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

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1		member or participant, except for a participant under Article
2		15, may irrevocably elect the benefits under Section 1-160 and
3		the benefits otherwise applicable to that member or
4		participant. The election must be made within 30 days after
5		becoming a member or participant. Each retirement system shall
6		establish procedures for making this election.
7		(c) A participant under Article 15 may irrevocably elect
8		the benefits otherwise provided to a Tier 2 member under
9		Article 15. The election must be made within 30 days after
10		becoming a member. The retirement system under Article 15 shall
11		establish procedures for making this election.
12		(c-5) A non-covered participant under Article 14 to whom
13		Section 1-160 applies, a Tier 2 member under Article 15, or a
14		participant under Article 16 to whom Section 1-160 applies may
15		irrevocably elect to receive the benefits under this Section in
16		lieu of the benefits under Section 1-160 or the benefits
17		otherwise available to a Tier 2 member under Article 15,
18		whichever is applicable. Each retirement System shall
19		establish procedures for making this election.
20		(d) "Final average salary" means the average monthly (or
21		annual) salary obtained by dividing the total salary or
22		earnings calculated under the Article applicable to the member
23		or participant during the last 120 months (or 10 years) of
24		service in which the total salary or earnings calculated under
25		the 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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1		person to whom this Section applies, in this Code, "final
2		average salary" shall be substituted for "final average
3		compensation" in Article 14.
4		(e) Beginning on the implementation date, for all purposes
5		under this Code (including without limitation the calculation
6		of benefits and employee contributions), the annual earnings,
7		salary, compensation, or wages (based on the plan year) of a
8		member or participant to whom this Section applies shall not at
9		any time exceed the federal Social Security Wage Base then in
10		effect.
11		(f) A member or participant is entitled to a retirement
12		annuity upon written application if he or she has attained the
13		normal retirement age determined by the Social Security
14		Administration for that member or participant's year of birth,
15		but no earlier than 67 years of age, and has at least 10 years
16		of service credit and is otherwise eligible under the
17		requirements of the applicable Article.
18		(g) The amount of the retirement annuity to which a member
19		or participant is entitled shall be computed by multiplying
20		1.25% for each year of service credit by his or her final
21		average salary.
22		(h) Any retirement annuity or supplemental annuity shall be
23		subject to annual increases on the first anniversary of the
24		annuity start date. Each annual increase shall be one-half the
25		annual unadjusted percentage increase (but not less than zero)
26		in the consumer price index-w for the 12 months ending with the

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

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1		under each Article if applicable.
2		(j) In lieu of any other employee contributions, except for
3		the contribution to the defined contribution plan under
4		subsection (k) of this Section, each employee shall contribute
5		6.2% of his her or salary to the retirement system. However,
6		the employee contribution under this subsection shall not
7		exceed the amount of the total normal cost of the benefits for
8		all members making contributions under this Section (except for
9		the defined contribution plan under subsection (k) of this
10		Section), expressed as a percentage of payroll and certified on
11		or before January 15 of each year by the board of trustees of
12		the retirement system. If the board of trustees of the
13		retirement system certifies that the 6.2% employee
14		contribution rate exceeds the normal cost of the benefits under
15		this Section (except for the defined contribution plan under
16		subsection (k) of this Section), then on or before December 1
17		of that year, the board of trustees shall certify the amount of
18		the normal cost of the benefits under this Section (except for
19		the defined contribution plan under subsection (k) of this
20		Section), expressed as a percentage of payroll, to the State
21		Actuary and the Commission on Government Forecasting and
22		Accountability, and the employee contribution under this
23		subsection shall be reduced to that amount beginning July 1 of
24		that year. Thereafter, if the normal cost of the benefits under
25		this Section (except for the defined contribution plan under
26		subsection (k) of this Section), expressed as a percentage of

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1		payroll and certified on or before January 1 of each year by
2		the board of trustees of the retirement system, exceeds 6.2% of
3		salary, then on or before January 15 of that year, the board of
4		trustees shall certify the normal cost to the State Actuary and
5		the Commission on Government Forecasting and Accountability,
6		and the employee contributions shall revert back to 6.2% of
7		salary beginning January 1 of the following year.
8		(k) In accordance with each retirement system's
9		implementation date, each retirement system under Article 14,
10		15, or 16 shall prepare and implement a defined contribution
11		plan for members or participants who are subject to this
12		Section. The defined contribution plan developed under this
13		subsection shall be a plan that aggregates employer and
14		employee contributions in individual participant accounts
15		which, after meeting any other requirements, are used for
16		payouts after retirement in accordance with this subsection and
17		any 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
3		this Section and any other provision of this Code, the
4		provisions of this Section shall control.
5		(40 ILCS 5/1-162 new)
6		Sec. 1-162. Optional benefits for certain Tier 2 members of
7		pension 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
10		under Article 8, 9, 10, 11, 12, or 17 that the governing body
11		of the unit of local government has designated as an affected
12		pension fund by adoption of a resolution or ordinance.
13		"Resolution or ordinance date" means the date on which the
14		governing body of the unit of local government designates a
15		pension fund under Article 8, 9, 10, 11, 12, or 17 as an
16		affected pension fund by adoption of a resolution or ordinance
17		or July 1, 2018, whichever is later.
18		(b) Notwithstanding any other provision of this Code to the
19		contrary, the provisions of this Section apply to a person who
20		first becomes a member or a participant in an affected pension
21		fund on or after 6 months after the resolution or ordinance
22		date and who does not make the election under subsection (c).
23		(c) In lieu of the benefits provided under this Section, a
24		member or participant may irrevocably elect the benefits under
25		Section 1-160 and the benefits otherwise applicable to that

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

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1		(f) A member or participant is entitled to a retirement
2		annuity upon written application if he or she has attained the
3		normal retirement age determined by the Social Security
4		Administration for that member or participant's year of birth,
5		but no earlier than 67 years of age, and has at least 10 years
6		of service credit and is otherwise eligible under the
7		requirements of the applicable Article.
8		(g) The amount of the retirement annuity to which a member
9		or participant is entitled shall be computed by multiplying
10		1.25% for each year of service credit by his or her final
11		average salary.
12		(h) Any retirement annuity or supplemental annuity shall be
13		subject to annual increases on the first anniversary of the
14		annuity start date. Each annual increase shall be one-half the
15		annual unadjusted percentage increase (but not less than zero)
16		in the consumer price index-w for the 12 months ending with the
17		September preceding each November 1 of the originally granted
18		retirement annuity. If the annual unadjusted percentage change
19		in the consumer price index-w for the 12 months ending with the
20		September preceding each November 1 is zero or there is a
21		decrease, then the annuity shall not be increased.
22		For the purposes of this Section, "consumer price index-w"
23		means the index published by the Bureau of Labor Statistics of
24		the United States Department of Labor that measures the average
25		change in prices of goods and services purchased by Urban Wage
26		Earners and Clerical Workers, United States city average, all

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1		items, 1982-84 = 100. The new amount resulting from each annual
2		adjustment shall be determined by the Public Pension Division
3		of the Department of Insurance and made available to the boards
4		of the retirement systems and pension funds by November 1 of
5		each year.
6		(i) The initial survivor's or widow's annuity of an
7		otherwise eligible survivor or widow of a retired member or
8		participant who first became a member or participant on or
9		after 6 months after the resolution or ordinance date shall be
10		in the amount of 66 2/3% of the retired member's or
11		participant's retirement annuity at the date of death. In the
12		case of the death of a member or participant who has not
13		retired and who first became a member or participant on or
14		after 6 months after the resolution or ordinance date,
15		eligibility for a survivor's or widow's annuity shall be
16		determined by the applicable Article of this Code. The benefit
17		shall be 66 2/3% of the earned annuity without a reduction due
18		to age. A child's annuity of an otherwise eligible child shall
19		be in the amount prescribed under each Article if applicable.
20		(j) In lieu of any other employee contributions, except for
21		the contribution to the defined contribution plan under
22		subsection (k) of this Section, each employee shall contribute
23		6.2% of his her or salary to the affected pension fund.
24		However, the employee contribution under this subsection shall
25		not exceed the amount of the normal cost of the benefits under
26		this Section (except for the defined contribution plan under

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

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1		ordinance date, an affected pension fund shall prepare and
2		implement a defined contribution plan for members or
3		participants who are subject to this Section. The defined
4		contribution plan developed under this subsection shall be a
5		plan that aggregates employer and employee contributions in
6		individual participant accounts which, after meeting any other
7		requirements, are used for payouts after retirement in
8		accordance 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
20		this Section and any other provision of this Code, the
21		provisions 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,
24		which has been held unconstitutional)
25		Sec. 2-124. Contributions by State.

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