889 and 96-1495 on the ability of retirements systems and pension funds established under this Code to maintain qualified plan status under the federal Internal Revenue Code and other applicable laws;

(3) to examine the impact of the changes made by Public Acts 96-889 and 96-1495 on the ability of public employers to attract and retain highly qualified employees and provide sufficient retirement security;

and (4) to make any recommendations regarding changes to the pension benefits provided to Tier II employees the Task Force deems necessary or advisable in order to:

(A) enhance the retirement security of Tier II members;

(B) ensure that the various pension systems maintain their status as qualified plans under the SB2404 Engrossed - 27 - LRB098 09018 EFG 39154 b federal Internal Revenue Code and other applicable laws;

and (C) ensure that public employers in this State are able to attract and retain highly qualified employees and provide sufficient retirement security.

(d) The Commission on Government Forecasting and Accountability shall provide administrative support to the Task Force.

(e) The Task Force shall conduct a minimum of 4 public hearings, with hearings in Springfield, Chicago, and at least two other locations in Illinois as determined by the Task Force.

(f) The Task Force shall issue its report to the General Assembly no later than February 1, 2014.

(g) This Section is repealed on January 1, 2015.

(40 ILCS 5/1-162 new) Sec.

1-162.

Optional cash balance plan.

(a) Participation and Applicability.

Beginning 12 months after the effective date of this Section, any Tier I employee who has made the election under item (i) of paragraph (1) of subsection (a) of Section 14-106.5, 15-132.9, or 16-122.9 may elect to participate in the optional cash balance plan created under this Section.

The Board of Trustees of the applicable retirement system shall promulgate rules to establish a one-time irrevocable SB2404 Engrossed - 28 - LRB098 09018 EFG 39154 b election period wherein a person eligible to participate in the optional cash balance plan may elect to participate.

(b) Title.

The package of benefits provided under this Section may be referred to as the "optional cash balance plan".

Persons subject to the provisions of this Section may be referred to as "participants in the optional cash balance plan".

(b-5) Definitions.

As used in this Section:

"Account" means the notional cash balance account established under this Section for a participant in the optional cash balance plan.

"Salary" means "compensation" as defined in Article 14, "earnings" as defined in Article 15, and "salary" as defined in Article 16, whichever is applicable, without regard to the limitation in subsection (b-5) of Section 1-160.

"Tier I employee" means a person who is a Tier I employee under the applicable Article of this Code.

(c) Cash Balance Account.

A notional cash balance account shall be established by the applicable retirement system for each participant in the optional cash balance plan.

The account is notional and does not contain any actual money segregated from the commingled assets of the retirement system.

The cash balance in the account is to be used in calculating benefits as provided in this Section, but is not to be used in the calculation of any refund, transfer, or other benefit under the applicable Article of this Code.

SB2404 Engrossed - 29 - LRB098 09018 EFG 39154 b The amounts to be credited to the cash balance account shall consist of (i) amounts contributed by or on behalf of the participant as employee contributions, (ii) notional employer contributions, and (iii) interest credit that is attributable to the account, all as provided in this Section.

Whenever necessary for the prompt calculation or administration, or when the System lacks information necessary to the calculation or administration otherwise required of or for a benefit under this Section, the applicable retirement system may estimate an amount to be credited to or debited from a participant's cash balance account and then adjust the amount so credited or debited when more accurate information becomes available.

The applicable retirement system shall give to each participant in the optional cash balance plan who has not yet retired annual notice of (1) the balance in the participant's cash balance account and (2) an estimate of the retirement annuity that will be payable to the participant if he or she retires at age 59 1/2.

(d) Employee Contributions.

In addition to the other contributions required under the applicable Article, each participant shall make contributions to the applicable retirement system at the rate of 2% of each payment of salary.

The amount of each contribution shall be credited to the participant's cash balance account upon receipt and after the retirement system's reconciliation of the contribution.

SB2404 Engrossed - 30 - LRB098 09018 EFG 39154 b (e) Optional Employer Contributions.

Employers may make optional additional contributions to the applicable retirement system on behalf of their employees who are participants in the optional cash balance plan in accordance with procedures prescribed by the retirement system, to the extent permitted by federal law and the rules prescribed by the retirement system.

The optional additional contributions under this subsection are actual monetary contributions to the retirement system, and the amount of each optional additional contribution shall be credited to the participant's cash balance account upon receipt and after the retirement system's reconciliation of the contribution.

(f) Interest Credit.

An amount representing earnings on investments shall be determined by the retirement system in accordance with this Section and credited to the participant's cash balance account for each fiscal year in which there is a positive balance in that account;

except that no additional interest credit shall be credited while an annuity based on the account is being paid.

The interest credit amount shall be a percentage of the average quarterly balance in the cash balance account during that fiscal year, and shall be calculated on June 30.

The percentage shall be the assumed treasury rate for the previous fiscal year, unless neither the retirement system's actual rate of investment earnings for the previous fiscal year nor the retirement system's actual rate of investment earnings SB2404 Engrossed - 31 - LRB098 09018 EFG 39154 b for the five-year period ending at the end of the previous fiscal year is less than the assumed treasury rate.

If both the retirement system's actual rate of investment earnings for the previous fiscal year and the actual rate of investment earnings for the five-year period ending at the end of the previous fiscal year are at least the assumed treasury rate, then the percentage shall be:

(i) the assumed treasury rate, plus (ii) two-thirds of the amount of the actual rate of investment earnings for the previous fiscal year that exceeds the assumed treasury rate.

However, in no event shall the percentage applied under this subsection exceed 10%.

For the purposes of this subsection only, "previous fiscal year" means fiscal year ending one year before the interest rate is calculated.

For the purposes of this subsection only, "assumed treasury rate" means the average annual yield of the 30-year U.S.

Treasury Bond over the previous fiscal year, but not less than 4%.

When a person applies for a benefit under this Section, the retirement system shall apply an interest credit based on a proration of an estimate of what the interest credit will be for the relevant year.

When the retirement system certifies the credit on June 30, it shall adjust the benefit accordingly.

(f-10) Distribution upon Termination of Employment.

Upon SB2404 Engrossed - 32 - LRB098 09018 EFG 39154 b termination of active employment with at least 5 years of service credit under the applicable retirement system and prior to making application for an annuity under this Section, a participant in the optional cash balance plan may make an irrevocable election to distribute an amount not to exceed 40% of the balance in the participant's account in the form of a direct rollover to another qualified plan, to the extent allowed by federal law.

If the participant makes such an election, then the amount distributed shall be debited from the participant's cash balance account.

A participant in the optional cash balance plan shall be allowed only one distribution under this subsection.

The remaining balance in the participant's account shall be used for the determination of other benefits provided under this Section.

(f-15) Refund.

In lieu of receiving a distribution under subsection (f-10), at any time after terminating active employment under the applicable retirement system, but before receiving a retirement annuity under this Section, a participant in the optional cash balance plan may elect to receive a refund under this subsection.

The refund shall consist of an amount equal to the amount of all employee contributions credited to the participant's account, but shall not include any interest credit or employer contributions.

If the participant so requests, the refund may be paid in the form of a direct rollover to another qualified plan, to the extent allowed by federal law and in accordance with the rules of the SB2404 Engrossed - 33 - LRB098 09018 EFG 39154 b applicable retirement system.

Upon payment of the refund, the participant's notional cash balance account shall be closed.

(g) Retirement Annuity.

A participant in the optional cash balance plan may begin collecting a retirement annuity at age 59 1/2, but no earlier than the date of termination of active employment under the applicable retirement system.

The amount of the retirement annuity shall be calculated by the retirement system, based on the balance in the cash balance account, the assumption of future investment returns as specified in this subsection, the participant's election to have a lifetime survivor's annuity as specified in this subsection, the annual increase in retirement annuity as specified in subsection (h), the annual increase in survivor's annuity as specified in subsection (l), and any actuarial assumptions and tables adopted by the board of the retirement system for this purpose.

The calculation shall determine the amount of retirement annuity, on an actuarially equivalent basis, that shall be designed to result in the balance in the participant's account arriving at zero on the date when the last payment of the retirement annuity (or survivor's annuity, if the participant elects to provide for a survivor's annuity pursuant to this subsection) is anticipated to be paid under the relevant actuarial assumptions.

A retirement annuity or a survivor's annuity provided under this Section shall be a life annuity and shall not expire if the account balance equals zero.

SB2404 Engrossed - 34 - LRB098 09018 EFG 39154 b The annuity payment shall begin on the date specified by the participant submitting a written application, which date shall not be prior to termination of employment or more than one year before the application is received by the board;

however, if the participant is not an employee of an employer participating in this System or in a participating system as defined in Article 20 of this Code on April 1 of the calendar year next following the calendar year in which the participant attains age 70 1/2, the annuity payment period shall begin on that date regardless of whether an application has been filed.

The participant may elect, under the participant's written application for retirement, to receive a reduced annuity payable for his or her life and to have a lifetime survivor's annuity in a monthly amount equal to 50%, 75%, or 100% of that reduced monthly amount, to be paid after the participant's death to his or her eligible survivor.

Eligibility for a survivor's annuity shall be determined under the applicable Article of this Code.

For the purpose of calculating retirement annuities, future investment returns shall be assumed to be a percentage equal to the average yield of the 30-year U.S.

Treasury Bond over the 5 fiscal years prior to the calculation of the initial retirement annuity, plus 250 basis points;

but not less than 4% nor more than 8%.

(h) Annual Increase in Retirement Annuity.

The retirement annuity shall be subject to an automatic annual increase in an SB2404 Engrossed - 35 - LRB098 09018 EFG 39154 b amount equal to 3% of the originally granted annuity on each January 1 occurring on or after the first anniversary of the annuity start date.

(i) Disability Benefits.

There are no disability benefits provided under the optional cash balance plan, and no amounts for disability shall be deducted from the account of a participant in the optional cash balance plan.

The disability benefits provided under the applicable retirement system apply to participants in the optional cash balance plan.

(j) Return to Service.

Upon a return to service under the same retirement system after beginning to receive a retirement annuity under the optional cash balance plan, the retirement annuity shall be suspended and active participation in the optional cash balance plan shall resume.

Upon termination of the employment, the retirement annuity shall resume in an amount to be recalculated in accordance with subsection (g), taking into effect the changes in the cash balance account.

If a retired annuitant returns to service, his or her notional cash balance account shall be decreased by each payment of retirement annuity prior to the return to service.

(k) Survivor's Annuity - Death before Retirement.

In the case of a participant in the optional cash balance plan who had less than 5 years of service under the applicable Article and had not begun receiving a retirement annuity, the eligible survivor shall be entitled only to a refund of employee contributions under subsection (f-15).

SB2404 Engrossed - 36 - LRB098 09018 EFG 39154 b In the case of a participant in the optional cash balance plan who had at least 5 years of service under the applicable Article and had not begun receiving a retirement annuity, the eligible survivor shall be entitled to receive a survivor's annuity beginning at age 59 1/2 upon written application.

The survivor's annuity shall be calculated in the same manner as a retirement annuity under subsection (g).

At any time before receiving a survivor's annuity, the eligible survivor may claim a distribution under subsection (f-10) or a refund under subsection (f-15).

The deceased participant's account shall continue to receive interest credit until the eligible survivor begins to receive a survivor's annuity or receives a refund of employee contributions under subsection (f-15).

Eligibility for a survivor's annuity shall be determined under the applicable Article of this Code.

A child's or parent's annuity for an otherwise eligible child or dependent parent shall be in the same amount, if any, prescribed under the applicable Article.

(l) Annual Increase in Survivor's Annuity.

A survivor's annuity granted under subsection (g) or (k) shall be subject to an automatic annual increase in an amount equal to 3% of the originally granted annuity on each January 1 occurring on or after the first anniversary of the annuity start date.

(m) Applicability of Provisions.

The following provisions, if and as they exist in this Code, do not apply to participants in the optional cash balance plan with respect to participation SB2404 Engrossed - 37 - LRB098 09018 EFG 39154 b in the optional cash balance plan, except as they are specifically provided for in this Section:

(1) minimum service or vesting requirements (other than as provided in this Section);

(2) provisions limiting a retirement annuity to a specified percentage of salary;

(3) provisions authorizing a minimum retirement or survivor's annuity or a supplemental annuity;

(4) provisions authorizing any form of retirement annuity or survivor's annuity not authorized under this Section;

(5) provisions authorizing a reversionary annuity (other than the survivor's annuity under subsection (g));

(6) provisions authorizing a refund of employee contributions upon termination of service (other than upon the death of the participant without an eligible survivor) or any lump-sum payout in lieu of a retirement or survivor's annuity (other than the distribution under subsection (f-10) or the refund under subsection (f-15) of this Section;

(7) provisions authorizing optional service credits or the payment of optional additional contributions (other than the optional employer contributions specifically authorized in this Section);

or (8) a level income option.

The Retirement Systems Reciprocal Act (Article 20 of this SB2404 Engrossed - 38 - LRB098 09018 EFG 39154 b Code) does not apply to participation in the optional cash balance plan and does not affect the calculation of benefits payable under this Section.

The other provisions of this Code continue to apply to participants in the optional cash balance plan, to the extent that they do not conflict with this Section.

In the case of a conflict between the provisions of this Section and any other provision of this Code, the provisions of this Section control.

(n) Rules.

The Board of Trustees of the applicable retirement system may adopt rules and procedures for the implementation of this Section, including but not limited to determinations of how to integrate the administration of this Section with the requirements of the applicable Article and any other applicable provisions of this Code.

(o) Actual Employer Contributions.

Payment of employer contributions with respect to participants in the optional cash balance plan shall be the responsibility of the actual employer.

Optional additional contributions by employers may be paid in any amount, but must be paid in the manner specified by the applicable retirement system.

(p) Prospective Modification.

The provisions set forth in this Section are subject to prospective changes made by law, provided that any such changes shall not apply to any benefits accrued under this Section prior to the effective date of any amendatory Act of the General Assembly.

(q) Qualified Plan Status.

No provision of this Section SB2404 Engrossed - 39 - LRB098 09018 EFG 39154 b shall be interpreted in a way that would cause the applicable retirement system to cease to be a qualified plan under Section 401(a) of the Internal Revenue Code of 1986.

(40 ILCS 5/2-105.1 new) Sec.

Tier I participant."Tieremployee. I participant":

A"Tier participant who first became a participant before January 1, 2011 and who is not a Tier I retiree.employee":

A participant who first became a participant before January 1, 2011.

"Tier I retiree" means a former Tier I participantemployee who is receiving a retirement annuity.

(40 ILCS 5/2-124)5/2-107.9 (fromnew) Ch.Sec.

2-107.9.

Future increase in income.

"Future increase in income":

Any increase in income in any form offered for service as a member under this Article after June 30, 2014 that would qualify as "salary", as defined in Section 2-108, but for the fact that the increase in income was offered to the member on the condition that it not qualify as salary and was accepted by the member subject to that condition.

(40 ILCS 5/2-108) (from Ch.

2-124)2-108) Sec.

2-124.2-108.

ContributionsSalary. by State.

SB2404"Salary": - 8 - LRB098 09018 EFG 39154 b (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% 90% funded basis in accordance with actuarial recommendations.

(b)(1) TheFor Boardmembers shallof determine the amountGeneral ofAssembly, Statethe contributionstotal requiredcompensation forpaid eachto fiscalthe yearmember onby the basisState for one year of service, including the actuarialadditional tablesSB2404 andEngrossed other- assumptions40 adopted- byLRB098 09018 EFG 39154 b amounts, if any, paid to the Boardmember andas an officer pursuant to Section 1 of "An Act in relation to the prescribedcompensation rateand emoluments of interest,the usingmembers of the formulaGeneral inAssembly", subsectionapproved (c).December 6, 1907, as now or hereafter amended.

(c)(2) For State fiscal years 2015 through 2045, the minimum contribution to the System to be made by the State forexecutive eachofficers fiscalspecified yearin shallSection be2-105, an amount determined by the System to be sufficient to bring the total assetscompensation ofpaid the System up to 100% of the totalmember actuarialfor liabilitiesone ofyear the System by the end of Stateservice. fiscal year 2045.

In(3) makingFor thesemembers determinations,of the requiredSystem Statewho contributionare shallparticipants beunder calculatedSection each2-117.1, yearor who are serving as aClerk levelor percentageAssistant Clerk of payrollthe overHouse of Representatives or Secretary or Assistant Secretary of the yearsSenate, remainingthe total compensation paid to andthe includingmember fiscalfor one year 2045of andservice, shallbut benot determinedto underexceed the projectedsalary unitof creditthe actuarialhighest costsalaried method.officer of the General Assembly.

ForHowever, Statein fiscalthe yearsevent 2012that throughfederal 2014law 2045,results thein minimumany contributionparticipant toreceiving theimputed Systemincome tobased beon made by the Statevalue forof eachgroup fiscalterm yearlife shallinsurance beprovided an amount determined by the SystemState, tosuch beimputed sufficientincome toshall bringnot thebe totalincluded assetsin ofsalary thefor System up to 90% of the totalpurposes actuarial liabilities of thethis SystemArticle. by the end of SB2404 - 9 - LRB098 09018 EFG 39154 b State fiscal year 2045.

InNotwithstanding makingany theseother determinations,provision theof requiredthis StateSection, contribution"salary" shalldoes benot calculatedinclude eachany yearfuture increase in income that is offered for service as a levelmember percentageunder ofthis payrollArticle overpursuant to the yearsrequirements remainingof tosubsection (c) of Section 2-110.3 and includingaccepted fiscalby yeara 2045Tier andI shallemployee, beor determineda underTier I retiree returning to active service, who has made the projectedelection unitunder creditparagraph actuarial(2) costof method.subsection (a) or (a-5) of Section 2-110.3.

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 SB2404 - 10 - LRB098 09018 EFG 39154 b 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% 90% of the total actuarial liabilities of the System.

Amounts received by the System pursuant to Section 25 of 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.

SB2404 - 11 - LRB098 09018 EFG 39154 b 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 80% 90%.

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 Code or the Budget Stabilization Act, amounts transferred to the System pursuant to the Budget Stabilization Act after the effective date of this amendatory Act of the 98th General Assembly do not reduce and do not constitute payment of any portion of the required State contribution 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 received payment of contributions pursuant to 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) SB2404 - 12 - LRB098 09018 EFG 39154 b 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 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 SB2404 - 13 - LRB098 09018 EFG 39154 b 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.

96-43,86-27; eff.

7-15-09;86-273;

96-1497,86-1028; eff.

1-14-11;86-1488.) SB2404 Engrossed - 41 - LRB098 09018 EFG 39154 b (40 ILCS 5/2-110.3 new) Sec.

96-1511,2-110.3. eff.

1-27-11;Election by Tier I employees and Tier I retirees.

96-1554,(a) eff.Each Tier I employee shall make an irrevocable election either:

3-18-11;(1) to agree to item (i) or (ii) as set forth in this paragraph (1):

97-813,(i) eff.to have the amount of the automatic annual increases in his or her retirement annuity that are otherwise provided for in this Article calculated, instead, as provided in subsection (a-1) of Section 2-119.1, and to waive his or her eligibility for 2 automatic annual increases in retirement annuity as provided in subsection (a-2) of Section 2-119.1;

7-13-12.)or (40(ii) ILCSto 5/2-125)waive (fromhis Ch.or her eligibility for 3 automatic annual increases in retirement annuity, as provided in subsection (a-3) of Section 2-119.1, and to make the contributions set forth in subsection (a-5) of Section 2-126;

or (2) to not agree to item (i) or (ii) as set forth in paragraph (1) of this subsection.

The election required under this subsection (a) shall be made by each Tier I employee no earlier than February 1, 2014 and no later than May 31, 2014, except that:

(i) a person who becomes a Tier I employee under this SB2404 Engrossed - 42 - LRB098 09018 EFG 39154 b Article on or after February 1, 2014 must make the election under this subsection (a) within 60 days after becoming a Tier I employee;

(ii) a person who returns to active service as a Tier I employee under this Article on or after February 1, 2014 and has not yet made an election under this Section must make the election under this subsection (a) within 60 days after returning to active service as a Tier I employee;

and (iii) a person who made the election under subsection (a-5) as a Tier I retiree remains bound by that election and shall not make a later election under this subsection (a).

If a Tier I employee fails for any reason to make a required election under this subsection within the time specified, then the employee shall be deemed to have made the election under paragraph (2) of this subsection.

(a-5) Each Tier I retiree shall make an irrevocable election either:

(1) to agree to the following:

(i) to have the amount of the automatic annual increases in his or her retirement annuity calculated without regard to subsection (a-1), (a-2), or (a-3) of Section 2-119.1;

and (ii) to waive his or her eligibility for 2 automatic annual increases in retirement annuity as provided in subsection (a-4) of Section 2-119.1;

or SB2404 Engrossed - 43 - LRB098 09018 EFG 39154 b (2) to not agree to items (i) and (ii) as set forth in paragraph (1) of this subsection.

The election required under this subsection (a-5) shall be made by each Tier I retiree no earlier than February 1, 2014 and no later than May 31, 2014, except that:

(i) a person who becomes a Tier I retiree under this Article on or after February 1, 2014 must make the election under this subsection (a-5) within 60 days after becoming a Tier I retiree;

and (ii) a person who made the election under subsection (a) as a Tier I employee remains bound by that election and shall not make a later election under this subsection (a-5).

If a Tier I retiree fails for any reason to make a required election under this subsection within the time specified, then the Tier I retiree shall be deemed to have made the election under paragraph (2) of this subsection.

(a-10) All elections under subsection (a) or (a-5) that are made or deemed to be made before June 1, 2014 shall take effect on July 1, 2014.

Elections that are made or deemed to be made on or after June 1, 2014 shall take effect on the first day of the month following the month in which the election is made or deemed to be made.

(b) As adequate and legal consideration provided under this amendatory Act of the 98th General Assembly for making an election under paragraph (1) of subsection (a) of this Section, SB2404 Engrossed - 44 - LRB098 09018 EFG 39154 b any future increases in income offered for service as a member under this Article to a Tier I employee who has made an election under paragraph (1) of subsection (a) of this Section shall be offered expressly and irrevocably as constituting salary under Section 2-108.

As adequate and legal consideration provided under this amendatory Act of the 98th General Assembly for making an election under paragraph (1) of subsection (a-5) of this Section, any future increases in income offered for service as a member under this Article to a Tier I retiree who returns to active service after having made an election under paragraph (1) of subsection (a-5) of this Section shall be offered expressly and irrevocably as constituting salary under Section 2-108.

(c) A Tier I employee who makes the election under paragraph (2) of subsection (a) of this Section shall not be subject to either item (i) or (ii) set forth in paragraph (1) of subsection (a) of this Section.

However, any future increases in income offered for service as a member under this Article to a Tier I employee who has made the election under paragraph (2) of subsection (a) of this Section shall be offered expressly and irrevocably as not constituting salary under Section 2-108, and the member may not accept any future increase in income that is offered in violation of this requirement.

A Tier I retiree who makes the election under paragraph (2) SB2404 Engrossed - 45 - LRB098 09018 EFG 39154 b of subsection (a-5) of this Section shall not be subject to either item (i) or (ii) set forth in paragraph (1) of subsection (a-5) of this Section.

However, any future increases in income offered for service as a member under this Article to a Tier I retiree who returns to active service and has made the election under paragraph (2) of subsection (a-5) of this Section shall be offered expressly and irrevocably as not constituting salary under Section 2-108, and the member may not accept any future increase in income that is offered in violation of this requirement.

(d) The System shall make a good faith effort to contact each Tier I employee and Tier I retiree subject to this Section.

The System shall mail information describing the required election to each Tier I employee and Tier I retiree by United States Postal Service mail to his or her last known address on file with the System.

If the Tier I employee or Tier I retiree is not responsive to other means of contact, it is sufficient for the System to publish the details of any required elections on its website or to publish those details in a regularly published newsletter or other existing public forum.

Tier I employees and Tier I retirees who are subject to this Section shall be provided with an election packet containing information regarding their options, as well as the forms necessary to make the required election.

Upon request, the System shall offer Tier I employees and Tier I retirees an SB2404 Engrossed - 46 - LRB098 09018 EFG 39154 b opportunity to receive information from the System before making the required election.

The information may be provided through video materials, group presentations, individual consultation with a member or authorized representative of the System in person or by telephone or other electronic means, or any combination of those methods.

The System shall not provide advice or counseling with respect to which election a Tier I employee or Tier I retiree should make or specific to the legal or tax circumstances of or consequences to the Tier I employee or Tier I retiree.

The System shall inform Tier I employees and Tier I retirees in the election packet required under this subsection that the Tier I employee or Tier I retiree may also wish to obtain information and counsel relating to the election required under this Section from any other available source, including but not limited to labor organizations and private counsel.

In no event shall the System, its staff, or the Board be held liable for any information given to a member, beneficiary, or annuitant regarding the elections under this Section.

The System shall coordinate with the Illinois Department of Central Management Services and each other retirement system administering an election in accordance with this amendatory Act of the 98th General Assembly to provide information concerning the impact of the election set forth in this Section.

SB2404 Engrossed - 47 - LRB098 09018 EFG 39154 b (e) Notwithstanding any other provision of law, any future increases in income offered for service as a member must be offered expressly and irrevocably as not constituting "salary" under Section 2-108 to any Tier I employee, or Tier I retiree returning to active service, who has made an election under paragraph (2) of subsection (a) or (a-5) of Section 2-110.3.

A Tier I employee, or Tier I retiree returning to active service, who has made an election under paragraph (2) or subsection (a) or (a-5) of Section 2-110.3 shall not accept any future increase in income that is offered for service as a member under this Article in violation of the requirement set forth in this subsection.

(f) A member's election under this Section is not a prohibited election under subdivision (j)(1) of Section 1-119 of this Code.

(g) No provision of this Section shall be interpreted in a way that would cause the System to cease to be a qualified plan under Section 401(a) of the Internal Revenue Code of 1986.

(h) If this Section is determined to be unconstitutional or otherwise invalid by a final unappealable decision of an Illinois court or a court of competent jurisdiction as applied to Tier I employees but not as applied to Tier I retirees, then this Section and the changes deriving from the election required under this Section shall be null and void as applied to Tier I employees but shall remain in full effect for Tier I retirees.

SB2404 Engrossed - 48 - LRB098 09018 EFG 39154 b (i) If this Section is determined to be unconstitutional or otherwise invalid by a final unappealable decision of an Illinois court or a court of competent jurisdiction as applied to Tier I retirees but not as applied to Tier I employees, then this Section and the changes deriving from the election required under this Section shall be null and void as applied to Tier I retirees but shall remain in full effect for Tier I employees.

(j) If an election created by this amendatory Act in any other Article of this Code or any change deriving from that election is determined to be unconstitutional or otherwise invalid by a final unappealable decision of an Illinois court or a court of competent jurisdiction, the invalidity of that provision shall not in any way affect the validity of this Section or the changes deriving from the election required under this Section.

(40 ILCS 5/2-119.1) (from Ch.

2-125)2-119.1) Sec.

2-119.1.

Automatic increase in retirement annuity.

(a) Except as provided in subsections (a-1), (a-2), (a-3), and (a-4), a A participant who retires after June 30, 1967, and who has not received an initial increase under this Section before the effective date of this amendatory Act of 1991, shall, in January or July next following the first anniversary of retirement, whichever occurs first, and in the same month of each year thereafter, but in no event prior to age 60, have the SB2404 Engrossed - 49 - LRB098 09018 EFG 39154 b amount of the originally granted retirement annuity increased as follows:

for each year through 1971, 1 1/2%;

for each year from 1972 through 1979, 2%;

and for 1980 and each year thereafter, 3%.

Annuitants who have received an initial increase under this subsection prior to the effective date of this amendatory Act of 1991 shall continue to receive their annual increases in the same month as the initial increase.

(a-1) Notwithstanding any other provision of this Article, for a Tier I employee who made the election under item (i) of paragraph (1) of subsection (a) of Section 2-110.3, the amount of each automatic annual increase in retirement annuity occurring on or after the effective date of that election, other than the initial increase, shall be 3% of the originally granted retirement annuity.

(a-2) Notwithstanding any other provision of this Article, for a Tier I employee who made the election under item (i) of paragraph (1) of subsection (a) of Section 2-110.3, once the first annual increase under this Section has been granted, the next 2 scheduled annual increases shall be skipped, and thereafter all annual increases shall be granted.

(a-3) Notwithstanding any other provision of this Article, for a Tier I employee who made the election under item (ii) of paragraph (1) of subsection (a) of Section 2-110.3, once the first annual increase under this Section has been granted, the next 3 scheduled annual increases shall be skipped, and thereafter all annual increases shall be granted.

SB2404 Engrossed - 50 - LRB098 09018 EFG 39154 b (a-4) Notwithstanding any other provision of this Article, for a Tier I retiree who made the election under paragraph (1) of subsection (a-5) of Section 2-110.3:

(1) if the Tier I retiree has not received the first annual increase under this Section as of the effective date of this amendatory Act of the 98th General Assembly, then once the first annual increase under this Section has been granted, the next scheduled annual increase shall be skipped, the following annual increase shall be granted, the next annual increase shall be skipped, and thereafter all annual increases shall be granted;

and (2) if the Tier I retiree has received the first annual increase under this Section as of the effective date of this amendatory Act of the 98th General Assembly, then the next annual increase after that effective date shall be skipped, the following annual increase shall be granted, the next annual increase shall be skipped, and thereafter all annual increases shall be granted.

(b) Beginning January 1, 1990, for eligible participants who remain in service after attaining 20 years of creditable service, the 3% increases provided under subsection (a) shall begin to accrue on the January 1 next following the date upon which the participant (1) attains age 55, or (2) attains 20 years of creditable service, whichever occurs later, and shall continue to accrue while the participant remains in service;

such increases shall become payable on January 1 or July 1, SB2404 Engrossed - 51 - LRB098 09018 EFG 39154 b whichever occurs first, next following the first anniversary of retirement.

For any person who has service credit in the System for the entire period from January 15, 1969 through December 31, 1992, regardless of the date of termination of service, the reference to age 55 in clause (1) of this subsection (b) shall be deemed to mean age 50.

This subsection (b) does not apply to any person who first becomes a member of the System after August 8, 2003 (the effective date of Public Act 93-494) this amendatory Act of the 93rd General Assembly.

(b-5) Notwithstanding any other provision of this Article, a participant who first becomes a participant on or after January 1, 2011 (the effective date of Public Act 96-889) shall, in January or July next following the first anniversary of retirement, whichever occurs first, and in the same month of each year thereafter, but in no event prior to age 67, have the amount of the retirement annuity then being paid increased by 3% or the annual unadjusted percentage increase in the Consumer Price Index for All Urban Consumers as determined by the Public Pension Division of the Department of Insurance under subsection (a) of Section 2-108.1, whichever is less.

(c) The foregoing provisions relating to automatic increases are not applicable to a participant who retires before having made contributions (at the rate prescribed in Section 2-126) for automatic increases for less than the equivalent of one full year.

However, in order to be eligible SB2404 Engrossed - 52 - LRB098 09018 EFG 39154 b for the automatic increases, such a participant may make arrangements to pay to the system the amount required to bring the total contributions for the automatic increase to the equivalent of one year's contributions based upon his or her last salary.

(d) A participant who terminated service prior to July 1, 1967, with at least 14 years of service is entitled to an increase in retirement annuity beginning January, 1976, and to additional increases in January of each year thereafter, except as otherwise provided in subsection (a-2), (a-3), or (a-4).

The initial increase shall be 1 1/2% of the originally granted retirement annuity multiplied by the number of full years that the annuitant was in receipt of such annuity prior to January 1, 1972, plus 2% of the originally granted retirement annuity for each year after that date.

The subsequent annual increases shall be at the rate of 2% of the originally granted retirement annuity for each year through 1979 and at the rate of 3% for 1980 and thereafter.

(e) Beginning January 1, 1990, and except as provided in subsection (a-1) or (b-5), all automatic annual increases payable under this Section shall be calculated as a percentage of the total annuity payable at the time of the increase, including previous increases granted under this Article.

(Source:

P.A.

96-889, eff.

1-1-11;

96-1490, eff.

1-1-11.) (40 ILCS 5/2-125) (from Ch.

108 1/2, par.

2-125) SB2404 Engrossed - 53 - LRB098 09018 EFG 39154 b Sec.

Obligations of StateState; ;

(b) All income, interest and dividends derived from deposits and investments shall be credited to the account of the system in the State Treasury and used to pay benefits under this Article.

(c)(b) PursuantThe to Article XIII, Section 5 of the 1970 Constitution of the State ofshall Illinois, beginning on July 1, 2013, the State shall, as a retirement benefit to each participant and annuitant of the System be contractually obligated to contribute to the System (asin aeach fiduciaryState andfiscal trusteeyear ofan theamount participantsnot andless annuitants)than to pay the annualsum required Statein SB2404Section -2-124 14 - LRB098 09018 EFG 39154 b contribution, as determinedthat bySection theexisted Boardprior of the System using generally accepted actuarial principles, as is necessary to bring the totaleffective assetsdate of thethis Systemamendatory upAct to 100% of the total98th actuarialGeneral liabilitiesAssembly. of the System by the end of State fiscal year 2045.

AsThe aobligations furthercreated retirementunder benefitthis andsubsection contractual(b) obligation,are eachcontractual fiscalobligations year,protected theand Stateenforceable shallunder payArticle toI, eachSection designated16 retirementand systemArticle theXIII, annualSection required5 Stateof contribution certified by the BoardIllinois forConstitution. that fiscal year.

PaymentsNotwithstanding any other provision of thelaw, annualif requiredthe State contributionfails forto eachpay in a State fiscal year shallthe beamount madeguaranteed under this subsection (b), the System may bring a mandamus action in equalthe monthlyCircuit installments.Court of Sangamon County to compel the State to make that payment, irrespective of other remedies that may be available to the System.

Additionally,It beginningshall inbe fiscalthe yearmandatory 2014,fiduciary Stateobligation transfersof to the PensionBoard Stabilizationof Fundthe pursuantSystem to Sectionbring 20that ofaction if the BudgetState Stabilizationfails Actto andpay paymentsin to the Systemfiscal pursuantyear tothe Sectionamount 25guaranteed ofSB2404 theEngrossed Budget- Stabilization54 Act- shallLRB098 be09018 furtherEFG retirement39154 benefitsb andunder contractualthis obligations.subsection (b).