HB2349 98TH GENERAL ASSEMBLY

LRB098 09395 EFG 39536 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB2349

Introduced , by Rep. John E. Bradley

SYNOPSIS AS INTRODUCED:

40 ILCS 5/24-101	from Ch. 108 1/2, par. 24-101
40 ILCS 5/24-105.1
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 a school district or community college district may administer a plan authorized in Section 403(b) of the Internal Revenue Code of 1986 and may authorize companies to provide annuities and other investments as part of the plan without a competitive selection process, subject to certain stated conditions. Among those conditions, provides that the company may not charge more than 10 times the fees and expenses of an investment in the deferred compensation plan for State employees. Effective immediately.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

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 Sections 24-101, 24-105.1, and 24-107 as follows:

(40 ILCS 5/24-101) (from Ch. 108 1/2, par. 24-101)

Sec. 24-101. Notwithstanding any law to the contrary, the State of Illinois or any unit of local government or school district may enter into a written contract with any of its employees to defer a part of their gross compensation and may invest such funds in any such manner as prescribed by the deferred compensation program adopted by it under this Article. Compensation deferred pursuant to a deferred compensation program adopted under this Article shall not exceed the amount of compensation allowed to be deferred without being subject to income tax in the year in which it is earned, pursuant to Section 403(b) or 457 of the United States Internal Revenue Code or laws supplementary or amendatory thereto.

It is hereby declared to be in the public interest to provide public employees with a plan for the deferral of compensation and the accrual of income and gain thereon if such deferred compensation be invested, and to encourage the continued service of public employees by making available such benefits to them.

(Source: P.A. 82-145.)

(40 ILCS 5/24-105.1)

Sec. 24-105.1. Changes in federal law. To the extent that federal law or regulations which require a governmental employer to own the assets of its deferred compensation plan are changed to allow plans established under Section 403(b) or 457 of the Internal Revenue Code to hold their assets in trust, a custodial account, an annuity contract, an insurance contract or some other contract, the Department of Central Management Services and units of local government with plans established under Section 24-107 shall within a reasonable time amend their plans accordingly.

(Source: P.A. 89-478, eff. 6-18-96.)

(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) A school district or community college district may administer a plan authorized in Section 403(b) of the Internal Revenue Code of 1986, and its subsequent amendments, and may authorize companies to provide annuities and other investments as part of the plan without a competitive selection process, if the school district or community college district includes the following provisions in its agreements with the authorized companies:

(1) The company will fully disclose all fees and expenses to the school or community college district and to employees.

(2) No annuity or other investment will have total fees and expenses that are more than (i) double the fees charged by the same company to a public employee for a similar product in a contiguous state or (ii) 10 times the fees and expenses of an investment in the deferred compensation plan for State employees.

(3) No individual product fees will be charged to participants in the plan, including but not limited to surrender fees, back-end loads, and redemption fees.

(4) The company will not provide undisclosed commissions or incentives to agents, representatives, or brokers, including but not limited to free trips and cash bonuses.

(5) Nothing of value, including but not limited to cash, food, and drink, will be provided by any employee or representative of the company, or any agent, representative, or broker, to an officer or employee of the school or community college to gain access to the officer or employee.

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 other than those described herein 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.