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.


LRB103 27812 RPS 54190 b

 

 

A BILL FOR

 

SB1645LRB103 27812 RPS 54190 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by
5changing Section 24-107 as follows:
 
6    (40 ILCS 5/24-107)  (from Ch. 108 1/2, par. 24-107)
7    Sec. 24-107. Local government plans.
8    (a) Any unit of local government or school district may
9establish for its employees a deferred compensation program.
10Participation shall be by written agreement between each
11employee and the legislative authority of the unit of local
12government or school district providing for the deferral of
13such compensation and the subsequent investment and
14administration of such funds.
15    (b) Any unit of local government may establish an
16employer-funded money purchase retirement plan for those of
17its full time employees who are not eligible to participate in
18any pension fund or retirement system established under
19Articles 2 through 18 of this Code. Contributions to the plan
20shall be made by the unit of local government only from general
21purpose funds not derived from real property taxes imposed by
22the unit, at a rate to be determined from time to time by the
23unit of local government. However, the rate of employer

 

 

SB1645- 2 -LRB103 27812 RPS 54190 b

1contribution shall be (i) the same for all employees
2participating in the plan, and (ii) not more than 10% of the
3employee's salary.
4    Any benefits accruing to the participants in a retirement
5plan established under this subsection shall be protected from
6impairment in accordance with Article XIII, Section 5 of the
7Illinois Constitution. However, the unit of local government
8establishing such a plan may terminate it at any time, unless
9it has otherwise contractually agreed with its participating
10employees.
11    (c) The agency or department designated by the unit of
12local government or school district to establish and
13administer a plan or program authorized under subsection (a)
14or (b) of this Section may invest the assets of the plan in
15investments deemed appropriate by the agency or department,
16including, but not limited to, life insurance or annuity
17contracts, and share or share certificate accounts of State or
18federal credit unions, the accounts of which are insured as
19required by the Illinois Credit Union Act or the Federal
20Credit Union Act, whichever is applicable. The payment of
21employer contributions to a retirement plan established under
22subsection (b), and investment and payment to a participant of
23deferred compensation and income or gain thereon, if any,
24shall not be construed to be prohibited uses of the general
25assets of the unit of local government or school district.
26    (d) In this subsection, "eligible sponsoring entity"

 

 

SB1645- 3 -LRB103 27812 RPS 54190 b

1means:
2        (1) a school district organized under Article 34 of
3    the School Code;
4        (2) the City of Chicago as the sponsoring entity for
5    the City of Chicago Deferred Compensation Plan; or
6        (3) Cook County as the sponsoring entity for the Cook
7    County Deferred Compensation Plan.
8    An eligible sponsoring entity is authorized to
9automatically enroll all active employees into its deferred
10compensation program. An eligible sponsoring entity shall
11continue to be subject to the fiduciary duty provisions in
12Article 1 of this Code. If multiple employer entities
13participate in a program sponsored by a distinct eligible
14sponsoring entity, the participating employers shall not have
15any liability for an employee's decision to participate in or
16opt out of the deferred compensation program or for the
17investment decisions of the eligible sponsoring entity or of
18any enrollee. A participating employer shall not be a
19fiduciary or considered to be a fiduciary over the program,
20nor shall a participating employer bear responsibility or
21liability for the administration, investment decisions,
22investment performance, investment returns, or design of the
23program. An eligible sponsoring entity shall begin
24automatically enrolling all new employees who begin employment
25on or after the effective date of this amendatory Act of the
26103rd General Assembly. All employees automatically enrolled

 

 

SB1645- 4 -LRB103 27812 RPS 54190 b

1into the program shall have the right to elect to not
2participate, pursuant to the procedures specified in this
3subsection. If an eligible sponsoring entity makes multiple
4plans or programs available to employees, automatic enrollment
5authority shall be available for only one plan or program. If
6multiple plans or programs are available, a plan under Section
7457(b) of the Internal Revenue Code of 1986, as amended, shall
8be the plan into which the eligible sponsoring entity shall
9automatically enroll employees into. If multiple plans or
10programs are available and a plan under Section 457(b) of the
11Internal Revenue Code of 1986, as amended, is not available,
12the eligible sponsoring entity shall publicly deliberate and
13decide upon which plan or program shall be used for automatic
14enrollment.
15    An employee automatically enrolled under this subsection
16shall contribute 3% of his or her pretax gross compensation
17for each compensation period into his or her deferred
18compensation account, unless the member otherwise instructs
19the eligible sponsoring entity. The eligible sponsoring entity
20shall create forms that allow employees to elect to not
21participate in the program. These forms must also allow the
22employee to change the amount of pretax gross compensation
23deferred each month, but compensation deferrals must comply
24with State and federal contribution restrictions. The eligible
25sponsoring entity shall provide such forms to all employees
26automatically enrolled into the program. An employee may

 

 

SB1645- 5 -LRB103 27812 RPS 54190 b

1submit these forms to elect to not participate in the deferred
2compensation program or to alter contribution amounts at any
3time.
4    An employee shall have 30 days from the date on which the
5eligible sponsoring entity provides the notice required under
6Section 414(w) of the Internal Revenue Code of 1986, as
7amended, to elect to not participate in the eligible deferred
8compensation program or to elect to increase or reduce the
9initial amount of elective deferrals made to the program. In
10the absence of such affirmative election, the employee shall
11be automatically enrolled in the program on the first day of
12the calendar month, or as soon as administratively practicable
13thereafter, following the 30th day from the date on which the
14eligible sponsoring entity provides the required notice.
15    An employee who has been automatically enrolled in the
16deferred compensation program may elect, within 90 days of
17enrollment, to be withdrawn from the program and receive a
18refund of amounts deferred, plus or minus any applicable
19earnings, investment fees, and administrative fees. Any refund
20amount shall be included in the member's gross income for the
21taxable year in which the refund is issued.
22    On or after January 1, 2024, the eligible sponsoring
23entity may elect to increase the automatic annual
24contributions under this Section. The increase in the rate of
25contribution, however, shall not exceed 1% of an employee's
26pretax gross compensation per year, and at no time shall any

 

 

SB1645- 6 -LRB103 27812 RPS 54190 b

1total contribution exceed any contribution limits established
2by State or federal law.
3    This Section does not limit the power or authority of any
4unit of local government, school district or any institution
5supported in whole or in part by public funds to establish and
6administer any other deferred compensation plans that may be
7authorized by law and deemed appropriate by the officials of
8such subdivisions or institutions.
9(Source: P.A. 87-794.)
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.