Full Text of HB3466 97th General Assembly
HB3466ham001 97TH GENERAL ASSEMBLY | Rep. Daniel J. Burke Filed: 3/3/2011
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| 1 | | AMENDMENT TO HOUSE BILL 3466
| 2 | | AMENDMENT NO. ______. Amend House Bill 3466 by replacing | 3 | | everything after the enacting clause with the following:
| 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 |
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| 1 | | retirement dates, the DROP eligibility date may be determined | 2 | | by the member as the first day of the month in which normal | 3 | | retirement is achieved in either class. | 4 | | "Deferred Retirement Option Plan" or "DROP" means a program | 5 | | available to certain members who are eligible to receive | 6 | | benefits under Section 14-110 of this Code under which members | 7 | | effectively retire and have their retirement accumulate, after | 8 | | applicable taxes, in the System while they continue covered | 9 | | employment for up to 5 years. | 10 | | "DROP begin date" means the first day of the month in which | 11 | | the member's DROP participation period begins and is always the | 12 | | same date as the member's effective date of retirement. Such | 13 | | date shall be the first day of the month in which the eligible | 14 | | member submits a DROP application, or any future month after | 15 | | the member reaches his or her DROP eligibility date, as | 16 | | selected by the member. However, a member's DROP begin date | 17 | | cannot precede the month the Board receives the DROP | 18 | | application. | 19 | | "DROP break in service" means a period for which no | 20 | | compensation is reported for a DROP participant during one full | 21 | | month of the participant's work year and there is no continuing | 22 | | employer-employee relationship. A member who is on leave of | 23 | | absence without pay or on a workers' compensation leave has an | 24 | | employer-employee relationship. | 25 | | "DROP eligibility date" means the first day of the month in | 26 | | which a vested member becomes eligible to elect to participate |
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| 1 | | in DROP by virtue of reaching either his normal retirement date | 2 | | or a deferred eligibility date, if a deferred eligibility date | 3 | | is applicable and elected by the member. Both the 12-month | 4 | | period during which the member may elect to participate in the | 5 | | DROP and the 60-month period that a member is allowed to | 6 | | participate in DROP begin on the member's DROP eligibility | 7 | | date. | 8 | | "DROP end date" means the date DROP participation ceases | 9 | | and shall be the date termination of all employment occurs. The | 10 | | DROP end date shall be effective as of the date of the | 11 | | participant's designated deferred resignation or earlier if | 12 | | the participant terminates prior to the designated resignation | 13 | | date. | 14 | | "DROP participation period" means the period of time a | 15 | | member participates in DROP, not to exceed 60 months. | 16 | | "Initial eligibility date" means the first day of the month | 17 | | in which a vested member first becomes eligible to elect to | 18 | | participate in DROP by virtue of reaching his or her normal | 19 | | retirement date. | 20 | | "Normal retirement date" means when the member becomes age | 21 | | 50 or when the member completes 26 years and 8 months of | 22 | | service. The member may either include or exclude optional | 23 | | service credit in determining the date on which 26 years and 8 | 24 | | months of service has been attained. | 25 | | "Optional service credit" includes credit for prior | 26 | | service, past service purchased by the member, and military |
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| 1 | | service. "Optional service credit" does not include workers' | 2 | | compensation credit or past service credit paid for by the | 3 | | employer. | 4 | | (b) A member who is eligible for benefits under Section | 5 | | 14-110 of this Code is eligible to participate in the DROP | 6 | | provided the member attains a normal retirement date and is | 7 | | employed in a regularly established position within their | 8 | | Department. | 9 | | An eligible member must elect to participate in DROP no | 10 | | less than 3 months prior to the member's DROP eligibility date, | 11 | | subject to the following conditions: | 12 | | (1) A member who reaches age 50 with 25 years of | 13 | | service or 26 years and 8 months at any age. | 14 | | (2) A member may elect to include or exclude any | 15 | | optional service credit from the total service used to | 16 | | establish the DROP begin date when determining the DROP | 17 | | eligibility date. | 18 | | (3) A member with dual normal retirement dates, due to | 19 | | an employment history in 2 different classes of membership | 20 | | with different normal retirement date and age | 21 | | requirements, may elect to participate in DROP within 12 | 22 | | months of attaining normal retirement date in either | 23 | | membership class. | 24 | | (c) It is the responsibility of the eligible member to make | 25 | | proper application to the System to participate in DROP. To | 26 | | qualify for DROP, the member shall submit a notice of election |
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| 1 | | to participate that shall specify the DROP begin date and the | 2 | | DROP termination and resignation date and is acknowledged by | 3 | | the employer, and the notice of election to participate shall | 4 | | be received by the System no later than the end of the last | 5 | | month of the member's election period described in subsection | 6 | | (b) of this Section or a later date, if authorized in | 7 | | subsection (b). Such termination and resignation date shall | 8 | | constitute a binding letter of resignation with the employer. | 9 | | Failure to complete the notice of election to participate | 10 | | within the limitations of subsection (b) of this Section shall | 11 | | result in the member being ineligible for DROP participation. | 12 | | An application for service retirement and the DROP shall be | 13 | | accepted by the System up to 6 months, but no later than 3 | 14 | | months, in advance of the intended DROP begin date and shall | 15 | | establish the member's effective date of retirement and DROP | 16 | | begin date. The effective date of retirement and the DROP begin | 17 | | date shall both be the first day of the month that the member | 18 | | indicates on his or her application as the date he or she | 19 | | wishes his or her DROP participation to begin, provided the | 20 | | System receives the member's application no later than the | 21 | | close of business on the last day 3 months prior to when the | 22 | | DROP begin date occurs. If a member fails to apply for DROP by | 23 | | the last day of the month in which his or her intended DROP | 24 | | begin date occurs, the effective date of retirement and the | 25 | | DROP begin date shall be the first day of the month in which | 26 | | the System receives the member's application, provided the |
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| 1 | | application is received within the 3-month election period. | 2 | | (d) When the System receives a member's application for | 3 | | DROP, the System must: | 4 | | (1) acknowledge receipt of the member's application | 5 | | and advise him or her of any required information or | 6 | | documents that have not yet been received; such information | 7 | | may include, but is not limited to, birth date, beneficiary | 8 | | designation, option selection, any payments due the | 9 | | member's account for purchase of additional service credit | 10 | | or a written statement from the member that the member does | 11 | | not wish to claim such service credit, and certification of | 12 | | final salary and accumulated annual leave payments; | 13 | | (2) establish the DROP begin date; and | 14 | | (3) send a follow-up notice, reminding the member of | 15 | | any required information or documents that have not yet | 16 | | been received. | 17 | | (e) Subject to timely submission of all required documents, | 18 | | the effective date of DROP participation shall be the effective | 19 | | date of retirement. The DROP participant may not modify or | 20 | | cancel his or her retirement benefit after the last day of the | 21 | | month of the DROP begin date. The DROP benefit shall be deemed | 22 | | cashed or deposited as of the last day of the month following | 23 | | the DROP begin date. | 24 | | (f) If all the required information and documents have not | 25 | | been received by the System after 3 follow-up notices have been | 26 | | sent to the member, the System must send the member a certified |
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| 1 | | letter, advising the member that he has 21 days to provide such | 2 | | information or documents without loss of his DROP begin date. | 3 | | If the System has not received all of the required information | 4 | | and documents after the 21 days specified in the certified | 5 | | letter, the System must send a final agency action letter to | 6 | | the member advising the member that his or her application is | 7 | | canceled and that he or she must reapply to join DROP, if | 8 | | eligible, with a new effective DROP begin date to be | 9 | | established upon application. | 10 | | (g) All employers paying the salary of a DROP participant | 11 | | shall contribute the required percentage of such participant's | 12 | | gross compensation. In addition, health insurance benefits | 13 | | continue in accordance with the State Employees Group Insurance | 14 | | Act of 1971. | 15 | | (h) The retirement benefit of a member who has elected to | 16 | | participate in the DROP shall be calculated as provided in this | 17 | | Section. | 18 | | A member may choose to receive his accumulated annual leave | 19 | | and applicable sick time payments and earned in accordance with | 20 | | agency policy, either upon beginning or terminating DROP.
This | 21 | | early annual leave payment shall be based on the hourly wage of | 22 | | the member at the time he or she begins participation in DROP. | 23 | | Any additional annual leave payment made at the DROP end date | 24 | | according to the employer's leave policy cannot be included in | 25 | | the retirement benefit, which was determined and fixed by law | 26 | | when the member elected to participate in DROP. If the member |
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| 1 | | elects to receive the annual leave payment upon termination of | 2 | | DROP and termination of employment with his or her employer, | 3 | | any accumulated annual leave payment made at that time cannot | 4 | | be included in the retirement benefit, which was determined and | 5 | | fixed by law when the member elected to participate in DROP. | 6 | | (i) The beneficiary eligible to receive any accrued DROP | 7 | | benefits payable if the DROP participant dies before the | 8 | | completion of the DROP participation period is the most recent | 9 | | joint annuitant or beneficiary designated to receive | 10 | | retirement benefits upon the death of the participant, as | 11 | | directed by the participant on his or her beneficiary forms. | 12 | | However, if the beneficiary or joint annuitant dies during the | 13 | | DROP participation period, the participant may designate a new | 14 | | beneficiary as follows: | 15 | | (1) If the participant retired under option 1 or 2, he | 16 | | or she may name a new beneficiary. Such beneficiary is | 17 | | eligible for both the DROP benefits and any benefits | 18 | | provided by the option selected. | 19 | | (2) If the participant retired under option 3 or 4, he | 20 | | or she may name a new qualified joint annuitant or spouse. | 21 | | Such beneficiary is eligible for both the accrued DROP | 22 | | benefits and any continuing benefits. | 23 | | (3) If the participant retired under option 3 or 4, he | 24 | | or she may name a new beneficiary who will receive only the | 25 | | accrued DROP benefits. Such beneficiary shall not replace | 26 | | the joint annuitant or spouse or be eligible for any |
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| 1 | | continuing benefits. | 2 | | (4) The participant may not name a beneficiary to | 3 | | receive DROP benefits who is different from the beneficiary | 4 | | designated to receive the retirement benefits. | 5 | | (j) Effective with the DROP begin date, the member's | 6 | | initial normal monthly benefit shall be fixed and shall accrue | 7 | | monthly in the System Trust Fund. The system shall earn any | 8 | | interest that may accrue at an effective annual rate of 3% | 9 | | compounded monthly, on the prior month's accumulated ending | 10 | | balance, up to the month of the DROP participant's termination | 11 | | or death. Any accrued interest in excess of 3% shall be divided | 12 | | equally between the System and the DROP participant.
The DROP | 13 | | benefit is increased by the annual cost-of-living adjustment as | 14 | | otherwise provided in this Article. | 15 | | (k) A DROP participant is not eligible to apply for or | 16 | | receive retiree health insurance subsidy payments until such | 17 | | participant has terminated employment and DROP participation. | 18 | | A member shall not earn creditable service applicable to the | 19 | | health insurance subsidy while participating in DROP. | 20 | | (l) A DROP participant is considered an annuitant; however, | 21 | | participation in DROP does not alter the participant's | 22 | | employment status. Terms and conditions of employment, | 23 | | including, but not limited to, salary, insurance coverage, | 24 | | leave accrual and seniority status, do not change as a result | 25 | | of DROP participation. However, employment is not guaranteed | 26 | | during the DROP participation period. |
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| 1 | | Employment continues during participation in DROP through | 2 | | the date the member preselected to stop participation in DROP, | 3 | | except that elected officers may continue in office after the | 4 | | DROP end date.
A DROP participant may change jobs or have more | 5 | | than one employer under this Article, as long as the | 6 | | participant does not have a break in service. If a break in | 7 | | service occurs, DROP participation ceases as of the end of the | 8 | | month in which no compensation is received for covered | 9 | | employment. All employers are required to acknowledge the | 10 | | participant's DROP termination date and to acknowledge | 11 | | potential liability for any additional retirement | 12 | | contributions and interest required if the participant fails to | 13 | | timely terminate employment. | 14 | | (m) DROP participants shall not be eligible for disability | 15 | | benefits under this Article. | 16 | | (n) If a participant continues employment beyond the | 17 | | preselected DROP end date and prior to completion of the | 18 | | maximum 60 months allowed, a new form must be submitted with a | 19 | | new DROP end date acknowledged by both the participant and any | 20 | | affected employer. | 21 | | (o) DROP benefits shall be subject to the provisions of | 22 | | this Article pertaining to assignment, execution, or | 23 | | attachment of benefits, and forfeiture of benefits, | 24 | | respectively. | 25 | | (p) Eligibility to participate in the DROP ends upon the | 26 | | death of the participant. |
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| 1 | | (q) A DROP participant must terminate employment on or | 2 | | before the preselected resignation date. If a participant fails | 3 | | to terminate on or before the DROP termination and resignation | 4 | | date:
(1) retirement and DROP participation are voided;
(2) the | 5 | | DROP accumulation and any monthly retirement benefits received | 6 | | are forfeited; (3) membership in the System is retroactively | 7 | | reestablished to the date the member initiated DROP | 8 | | participation;
(4) each employer is liable for payment of or | 9 | | eligible for a refund of, as applicable, the difference between | 10 | | the DROP contributions paid and the required retirement | 11 | | contributions for the applicable class of membership during the | 12 | | period of DROP participation, plus interest at an annual | 13 | | effective rate of 3%, compounded annually; no interest is | 14 | | payable on refunds to employers; and (5) the designated | 15 | | beneficiary shall remain the named beneficiary, unless | 16 | | revised. | 17 | | (r) Upon the participant's termination of all employment, | 18 | | the deferred resignation becoming effective, and the | 19 | | conclusion of the DROP participation period, or upon the death | 20 | | of the participant, benefits shall be paid or distributed as | 21 | | follows: | 22 | | (1) The previously determined normal monthly | 23 | | retirement benefits, plus applicable cost-of-living | 24 | | increases, commence in accordance with the method of | 25 | | payment chosen by the participant at the time he or she | 26 | | began DROP participation. |
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| 1 | | (2) The total accumulated DROP benefits are | 2 | | distributed to the participant, or, if deceased, to the | 3 | | participant's joint annuitant or beneficiary as | 4 | | appropriate, provided the System receives the proper forms | 5 | | signed by both the participant and employer verifying | 6 | | termination of employment and notifying the System as to | 7 | | which of the following methods of payment he or she has | 8 | | chosen:
(i) lump sum (if the participant is deceased, a | 9 | | beneficiary, other than a spouse, must receive the lump sum | 10 | | distribution only),
(ii) direct rollover, or
(iii) | 11 | | combined partial lump sum and rollover. | 12 | | A DROP participant or beneficiary who submits all required | 13 | | forms, but fails to elect a method of payment within 60 days of | 14 | | termination of DROP, automatically receives a lump sum | 15 | | distribution, less applicable withheld taxes. | 16 | | A participant who elects a rollover must have the rollover | 17 | | paid directly to the custodian of an eligible retirement plan. | 18 | | Eligible retirement plans include an individual retirement | 19 | | account as described in Section 408(a) of the Internal Revenue | 20 | | Code, an Individual Retirement Annuity as described in Section | 21 | | 408(b) of the Internal Revenue Code, excluding an endowment | 22 | | contract, a qualified trust established in accordance with | 23 | | Section 401(a) of the Internal Revenue Code, for the sole and | 24 | | exclusive benefit of employees or their beneficiaries, an | 25 | | annuity plan as described in Section 403(a) of the Internal | 26 | | Revenue Code, excluding a plan described in Sections 403(b) and |
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| 1 | | 457 of in the Internal Revenue Code, an eligible deferred | 2 | | compensation plan described in Section 457(B) of the Internal | 3 | | Revenue Code that is maintained by an eligible employer as | 4 | | described in Section 457(e)(1)(A) of the Internal Revenue Code, | 5 | | and an annuity contract as described in Section 403(b) of the | 6 | | Internal Revenue Code.
If the DROP participant dies and the | 7 | | surviving spouse wishes to roll over the DROP account, it can | 8 | | only be rolled over into an individual retirement account, an | 9 | | individual retirement annuity, an eligible deferred | 10 | | compensation plan, or an annuity contract. | 11 | | (s) Benefits accumulating in the DROP are not subject to | 12 | | federal benefit limitations specified in Section 415 of the | 13 | | Internal Revenue Code until DROP participation ends and the | 14 | | participant begins receiving his monthly retirement benefits. | 15 | | The amount of the accumulated DROP at the time the member | 16 | | ceases DROP is amortized over the member's expected lifetime, | 17 | | in the manner required by the Internal Revenue Code, and the | 18 | | annualized value of the DROP account reduces the federal | 19 | | maximum annual benefit the member is entitled to receive. | 20 | | (t) Reemployment with an employer during the first calendar | 21 | | month after concluding DROP shall result in cancellation of | 22 | | DROP and retirement. The member's DROP application shall be | 23 | | void, and he or she shall be required to repay all DROP and | 24 | | monthly retirement benefits received. The employer who | 25 | | re-employs such member is liable for payment of or eligible for | 26 | | a refund of, as applicable, the difference between the DROP |
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| 1 | | contributions paid and the required SERS retirement | 2 | | contributions for the applicable class of membership during the | 3 | | period of DROP participation. Payment of additional | 4 | | contributions for the applicable class of membership during the | 5 | | period of DROP participation. Payment of additional | 6 | | contributions shall include interest at an annual effective | 7 | | interest rate of 3%, compounded annually. No interest will be | 8 | | paid on refunds to employers.
| 9 | | Section 99. Effective date. This Act takes effect upon | 10 | | becoming law.".
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