Illinois Compiled Statutes 40 ILCS 5/1-162 – Optional benefits for certain Tier 2 members of pension funds under …
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Optional benefits for certain Tier 2 members of pension funds under Articles 8, 9, 10, 11, 12, and 17.
(a) As used in this Section:
“Affected pension fund” means a pension fund established under Article 8, 9, 10, 11, 12, or 17 that the governing body of the unit of local government has designated as an affected pension fund by adoption of a resolution or ordinance.
“Resolution or ordinance date” means the date on which the governing body of the unit of local government designates a pension fund under Article 8, 9, 10, 11, 12, or 17 as an affected pension fund by adoption of a resolution or ordinance or July 1, 2018, whichever is later.
(b) Notwithstanding any other provision of this Code to the contrary, the provisions of this Section apply to a person who first becomes a member or a participant in an affected pension fund on or after 6 months after the resolution or ordinance date and who does not make the election under subsection (c).
(c) In lieu of the benefits provided under this Section, a member or participant may irrevocably elect the benefits under Section 1-160 and the benefits otherwise applicable to that member or participant. The election must be made within 30 days after becoming a member or participant. Each affected pension fund shall establish procedures for making this election.
(d) “Final average salary” means the average monthly (or annual) salary obtained by dividing the total salary or earnings calculated under the Article applicable to the member or participant during the last 120 months (or 10 years) of service in which the total salary or earnings calculated under the applicable Article was the highest by the number of months (or years) of service in that period. For the purposes of a person who first becomes a member or participant of an affected pension fund on or after 6 months after the ordinance or resolution date, in this Code, “final average salary” shall be substituted for the following:
(1) In Articles 8, 9, 10, 11, and 12, “highest
(a) As used in this Section:
Terms Used In Illinois Compiled Statutes 40 ILCS 5/1-162
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- individual: shall include every infant member of the species homo sapiens who is born alive at any stage of development. See Illinois Compiled Statutes 5 ILCS 70/1.36
- State: when applied to different parts of the United States, may be construed to include the District of Columbia and the several territories, and the words "United States" may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14
- United States: may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14
“Affected pension fund” means a pension fund established under Article 8, 9, 10, 11, 12, or 17 that the governing body of the unit of local government has designated as an affected pension fund by adoption of a resolution or ordinance.
“Resolution or ordinance date” means the date on which the governing body of the unit of local government designates a pension fund under Article 8, 9, 10, 11, 12, or 17 as an affected pension fund by adoption of a resolution or ordinance or July 1, 2018, whichever is later.
(b) Notwithstanding any other provision of this Code to the contrary, the provisions of this Section apply to a person who first becomes a member or a participant in an affected pension fund on or after 6 months after the resolution or ordinance date and who does not make the election under subsection (c).
(c) In lieu of the benefits provided under this Section, a member or participant may irrevocably elect the benefits under Section 1-160 and the benefits otherwise applicable to that member or participant. The election must be made within 30 days after becoming a member or participant. Each affected pension fund shall establish procedures for making this election.
(d) “Final average salary” means the average monthly (or annual) salary obtained by dividing the total salary or earnings calculated under the Article applicable to the member or participant during the last 120 months (or 10 years) of service in which the total salary or earnings calculated under the applicable Article was the highest by the number of months (or years) of service in that period. For the purposes of a person who first becomes a member or participant of an affected pension fund on or after 6 months after the ordinance or resolution date, in this Code, “final average salary” shall be substituted for the following:
(1) In Articles 8, 9, 10, 11, and 12, “highest
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average annual salary for any 4 consecutive years within the last 10 years of service immediately preceding the date of withdrawal”.
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(2) In Article 17, “average salary”.
(e) Beginning 6 months after the resolution or ordinance date, for all purposes under this Code (including without limitation the calculation of benefits and employee contributions), the annual earnings, salary, or wages (based on the plan year) of a member or participant to whom this Section applies shall not at any time exceed the federal Social Security Wage Base then in effect.
(f) A member or participant is entitled to a retirement annuity upon written application if he or she has attained the normal retirement age determined by the Social Security Administration for that member or participant’s year of birth, but no earlier than 67 years of age, and has at least 10 years of service credit and is otherwise eligible under the requirements of the applicable Article.
(g) The amount of the retirement annuity to which a member or participant is entitled shall be computed by multiplying 1.25% for each year of service credit by his or her final average salary.
(h) Any retirement annuity or supplemental annuity shall be subject to annual increases on the first anniversary of the annuity start date. Each annual increase shall be one-half the annual unadjusted percentage increase (but not less than zero) in the consumer price index-w for the 12 months ending with the September preceding each November 1 of the originally granted retirement annuity. If the annual unadjusted percentage change in the consumer price index-w for the 12 months ending with the September preceding each November 1 is zero or there is a decrease, then the annuity shall not be increased.
For the purposes of this Section, “consumer price index-w” means the index published by the Bureau of Labor Statistics of the United States Department of Labor that measures the average change in prices of goods and services purchased by Urban Wage Earners and Clerical Workers, United States city average, all items, 1982-84 = 100. The new amount resulting from each annual adjustment shall be determined by the Public Pension Division of the Department of Insurance and made available to the boards of the retirement systems and pension funds by November 1 of each year.
(i) The initial survivor’s or widow’s annuity of an otherwise eligible survivor or widow of a retired member or participant who first became a member or participant on or after 6 months after the resolution or ordinance date shall be in the amount of 66 2/3% of the retired member’s or participant’s retirement annuity at the date of death. In the case of the death of a member or participant who has not retired and who first became a member or participant on or after 6 months after the resolution or ordinance date, eligibility for a survivor’s or widow’s annuity shall be determined by the applicable Article of this Code. The benefit shall be 66 2/3% of the earned annuity without a reduction due to age. A child’s annuity of an otherwise eligible child shall be in the amount prescribed under each Article if applicable.
(j) In lieu of any other employee contributions, except for the contribution to the defined contribution plan under subsection (k) of this Section, each employee shall contribute 6.2% of his or her salary to the affected pension fund. However, the employee contribution under this subsection shall not exceed the amount of the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll and determined on or before November 1 of each year by the board of trustees of the affected pension fund. If the board of trustees of the affected pension fund determines that the 6.2% employee contribution rate exceeds the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), then on or before December 1 of that year, the board of trustees shall certify the amount of the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll, to the State Actuary and the Commission on Government Forecasting and Accountability, and the employee contribution under this subsection shall be reduced to that amount beginning January 1 of the following year. Thereafter, if the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll and determined on or before November 1 of each year by the board of trustees of the affected pension fund, exceeds 6.2% of salary, then on or before December 1 of that year, the board of trustees shall certify the normal cost to the State Actuary and the Commission on Government Forecasting and Accountability, and the employee contributions shall revert back to 6.2% of salary beginning January 1 of the following year.
(k) No later than 5 months after the resolution or ordinance date, an affected pension fund shall prepare and implement a defined contribution plan for members or participants who are subject to this Section. The defined contribution plan developed under this subsection shall be a plan that aggregates employer and employee contributions in individual participant accounts which, after meeting any other requirements, are used for payouts after retirement in accordance with this subsection and any other applicable laws.
(1) Each member or participant shall contribute a
(e) Beginning 6 months after the resolution or ordinance date, for all purposes under this Code (including without limitation the calculation of benefits and employee contributions), the annual earnings, salary, or wages (based on the plan year) of a member or participant to whom this Section applies shall not at any time exceed the federal Social Security Wage Base then in effect.
(f) A member or participant is entitled to a retirement annuity upon written application if he or she has attained the normal retirement age determined by the Social Security Administration for that member or participant’s year of birth, but no earlier than 67 years of age, and has at least 10 years of service credit and is otherwise eligible under the requirements of the applicable Article.
(g) The amount of the retirement annuity to which a member or participant is entitled shall be computed by multiplying 1.25% for each year of service credit by his or her final average salary.
(h) Any retirement annuity or supplemental annuity shall be subject to annual increases on the first anniversary of the annuity start date. Each annual increase shall be one-half the annual unadjusted percentage increase (but not less than zero) in the consumer price index-w for the 12 months ending with the September preceding each November 1 of the originally granted retirement annuity. If the annual unadjusted percentage change in the consumer price index-w for the 12 months ending with the September preceding each November 1 is zero or there is a decrease, then the annuity shall not be increased.
For the purposes of this Section, “consumer price index-w” means the index published by the Bureau of Labor Statistics of the United States Department of Labor that measures the average change in prices of goods and services purchased by Urban Wage Earners and Clerical Workers, United States city average, all items, 1982-84 = 100. The new amount resulting from each annual adjustment shall be determined by the Public Pension Division of the Department of Insurance and made available to the boards of the retirement systems and pension funds by November 1 of each year.
(i) The initial survivor’s or widow’s annuity of an otherwise eligible survivor or widow of a retired member or participant who first became a member or participant on or after 6 months after the resolution or ordinance date shall be in the amount of 66 2/3% of the retired member’s or participant’s retirement annuity at the date of death. In the case of the death of a member or participant who has not retired and who first became a member or participant on or after 6 months after the resolution or ordinance date, eligibility for a survivor’s or widow’s annuity shall be determined by the applicable Article of this Code. The benefit shall be 66 2/3% of the earned annuity without a reduction due to age. A child’s annuity of an otherwise eligible child shall be in the amount prescribed under each Article if applicable.
(j) In lieu of any other employee contributions, except for the contribution to the defined contribution plan under subsection (k) of this Section, each employee shall contribute 6.2% of his or her salary to the affected pension fund. However, the employee contribution under this subsection shall not exceed the amount of the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll and determined on or before November 1 of each year by the board of trustees of the affected pension fund. If the board of trustees of the affected pension fund determines that the 6.2% employee contribution rate exceeds the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), then on or before December 1 of that year, the board of trustees shall certify the amount of the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll, to the State Actuary and the Commission on Government Forecasting and Accountability, and the employee contribution under this subsection shall be reduced to that amount beginning January 1 of the following year. Thereafter, if the normal cost of the benefits under this Section (except for the defined contribution plan under subsection (k) of this Section), expressed as a percentage of payroll and determined on or before November 1 of each year by the board of trustees of the affected pension fund, exceeds 6.2% of salary, then on or before December 1 of that year, the board of trustees shall certify the normal cost to the State Actuary and the Commission on Government Forecasting and Accountability, and the employee contributions shall revert back to 6.2% of salary beginning January 1 of the following year.
(k) No later than 5 months after the resolution or ordinance date, an affected pension fund shall prepare and implement a defined contribution plan for members or participants who are subject to this Section. The defined contribution plan developed under this subsection shall be a plan that aggregates employer and employee contributions in individual participant accounts which, after meeting any other requirements, are used for payouts after retirement in accordance with this subsection and any other applicable laws.
(1) Each member or participant shall contribute a
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minimum of 4% of his or her salary to the defined contribution plan.
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(2) For each participant in the defined contribution
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plan who has been employed with the same employer for at least one year, employer contributions shall be paid into that participant’s accounts at a rate expressed as a percentage of salary. This rate may be set for individual employees, but shall be no higher than 6% of salary and shall be no lower than 2% of salary.
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(3) Employer contributions shall vest when those
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contributions are paid into a member’s or participant’s account.
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(4) The defined contribution plan shall provide a
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variety of options for investments. These options shall include investments handled by the Illinois State Board of Investment as well as private sector investment options.
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(5) The defined contribution plan shall provide a
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variety of options for payouts to retirees and their survivors.
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(6) To the extent authorized under federal law and as
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authorized by the affected pension fund, the defined contribution plan shall allow former participants in the plan to transfer or roll over employee and employer contributions, and the earnings thereon, into other qualified retirement plans.
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(7) Each affected pension fund shall reduce the
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employee contributions credited to the member’s defined contribution plan account by an amount determined by that affected pension fund to cover the cost of offering the benefits under this subsection and any applicable administrative fees.
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(8) No person shall begin participating in the
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defined contribution plan until it has attained qualified plan status and received all necessary approvals from the U.S. Internal Revenue Service.
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(l) In the case of a conflict between the provisions of this Section and any other provision of this Code, the provisions of this Section shall control.