HB4991 95TH GENERAL ASSEMBLY

LRB095 18343 AMC 44428 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB4991

Introduced , by Rep. Gary Hannig

SYNOPSIS AS INTRODUCED:

40 ILCS 5/4-105e new
40 ILCS 5/4-109	from Ch. 108 1/2, par. 4-109
40 ILCS 5/4-109.4 new

Amends the Downstate Firefighter Article of the Illinois Pension Code. Allows a firefighter to elect to receive either a lump sum payment or an actuarially equivalent annuity for up to 5 years of service as part of a deferred retirement option plan. Amends the State Mandates Act to require implementation without reimbursement. Effective July 1, 2008.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

A BILL FOR

AN ACT concerning 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 4-109 and by adding Sections 4-105e and 4-109.4 and by changing Section 4-109 as follows:

(40 ILCS 5/4-105e new)

Sec. 4-105e. Deferred Retirement Option Plan. "Deferred Retirement Option Plan" or "DROP plan" means the Deferred Retirement Option Plan established under Section 4-109.3.

(40 ILCS 5/4-109) (from Ch. 108 1/2, par. 4-109)

Sec. 4-109. Pension.

(a) A firefighter age 50 or more with 20 or more years of creditable service, who is no longer in service as a firefighter, shall receive a monthly pension of 1/2 the monthly salary attached to the rank held by him or her in the fire service at the date of retirement.

The monthly pension shall be increased by 1/12 of 2.5% of such monthly salary for each additional month over 20 years of service through 30 years of service, to a maximum of 75% of such monthly salary.

For a firefighter who retires at the conclusion of participation in the DROP plan, calculation of the amount of the retirement pension shall be based on the firefighter's salary and accumulated service on the date he or she began participation in the DROP plan, but the monthly retirement pension shall not be less than the last monthly amount payable to the DROP account under subdivision (g)(1) of Section 4-109.4.

The changes made to this subsection (a) by this amendatory Act of the 91st General Assembly apply to all pensions that become payable under this subsection on or after January 1, 1999. All pensions payable under this subsection that began on or after January 1, 1999 and before the effective date of this amendatory Act shall be recalculated, and the amount of the increase accruing for that period shall be payable to the pensioner in a lump sum.

(b) A firefighter who retires or is separated from service having at least 10 but less than 20 years of creditable service, who is not entitled to receive a disability pension, and who did not apply for a refund of contributions at his or her last separation from service shall receive a monthly pension upon attainment of age 60 based on the monthly salary attached to his or her rank in the fire service on the date of retirement or separation from service according to the following schedule:

For 10 years of service, 15% of salary;

For 11 years of service, 17.6% of salary;

For 12 years of service, 20.4% of salary;

For 13 years of service, 23.4% of salary;

For 14 years of service, 26.6% of salary;

For 15 years of service, 30% of salary;

For 16 years of service, 33.6% of salary;

For 17 years of service, 37.4% of salary;

For 18 years of service, 41.4% of salary;

For 19 years of service, 45.6% of salary.

(Source: P.A. 91-466, eff. 8-6-99.)

(40 ILCS 5/4-109.4 new)

Sec. 4-109.4. Deferred Retirement Option Plan (DROP).

(a) To be eligible to participate in the DROP plan, a firefighter must (i) be in active service, (ii) have attained age 50, and (iii) have at least 20 years of creditable service in the Fund. A firefighter may participate in the DROP plan only once and for a maximum period of 5 years.

(b) An election to participate in the DROP plan must be made within 3 years after becoming eligible under subsection (a) The election, once made, is irrevocable. The election to participate in the DROP plan shall be made in writing on forms provided for that purpose by the Board and shall be filed with the Board. The application must indicate the date upon which participation in the DROP plan is to begin, which shall be the first day of a calendar month and not less than 30 days nor more than 90 days after the date of filing the application. As a part of the application, the firefighter must file with the Board and with his or her employer an irrevocable letter of resignation from employment, effective on the date of termination of the firefighter's participation in the DROP plan (unless that termination results from acceptance of a disability benefit).

(c) A firefighter's participation in the DROP plan shall commence on the date specified in the application and shall end upon (i) termination of service, (ii) death of the firefighter, (iii) disability for which the firefighter receives a benefit under Section 4-110, 4-110.1, or 4-111, or (iv) completion of the maximum 5 years of participation in the DROP plan, whichever occurs first.

(d) A firefighter who is participating in the DROP plan shall be considered an active firefighter for the purposes of this Article, including Section 4-121, but shall be subject to the special conditions of the DROP plan. A firefighter shall continue to make the contributions that are required for active firefighters during his or her participation in the DROP plan. These contributions shall be accumulated in the firefighter's DROP account and shall be treated as being "picked up" within the meaning of Section 4-118.2 of this Code and Section 414(h)(2) of the Internal Revenue Code of 1986, as amended. A firefighter who is participating in the DROP plan shall not receive service credit for the period of that participation, and the salary earned during that period shall be disregarded in calculating the firefighter's benefit under this Article.

(e) A firefighter who participates in the DROP plan may terminate service at any time during participation in the DROP plan. A firefighter who participates in the DROP plan must terminate service on the last day of participation in the DROP plan, unless participation in the DROP plan is ended due to acceptance of a disability benefit.

(f) A firefighter who is participating in the DROP plan remains eligible to apply for a disability benefit under Section 4-110, 4-110.1, or 4-111, but participation in the DROP plan ceases upon acceptance of the disability benefit. If participation in the DROP plan is ended due to acceptance of a disability benefit, (1) the disabled firefighter shall be credited with employee contributions and creditable service for the period of participation in the DROP plan, (2) the firefighter's letter of resignation from service that is required to be filed at the time of application to participate in the DROP plan is void, and (3) the amounts in the disabled firefighter's DROP account are forfeited to the Fund.

(g) The Fund shall maintain a separate DROP account for the benefit of each firefighter who becomes a participant in the DROP plan. The Fund shall pay into the firefighter's DROP account:

(1) for each month of the firefighter's participation in the DROP plan, an amount equal to the monthly retirement pension that the firefighter would have been eligible to receive if the firefighter had terminated service and begun receiving a retirement pension on the date his or her participation in the DROP plan began, but calculating the amount of any increase that would accrue under Section 4-109.1(d) to exclude the period before attainment of age 55;

(2) the employee contributions paid by the firefighter during the period of participation in the DROP plan; and

(3) interest on the balance in the DROP account, at the rate of 6% per annum, paid and compounded monthly, throughout the period of participation in the DROP plan. The DROP account shall cease earning interest when the firefighter's participation in the DROP plan ends. DROP accounts shall be treated as separate accounts for accounting purposes, but the actual assets shall be commingled with the other assets of the pension fund for investment purposes, rather than kept in separate investment accounts.

(h) In addition to the retirement pension under Section 4-109, a firefighter who terminates service and retires at the conclusion of his or her participation in the DROP plan shall receive, upon retirement, a DROP benefit equal to the balance in the firefighter's DROP account at the time of retirement.

At the time of application for a retirement pension, the firefighter shall elect to receive the DROP benefit in the form of either a lump sum or an actuarially equivalent annuity for life. If a lump sum payment is elected, it may be taken in the form of cash or a cash equivalent or be rolled over into an individual retirement account (IRA) or a qualified retirement plan. A DROP benefit payable in the form of an annuity shall be in a fixed amount not subject to annual or other increases; the amount of the annuity shall be calculated in the manner prescribed by the Public Pension Division of the Department of Financial and Professional Regulation. A DROP benefit shall be treated as a retirement benefit for the purposes of Section 1-119 (QILDROs).

(i) If a firefighter receiving a DROP benefit in the form of an annuity re-enters service, the DROP benefit annuity payments shall be suspended until the firefighter's subsequent retirement.

(j) If a firefighter dies while participating in the DROP plan, the DROP benefit shall be paid as a lump sum to the surviving spouse or other survivor of the firefighter entitled to a pension under Section 4-114 or, if there is no such survivor, then to the deceased firefighter's estate.

(k) If a retired firefighter dies while receiving a DROP benefit in the form of an annuity, and the DROP account balance at the time of retirement exceeds the total amount of DROP benefit annuity payments received, the excess shall be refunded to the surviving spouse or other survivor of the firefighter entitled to a pension under Section 4-114 or, if there is no such survivor, then to the deceased firefighter's estate.

Section 99. Effective date. This Act takes effect July 1, 2008.