Illinois General Assembly - Full Text of SB3654
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Full Text of SB3654  102nd General Assembly

SB3654 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB3654

 

Introduced 1/21/2022, by Sen. Robert F. Martwick

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/15-202
40 ILCS 5/16-204
40 ILCS 5/24-104  from Ch. 108 1/2, par. 24-104
40 ILCS 5/24-107  from Ch. 108 1/2, par. 24-107
110 ILCS 95/2  from Ch. 144, par. 1702

    Amends the State Universities and Downstate Teacher Articles of the Illinois Pension Code. Provides that in administering the optional deferred compensation plan, the System shall require that the deferred compensation plan recordkeeper agree that, in performing services with respect to the deferred compensation plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the deferred compensation plan or the participants in the deferred compensation plan to solicit the participants in the deferred compensation plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the deferred compensation plan; and (ii) will not promote, recommend, endorse, or solicit participants in the deferred compensation plan to purchase any financial products or services outside of the deferred compensation plan. Adds similar provisions with regard to the deferred compensation plan and local government deferred compensation plans under the Deferred Compensation Article. Amends the University Employees Custodial Accounts Act. Provides that in administering a defined contribution plan to provide retirement benefits, the governing board of any public institution of higher education shall require that the plan recordkeeper agree that, in performing services with respect to the plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the plan or the plan's participants to solicit the plan's participants for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the plan; and (ii) will not promote, recommend, endorse, or solicit participants in the plan to purchase any financial products or services outside of the plan.


LRB102 23125 RPS 32285 b

 

 

A BILL FOR

 

SB3654LRB102 23125 RPS 32285 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 Sections 15-202, 16-204, 24-104, and 24-107 as
6follows:
 
7    (40 ILCS 5/15-202)
8    Sec. 15-202. Optional deferred compensation plan.
9    (a) As soon as practicable after August 10, 2018 (the
10effective date of Public Act 100-769), the System shall offer
11a deferred compensation plan that is eligible under Section
12457(b) of the Internal Revenue Code of 1986, as amended, to
13participating employees of the System employed by employers
14described in Section 15-106 of this Code that qualify as
15eligible employers under Section 457(e)(1)(A) of the Internal
16Revenue Code of 1986, as amended. Such eligible employers
17shall adopt the plan with an effective date no later than
18September 1, 2021. Participating employees may voluntarily
19elect to make elective deferrals to the eligible deferred
20compensation plan. Eligible employers may make optional
21employer contributions to the plan on behalf of participating
22employees, which contributions may be maintained, increased,
23reduced, or eliminated at the discretion of the employer from

 

 

SB3654- 2 -LRB102 23125 RPS 32285 b

1plan year to plan year. The plan shall collect voluntary
2employee and optional employer contributions into an account
3for each participant and shall offer investment options to the
4participant. The plan under this Section shall be operated in
5full compliance with any applicable State and federal laws,
6and the System shall utilize generally accepted practices in
7creating and maintaining the plan for the best interest of the
8participants. In administering the deferred compensation plan,
9the System shall require that the deferred compensation plan
10recordkeeper agree that, in performing services with respect
11to the deferred compensation plan, the recordkeeper: (i) will
12not use information received as a result of providing services
13with respect to the deferred compensation plan or the
14participants in the deferred compensation plan to solicit the
15participants in the deferred compensation plan for the purpose
16of cross-selling nonplan products and services, unless in
17response to a request by a participant in the deferred
18compensation plan; and (ii) will not promote, recommend,
19endorse, or solicit participants in the deferred compensation
20plan to purchase any financial products or services outside of
21the deferred compensation plan. The System may use funds from
22the employee and employer contributions to defray any and all
23costs of creating and maintaining the plan. The System shall
24produce an annual report on the participation in the plan and
25shall make the report public.
26    (b) The System shall automatically enroll in the eligible

 

 

SB3654- 3 -LRB102 23125 RPS 32285 b

1deferred compensation plan any employee of an eligible
2employer who first becomes a participating employee of the
3System on or after July 1, 2023 under an eligible automatic
4contribution arrangement that is subject to Section 414(w) of
5the Internal Revenue Code of 1986, as amended, and the United
6States Department of Treasury regulations promulgated
7thereunder. An employee who is automatically enrolled under
8this subsection (b) shall have 3% of his or her compensation,
9as defined by the plan, for each pay period deferred on a
10pre-tax basis into his or her account, subject to any
11contribution limits applicable to the plan. The Board may
12increase the default percentage of compensation deferred under
13this subsection (b).
14    An employee shall have 30 days from the date on which the
15System provides the notice required under Section 414(w) of
16the Internal Revenue Code of 1986, as amended, to elect to not
17participate in the eligible deferred compensation plan or to
18elect to increase or reduce the initial amount of elective
19deferrals made to the plan. In the absence of such affirmative
20election, the employee shall be automatically enrolled in the
21plan on the first day of the calendar month, or as soon as
22administratively practicable thereafter, following the 30th
23day from the date on which the System provides the required
24notice. An employee who has been automatically enrolled in the
25plan under this subsection (b) may elect, within 90 days of
26enrollment, to withdraw from the plan and receive a refund of

 

 

SB3654- 4 -LRB102 23125 RPS 32285 b

1amounts deferred, adjusted by applicable earnings and fees. An
2employee making such an election shall forfeit all employer
3matching contributions, if any, made with respect to such
4refunded elective deferrals and such forfeited amounts shall
5be used to defray plan expenses. Any refunded elective
6deferrals shall be included in the employee's gross income for
7the taxable year in which the refund is issued.
8    (c) The System may provide for one or more automatic
9contribution arrangements, which shall comply with all
10applicable Internal Revenue Service rules and regulations, in
11conjunction with or in lieu of the eligible automatic
12contribution arrangement under subsection (b), for
13participating employees of eligible employers whose annual
14earnings are limited by application of subsection (b) of
15Section 15-111 of this Code. The amount of elective deferrals
16made for the employee each pay period under an automatic
17contribution arrangement shall equal the default percentage
18specified by resolution of the Board multiplied by the
19employee's compensation as defined by the plan, subject to any
20contribution limits applicable to the plan, and shall be made
21on a pre-tax basis. An employee subject to this subsection (c)
22shall have 30 days from the date on which the System provides
23written notice to the employee to elect to not participate in
24the eligible deferred compensation plan or to elect to
25increase or reduce the amount of initial elective deferrals
26made to the plan. In the absence of such affirmative election,

 

 

SB3654- 5 -LRB102 23125 RPS 32285 b

1the employee shall be automatically enrolled in the plan
2beginning the first day of the calendar month, or as soon as
3administratively practicable thereafter, following the 30th
4day from the date on which the System provides the required
5notice.
6    (d) The System may provide that the default percentage for
7any employee automatically enrolled in the eligible deferred
8compensation plan under subsection (b) or (c) be increased by
9a specified percentage each plan year after the plan year in
10which the employee is automatically enrolled in the plan. The
11amount of automatic annual increases in any plan year shall
12not exceed 1% of compensation as defined by the plan.
13    (e) The changes made to this Section by this amendatory
14Act of the 102nd General Assembly are corrections of existing
15law and are intended to be retroactive to the effective date of
16Public Act 100-769, notwithstanding Section 1-103.1 of this
17Code.
18(Source: P.A. 102-540, eff. 8-20-21.)
 
19    (40 ILCS 5/16-204)
20    Sec. 16-204. Optional defined contribution benefit. As
21soon as practicable after the effective date of this
22amendatory Act of the 100th General Assembly, the System shall
23offer a defined contribution benefit to active members of the
24System. The defined contribution benefit shall be an optional
25benefit to any member who chooses to participate. The defined

 

 

SB3654- 6 -LRB102 23125 RPS 32285 b

1contribution benefit shall collect optional employee and
2optional employer contributions into an account and shall
3offer investment options to the participant. The benefit under
4this Section shall be operated in full compliance with any
5applicable State and federal laws, and the System shall
6utilize generally accepted practices in creating and
7maintaining the benefit for the best interest of the
8participants. In administering the defined contribution
9benefit, the System shall require that the defined
10contribution benefit recordkeeper agree that, in performing
11services with respect to the defined contribution benefit, the
12recordkeeper: (i) will not use information received as a
13result of providing services with respect to the defined
14contribution benefit or the participants in the defined
15contribution benefit to solicit the participants in the
16defined contribution benefit for the purpose of cross-selling
17nonplan products and services, unless in response to a request
18by a participant in the defined contribution benefit; and (ii)
19will not promote, recommend, endorse, or solicit participants
20in the defined contribution benefit to purchase any financial
21products or services outside of the defined contribution
22benefit. The System may use funds from the employee and
23employer contributions to defray any and all costs of creating
24and maintaining the benefit. In addition, the System may use
25funds provided under Section 16-158 of this Code to defray any
26and all costs of creating and maintaining the benefit and then

 

 

SB3654- 7 -LRB102 23125 RPS 32285 b

1shall reimburse those costs from funds received from the
2employee and employer contributions under this Section. All
3employers must comply with the reporting and administrative
4functions established by the System and are required to
5implement the benefits established under this Section. The
6System shall produce an annual report on the participation in
7the benefit and shall make the report public.
8    As soon as is practicable on or after January 1, 2022, the
9System shall automatically enroll any employee who first
10becomes an active member or participant in the System. A
11member automatically enrolled under this Section shall have 3%
12of his or her pre-tax gross compensation for each compensation
13period deferred into his or her deferred compensation account,
14unless the member otherwise instructs the System on forms
15approved by the System. A member may elect, in a manner
16provided for by the System, to not participate in the defined
17contribution benefit or to increase or reduce the amount of
18pre-tax gross compensation contributed, consistent with State
19or federal law. A member shall be automatically enrolled in
20the benefit beginning the first day of the pay period
21following the member's 30th day of employment. A member who
22has been automatically enrolled in the benefit may elect,
23within 90 days of enrollment, to withdraw from the benefit and
24receive a refund of amounts deferred, plus or minus any
25applicable earnings, investment fees, and administrative fees.
26Any refunded amount shall be included in the member's gross

 

 

SB3654- 8 -LRB102 23125 RPS 32285 b

1income for the taxable year in which the refund is issued.
2    On or after January 1, 2023, the System may elect to
3increase the automatic annual contributions under this
4Section. The increase in the rate of contribution, however,
5shall not exceed 2% of a member's pre-tax gross compensation
6per year, and at no time shall any total contribution exceed
7any contribution limits established by State or federal law.
8(Source: P.A. 102-540, eff. 8-20-21.)
 
9    (40 ILCS 5/24-104)  (from Ch. 108 1/2, par. 24-104)
10    Sec. 24-104. State Employees Deferred Compensation Plan.
11    In this Section, "Plan" means the State Employees Deferred
12Compensation Plan.
13    The Illinois State Board of Investment created under
14Article 22A of this Act shall develop and establish a deferred
15compensation plan for employees of the State which shall be
16known as the State Employees Deferred Compensation Plan. The
17Plan shall provide for the Board to review proposed investment
18offerings and shall require that only investments determined
19to be acceptable by the Board may be used for investing
20compensation deferred.
21    The Plan shall include appropriate provisions pertaining
22to its day to day operation providing for methods of electing
23to defer income, methods of changing the amount of income to be
24deferred, methods of selecting from among investment options
25available under the plan and such other provisions as may be

 

 

SB3654- 9 -LRB102 23125 RPS 32285 b

1appropriate.
2    In administering the Plan, the Board shall require that
3the Plan recordkeeper agree that, in performing services with
4respect to the Plan, the recordkeeper: (i) will not use
5information received as a result of providing services with
6respect to the Plan or the Plan's participants to solicit the
7Plan's participants for the purpose of cross-selling non-Plan
8products and services, unless in response to a request by a
9Plan participant; and (ii) will not promote, recommend,
10endorse, or solicit Plan participants to purchase any
11financial products or services outside of the Plan.
12    The Plan shall provide for the preparation, and
13distribution from time to time to all eligible State
14employees, of pamphlets describing the Plan and outlining the
15options and opportunities available to State employees under
16the Plan.
17    The Plan established under this Section shall not be
18implemented or amended until the Board is satisfied that
19compensation deferred under the Plan is not subject to income
20tax for the year in which it is earned and that the taxation of
21such compensation will be deferred until the time of its
22distribution to the employee.
23    The Board shall also review and oversee the administration
24of the Plan.
25(Source: P.A. 81-671.)
 

 

 

SB3654- 10 -LRB102 23125 RPS 32285 b

1    (40 ILCS 5/24-107)  (from Ch. 108 1/2, par. 24-107)
2    Sec. 24-107. Local government plans.
3    (a) Any unit of local government or school district may
4establish for its employees a deferred compensation plan
5program. Participation shall be by written agreement between
6each employee and the legislative authority of the unit of
7local government or school district providing for the deferral
8of such compensation and the subsequent investment and
9administration of such funds.
10    (b) Any unit of local government may establish an
11employer-funded money purchase retirement plan for those of
12its full time employees who are not eligible to participate in
13any pension fund or retirement system established under
14Articles 2 through 18 of this Code. Contributions to the plan
15shall be made by the unit of local government only from general
16purpose funds not derived from real property taxes imposed by
17the unit, at a rate to be determined from time to time by the
18unit of local government. However, the rate of employer
19contribution shall be (i) the same for all employees
20participating in the plan, and (ii) not more than 10% of the
21employee's salary.
22    Any benefits accruing to the participants in a retirement
23plan established under this subsection shall be protected from
24impairment in accordance with Article XIII, Section 5 of the
25Illinois Constitution. However, the unit of local government
26establishing such a plan may terminate it at any time, unless

 

 

SB3654- 11 -LRB102 23125 RPS 32285 b

1it has otherwise contractually agreed with its participating
2employees.
3    (c) The agency or department designated by the unit of
4local government or school district to establish and
5administer a plan or program authorized under subsection (a)
6or (b) of this Section may invest the assets of the plan in
7investments deemed appropriate by the agency or department,
8including but not limited to life insurance or annuity
9contracts, and share or share certificate accounts of State or
10federal credit unions, the accounts of which are insured as
11required by the Illinois Credit Union Act or the Federal
12Credit Union Act, whichever is applicable. The payment of
13employer contributions to a retirement plan established under
14subsection (b), and investment and payment to a participant of
15deferred compensation and income or gain thereon, if any,
16shall not be construed to be prohibited uses of the general
17assets of the unit of local government or school district.
18    This Section does not limit the power or authority of any
19unit of local government, school district or any institution
20supported in whole or in part by public funds to establish and
21administer any other deferred compensation plans that may be
22authorized by law and deemed appropriate by the officials of
23such subdivisions or institutions.
24    (d) In administering the deferred compensation plans
25authorized under this Section, the governing board or
26administrators of the sponsoring unit of local government or

 

 

SB3654- 12 -LRB102 23125 RPS 32285 b

1school district shall require that the deferred compensation
2plan recordkeeper agree that, in performing services with
3respect to the deferred compensation plan, the recordkeeper:
4(i) will not use information received as a result of providing
5services with respect to the deferred compensation plan or the
6deferred compensation plan's participants to solicit the
7participants in the deferred compensation plan for the purpose
8of cross-selling nonplan products and services, unless in
9response to a request by a participant in the deferred
10compensation plan; and (ii) will not promote, recommend,
11endorse, or solicit participants in the deferred compensation
12plan to purchase any financial products or services outside of
13the deferred compensation plan.
14(Source: P.A. 87-794.)
 
15    Section 10. The University Employees Custodial Accounts
16Act is amended by changing Section 2 as follows:
 
17    (110 ILCS 95/2)  (from Ch. 144, par. 1702)
18    Sec. 2. The governing board of any public institution of
19higher education has the power to establish a defined
20contribution plan to make payments to custodial accounts for
21investment in regulated investment company stock to provide
22retirement benefits as described in Section 403(b)(7) of the
23Internal Revenue Code for eligible employees of such
24institutions. Such payments shall be made with funds made

 

 

SB3654- 13 -LRB102 23125 RPS 32285 b

1available by deductions from or reductions in salary or wages
2of eligible employees who authorize in writing deductions or
3reductions for such purpose. Such stock shall be purchased
4only from persons authorized to sell such stock in this State.
5    In administering the defined contribution plan, the
6governing board of any public institution of higher education
7shall require that the defined contribution plan recordkeeper
8agree that, in performing services with respect to the defined
9contribution plan, the recordkeeper: (i) will not use
10information received as a result of providing services with
11respect to the defined contribution plan or the participants
12in the defined contribution plan to solicit the participants
13in the defined contribution plan for the purpose of
14cross-selling nonplan products and services, unless in
15response to a request by a participant in the defined
16contribution plan; and (ii) will not promote, recommend,
17endorse, or solicit participants in the defined contribution
18plan to purchase any financial products or services outside of
19the defined contribution plan.
20(Source: P.A. 83-261.)