[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
90_SB1614
40 ILCS 5/7-137 from Ch. 108 1/2, par. 7-137
40 ILCS 5/7-224 new
Amends the IMRF Article of the Pension Code. Authorizes
the creation of an optional defined contribution retirement
plan for supervisory employees of cities and villages.
Effective immediately.
LRB9009078XXbd
LRB9009078XXbd
1 AN ACT in relation to public employee retirement
2 benefits.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Pension Code is amended by
6 changing Section 7-137 and adding Section 7-224 as follows:
7 (40 ILCS 5/7-137) (from Ch. 108 1/2, par. 7-137)
8 Sec. 7-137. Participating and covered employees.
9 (a) The persons described in this paragraph (a) shall be
10 included within and be subject to this Article and eligible
11 to benefits from this fund, beginning upon the dates
12 hereinafter specified:
13 1. Except as to the employees specifically excluded
14 under the provisions of this Article, all persons who are
15 employees of any municipality (or instrumentality
16 thereof) or participating instrumentality on the
17 effective date of participation of the municipality or
18 participating instrumentality beginning upon such
19 effective date.
20 2. Except as to the employees specifically excluded
21 under the provisions of this Article, all persons, who
22 became employees of any participating municipality (or
23 instrumentality thereof) or participating instrumentality
24 after the effective date of participation of such
25 municipality or participating instrumentality, beginning
26 upon the date such person becomes an employee.
27 3. All persons who file notice with the board as
28 provided in paragraph (b) 2 and 3 of this Section,
29 beginning upon the date of filing such notice.
30 (b) The following described persons shall not be
31 considered participating employees eligible for benefits from
-2- LRB9009078XXbd
1 this fund, but shall be included within and be subject to
2 this Article (each of the descriptions is not exclusive but
3 is cumulative):
4 1. Any person who occupies an office or is employed
5 in a position normally requiring performance of duty
6 during less than 600 hours a year for a municipality
7 (including all instrumentalities thereof) or a
8 participating instrumentality. If a school treasurer
9 performs services for more than one school district, the
10 total number of hours of service normally required for
11 the several school districts shall be considered to
12 determine whether he qualifies under this paragraph;
13 2. Any person who holds elective office unless he
14 has elected while in that office in a written notice on
15 file with the board to become a participating employee;
16 3. Any person working for a city hospital unless
17 any such person, while in active employment, has elected
18 in a written notice on file with the board to become a
19 participating employee and notification thereof is
20 received by the board;
21 4. Any person who becomes an employee after June
22 30, 1979 as a public service employment program
23 participant under the federal Comprehensive Employment
24 and Training Act and whose wages or fringe benefits are
25 paid in whole or in part by funds provided under such
26 Act.
27 (c) Any person electing to be a participating employee,
28 pursuant to paragraph (b) of this Section may not change such
29 election, except as provided in Section 7-137.1.
30 (d) Any employee who occupied the position of school
31 nurse in any participating municipality on August 8, 1961 and
32 continuously thereafter until the effective date of the
33 exercise of the option authorized by this subparagraph, who
34 on August 7, 1961 was a member of the Teachers' Retirement
-3- LRB9009078XXbd
1 System of Illinois, by virtue of certification by the
2 Department of Registration and Education as a public health
3 nurse, may elect to terminate participation in this Fund in
4 order to re-establish membership in such System. The
5 election may be exercised by filing written notice thereof
6 with the Board or with the Board of Trustees of said
7 Teachers' Retirement System, not later than September 30,
8 1963, and shall be effective on the first day of the calendar
9 month next following the month in which the notice was filed.
10 If the written notice is filed with such Teachers' Retirement
11 System, that System shall immediately notify this Fund, but
12 neither failure nor delay in notification shall affect the
13 validity of the employee's election. If the option is
14 exercised, the Fund shall notify such Teachers' Retirement
15 System of such fact and transfer to that system the amounts
16 contributed by the employee to this Fund, including interest
17 at 3% per annum, but excluding contributions applicable to
18 social security coverage during the period beginning August
19 8, 1961 to the effective date of the employee's election.
20 Participation in this Fund as to any credits on or after
21 August 8, 1961 and up to the effective date of the employee's
22 election shall terminate on such effective date.
23 (e) Any participating municipality or participating
24 instrumentality, other than a school district or special
25 education joint agreement created under Section 10-22.31 of
26 the School Code, may, by a resolution or ordinance duly
27 adopted by its governing body, elect to exclude from
28 participation and eligibility for benefits all persons who
29 are employed after the effective date of such resolution or
30 ordinance and who occupy an office or are employed in a
31 position normally requiring performance of duty for less than
32 1000 hours per year for the participating municipality
33 (including all instrumentalities thereof) or participating
34 instrumentality except for persons employed in a position
-4- LRB9009078XXbd
1 normally requiring performance of duty for 600 hours or more
2 per year (i) by such participating municipality or
3 participating instrumentality prior to the effective date of
4 the resolution or ordinance, (ii) by any participating
5 municipality or participating instrumentality prior to
6 January 1, 1982 and (iii) by a participating municipality or
7 participating instrumentality, which had not adopted such a
8 resolution when the person was employed, and the function
9 served by the employee's position is assumed by another
10 participating municipality or participating instrumentality.
11 A participating municipality or participating instrumentality
12 included in and subject to this Article after January 1, 1982
13 may adopt such resolution or ordinance only prior to the date
14 it becomes included in and subject to this Article.
15 Notwithstanding the foregoing, a participating municipality
16 or participating instrumentality which is formed solely to
17 succeed to the functions of a participating municipality or
18 participating instrumentality shall be considered to have
19 adopted any such resolution or ordinance which may have been
20 applicable to the employees performing such functions. The
21 election made by the resolution or ordinance shall take
22 effect at the time specified in the resolution or ordinance,
23 and once effective shall be irrevocable.
24 (f) Any participating city or village may, by a
25 resolution or ordinance duly adopted by its governing body,
26 elect to exclude from participation and eligibility for
27 benefits all employees who voluntarily elect to enroll in an
28 employee directed pension plan, as described in Section 7-224
29 of this Article.
30 (Source: P.A. 86-272; 87-740; 87-850.)
31 (40 ILCS 5/7-224 new)
32 Sec. 7-224. Optional Retirement Plan - Employee Directed
33 Pension.
-5- LRB9009078XXbd
1 (a) Title. This Section shall be known and may be cited
2 as the Optional Retirement Plan for supervisory city or
3 village employees.
4 (b) Definitions. As used in this Section, unless the
5 context clearly requires a different meaning:
6 "Employee directed plan" or "plan" means a defined
7 contribution retirement plan established pursuant to this
8 Section, under which an employer makes periodic defined
9 contributions to the plan for an employee, and which meets
10 requirements for qualified plans contained in the Internal
11 Revenue Code of 1986, as amended. Such plan may be
12 administered by the employer or by a third party organization
13 selected through a competitive selection process.
14 "Existing retirement system" means the Illinois Municipal
15 Retirement Fund.
16 "Employee" means any person, employed by any city or
17 village that elects to offer an employee directed plan, who
18 (i) is eligible to participate in the existing retirement
19 system, and (ii) is a supervisor or professional employee or
20 confidential employee, as defined under the Illinois Public
21 Labor Relations Act, and (iii) is not eligible to be included
22 in a bargaining unit.
23 "Employer" means any city or village eligible to
24 participate in the existing retirement system.
25 "Compensation" means the annual income actually received
26 by an employee for services rendered to his or her employer.
27 "Employee contribution" means an amount deducted from the
28 employee's regular pay periodically, and deposited into the
29 employee's individual account within the employee directed
30 plan.
31 "Employer contribution" means an amount deposited into
32 the employee's individual account periodically by an employer
33 from its own funds.
34 "Individual account" or "account" means an account in an
-6- LRB9009078XXbd
1 employee directed plan established for each member to record
2 the deposit of employee and employer contributions and
3 earnings thereon on behalf of the member.
4 "Retirement" means a member's withdrawal from the active
5 employment of an employer or completion of all conditions
6 precedent to retirement.
7 "Accrued service benefits" means the amount, determined
8 by the actuary of the existing retirement system, which
9 represents the present value of an employee's accrued
10 retirement benefit earned through the date on which a payment
11 is made to an employee directed plan by an existing
12 retirement system for the benefit of an individual account.
13 To determine the present value of the accrued benefit, the
14 discount rate for investment earnings and the assumptions for
15 current final average compensation shall be approved by the
16 employer. At the employer's written election, the accrued
17 service benefit shall also include an employee's pro rata
18 share of any actuarially determined excess of plan assets
19 compared to accrued liabilities in the existing retirement
20 system on the reporting date prior to the employer's election
21 to make an employee directed plan available to a specific
22 group of employees.
23 (c) Purpose. The provisions of this Section shall be
24 liberally construed to authorize the establishment of
25 optional retirement plans for employers. The purpose of this
26 Section is to authorize employers to provide employee
27 directed plans for their respective employees that are fully
28 funded on a current basis from employer and employee
29 contributions. Such plans may be tailored to each employer's
30 individual needs and shall provide for the opportunity for
31 retirement savings and for the orderly administration of the
32 plans.
33 (d) Plan administration; Mitigation of Employee Risk.
34 (1) The employer has all powers necessary to
-7- LRB9009078XXbd
1 effectuate the purposes of this Section including the
2 power to determine employer and employee contributions.
3 The employer may administer the plan itself or it may
4 contract with a private pension, insurance, annuity,
5 mutual fund, or other qualified company or companies to
6 administer the day-to-day operations of the plan or to
7 provide investment options for the plan.
8 (2) Any employee directed plan established under
9 this Section must include an educational program,
10 approved by the employer, which explains to employees
11 considering enrollment in the plan the probable and
12 possible benefits and risks of defined benefit and
13 employee directed plans, and alternative investment
14 strategies suitable for public employees.
15 (3) The provisions of any other statute, rule or
16 regulation notwithstanding, the assets of an employee's
17 individual account may be invested by the employee among
18 any suitable investment options selected for the plan by
19 the employer. Suitable investment options include, but
20 are not limited to, mutual funds, funds offered by
21 commingled trusts, pooled funds, fixed or variable
22 annuity contracts, and bank commingled funds. An
23 employee may choose from at least 3 investment
24 alternatives: (i) each of which is diversified; (ii)
25 each of which has materially different risk and return
26 characteristics; (iii) which in the aggregate enable the
27 employee enrolled in the plan to achieve an investment
28 portfolio with aggregate risk and return characteristics
29 at any point within the range normally appropriate for
30 the enrolled employee; and (iv) each of which when
31 combined with investments in the other alternatives tends
32 to minimize through diversification the overall risk of
33 an employee's portfolio.
34 (e) Conversion to an Employee Directed Plan.
-8- LRB9009078XXbd
1 (1) Any employee who is a member of any existing
2 retirement system on the effective date of this Section
3 may, in lieu of continued participation in an existing
4 retirement system and upon written election, voluntarily
5 and irrevocably elect membership in an employee directed
6 plan established by the employer. Employees shall have
7 one year from the date of the establishment of the
8 employee directed plan to make an election. The employer
9 or its agent shall notify the existing retirement system
10 of the employee's election and of the employee's service
11 record and compensation history within 45 days of such
12 election, and the existing retirement system, within 45
13 days, shall transfer to the plan administrator a payment
14 equal to the actuarial present value of the employee's
15 accrued service benefit on the date of the transfer. The
16 amount so transferred shall be credited to the employee's
17 individual account.
18 (2) The employer or its agent is authorized to
19 purchase disability insurance investment contracts, group
20 annuity contracts, individual retirement annuities,
21 securities, interests in trusts and other financial
22 instruments, and group insurance as necessary or
23 appropriate for the plan to provide retirement and
24 related benefits comparable to those provided under an
25 existing retirement system. If requested by a
26 participating employer, an existing retirement system
27 shall calculate an actuarially determined amount
28 necessary for the employer to provide related benefits
29 such as an optional disability benefit for employees who
30 elect to convert to the employee directed plan.
31 (f) Employee Directed Plan and Existing Retirement
32 System Are Comparable. On or after the effective date of
33 this Section, employers may establish employee directed plans
34 for employees eligible to participate in the existing
-9- LRB9009078XXbd
1 retirement system who may instead elect to participate
2 thereafter in the employee directed plan. Employees shall be
3 eligible to contribute to the plan. The employer shall
4 determine the amounts which the employer and employees are
5 required or are eligible to contribute to the plan, provided
6 that the average contributions made by the employer may not
7 exceed the normal percentage contribution to the existing
8 retirement system for similar classes of employees for
9 similar benefits, taking into account such factors as the
10 employer may consider, including: matching employer
11 contributions, contribution rates for existing retirement
12 systems, historical employer contribution rates, collective
13 bargaining arrangements, the cost of providing replacement
14 benefits including disability benefits, and budgetary
15 limitations.
16 (g) Plan Membership and Readmission. An employee whose
17 employment is suspended as a result of an approved leave of
18 absence, approved maternity leave or paternity leave, or any
19 other approved break in service authorized by the employer,
20 is eligible for readmission to the plan in which he or she
21 was a member at the time the break in service began. In all
22 cases where a question exists as to membership in, or
23 readmission to, the plan, the employer shall decide the
24 question.
25 (h) Quarterly Statements and Independent Audit. The
26 plan administrator shall prepare, or cause to be prepared, at
27 least quarterly a statement for each member's individual
28 account. The statement shall include the current market
29 value of the account, including self-directed investment
30 options, an itemization of changes in the account, the amount
31 vested, and such other information as may be required by the
32 employer. The employer shall arrange for an independent
33 audit of the plan's assets unless such audit is provided for
34 by a third party organization.
-10- LRB9009078XXbd
1 Section 99. Effective date. This Act takes effect upon
2 becoming law.