State of Illinois
2017 and 2018


Introduced , by Rep. Joe Sosnowski


40 ILCS 5/15-158.2

    Amends the State Universities Article of the Illinois Pension Code. In a Section relating to the self-managed plan, provides that pursuant to federal law, all employees with applicable retirement plans will be provided options to: (i) establish, (ii) contribute to, and (iii) transfer any guaranteed or vested portion of their traditional accounts, on any day, into qualified in-plan Roth accounts, without distribution. Effective immediately.

LRB100 05865 RPS 15890 b






HB2760LRB100 05865 RPS 15890 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 changing
5Section 15-158.2 as follows:
6    (40 ILCS 5/15-158.2)
7    Sec. 15-158.2. Self-managed plan.
8    (a) Purpose. The General Assembly finds that it is
9important for colleges and universities to be able to attract
10and retain the most qualified employees and that in order to
11attract and retain these employees, colleges and universities
12should have the flexibility to provide a defined contribution
13plan as an alternative for eligible employees who elect not to
14participate in a defined benefit retirement program provided
15under this Article. Accordingly, the State Universities
16Retirement System is hereby authorized to establish and
17administer a self-managed plan, which shall offer
18participating employees the opportunity to accumulate assets
19for retirement through a combination of employee and employer
20contributions that may be invested in mutual funds, collective
21investment funds, or other investment products and used to
22purchase annuity contracts, either fixed or variable or a
23combination thereof. The plan must be qualified under the



HB2760- 2 -LRB100 05865 RPS 15890 b

1Internal Revenue Code of 1986.
2    (b) Adoption by employers. Each employer subject to this
3Article may elect to adopt the self-managed plan established
4under this Section; this election is irrevocable. An employer's
5election to adopt the self-managed plan makes available to the
6eligible employees of that employer the elections described in
7Section 15-134.5.
8    The State Universities Retirement System shall be the plan
9sponsor for the self-managed plan and shall prepare a plan
10document and prescribe such rules and procedures as are
11considered necessary or desirable for the administration of the
12self-managed plan. Consistent with its fiduciary duty to the
13participants and beneficiaries of the self-managed plan, the
14Board of Trustees of the System may delegate aspects of plan
15administration as it sees fit to companies authorized to do
16business in this State, to the employers, or to a combination
17of both.
18    (c) Selection of service providers and funding vehicles.
19The System, in consultation with the employers, shall solicit
20proposals to provide administrative services and funding
21vehicles for the self-managed plan from insurance and annuity
22companies and mutual fund companies, banks, trust companies, or
23other financial institutions authorized to do business in this
24State. In reviewing the proposals received and approving and
25contracting with no fewer than 2 and no more than 7 companies,
26the Board of Trustees of the System shall consider, among other



HB2760- 3 -LRB100 05865 RPS 15890 b

1things, the following criteria:
2        (1) the nature and extent of the benefits that would be
3    provided to the participants;
4        (2) the reasonableness of the benefits in relation to
5    the premium charged;
6        (3) the suitability of the benefits to the needs and
7    interests of the participating employees and the employer;
8        (4) the ability of the company to provide benefits
9    under the contract and the financial stability of the
10    company; and
11        (5) the efficacy of the contract in the recruitment and
12    retention of employees.
13    The System, in consultation with the employers, shall
14periodically review each approved company. A company may
15continue to provide administrative services and funding
16vehicles for the self-managed plan only so long as it continues
17to be an approved company under contract with the Board.
18    (d) Employee Direction. Employees who are participating in
19the program must be allowed to direct the transfer of their
20account balances among the various investment options offered,
21subject to applicable contractual provisions. The participant
22shall not be deemed a fiduciary by reason of providing such
23investment direction. A person who is a fiduciary shall not be
24liable for any loss resulting from such investment direction
25and shall not be deemed to have breached any fiduciary duty by
26acting in accordance with that direction. The System shall



HB2760- 4 -LRB100 05865 RPS 15890 b

1provide advance notice to the participant of the participant's
2obligation to direct the investment of employee and employer
3contributions into one or more investment funds selected by the
4System at the time he or she makes his or her initial
5retirement plan selection. If a participant fails to direct the
6investment of employee and employer contributions into the
7various investment options offered to the participant when
8making his or her initial retirement election choice, that
9failure shall require the System to invest the employee and
10employer contributions in a default investment fund on behalf
11of the participant, and the investment shall be deemed to have
12been made at the participant's investment direction. The
13participant has the right to transfer account balances out of
14the default investment fund during time periods designated by
15the System. Neither the System nor the employer guarantees any
16of the investments in the employee's account balances.
17    (e) Participation. An employee eligible to participate in
18the self-managed plan must make a written election in
19accordance with the provisions of Section 15-134.5 and the
20procedures established by the System. Participation in the
21self-managed plan by an electing employee shall begin on the
22first day of the first pay period following the later of the
23date the employee's election is filed with the System or the
24effective date as of which the employee's employer begins to
25offer participation in the self-managed plan. Employers may not
26make the self-managed plan available earlier than January 1,



HB2760- 5 -LRB100 05865 RPS 15890 b

11998. An employee's participation in any other retirement
2program administered by the System under this Article shall
3terminate on the date that participation in the self-managed
4plan begins.
5    An employee who has elected to participate in the
6self-managed plan under this Section must continue
7participation while employed in an eligible position, and may
8not participate in any other retirement program administered by
9the System under this Article while employed by that employer
10or any other employer that has adopted the self-managed plan,
11unless the self-managed plan is terminated in accordance with
12subsection (i).
13    Notwithstanding any other provision of this Article, a Tier
142 member shall have the option to enroll in the self-managed
16    Participation in the self-managed plan under this Section
17shall constitute membership in the State Universities
18Retirement System.
19    A participant under this Section shall be entitled to the
20benefits of Article 20 of this Code.
21    (f) Establishment of Initial Account Balance. If at the
22time an employee elects to participate in the self-managed plan
23he or she has rights and credits in the System due to previous
24participation in the traditional benefit package, the System
25shall establish for the employee an opening account balance in
26the self-managed plan, equal to the amount of contribution



HB2760- 6 -LRB100 05865 RPS 15890 b

1refund that the employee would be eligible to receive under
2Section 15-154 if the employee terminated employment on that
3date and elected a refund of contributions, except that this
4hypothetical refund shall include interest at the effective
5rate for the respective years. The System shall transfer assets
6from the defined benefit retirement program to the self-managed
7plan, as a tax free transfer in accordance with Internal
8Revenue Service guidelines, for purposes of funding the
9employee's opening account balance.
10    (g) No Duplication of Service Credit. Notwithstanding any
11other provision of this Article, an employee may not purchase
12or receive service or service credit applicable to any other
13retirement program administered by the System under this
14Article for any period during which the employee was a
15participant in the self-managed plan established under this
17    (h) Contributions. The self-managed plan shall be funded by
18contributions from employees participating in the self-managed
19plan and employer contributions as provided in this Section.
20    The contribution rate for employees participating in the
21self-managed plan under this Section shall be equal to the
22employee contribution rate for other participants in the
23System, as provided in Section 15-157. This required
24contribution shall be made as an "employer pick-up" under
25Section 414(h) of the Internal Revenue Code of 1986 or any
26successor Section thereof. Any employee participating in the



HB2760- 7 -LRB100 05865 RPS 15890 b

1System's traditional benefit package prior to his or her
2election to participate in the self-managed plan shall continue
3to have the employer pick up the contributions required under
4Section 15-157. However, the amounts picked up after the
5election of the self-managed plan shall be remitted to and
6treated as assets of the self-managed plan. In no event shall
7an employee have an option of receiving these amounts in cash.
8Employees may make additional contributions to the
9self-managed plan in accordance with procedures prescribed by
10the System, to the extent permitted under rules prescribed by
11the System.
12    The program shall provide for employer contributions to be
13credited to each self-managed plan participant at a rate of
147.6% of the participating employee's salary, less the amount
15used by the System to provide disability benefits for the
16employee. The amounts so credited shall be paid into the
17participant's self-managed plan accounts in a manner to be
18prescribed by the System.
19    An amount of employer contribution, not exceeding 1% of the
20participating employee's salary, shall be used for the purpose
21of providing the disability benefits of the System to the
22employee. Prior to the beginning of each plan year under the
23self-managed plan, the Board of Trustees shall determine, as a
24percentage of salary, the amount of employer contributions to
25be allocated during that plan year for providing disability
26benefits for employees in the self-managed plan.



HB2760- 8 -LRB100 05865 RPS 15890 b

1    The State of Illinois shall make contributions by
2appropriations to the System of the employer contributions
3required for employees who participate in the self-managed plan
4under this Section. The amount required shall be certified by
5the Board of Trustees of the System and paid by the State in
6accordance with Section 15-165. The System shall not be
7obligated to remit the required employer contributions to any
8of the insurance and annuity companies, mutual fund companies,
9banks, trust companies, financial institutions, or other
10sponsors of any of the funding vehicles offered under the
11self-managed plan until it has received the required employer
12contributions from the State. In the event of a deficiency in
13the amount of State contributions, the System shall implement
14those procedures described in subsection (c) of Section 15-165
15to obtain the required funding from the General Revenue Fund.
16    (i) Termination. The self-managed plan authorized under
17this Section may be terminated by the System, subject to the
18terms of any relevant contracts, and the System shall have no
19obligation to reestablish the self-managed plan under this
20Section. This Section does not create a right to continued
21participation in any self-managed plan set up by the System
22under this Section. If the self-managed plan is terminated, the
23participants shall have the right to participate in one of the
24other retirement programs offered by the System and receive
25service credit in such other retirement program for any years
26of employment following the termination.



HB2760- 9 -LRB100 05865 RPS 15890 b

1    (j) Vesting; Withdrawal; Return to Service. A participant
2in the self-managed plan becomes vested in the employer
3contributions credited to his or her accounts in the
4self-managed plan on the earliest to occur of the following:
5(1) completion of 5 years of service with an employer described
6in Section 15-106; (2) the death of the participating employee
7while employed by an employer described in Section 15-106, if
8the participant has completed at least 1 1/2 years of service;
9or (3) the participant's election to retire and apply the
10reciprocal provisions of Article 20 of this Code.
11    A participant in the self-managed plan who receives a
12distribution of his or her vested amounts from the self-managed
13plan while not yet eligible for retirement under this Article
14(and Article 20, if applicable) shall forfeit all service
15credit and accrued rights in the System; if subsequently
16re-employed, the participant shall be considered a new
17employee. If a former participant again becomes a participating
18employee (or becomes employed by a participating system under
19Article 20 of this Code) and continues as such for at least 2
20years, all such rights, service credits, and previous status as
21a participant shall be restored upon repayment of the amount of
22the distribution, without interest.
23    (k) Benefit amounts. If an employee who is vested in
24employer contributions terminates employment, the employee
25shall be entitled to a benefit which is based on the account
26values attributable to both employer and employee



HB2760- 10 -LRB100 05865 RPS 15890 b

1contributions and any investment return thereon.
2    If an employee who is not vested in employer contributions
3terminates employment, the employee shall be entitled to a
4benefit based solely on the account values attributable to the
5employee's contributions and any investment return thereon,
6and the employer contributions and any investment return
7thereon shall be forfeited. Any employer contributions which
8are forfeited shall be held in escrow by the company investing
9those contributions and shall be used as directed by the System
10for future allocations of employer contributions or for the
11restoration of amounts previously forfeited by former
12participants who again become participating employees.
13    (l) Roth account. Pursuant to Section 902 of the federal
14American Taxpayer Relief Act of 2012, all employees with
15applicable retirement plans will be provided options to: (1)
16establish, (2) contribute to, and (3) transfer any guaranteed
17or vested portion of their traditional accounts, on any day,
18into qualified in-plan Roth accounts, without distribution.
19(Source: P.A. 98-92, eff. 7-16-13; 99-897, eff. 1-1-17.)
20    Section 99. Effective date. This Act takes effect upon
21becoming law.