SB1645 103RD GENERAL ASSEMBLY

LRB103 27812 RPS 54190 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB1645

Introduced 2/8/2023, by Sen. Robert F. Martwick

SYNOPSIS AS INTRODUCED:

40 ILCS 5/24-107

from Ch. 108 1/2, par. 24-107

Amends the Deferred Compensation Article of the Illinois Pension Code. Provides that "eligible sponsoring entity" means a school district organized under the Chicago School District Article of the School Code; the City of Chicago as the sponsoring entity for the City of Chicago Deferred Compensation Plan; or Cook County as the sponsoring entity for the Cook County Deferred Compensation Plan. Authorizes an eligible sponsoring entity to automatically enroll employees in its deferred compensation program. Provides that the eligible sponsoring entity shall continue to be subject to specified fiduciary duty provisions under the General Provisions Article of the Illinois Pension Code. Provides that an employee who is automatically enrolled in the deferred compensation program shall contribute 3% of his or her pretax gross compensation for each compensation period into his or her account. Removes language providing that the provisions authorizing local government deferred compensation plans does not limit the power or authority of any unit of local government, school district, or any institution supported in whole or in part by public funds to establish and administer any other deferred compensation plans that may be authorized by law and deemed appropriate by the officials of such subdivisions or institutions. Contains provisions concerning fiduciary duties; availability of multiple plans or programs; elections not to participate; refunds; and increases to the default contribution rate. Effective immediately.

A BILL FOR

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Pension Code is amended by changing Section 24-107 as follows:

(40 ILCS 5/24-107) (from Ch. 108 1/2, par. 24-107)

Sec. 24-107. Local government plans.

(a) Any unit of local government or school district may establish for its employees a deferred compensation program. Participation shall be by written agreement between each employee and the legislative authority of the unit of local government or school district providing for the deferral of such compensation and the subsequent investment and administration of such funds.

(b) Any unit of local government may establish an employer-funded money purchase retirement plan for those of its full time employees who are not eligible to participate in any pension fund or retirement system established under Articles 2 through 18 of this Code. Contributions to the plan shall be made by the unit of local government only from general purpose funds not derived from real property taxes imposed by the unit, at a rate to be determined from time to time by the unit of local government. However, the rate of employer contribution shall be (i) the same for all employees participating in the plan, and (ii) not more than 10% of the employee's salary.

Any benefits accruing to the participants in a retirement plan established under this subsection shall be protected from impairment in accordance with Article XIII, Section 5 of the Illinois Constitution. However, the unit of local government establishing such a plan may terminate it at any time, unless it has otherwise contractually agreed with its participating employees.

(c) The agency or department designated by the unit of local government or school district to establish and administer a plan or program authorized under subsection (a) or (b) of this Section may invest the assets of the plan in investments deemed appropriate by the agency or department, including, but not limited to, life insurance or annuity contracts, and share or share certificate accounts of State or federal credit unions, the accounts of which are insured as required by the Illinois Credit Union Act or the Federal Credit Union Act, whichever is applicable. The payment of employer contributions to a retirement plan established under subsection (b), and investment and payment to a participant of deferred compensation and income or gain thereon, if any, shall not be construed to be prohibited uses of the general assets of the unit of local government or school district.

(d) In this subsection, "eligible sponsoring entity" means:

(1) a school district organized under Article 34 of the School Code;

(2) the City of Chicago as the sponsoring entity for the City of Chicago Deferred Compensation Plan; or

(3) Cook County as the sponsoring entity for the Cook County Deferred Compensation Plan.

An eligible sponsoring entity is authorized to automatically enroll all active employees into its deferred compensation program. An eligible sponsoring entity shall continue to be subject to the fiduciary duty provisions in Article 1 of this Code. If multiple employer entities participate in a program sponsored by a distinct eligible sponsoring entity, the participating employers shall not have any liability for an employee's decision to participate in or opt out of the deferred compensation program or for the investment decisions of the eligible sponsoring entity or of any enrollee. A participating employer shall not be a fiduciary or considered to be a fiduciary over the program, nor shall a participating employer bear responsibility or liability for the administration, investment decisions, investment performance, investment returns, or design of the program. An eligible sponsoring entity shall begin automatically enrolling all new employees who begin employment on or after the effective date of this amendatory Act of the 103rd General Assembly. All employees automatically enrolled into the program shall have the right to elect to not participate, pursuant to the procedures specified in this subsection. If an eligible sponsoring entity makes multiple plans or programs available to employees, automatic enrollment authority shall be available for only one plan or program. If multiple plans or programs are available, a plan under Section 457(b) of the Internal Revenue Code of 1986, as amended, shall be the plan into which the eligible sponsoring entity shall automatically enroll employees into. If multiple plans or programs are available and a plan under Section 457(b) of the Internal Revenue Code of 1986, as amended, is not available, the eligible sponsoring entity shall publicly deliberate and decide upon which plan or program shall be used for automatic enrollment.

An employee automatically enrolled under this subsection shall contribute 3% of his or her pretax gross compensation for each compensation period into his or her deferred compensation account, unless the member otherwise instructs the eligible sponsoring entity. The eligible sponsoring entity shall create forms that allow employees to elect to not participate in the program. These forms must also allow the employee to change the amount of pretax gross compensation deferred each month, but compensation deferrals must comply with State and federal contribution restrictions. The eligible sponsoring entity shall provide such forms to all employees automatically enrolled into the program. An employee may submit these forms to elect to not participate in the deferred compensation program or to alter contribution amounts at any time.

An employee shall have 30 days from the date on which the eligible sponsoring entity provides the notice required under Section 414(w) of the Internal Revenue Code of 1986, as amended, to elect to not participate in the eligible deferred compensation program or to elect to increase or reduce the initial amount of elective deferrals made to the program. In the absence of such affirmative election, the employee shall be automatically enrolled in the program on the first day of the calendar month, or as soon as administratively practicable thereafter, following the 30th day from the date on which the eligible sponsoring entity provides the required notice.

An employee who has been automatically enrolled in the deferred compensation program may elect, within 90 days of enrollment, to be withdrawn from the program and receive a refund of amounts deferred, plus or minus any applicable earnings, investment fees, and administrative fees. Any refund amount shall be included in the member's gross income for the taxable year in which the refund is issued.

On or after January 1, 2024, the eligible sponsoring entity may elect to increase the automatic annual contributions under this Section. The increase in the rate of contribution, however, shall not exceed 1% of an employee's pretax gross compensation per year, and at no time shall any total contribution exceed any contribution limits established by State or federal law.

This Section does not limit the power or authority of any unit of local government, school district or any institution supported in whole or in part by public funds to establish and administer any other deferred compensation plans that may be authorized by law and deemed appropriate by the officials of such subdivisions or institutions.

(Source: P.A. 87-794.)

Section 99. Effective date. This Act takes effect upon becoming law.