Wednesday, July 12, 2017

Tier II (Tier III) Optional Benefit Structures for TRS of Illinois (from Senate Bill 42, Public Act 100-0023 "Budget Implementation Act" Pages 270-83)


(40 ILCS 5/1-161 new)
3    Sec. 1-161. Optional benefits for certain Tier 2 members 
4under Articles 14, 15, and 16.
5    (a) Notwithstanding any other provision of this Code to the 
6contrary, the provisions of this Section apply to a person who 
7first becomes a member or a participant under Article 14, 15, 
8or 16 on or after the implementation date under this Section 
9for the applicable Article and who does not make the election 
10under subsection (b) or (c), whichever applies. The provisions 
11of this Section also apply to a person who makes the election 
12under subsection (c-5). However, the provisions of this Section 
13do not apply to any participant in a self-managed plan, nor to 
14a covered employee under Article 14.
15    As used in this Section and Section 1-160, the 
16"implementation date" under this Section means the earliest 
17date upon which the board of a retirement system authorizes 
18members of that system to begin participating in accordance 
19with this Section, as determined by the board of that 
20retirement system. Each of the retirement systems subject to 
21this Section shall endeavor to make such participation 
22available as soon as possible after the effective date of this 
23Section and shall establish an implementation date by board 
24resolution.
25    (b) In lieu of the benefits provided under this Section, a 

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1member or participant, except for a participant under Article 
215, may irrevocably elect the benefits under Section 1-160 and 
3the benefits otherwise applicable to that member or 
4participant. The election must be made within 30 days after 
5becoming a member or participant. Each retirement system shall 
6establish procedures for making this election.
7    (c) A participant under Article 15 may irrevocably elect 
8the benefits otherwise provided to a Tier 2 member under 
9Article 15. The election must be made within 30 days after 
10becoming a member. The retirement system under Article 15 shall 
11establish procedures for making this election.
12    (c-5) A non-covered participant under Article 14 to whom 
13Section 1-160 applies, a Tier 2 member under Article 15, or a 
14participant under Article 16 to whom Section 1-160 applies may 
15irrevocably elect to receive the benefits under this Section in 
16lieu of the benefits under Section 1-160 or the benefits 
17otherwise available to a Tier 2 member under Article 15, 
18whichever is applicable. Each retirement System shall 
19establish procedures for making this election.
20    (d) "Final average salary" means the average monthly (or 
21annual) salary obtained by dividing the total salary or 
22earnings calculated under the Article applicable to the member 
23or participant during the last 120 months (or 10 years) of 
24service in which the total salary or earnings calculated under 
25the applicable Article was the highest by the number of months 
26(or years) of service in that period. For the purposes of a 

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1person to whom this Section applies, in this Code, "final 
2average salary" shall be substituted for "final average 
3compensation" in Article 14.
4    (e) Beginning on the implementation date, for all purposes 
5under this Code (including without limitation the calculation 
6of benefits and employee contributions), the annual earnings, 
7salary, compensation, or wages (based on the plan year) of a 
8member or participant to whom this Section applies shall not at 
9any time exceed the federal Social Security Wage Base then in 
10effect.
11    (f) A member or participant is entitled to a retirement
12annuity upon written application if he or she has attained the 
13normal retirement age determined by the Social Security 
14Administration for that member or participant's year of birth, 
15but no earlier than 67 years of age, and has at least 10 years 
16of service credit and is otherwise eligible under the 
17requirements of the applicable Article.
18    (g) The amount of the retirement annuity to which a member 
19or participant is entitled shall be computed by multiplying 
201.25% for each year of service credit by his or her final 
21average salary.
22    (h) Any retirement annuity or supplemental annuity shall be 
23subject to annual increases on the first anniversary of the 
24annuity start date. Each annual increase shall be one-half the 
25annual unadjusted percentage increase (but not less than zero) 
26in the consumer price index-w for the 12 months ending with the 

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1September preceding each November 1 of the originally granted 
2retirement annuity. If the annual unadjusted percentage change 
3in the consumer price index-w for the 12 months ending with the 
4September preceding each November 1 is zero or there is a 
5decrease, then the annuity shall not be increased.
6    For the purposes of this Section, "consumer price index-w" 
7means the index published by the Bureau of Labor Statistics of 
8the United States Department of Labor that measures the average 
9change in prices of goods and services purchased by Urban Wage 
10Earners and Clerical Workers, United States city average, all 
11items, 1982-84 = 100. The new amount resulting from each annual 
12adjustment shall be determined by the Public Pension Division 
13of the Department of Insurance and made available to the boards 
14of the retirement systems and pension funds by November 1 of 
15each year.
16    (i) The initial survivor's or widow's annuity of an 
17otherwise eligible survivor or widow of a retired member or 
18participant to whom this Section applies shall be in the amount 
19of 66 2/3% of the retired member's or participant's retirement 
20annuity at the date of death. In the case of the death of a 
21member or participant who has not retired and to whom this 
22Section applies, eligibility for a survivor's or widow's 
23annuity shall be determined by the applicable Article of this 
24Code. The benefit shall be 66 2/3% of the earned annuity 
25without a reduction due to age. A child's annuity of an 
26otherwise eligible child shall be in the amount prescribed 

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1under each Article if applicable.
2    (j) In lieu of any other employee contributions, except for 
3the contribution to the defined contribution plan under 
4subsection (k) of this Section, each employee shall contribute 
56.2% of his her or salary to the retirement system. However, 
6the employee contribution under this subsection shall not 
7exceed the amount of the total normal cost of the benefits for 
8all members making contributions under this Section (except for 
9the defined contribution plan under subsection (k) of this 
10Section), expressed as a percentage of payroll and certified on 
11or before January 15 of each year by the board of trustees of 
12the retirement system. If the board of trustees of the 
13retirement system certifies that the 6.2% employee 
14contribution rate exceeds the normal cost of the benefits under 
15this Section (except for the defined contribution plan under 
16subsection (k) of this Section), then on or before December 1 
17of that year, the board of trustees shall certify the amount of 
18the normal cost of the benefits under this Section (except for 
19the defined contribution plan under subsection (k) of this 
20Section), expressed as a percentage of payroll, to the State 
21Actuary and the Commission on Government Forecasting and 
22Accountability, and the employee contribution under this 
23subsection shall be reduced to that amount beginning July 1 of 
24that year. Thereafter, if the normal cost of the benefits under 
25this Section (except for the defined contribution plan under 
26subsection (k) of this Section), expressed as a percentage of 

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1payroll and certified on or before January 1 of each year by 
2the board of trustees of the retirement system, exceeds 6.2% of 
3salary, then on or before January 15 of that year, the board of 
4trustees shall certify the normal cost to the State Actuary and 
5the Commission on Government Forecasting and Accountability, 
6and the employee contributions shall revert back to 6.2% of 
7salary beginning January 1 of the following year.
8    (k) In accordance with each retirement system's 
9implementation date, each retirement system under Article 14, 
1015, or 16 shall prepare and implement a defined contribution 
11plan for members or participants who are subject to this 
12Section. The defined contribution plan developed under this 
13subsection shall be a plan that aggregates employer and 
14employee contributions in individual participant accounts 
15which, after meeting any other requirements, are used for 
16payouts after retirement in accordance with this subsection and 
17any other applicable laws.
18        (1) Each member or participant shall contribute a 
19    minimum of 4% of his or her salary to the defined 
20    contribution plan.
21        (2) For each participant in the defined contribution 
22    plan who has been employed with the same employer for at 
23    least one year, employer contributions shall be paid into 
24    that participant's accounts at a rate expressed as a 
25    percentage of salary. This rate may be set for individual 
26    employees, but shall be no higher than 6% of salary and 

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1    shall be no lower than 2% of salary.
2        (3) Employer contributions shall vest when those 
3    contributions are paid into a member's or participant's 
4    account.
5        (4) The defined contribution plan shall provide a 
6    variety of options for investments. These options shall 
7    include investments handled by the Illinois State Board of 
8    Investment as well as private sector investment options.
9        (5) The defined contribution plan shall provide a 
10    variety of options for payouts to retirees and their 
11    survivors.
12        (6) To the extent authorized under federal law and as 
13    authorized by the retirement system, the defined 
14    contribution plan shall allow former participants in the 
15    plan to transfer or roll over employee and employer 
16    contributions, and the earnings thereon, into other 
17    qualified retirement plans.
18        (7) Each retirement system shall reduce the employee 
19    contributions credited to the member's defined 
20    contribution plan account by an amount determined by that 
21    retirement system to cover the cost of offering the 
22    benefits under this subsection and any applicable 
23    administrative fees.
24        (8) No person shall begin participating in the defined 
25    contribution plan until it has attained qualified plan 
26    status and received all necessary approvals from the U.S. 

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1    Internal Revenue Service.
2    (l) In the case of a conflict between the provisions of 
3this Section and any other provision of this Code, the 
4provisions of this Section shall control. 
5    (40 ILCS 5/1-162 new)
6    Sec. 1-162. Optional benefits for certain Tier 2 members of 
7pension funds under Articles 8, 9, 10, 11, 12, and 17.
8    (a) As used in this Section:
9    "Affected pension fund" means a pension fund established 
10under Article 8, 9, 10, 11, 12, or 17 that the governing body 
11of the unit of local government has designated as an affected 
12pension fund by adoption of a resolution or ordinance.
13    "Resolution or ordinance date" means the date on which the 
14governing body of the unit of local government designates a 
15pension fund under Article 8, 9, 10, 11, 12, or 17 as an 
16affected pension fund by adoption of a resolution or ordinance 
17or July 1, 2018, whichever is later.
18    (b) Notwithstanding any other provision of this Code to the 
19contrary, the provisions of this Section apply to a person who 
20first becomes a member or a participant in an affected pension 
21fund on or after 6 months after the resolution or ordinance 
22date and who does not make the election under subsection (c).
23    (c) In lieu of the benefits provided under this Section, a 
24member or participant may irrevocably elect the benefits under 
25Section 1-160 and the benefits otherwise applicable to that 

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1member or participant. The election must be made within 30 days 
2after becoming a member or participant. Each affected pension 
3fund shall establish procedures for making this election.
4    (d) "Final average salary" means the average monthly (or 
5annual) salary obtained by dividing the total salary or 
6earnings calculated under the Article applicable to the member 
7or participant during the last 120 months (or 10 years) of 
8service in which the total salary or earnings calculated under 
9the applicable Article was the highest by the number of months 
10(or years) of service in that period. For the purposes of a 
11person who first becomes a member or participant of an affected 
12pension fund on or after 6 months after the ordinance or 
13resolution date, in this Code, "final average salary" shall be 
14substituted for the following:
15        (1) In Articles 8, 9, 10, 11, and 12, "highest average 
16    annual salary for any 4 consecutive years within the last 
17    10 years of service immediately preceding the date of 
18    withdrawal".
19        (2) In Article 17, "average salary".
20    (e) Beginning 6 months after the resolution or ordinance 
21date, for all purposes under this Code (including without 
22limitation the calculation of benefits and employee 
23contributions), the annual earnings, salary, or wages (based on 
24the plan year) of a member or participant to whom this Section 
25applies shall not at any time exceed the federal Social 
26Security Wage Base then in effect.

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1    (f) A member or participant is entitled to a retirement
2annuity upon written application if he or she has attained the 
3normal retirement age determined by the Social Security 
4Administration for that member or participant's year of birth, 
5but no earlier than 67 years of age, and has at least 10 years 
6of service credit and is otherwise eligible under the 
7requirements of the applicable Article.
8    (g) The amount of the retirement annuity to which a member 
9or participant is entitled shall be computed by multiplying 
101.25% for each year of service credit by his or her final 
11average salary.
12    (h) Any retirement annuity or supplemental annuity shall be 
13subject to annual increases on the first anniversary of the 
14annuity start date. Each annual increase shall be one-half the 
15annual unadjusted percentage increase (but not less than zero) 
16in the consumer price index-w for the 12 months ending with the 
17September preceding each November 1 of the originally granted 
18retirement annuity. If the annual unadjusted percentage change 
19in the consumer price index-w for the 12 months ending with the 
20September preceding each November 1 is zero or there is a 
21decrease, then the annuity shall not be increased.
22    For the purposes of this Section, "consumer price index-w" 
23means the index published by the Bureau of Labor Statistics of 
24the United States Department of Labor that measures the average 
25change in prices of goods and services purchased by Urban Wage 
26Earners and Clerical Workers, United States city average, all 

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1items, 1982-84 = 100. The new amount resulting from each annual 
2adjustment shall be determined by the Public Pension Division 
3of the Department of Insurance and made available to the boards 
4of the retirement systems and pension funds by November 1 of 
5each year.
6    (i) The initial survivor's or widow's annuity of an 
7otherwise eligible survivor or widow of a retired member or 
8participant who first became a member or participant on or 
9after 6 months after the resolution or ordinance date shall be 
10in the amount of 66 2/3% of the retired member's or 
11participant's retirement annuity at the date of death. In the 
12case of the death of a member or participant who has not 
13retired and who first became a member or participant on or 
14after 6 months after the resolution or ordinance date, 
15eligibility for a survivor's or widow's annuity shall be 
16determined by the applicable Article of this Code. The benefit 
17shall be 66 2/3% of the earned annuity without a reduction due 
18to age. A child's annuity of an otherwise eligible child shall 
19be in the amount prescribed under each Article if applicable.
20    (j) In lieu of any other employee contributions, except for 
21the contribution to the defined contribution plan under 
22subsection (k) of this Section, each employee shall contribute 
236.2% of his her or salary to the affected pension fund. 
24However, the employee contribution under this subsection shall 
25not exceed the amount of the normal cost of the benefits under 
26this Section (except for the defined contribution plan under 

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1subsection (k) of this Section), expressed as a percentage of 
2payroll and determined on or before November 1 of each year by 
3the board of trustees of the affected pension fund. If the 
4board of trustees of the affected pension fund determines that 
5the 6.2% employee contribution rate exceeds the normal cost of 
6the benefits under this Section (except for the defined 
7contribution plan under subsection (k) of this Section), then 
8on or before December 1 of that year, the board of trustees 
9shall certify the amount of the normal cost of the benefits 
10under this Section (except for the defined contribution plan 
11under subsection (k) of this Section), expressed as a 
12percentage of payroll, to the State Actuary and the Commission 
13on Government Forecasting and Accountability, and the employee 
14contribution under this subsection shall be reduced to that 
15amount beginning January 1 of the following year. Thereafter, 
16if the normal cost of the benefits under this Section (except 
17for the defined contribution plan under subsection (k) of this 
18Section), expressed as a percentage of payroll and determined 
19on or before November 1 of each year by the board of trustees 
20of the affected pension fund, exceeds 6.2% of salary, then on 
21or before December 1 of that year, the board of trustees shall 
22certify the normal cost to the State Actuary and the Commission 
23on Government Forecasting and Accountability, and the employee 
24contributions shall revert back to 6.2% of salary beginning 
25January 1 of the following year.
26    (k) No later than 5 months after the resolution or 

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1ordinance date, an affected pension fund shall prepare and 
2implement a defined contribution plan for members or 
3participants who are subject to this Section. The defined 
4contribution plan developed under this subsection shall be a 
5plan that aggregates employer and employee contributions in 
6individual participant accounts which, after meeting any other 
7requirements, are used for payouts after retirement in 
8accordance with this subsection and any other applicable laws.
9        (1) Each member or participant shall contribute a 
10    minimum of 4% of his or her salary to the defined 
11    contribution plan.
12        (2) For each participant in the defined contribution 
13    plan who has been employed with the same employer for at 
14    least one year, employer contributions shall be paid into 
15    that participant's accounts at a rate expressed as a 
16    percentage of salary. This rate may be set for individual 
17    employees, but shall be no higher than 6% of salary and 
18    shall be no lower than 2% of salary.
19        (3) Employer contributions shall vest when those 
20    contributions are paid into a member's or participant's 
21    account.
22        (4) The defined contribution plan shall provide a 
23    variety of options for investments. These options shall 
24    include investments handled by the Illinois State Board of 
25    Investment as well as private sector investment options.
26        (5) The defined contribution plan shall provide a 

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1    variety of options for payouts to retirees and their 
2    survivors.
3        (6) To the extent authorized under federal law and as 
4    authorized by the affected pension fund, the defined 
5    contribution plan shall allow former participants in the 
6    plan to transfer or roll over employee and employer 
7    contributions, and the earnings thereon, into other 
8    qualified retirement plans.
9        (7) Each affected pension fund shall reduce the 
10    employee contributions credited to the member's defined 
11    contribution plan account by an amount determined by that 
12    affected pension fund to cover the cost of offering the 
13    benefits under this subsection and any applicable 
14    administrative fees.
15        (8) No person shall begin participating in the defined 
16    contribution plan until it has attained qualified plan 
17    status and received all necessary approvals from the U.S. 
18    Internal Revenue Service.
19    (l) In the case of a conflict between the provisions of 
20this Section and any other provision of this Code, the 
21provisions of this Section shall control. 
22    (40 ILCS 5/2-124)  (from Ch. 108 1/2, par. 2-124)
23    (Text of Section WITHOUT the changes made by P.A. 98-599, 
24which has been held unconstitutional)
25    Sec. 2-124. Contributions by State. 

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1 comment:

  1. February 11, 2012 on this blog:

    ...Because we are victims of today’s disappearing and weakened organized labor unions that were once the guardians of middle-class workers and a representative democracy; because we are victims of our unions' lack of strong leadership and their lack of sustained organizational acumen, and because of our own indecisiveness and political ignorance; because of our inability to marshal essential resources and to draw upon experts in the fields of economics and law; because of our inability to build an effective coalition and to launch a counter-attack against the arrogant, wealthy minority that is waging an economic war against the poor and middle class in Illinois and elsewhere, we will continue to be the scapegoats for the reprehensible problems created by the “wealthy elite” until we mobilize our collective efforts against their powerful economic interests, their lucrative lobbying of the state’s policymakers, and their insistence upon deficit reduction by way of public “pension reform.”

    ReplyDelete