|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
1 | AN ACT concerning public employee benefits.
| ||||||||||||||||||||||||
2 | Be it enacted by the People of the State of Illinois,
| ||||||||||||||||||||||||
3 | represented in the General Assembly:
| ||||||||||||||||||||||||
4 | Section 5. The Illinois Pension Code is amended by adding | ||||||||||||||||||||||||
5 | Section 14-110.5 as follows: | ||||||||||||||||||||||||
6 | (40 ILCS 5/14-110.5 new) | ||||||||||||||||||||||||
7 | Sec. 14-110.5. Deferred Retirement Option Plan. | ||||||||||||||||||||||||
8 | (a) As used in this Section: | ||||||||||||||||||||||||
9 | "Deferred eligibility date" means the first day of any | ||||||||||||||||||||||||
10 | month to which a vested member is eligible to defer his | ||||||||||||||||||||||||
11 | election to participate in DROP. A vested member who has | ||||||||||||||||||||||||
12 | reached 26 years and 8 months of actual service and has not | ||||||||||||||||||||||||
13 | reached the age of 50 may enter the DROP and be eligible for | ||||||||||||||||||||||||
14 | contributions to this fund. If the member resigns or dies prior | ||||||||||||||||||||||||
15 | to age 50 he or his designee is not eligible to collect any of | ||||||||||||||||||||||||
16 | the DROP contributions. For a member with dual normal | ||||||||||||||||||||||||
17 | retirement dates, the DROP eligibility date may be determined | ||||||||||||||||||||||||
18 | by the member as the first day of the month in which normal | ||||||||||||||||||||||||
19 | retirement is achieved in either class. For an elected officer | ||||||||||||||||||||||||
20 | member who has reached normal retirement date during a term of | ||||||||||||||||||||||||
21 | office, the DROP initial eligibility date may be deferred to | ||||||||||||||||||||||||
22 | the first day of the month after the beginning date of the next | ||||||||||||||||||||||||
23 | succeeding term of office. |
| |||||||
| |||||||
1 | "Deferred Retirement Option Plan" or "DROP" means a program | ||||||
2 | available to certain members who are eligible to receive | ||||||
3 | benefits under Section 14-110 of this Code under which members | ||||||
4 | effectively retire and have their retirement accumulate, after | ||||||
5 | applicable taxes, in the System while they continue covered | ||||||
6 | employment for up to 5 years. | ||||||
7 | "DROP begin date" means the first day of the month in which | ||||||
8 | the member's DROP participation period begins and is always the | ||||||
9 | same date as the member's effective date of retirement. Such | ||||||
10 | date shall be the first day of the month in which the eligible | ||||||
11 | member submits a DROP application, or any future month after | ||||||
12 | the member reaches his or her DROP eligibility date, as | ||||||
13 | selected by the member. However, a member's DROP begin date | ||||||
14 | cannot precede the month the Board receives the DROP | ||||||
15 | application. | ||||||
16 | "DROP break in service" means a period for which no | ||||||
17 | compensation is reported for a DROP participant during one full | ||||||
18 | month of the participant's work year and there is no continuing | ||||||
19 | employer-employee relationship. A member who is on leave of | ||||||
20 | absence without pay or on a workers' compensation leave has an | ||||||
21 | employer-employee relationship. | ||||||
22 | "DROP eligibility date" means the first day of the month in | ||||||
23 | which a vested member becomes eligible to elect to participate | ||||||
24 | in DROP by virtue of reaching either his normal retirement date | ||||||
25 | or a deferred eligibility date, if a deferred eligibility date | ||||||
26 | is applicable and elected by the member. Both the 12-month |
| |||||||
| |||||||
1 | period during which the member may elect to participate in the | ||||||
2 | DROP and the 60-month period that a member is allowed to | ||||||
3 | participate in DROP begin on the member's DROP eligibility | ||||||
4 | date. | ||||||
5 | "DROP end date" means the date DROP participation ceases | ||||||
6 | and shall be the date termination of all employment occurs. The | ||||||
7 | DROP end date shall be effective as of the date of the | ||||||
8 | participant's designated deferred resignation or earlier if | ||||||
9 | the participant terminates prior to the designated resignation | ||||||
10 | date. | ||||||
11 | "DROP participation period" means the period of time a | ||||||
12 | member participates in DROP, not to exceed 60 months. | ||||||
13 | "Initial eligibility date" means the first day of the month | ||||||
14 | in which a vested member first becomes eligible to elect to | ||||||
15 | participate in DROP by virtue of reaching his or her normal | ||||||
16 | retirement date. | ||||||
17 | "Normal retirement date" means when the member becomes age | ||||||
18 | 50 or when the member completes 26 years and 8 months of | ||||||
19 | service. The member may either include or exclude optional | ||||||
20 | service credit in determining the date on which 26 years and 8 | ||||||
21 | months of service has been attained. | ||||||
22 | "Optional service credit" includes credit for prior | ||||||
23 | service, past service purchased by the member, and military | ||||||
24 | service. "Optional service credit" does not include workers' | ||||||
25 | compensation credit or past service credit paid for by the | ||||||
26 | employer. |
| |||||||
| |||||||
1 | (b) A member who is eligible for benefits under Section | ||||||
2 | 14-110 of this Code is eligible to participate in the DROP | ||||||
3 | provided the member attains a normal retirement date and is | ||||||
4 | employed in a regularly established position within their | ||||||
5 | Department. | ||||||
6 | An eligible member must elect to participate in DROP no | ||||||
7 | less than 3 months prior to the member's DROP eligibility date, | ||||||
8 | subject to the following conditions: | ||||||
9 | (1) A member who reaches age 50 with 25 years of | ||||||
10 | service or 26 years and 8 months at any age in accordance | ||||||
11 | with section (b)1. | ||||||
12 | (2) A member may elect to include or exclude any | ||||||
13 | optional service credit from the total service used to | ||||||
14 | establish the DROP begin date when determining the DROP | ||||||
15 | eligibility date. | ||||||
16 | (3) A member with dual normal retirement dates, due to | ||||||
17 | an employment history in 2 different classes of membership | ||||||
18 | with different normal retirement date and age | ||||||
19 | requirements, may elect to participate in DROP within 12 | ||||||
20 | months of attaining normal retirement date in either | ||||||
21 | membership class. | ||||||
22 | (4) An elected officer who reaches his or her DROP | ||||||
23 | eligibility date during a term of office may defer DROP | ||||||
24 | participation until the next term in such office. The | ||||||
25 | officer must elect to participate in DROP within 12 months | ||||||
26 | of the first day of the month following the first month of |
| |||||||
| |||||||
1 | such succeeding term and may participate for no more than | ||||||
2 | 60 months after such day or until the end of the term, | ||||||
3 | whichever occurs first. | ||||||
4 | (c) It is the responsibility of the eligible member to make | ||||||
5 | proper application to the System to participate in DROP. To | ||||||
6 | qualify for DROP, the member shall submit a notice of election | ||||||
7 | to participate that shall specify the DROP begin date and the | ||||||
8 | DROP termination and resignation date and is acknowledged by | ||||||
9 | the employer, and the notice of election to participate shall | ||||||
10 | be received by the System no later than the end of the last | ||||||
11 | month of the member's election period described in subsection | ||||||
12 | (b) of this Section or a later date, if authorized in | ||||||
13 | subsection (b). Such termination and resignation date shall | ||||||
14 | constitute a binding letter of resignation with the employer. | ||||||
15 | Failure to complete the notice of election to participate | ||||||
16 | within the limitations of subsection (b) of this Section shall | ||||||
17 | result in the member being ineligible for DROP participation. | ||||||
18 | An application for service retirement and the DROP shall be | ||||||
19 | accepted by the System up to 6 months, but no later than 3 | ||||||
20 | months, in advance of the intended DROP begin date and shall | ||||||
21 | establish the member's effective date of retirement and DROP | ||||||
22 | begin date. The effective date of retirement and the DROP begin | ||||||
23 | date shall both be the first day of the month that the member | ||||||
24 | indicates on his or her application as the date he or she | ||||||
25 | wishes his or her DROP participation to begin, provided the | ||||||
26 | System receives the member's application no later than the |
| |||||||
| |||||||
1 | close of business on the last day 3 months prior to when the | ||||||
2 | DROP begin date occurs. If a member fails to apply for DROP by | ||||||
3 | the last day of the month in which his or her intended DROP | ||||||
4 | begin date occurs, the effective date of retirement and the | ||||||
5 | DROP begin date shall be the first day of the month in which | ||||||
6 | the System receives the member's application, provided the | ||||||
7 | application is received within the 3-month election period. | ||||||
8 | (d) When the System receives a member's application for | ||||||
9 | DROP, the System must: | ||||||
10 | (1) acknowledge receipt of the member's application | ||||||
11 | and advise him or her of any required information or | ||||||
12 | documents that have not yet been received; such information | ||||||
13 | may include, but is not limited to, birth date, beneficiary | ||||||
14 | designation, option selection, any payments due the | ||||||
15 | member's account for purchase of additional service credit | ||||||
16 | or a written statement from the member that the member does | ||||||
17 | not wish to claim such service credit, and certification of | ||||||
18 | final salary and accumulated annual leave payments; | ||||||
19 | (2) establish the DROP begin date; and | ||||||
20 | (3) send a follow-up notice, reminding the member of | ||||||
21 | any required information or documents that have not yet | ||||||
22 | been received. | ||||||
23 | (e) Subject to timely submission of all required documents, | ||||||
24 | the effective date of DROP participation shall be the effective | ||||||
25 | date of retirement. The DROP participant may not modify or | ||||||
26 | cancel his or her retirement benefit after the last day of the |
| |||||||
| |||||||
1 | month of the DROP begin date. The DROP benefit shall be deemed | ||||||
2 | cashed or deposited as of the last day of the month following | ||||||
3 | the DROP begin date. | ||||||
4 | (f) If all the required information and documents have not | ||||||
5 | been received by the System after 3 follow-up notices have been | ||||||
6 | sent to the member, the System must send the member a certified | ||||||
7 | letter, advising the member that he has 21 days to provide such | ||||||
8 | information or documents without loss of his DROP begin date. | ||||||
9 | If the System has not received all of the required information | ||||||
10 | and documents after the 21 days specified in the certified | ||||||
11 | letter, the System must send a final agency action letter to | ||||||
12 | the member advising the member that his or her application is | ||||||
13 | canceled and that he or she must reapply to join DROP, if | ||||||
14 | eligible, with a new effective DROP begin date to be | ||||||
15 | established upon application. | ||||||
16 | (g) All employers paying the salary of a DROP participant | ||||||
17 | shall contribute the required percentage of such participant's | ||||||
18 | gross compensation. In addition, health insurance benefits | ||||||
19 | continue in accordance with the State Employees Group Insurance | ||||||
20 | Act of 1971. | ||||||
21 | (h) The retirement benefit of a member who has elected to | ||||||
22 | participate in the DROP shall be calculated as provided in this | ||||||
23 | Section. | ||||||
24 | A member may choose to receive his accumulated annual leave | ||||||
25 | and applicable sick time payments and earned in accordance with | ||||||
26 | agency policy, either upon beginning or terminating DROP.
This |
| |||||||
| |||||||
1 | early annual leave payment shall be based on the hourly wage of | ||||||
2 | the member at the time he or she begins participation in DROP. | ||||||
3 | Any additional annual leave payment made at the DROP end date | ||||||
4 | according to the employer's leave policy cannot be included in | ||||||
5 | the retirement benefit, which was determined and fixed by law | ||||||
6 | when the member elected to participate in DROP. If the member | ||||||
7 | elects to receive the annual leave payment upon termination of | ||||||
8 | DROP and termination of employment with his or her employer, | ||||||
9 | any accumulated annual leave payment made at that time cannot | ||||||
10 | be included in the retirement benefit, which was determined and | ||||||
11 | fixed by law when the member elected to participate in DROP. | ||||||
12 | (i) The beneficiary eligible to receive any accrued DROP | ||||||
13 | benefits payable if the DROP participant dies before the | ||||||
14 | completion of the DROP participation period is the most recent | ||||||
15 | joint annuitant or beneficiary designated to receive | ||||||
16 | retirement benefits upon the death of the participant, as | ||||||
17 | directed by the participant on his or her beneficiary forms. | ||||||
18 | However, if the beneficiary or joint annuitant dies during the | ||||||
19 | DROP participation period, the participant may designate a new | ||||||
20 | beneficiary as follows: | ||||||
21 | (1) If the participant retired under option 1 or 2, he | ||||||
22 | or she may name a new beneficiary. Such beneficiary is | ||||||
23 | eligible for both the DROP benefits and any benefits | ||||||
24 | provided by the option selected. | ||||||
25 | (2) If the participant retired under option 3 or 4, he | ||||||
26 | or she may name a new qualified joint annuitant or spouse. |
| |||||||
| |||||||
1 | Such beneficiary is eligible for both the accrued DROP | ||||||
2 | benefits and any continuing benefits. | ||||||
3 | (3) If the participant retired under option 3 or 4, he | ||||||
4 | or she may name a new beneficiary who will receive only the | ||||||
5 | accrued DROP benefits. Such beneficiary shall not replace | ||||||
6 | the joint annuitant or spouse or be eligible for any | ||||||
7 | continuing benefits. | ||||||
8 | (4) The participant may not name a beneficiary to | ||||||
9 | receive DROP benefits who is different from the beneficiary | ||||||
10 | designated to receive the retirement benefits. | ||||||
11 | (j) Effective with the DROP begin date, the member's | ||||||
12 | initial normal monthly benefit shall be fixed and shall accrue | ||||||
13 | monthly in the System Trust Fund. Interest shall accrue at an | ||||||
14 | effective annual rate of 6.5% compounded monthly, on the prior | ||||||
15 | month's accumulated ending balance, up to the month of the DROP | ||||||
16 | participant's termination or death.
The DROP benefit is | ||||||
17 | increased by the annual cost-of-living adjustment as otherwise | ||||||
18 | provided in this Article. | ||||||
19 | (k) A DROP participant is not eligible to apply for or | ||||||
20 | receive retiree health insurance subsidy payments until such | ||||||
21 | participant has terminated employment and DROP participation. | ||||||
22 | A member shall not earn creditable service applicable to the | ||||||
23 | health insurance subsidy while participating in DROP. | ||||||
24 | (l) A DROP participant is considered an annuitant; however, | ||||||
25 | participation in DROP does not alter the participant's | ||||||
26 | employment status. Terms and conditions of employment, |
| |||||||
| |||||||
1 | including, but not limited to, salary, insurance coverage, | ||||||
2 | leave accrual and seniority status, do not change as a result | ||||||
3 | of DROP participation. However, employment is not guaranteed | ||||||
4 | during the DROP participation period. | ||||||
5 | Employment continues during participation in DROP through | ||||||
6 | the date the member preselected to stop participation in DROP, | ||||||
7 | except that elected officers may continue in office after the | ||||||
8 | DROP end date.
A DROP participant may change jobs or have more | ||||||
9 | than one employer under this Article, as long as the | ||||||
10 | participant does not have a break in service. If a break in | ||||||
11 | service occurs, DROP participation ceases as of the end of the | ||||||
12 | month in which no compensation is received for covered | ||||||
13 | employment. All employers are required to acknowledge the | ||||||
14 | participant's DROP termination date and to acknowledge | ||||||
15 | potential liability for any additional retirement | ||||||
16 | contributions and interest required if the participant fails to | ||||||
17 | timely terminate employment. | ||||||
18 | (m) DROP participants shall not be eligible for disability | ||||||
19 | benefits under this Article. | ||||||
20 | (n) If a participant continues employment beyond the | ||||||
21 | preselected DROP end date and prior to completion of the | ||||||
22 | maximum 60 months allowed, a new form must be submitted with a | ||||||
23 | new DROP end date acknowledged by both the participant and any | ||||||
24 | affected employer. | ||||||
25 | (o) DROP benefits shall be subject to the provisions of | ||||||
26 | this Article pertaining to assignment, execution, or |
| |||||||
| |||||||
1 | attachment of benefits, and forfeiture of benefits, | ||||||
2 | respectively. | ||||||
3 | (p) Eligibility to participate in the DROP ends upon the | ||||||
4 | death of the participant.
A DROP participant's survivors shall | ||||||
5 | not be eligible to receive the participant's line-of-duty death | ||||||
6 | benefits.
If the participant dies on or after the DROP begin | ||||||
7 | date, but prior to the first monthly benefit being credited to | ||||||
8 | his or her DROP account, benefits shall be paid as follows: | ||||||
9 | (1) according to the option selected by the participant | ||||||
10 | at the time he or she entered DROP; | ||||||
11 | (2) if the beneficiary qualifies as a joint annuitant | ||||||
12 | and the participant had selected an option other than | ||||||
13 | option 3, the beneficiary may choose to receive a benefit | ||||||
14 | payable under option 3 with no payout of DROP accrual, as | ||||||
15 | though the participant had not applied for DROP and had | ||||||
16 | retired on the date of death; or | ||||||
17 | (3) if no option had been selected by the participant, | ||||||
18 | benefits shall be paid in accordance with System rules. | ||||||
19 | Upon the death of a DROP participant, the designated | ||||||
20 | beneficiary shall be entitled to apply for and receive the | ||||||
21 | accrued benefits in the DROP. | ||||||
22 | (q) A DROP participant not in the Elected Officers' Class | ||||||
23 | must terminate employment on or before the preselected | ||||||
24 | resignation date. If a participant fails to terminate on or | ||||||
25 | before the DROP termination and resignation date:
(1) | ||||||
26 | retirement and DROP participation are voided;
(2) the DROP |
| |||||||
| |||||||
1 | accumulation and any monthly retirement benefits received are | ||||||
2 | forfeited; (3) membership in the System is retroactively | ||||||
3 | reestablished to the date the member initiated DROP | ||||||
4 | participation;
(4) each employer is liable for payment of or | ||||||
5 | eligible for a refund of, as applicable, the difference between | ||||||
6 | the DROP contributions paid and the required retirement | ||||||
7 | contributions for the applicable class of membership during the | ||||||
8 | period of DROP participation, plus 6.5% interest compounded | ||||||
9 | annually; no interest is payable on refunds to employers; and | ||||||
10 | (5) the designated beneficiary shall remain the named | ||||||
11 | beneficiary, unless revised. | ||||||
12 | (r) A member of the Elected Officers' Class participating | ||||||
13 | in the DROP may continue to serve in elected office upon | ||||||
14 | reaching the DROP end date. No additional DROP benefits shall | ||||||
15 | accrue on behalf of the officer after the officer's DROP end | ||||||
16 | date, however, cost-of-living adjustments and interest shall | ||||||
17 | continue to accrue until the officer ceases holding office and | ||||||
18 | satisfies the definition of termination provided in this | ||||||
19 | Section. The officer shall not be a renewed member in the | ||||||
20 | Elected Officers' Class and the employer shall not make | ||||||
21 | retirement contributions on the officer's behalf after the | ||||||
22 | officer's DROP end date, however, the employer shall submit | ||||||
23 | health insurance subsidy contributions until the officer | ||||||
24 | ceases holding elective office. Monthly retirement benefit | ||||||
25 | payments shall be paid to the officer beginning the first month | ||||||
26 | after the officer ceases holding office and satisfies the |
| |||||||
| |||||||
1 | definition of termination provided in this Section. After | ||||||
2 | satisfying the definition of termination, such officer who is | ||||||
3 | reemployed or reelected shall be subject to the reemployment | ||||||
4 | limitations provided in this Article. | ||||||
5 | (s) Upon the participant's termination of all employment, | ||||||
6 | the deferred resignation becoming effective, and the | ||||||
7 | conclusion of the DROP participation period, or upon the death | ||||||
8 | of the participant, or for an elected officer as provided in | ||||||
9 | this Section, benefits shall be paid or distributed as follows: | ||||||
10 | (1) The previously determined normal monthly | ||||||
11 | retirement benefits, plus applicable cost-of-living | ||||||
12 | increases, commence in accordance with the method of | ||||||
13 | payment chosen by the participant at the time he or she | ||||||
14 | began DROP participation. | ||||||
15 | (2) The total accumulated DROP benefits are | ||||||
16 | distributed to the participant, or, if deceased, to the | ||||||
17 | participant's joint annuitant or beneficiary as | ||||||
18 | appropriate, provided the System receives the proper forms | ||||||
19 | signed by both the participant and employer verifying | ||||||
20 | termination of employment and notifying the System as to | ||||||
21 | which of the following methods of payment he or she has | ||||||
22 | chosen:
(i) lump sum (if the participant is deceased, a | ||||||
23 | beneficiary, other than a spouse, must receive the lump sum | ||||||
24 | distribution only),
(ii) direct rollover, or
(iii) | ||||||
25 | combined partial lump sum and rollover. | ||||||
26 | A DROP participant or beneficiary who submits all required |
| |||||||
| |||||||
1 | forms, but fails to elect a method of payment within 60 days of | ||||||
2 | termination of DROP, automatically receives a lump sum | ||||||
3 | distribution, less applicable withheld taxes. | ||||||
4 | A participant who elects a rollover must have the rollover | ||||||
5 | paid directly to the custodian of an eligible retirement plan. | ||||||
6 | Eligible retirement plans include an individual retirement | ||||||
7 | account as described in Section 408(a) of the Internal Revenue | ||||||
8 | Code, an Individual Retirement Annuity as described in Section | ||||||
9 | 408(b) of the Internal Revenue Code, excluding an endowment | ||||||
10 | contract, a qualified trust established in accordance with | ||||||
11 | Section 401(a) of the Internal Revenue Code, for the sole and | ||||||
12 | exclusive benefit of employees or their beneficiaries, an | ||||||
13 | annuity plan as described in Section 403(a) of the Internal | ||||||
14 | Revenue Code, excluding a plan described in Sections 403(b) and | ||||||
15 | 457 of in the Internal Revenue Code, an eligible deferred | ||||||
16 | compensation plan described in Section 457(B) of the Internal | ||||||
17 | Revenue Code that is maintained by an eligible employer as | ||||||
18 | described in Section 457(e)(1)(A) of the Internal Revenue Code, | ||||||
19 | and an annuity contract as described in Section 403(b) of the | ||||||
20 | Internal Revenue Code.
If the DROP participant dies and the | ||||||
21 | surviving spouse wishes to roll over the DROP account, it can | ||||||
22 | only be rolled over into an individual retirement account, an | ||||||
23 | individual retirement annuity, an eligible deferred | ||||||
24 | compensation plan, or an annuity contract. | ||||||
25 | (t) Benefits accumulating in the DROP are not subject to | ||||||
26 | federal benefit limitations specified in Section 415 of the |
| |||||||
| |||||||
1 | Internal Revenue Code until DROP participation ends and the | ||||||
2 | participant begins receiving his monthly retirement benefits. | ||||||
3 | The amount of the accumulated DROP at the time the member | ||||||
4 | ceases DROP is amortized over the member's expected lifetime, | ||||||
5 | in the manner required by the Internal Revenue Code, and the | ||||||
6 | annualized value of the DROP account reduces the federal | ||||||
7 | maximum annual benefit the member is entitled to receive. | ||||||
8 | (u) Reemployment with an employer during the first calendar | ||||||
9 | month after concluding DROP shall result in cancellation of | ||||||
10 | DROP and retirement. The member's DROP application shall be | ||||||
11 | void, and he or she shall be required to repay all DROP and | ||||||
12 | monthly retirement benefits received. The employer who | ||||||
13 | re-employs such member is liable for payment of or eligible for | ||||||
14 | a refund of, as applicable, the difference between the DROP | ||||||
15 | contributions paid and the required SERS retirement | ||||||
16 | contributions for the applicable class of membership during the | ||||||
17 | period of DROP participation. Payment of additional | ||||||
18 | contributions for the applicable class of membership during the | ||||||
19 | period of DROP participation. Payment of additional | ||||||
20 | contributions shall include 6.5% interest compounded annually. | ||||||
21 | No interest will be paid on refunds to employers.
| ||||||
22 | Section 99. Effective date. This Act takes effect upon | ||||||
23 | becoming law.
|