SB0304 96TH GENERAL ASSEMBLY

LRB096 07811 AMC 17914 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB0304

Introduced 2/6/2009, by Sen. Bill Brady

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Pension Code. Requires the General Assembly Retirement System, the State Employees' Retirement System of Illinois, the State Universities Retirement System, the Teachers' Retirement System of the State of Illinois, and the Judges Retirement System of Illinois to automatically enroll its newly eligible employees in a self-managed program of retirement benefits instead of the program of retirement benefits currently offered and allows currently eligible employees to elect to participate in the self-managed program. Provides that a self-managed plan shall authorize a participating employee to accumulate assets for retirement through a combination of employer and employee contributions that may be invested at the employee's direction in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts. Provides that, to the extent that the changes made by the amendatory Act are determined to be a new benefit increase, the changes are exempt from the 5-year expiration provision. Effective immediately.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning public 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 adding Sections 2-103.1, 2-103.2, 2-117.4, 2-126.2, 2-162.1, 14-103.40, 14-103.41, 14-105.8, 14-133.2, 15-198.1, 16-104.1, 16-104.2, 16-131.7, 16-158.2, 16-203.1, 18-105.1, 18-105.2, 18-123.3, 18-133.2, and 18-169.1 and changing Sections 2-126, 14-133, 14-152.2, 15-103.3, 15-134.5, 15-158.2, 16-152, and 18-133 as follows:

(40 ILCS 5/2-103.1 new)

Sec. 2-103.1. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 2-119, 2-119.01, 2-119.1, and 2-120; survivor's annuities payable directly from the System, as provided in Sections 2-121, 2-121.1, 2-121.2, and 2-121.3; and contribution refunds, as provided in Section 2-123.

(40 ILCS 5/2-103.2 new)

Sec. 2-103.2. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 2-126.2. The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System, as provided in Sections 2-119, 2-119.01, 2-119.1, 2-120, 2-121, 2-121.1, 2-121.2, and 2-121.3 or refunds determined under Section 2-123.

(40 ILCS 5/2-117.4 new)

Sec. 2-117.4. Retirement program elections.

(a) For the purposes of this Section:

"Eligible participant" means either a currently eligible participant or a newly eligible participant of the System.

"Currently eligible participant" means a person who is a participant under this Article on the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

"Newly eligible participant" means a person who first becomes a participant after the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

(b) When the System offers to participants under this Article a self-managed plan as an alternative to the traditional benefit package, each currently eligible participant shall be given the choice to elect which retirement program he or she wishes to participate in with respect to all periods of covered employment occurring on, before, and after the effective date of the participant's election. The retirement program election made by a currently eligible participant must be made in writing, in the manner prescribed by the System, and within the time period described in this Section.

If a currently eligible participant elects the self-managed plan, then that election is irrevocable. If a currently eligible participant who elected to participate or participated by default in the traditional benefit plan terminates employment under this Article, then the participant, upon his or her subsequent re-employment under this Article, may make an election under this Section.

A currently eligible participant who fails to make an election under this Section shall, by default, participate in the traditional benefit package.

(c) A currently eligible participant may elect to participate in the traditional benefit package or the self-managed plan.

A currently eligible participant must make this election within 5 years after the effective date of the adoption of the self-managed plan under Section 2-126.2 or, in the case of a currently eligible participant who terminates employment under this Article, within 6 months after his or her re-employment under this Article.

A newly eligible participant is automatically enrolled in the self-managed plan under Section 2-162.2.

(d) If the currently eligible participant elects to participate in the self-managed plan, the system shall fund their account as stated in subsection (f) of Section 2-126.2.

(e) A currently eligible participant shall be provided with written information prepared or prescribed by the System that describes the participant's retirement program choices. The eligible participant shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(40 ILCS 5/2-126) (from Ch. 108 1/2, par. 2-126)

Sec. 2-126. Contributions by participants.

(a) Each participant shall contribute toward the cost of his or her retirement annuity a percentage of each payment of salary received by him or her for service as a member as follows: for service between October 31, 1947 and January 1, 1959, 5%; for service between January 1, 1959 and June 30, 1969, 6%; for service between July 1, 1969 and January 10, 1973, 6 1/2%; for service after January 10, 1973, 7%; for service after December 31, 1981, 8 1/2%.

(b) Beginning August 2, 1949, each male participant, and from July 1, 1971, each female participant shall contribute towards the cost of the survivor's annuity 2% of salary.

A participant who has no eligible survivor's annuity beneficiary may elect to cease making contributions for survivor's annuity under this subsection. A survivor's annuity shall not be payable upon the death of a person who has made this election, unless prior to that death the election has been revoked and the amount of the contributions that would have been paid under this subsection in the absence of the election is paid to the System, together with interest at the rate of 4% per year from the date the contributions would have been made to the date of payment.

Notwithstanding any provision in this subsection (b) to the contrary, in the case of an employee who participates in the self-managed plan under Section 2-126.2, contributions for a survivor's annuity shall instead be used to finance the benefits available under Section 2-126.2.

(c) Beginning July 1, 1967, each participant shall contribute 1% of salary towards the cost of automatic increase in annuity provided in Section 2-119.1. These contributions shall be made concurrently with contributions for retirement annuity purposes.

(d) In addition, each participant serving as an officer of the General Assembly shall contribute, for the same purposes and at the same rates as are required of a regular participant, on each additional payment received as an officer. If the participant serves as an officer for at least 2 but less than 4 years, he or she shall contribute an amount equal to the amount that would have been contributed had the participant served as an officer for 4 years. Persons who serve as officers in the 87th General Assembly but cannot receive the additional payment to officers because of the ban on increases in salary during their terms may nonetheless make contributions based on those additional payments for the purpose of having the additional payments included in their highest salary for annuity purposes; however, persons electing to make these additional contributions must also pay an amount representing the corresponding employer contributions, as calculated by the System.

(Source: P.A. 90-766, eff. 8-14-98.)

(40 ILCS 5/2-126.2 new)

Sec. 2-126.2. Self-managed plan.

(a) The General Assembly finds that the State should have the flexibility to provide a defined contribution (self-managed) plan for eligible participants. Accordingly, the General Assembly Retirement System is hereby authorized to establish and administer a self-managed plan, which shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and State contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

(b) The Board shall adopt the self-managed plan established under this Section for participants under this Article. The adoption of the self-managed plan makes available to the eligible participants under this Article the elections described in Section 2-117.4.

The General Assembly Retirement System shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the State; and

(4) the ability of the company to provide benefits under the contract and the financial stability of the company.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the System.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from that investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State shall guarantee any of the investments in the participant's account balances.

(e) A currently eligible participant, as defined in Section 2-117.4, must make a written election to participate in the self-managed plan in accordance with the provisions of Section 2-117.4 and the procedures established by the System. Participation in the self-managed plan shall begin on the first day of the month immediately following the month in which the currently eligible participant's election is filed with the System or when a newly eligible participant, as defined in Section 2-117.4, enters the System, but not sooner than the effective date of the self-managed plan. The System shall make the self-managed plan available under this Article by January 1, 2011. A member's participation in the traditional retirement package under this Article shall terminate on the date that participation in the self-managed plan begins.

A member who has elected to participate in the self-managed plan under this Section must continue participation while he or she remains a participant under this Article, and may not participate in the traditional benefit package.

Participation in the self-managed plan under this Section shall constitute participation in the General Assembly Retirement System.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) If, at the time a participant elects to participate in the self-managed plan, the participant has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the participant an opening account balance in the self-managed plan, equal to (1) the amount of the contribution refund that the participant would be eligible to receive under Section 2-123 if the participant terminated employment on that date and elected a refund of contributions and (2) an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned, provided that the total opening account balance does not exceed 7.6% of the participant's salary for that year, plus interest. The interest used in this subsection (f) is calculated as the average annual rate of return that the System has earned over the past 20 fiscal years and is compounded. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax-free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the participant's opening account balance.

(g) Notwithstanding any other provision of this Article, a participant may not purchase or receive service or service credit applicable to the traditional benefit package under this Article for any period during which the employee was a participant in the self-managed plan established under this Section.

(h) The self-managed plan shall be funded by contributions from participants in the self-managed plan and State contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for other participants in the System, as provided in Section 2-126. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 2-126. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned had the participant chosen to enroll in the traditional benefit plan. The amounts so credited shall be paid into the participant's self-managed plan accounts in a manner to be prescribed by the System.

The State of Illinois shall make contributions by appropriations to the System for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 2-134. The System shall not be obligated to remit the required State contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required State contributions from the State.

(i) A participant in the self-managed plan becomes vested in the State contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) attainment of 5 years of service credit; (2) the death of the participating member while employed under this Article, if the member has completed at least 1.5 years of service; or (3) the member's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if he or she subsequently becomes a participant under this Article again, he or she shall be considered a new participant. If a former participant again becomes a participating member (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(j) If a participant in the self-managed plan who is vested in State contributions terminates employment, the participant shall be entitled to a benefit that is based on the account values attributable to both State and member contributions and any investment return thereon.

If a participant in the self-managed plan who is not vested in State contributions terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the State contributions and any investment return thereon shall be forfeited. Any State contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of State contributions or for the restoration of amounts previously forfeited by former participants who again become participating members.

(40 ILCS 5/2-162.1 new)

Sec. 2-162.1. New benefit increases. To the extent that the changes made to this Article by this amendatory Act of the 96th General Assembly authorizing the System to offer a self-managed plan are determined to be a new benefit increase within the meaning of Section 2-162, the changes made by this amendatory Act are exempt from the provisions of subsection (d) of Section 2-162.

(40 ILCS 5/14-103.40 new)

Sec. 14-103.40. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 14-107, 14-108, 14-108.3, 14-108.4, 14-109, 14-110, 14-112, 14-113, 14-114, and 14-115; disability benefits payable under Sections 14-123, 14-123.1, 14-124, 14-125, 14-125.1, and 14-126; death benefits payable directly from the System, as provided in Sections 14-116, 14-117, and 14-128; widow or survivors annuities payable directly from the System, as provided in Sections 14-118, 14-119, 14-120, 14-121, 14-121.1, and 14-122; and contribution refunds, as provided in Section 14-130.

(40 ILCS 5/14-103.41 new)

Sec. 14-103.41. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained under the System, as described in Section 14-133.2. The self-managed plan also includes disability benefits, as provided in Sections 14-123, 14-123.1, 14-124, 14-125, 14-125.1, and 14-126. The self-managed plan does not include retirement annuities, death benefits, widow or survivors annuities payable directly from the System, as provided in Sections 14-107, 14-108, 14-108.3, 14-108.4, 14-109, 14-110, 14-112, 14-113, 14-114, 14-115, 14-116, 14-117, 14-118, 14-119, 14-120, 14-121, 14-121.1, 14-122, and 14-128 or refunds determined under Section 14-130.

(40 ILCS 5/14-105.8 new)

Sec. 14-105.8. Retirement program elections.

(a) For the purposes of this Section:

"Eligible employee" means either a currently eligible employee or a newly eligible employee.

"Currently eligible employee" means an employee who is employed by the State on the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

"Newly eligible employee" means an employee who first becomes employed under this Article after the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

(b) When the System offers to employees under this Article the self-managed plan as an alternative to the traditional benefit package, each currently eligible employee shall be given the choice to elect which retirement program he or she wishes to participate in with respect to all periods of covered employment occurring on, before, and after the effective date of the employee's election. The retirement program election made by a currently eligible employee must be made in writing, in the manner prescribed by the System, and within the time period described in this Section.

If a currently eligible employee elects the self-managed plan, then that election is irrevocable. If a currently eligible employee who elected to participate or participated by default in the traditional benefit plan terminates employment under this Article, then the employee, upon his or her subsequent re-employment under this Article, may make an election under this Section.

A currently eligible employee who fails to make an election under this Section shall, by default, participate in the traditional benefit package.

(c) A currently eligible employee may elect to participate in the traditional benefit package or the self-managed plan.

A currently eligible employee must make this election within 5 years after the effective date of the adoption of the self-managed plan under Section 14-133.2 or, in the case of a currently eligible employee who terminates employment under this Article, within 6 months after his or her re-employment under this Article.

A newly eligible employee is automatically enrolled in the self-managed plan under Section 14-133.2.

(d) If a currently eligible participant elects to participate in the self-managed plan, the System shall fund their account as stated in subsection (f) of Section 14-133.2.

(e) A currently eligible employee shall be provided with written information prepared or prescribed by the System that describes the employee's retirement program choices. Each eligible employee shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(40 ILCS 5/14-133) (from Ch. 108 1/2, par. 14-133)

Sec. 14-133. Contributions on behalf of members.

(a) Each participating employee shall make contributions to the System, based on the employee's compensation, as follows:

(1) Covered employees, except as indicated below, 3.5% for retirement annuity, and 0.5% for a widow or survivors annuity;

(2) Noncovered employees, except as indicated below, 7% for retirement annuity and 1% for a widow or survivors annuity;

(3) Noncovered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter;

(4) Covered employees serving in a position in which "eligible creditable service" as defined in Section 14-110 may be earned, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(5) Each security employee of the Department of Corrections or of the Department of Human Services who is a covered employee, 0.5% for a widow or survivors annuity plus the following amount for retirement annuity: 5% through December 31, 2001; 6% in 2002; 7% in 2003; and 8% in 2004 and thereafter;

(6) Each security employee of the Department of Corrections or of the Department of Human Services who is not a covered employee, 1% for a widow or survivors annuity plus the following amount for retirement annuity: 8.5% through December 31, 2001; 9.5% in 2002; 10.5% in 2003; and 11.5% in 2004 and thereafter.

Notwithstanding any provision in this subsection (a) to the contrary, in the case of an employee who participates in the self-managed plan under Section 14-133.2, contributions for widow or survivors annuities shall instead be used by the System to fund the benefits in Sections 14-123, 14-123.1, 14-124, 14-125, 14-125.1, and 14-126.

(b) Contributions shall be in the form of a deduction from compensation and shall be made notwithstanding that the compensation paid in cash to the employee shall be reduced thereby below the minimum prescribed by law or regulation. Each member is deemed to consent and agree to the deductions from compensation provided for in this Article, and shall receipt in full for salary or compensation.

(Source: P.A. 92-14, eff. 6-28-01.)

(40 ILCS 5/14-133.2 new)

Sec. 14-133.2. Self-managed plan.

(a) The General Assembly finds that it is important for Illinois to be able to attract and retain the most qualified employees and that in order to attract and retain these employees, the State of Illinois should have the flexibility to provide the defined contribution (self-managed) plan for eligible employees. Accordingly, the State Employees Retirement System of Illinois is hereby authorized to establish and administer a self-managed plan, which shall offer participating employees the opportunity to accumulate assets for retirement through a combination of employee and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

(b) The Board shall adopt the self-managed plan established under this Section for members under this Article. The State's election to adopt the self-managed plan makes available to the eligible employees of the State of Illinois the elections described in Section 14-105.8.

The State Employees Retirement System of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt such rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participating employees and the State;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of employees.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the System.

(d) Employees who are participating in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the employer shall guarantee any of the investments in the employee's account balances.

(e) A currently eligible employee, as defined in Section 14-105.8, must make a written election to participate in the self-managed plan in accordance with the provisions of Section 14-105.8 and the procedures established by the System. Participation in the self-managed plan shall begin on the first day of the month immediately following the month in which the currently eligible employee's election is filed with the System or when a newly eligible employee, as defined in Section 14-105.8, enters the System, but not sooner than the effective date of the self-managed plan. The System shall make the self-managed plan available under this Article by January 1, 2011. An employee's participation in the traditional retirement package under this Article shall terminate on the date that participation in the self-managed plan begins.

An employee who has elected to participate in the self-managed plan under this Section must continue participation while employed in an eligible position, and may not participate in the traditional benefit package administered by the System under this Article while employed by the State under this Article.

Participation in the self-managed plan under this Section shall constitute membership in the State Employees' Retirement System of Illinois.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) If, at the time an employee elects to participate in the self-managed plan, the employee has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the employee an opening account balance in the self-managed plan, equal to (i) the amount of the contribution refund that the employee would be eligible to receive under Section 14-130 if the employee terminated employment on that date and elected a refund of contributions, plus (ii) an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned, provided that the total opening account balance does not exceed 7.6% of that participant's salary for that year, plus interest. The interest used in this subsection (f) is calculated as the average annual rate of return that the System has earned over the past 20 fiscal years and is compounded. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax-free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the employee's opening account balance.

(g) Notwithstanding any other provision of this Article, an employee may not purchase or receive service or service credit applicable to the traditional benefit package under this Article for any period during which the employee was a participant in the self-managed plan established under this Section.

(h) The self-managed plan shall be funded by contributions from employees participating in the self-managed plan and State contributions as provided in this Section.

The contribution rate for employees participating in the self-managed plan under this Section shall be equal to the employee contribution rate applicable to participants of the same class under Section 14-133. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any employee participating in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 14-133. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall the employee have an option of receiving these amounts in cash. Employees may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules adopted by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned had the participant chosen to enroll in the traditional benefit plan.

The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement any procedures to obtain the required funding from the General Revenue Fund.

An amount of employer contribution, not exceeding 1% of the participating employee's salary, shall be used for the purpose of providing the disability benefits of the System to the employee. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of employer contributions to be allocated during that plan year for providing disability benefits for employees in the self-managed plan. The provisions of this paragraph shall work in conjunction with the provisions of subsection (a-1) of Section 14-133.

(i) A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) completion of 5 years of service credit under this Article; (2) the death of the participating employee while employed by an employer under this Article, if the participant has completed at least 1.5 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed, the participant shall be considered a new employee. If a former participant again becomes a participating employee (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(j) If an employee participating in the self-managed plan who is vested in employer contributions terminates employment, the employee shall be entitled to a benefit which is based on the account values attributable to both employer and employee contributions and any investment return thereon.

If an employee participating in the self-managed plan who is not vested in employer contributions terminates employment, the employee shall be entitled to a benefit based solely on the account values attributable to the employee's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions which are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participating employees.

(40 ILCS 5/14-152.2)

Sec. 14-152.2. New benefit increases.

(a) The General Assembly finds and declares that the amendment to Section 14-104 made by this amendatory Act of the 95th General Assembly that allows members to establish creditable service for certain participation in the University of Illinois Government Public Service Internship Program (GPSI) constitutes a new benefit increase within the meaning of Section 14-152.1. Funding for this new benefit increase will be provided by additional employee contributions under subsection (r) of Section 14-104.

(b) To the extent that the changes made to this Article by this amendatory Act of the 96th General Assembly authorizing the System to offer a self-managed plan are determined to be a new benefit increase within the meaning of Section 14-152.1, the changes made by this amendatory Act are exempt from the provisions of subsection (d) of Section 14-152.1.

(Source: P.A. 95-652, eff. 10-11-07.)

(40 ILCS 5/15-103.3)

Sec. 15-103.3. Self-Managed Plan. "Self-managed plan": The defined contribution retirement program maintained under the System as described in Section 15-158.2. The self-managed plan also includes disability benefits as provided in Sections 15-150 through 15-153.3 (but disregarding disability retirement annuities under Section 15-153.2). The self-managed plan does not include retirement annuities, death benefits, or survivors insurance benefits payable directly from the System as provided in Sections 15-135 through 15-149 and Section 15-153.2, or refunds determined under Section 15-154.

(Source: P.A. 90-766, eff. 8-14-98.)

(40 ILCS 5/15-134.5)

Sec. 15-134.5. Retirement program elections.

(a) All participating employees are participants under the traditional benefit package prior to January 1, 1998.

Effective as of the date that the System offers an employer elects, as described in Section 15-158.2, to offer to its employees the portable benefit package and the self-managed plan as alternatives to the traditional benefit package, each of that employer's eligible employee employees (as defined in subsection (b)) shall be given the choice to elect which retirement program he or she wishes to participate in with respect to all periods of covered employment occurring on and after the effective date of the employee's election. The retirement program election made by an eligible employee must be made in writing, in the manner prescribed by the System, and within the time period described in subsection (d) or (d-1).

If a currently eligible employee elects the self-managed plan, then that election is irrevocable. The employee election authorized by this Section is a one-time, irrevocable election. If an employee who elected to participate or participated by default in the traditional benefit plan terminates employment after making the election provided under this subsection (a), then upon his or her subsequent re-employment under this Article the employee may make an election under this Section with an employer the original election shall automatically apply to him or her, provided that the employer is then a participating employer as described in Section 15-158.2.

An eligible employee who fails to make this election shall, by default, participate in the traditional benefit package.

(b) "Eligible employee" means an employee (as defined in Section 15-107) who is either a currently eligible employee or a newly eligible employee. For purposes of this Section, a "currently eligible employee" is an employee who is employed under this Article on the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package an employee who is employed by an employer on the effective date on which the employer offers to its employees the portable benefit package and the self-managed plan as alternatives to the traditional benefit package. A "newly eligible employee" is an employee who first becomes an employee after the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package. an employee who first becomes employed by an employer after the effective date on which the employer offers its employees the portable benefit package and the self-managed plan as alternatives to the traditional benefit package. A newly eligible employee participates in the traditional benefit package until he or she makes an election to participate in the portable benefit package or the self-managed plan. If an employee does not elect to participate in the portable benefit package or the self-managed plan, he or she shall continue to participate in the traditional benefit package by default.

(c) A currently An eligible employee who at the time he or she is first eligible to make the election described in subsection (a) does not have sufficient age and service to qualify for a retirement annuity under Section 15-135 may elect to participate in the traditional benefit package, the portable benefit package, or the self-managed plan. An eligible employee who has sufficient age and service to qualify for a retirement annuity under Section 15-135 at the time he or she is first eligible to make the election described in subsection (a) may elect to participate in the traditional benefit package or the portable benefit package, but may not elect to participate in the self-managed plan.

(d) A currently eligible employee must make this election within 5 years one year after the effective date of the employer's adoption of the self-managed plan.

A currently newly eligible employee who terminates employment under this Article must make this election within 6 months after his or her re-employment under this Article. the date on which the System receives the report of status certification from the employer. If an employee elects to participate in the self-managed plan, no employer contributions shall be remitted to the self-managed plan when the employee's account balance transfer is made. Employer contributions to the self-managed plan shall commence as of the first pay period that begins after the System receives the employee's election.

(d-1) A newly eligible employee is automatically enrolled in the self-managed plan under Section 15-158.2. who, prior to the effective date of this amendatory Act of the 91st General Assembly, fails to make the election within the period provided under subsection (d) and participates by default in the traditional benefit package may make a late election to participate in the portable benefit package or the self-managed plan instead of the traditional benefit package at any time within 6 months after the effective date of this amendatory Act of the 91st General Assembly.

(e) (Blank) If a currently eligible employee elects the portable benefit package, that election shall not become effective until the one-year anniversary of the date on which the election is filed with the System, provided the employee remains continuously employed by the employer throughout the one-year waiting period, and any benefits payable to or on account of the employee before such one-year waiting period has ended shall not be determined under the provisions applicable to the portable benefit package but shall instead be determined in accordance with the traditional benefit package. If a currently eligible employee who has elected the portable benefit package terminates employment covered by the System before the one-year waiting period has ended, then no benefits shall be determined under the portable benefit package provisions while he or she is inactive in the System and upon re-employment with an employer covered by the System he or she shall begin a new one-year waiting period before the provisions of the portable benefit package become effective.

(f) An eligible employee shall be provided with written information prepared or prescribed by the System which describes the employee's retirement program choices. The eligible employee shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(Source: P.A. 90-766, eff. 8-14-98; 91-887, eff. 7-6-00.)

(40 ILCS 5/15-158.2)

Sec. 15-158.2. Self-managed plan.

(a) Purpose. The General Assembly finds that it is important for colleges and universities to be able to attract and retain the most qualified employees and that in order to attract and retain these employees, colleges and universities should have the flexibility to provide a defined contribution (self-managed) plan as an alternative for eligible employees who elect not to participate in a defined benefit retirement program provided under this Article. Accordingly, the State Universities Retirement System is hereby authorized to establish and administer a self-managed plan, which shall offer participating employees the opportunity to accumulate assets for retirement through a combination of employee and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination thereof. The plan must be qualified under the Internal Revenue Code of 1986.

(b) The Board shall adopt the self-managed plan established under this Section for participants under this Article. The adoption of Adoption by employers. Each employer subject to this Article may elect to adopt the self-managed plan established under this Section; this election is irrevocable. An employer's election to adopt the self-managed plan makes available to the eligible employees of that employer the elections described in Section 15-134.5.

The State Universities Retirement System shall be the plan sponsor for the self-managed plan and shall prepare a plan document and prescribe such rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State, to the employers, or to a combination of both.

(c) Selection of service providers and funding vehicles. The System, in consultation with the employers, shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participating employees and the employer;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of employees.

The System, in consultation with the employers, shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the System.

(d) Employee Direction. Employees who are participating in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the employer guarantees any of the investments in the employee's account balances.

(e) Participation. A currently eligible An employee eligible to participate in the self-managed plan must make a written election in accordance with the provisions of Section 15-134.5 and the procedures established by the System. Participation in the self-managed plan by an electing employee shall begin on the first day of the first pay period following the later of the date the employee's election is filed with the System or the effective date as of which the employee's employer begins to offer participation in the self-managed plan. Employers may not make the self-managed plan available earlier than January 1, 1998. An employee's participation in any other retirement program administered by the System under this Article shall terminate on the date that participation in the self-managed plan begins.

An employee who has elected to participate in the self-managed plan under this Section must continue participation while employed in an eligible position, and may not participate in any other retirement program administered by the System under this Article while employed by that employer or any other employer that has adopted the self-managed plan, unless the self-managed plan is terminated in accordance with subsection (i).

Participation in the self-managed plan under this Section shall constitute membership in the State Universities Retirement System.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) Establishment of Initial Account Balance. If at the time an employee elects to participate in the self-managed plan he or she has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the employee an opening account balance in the self-managed plan, equal to the amount of contribution refund that the employee would be eligible to receive under Section 15-154 if the employee terminated employment on that date and elected a refund of contributions, except that this hypothetical refund shall include interest at the effective rate for the respective years. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the employee's opening account balance.

(g) No Duplication of Service Credit. Notwithstanding any other provision of this Article, an employee may not purchase or receive service or service credit applicable to any other retirement program administered by the System under this Article for any period during which the employee was a participant in the self-managed plan established under this Section.

(h) Contributions. The self-managed plan shall be funded by contributions from employees participating in the self-managed plan and employer contributions as provided in this Section.

The contribution rate for employees participating in the self-managed plan under this Section shall be equal to the employee contribution rate for other participants in the System, as provided in Section 15-157. This required contribution shall be made as an "employer pick-up" under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any employee participating in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 15-157. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall an employee have an option of receiving these amounts in cash. Employees may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules prescribed by the System.

The program shall provide for employer contributions to be credited to each self-managed plan participant in an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned had the participant chosen to enroll in the traditional benefit plan. at a rate of 7.6% of the participating employee's salary, less the amount used by the System to provide disability benefits for the employee. The amounts so credited shall be paid into the participant's self-managed plan accounts in a manner to be prescribed by the System.

An amount of employer contribution, not exceeding 1% of the participating employee's salary, shall be used for the purpose of providing the disability benefits of the System to the employee. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of employer contributions to be allocated during that plan year for providing disability benefits for employees in the self-managed plan.

The State of Illinois shall make contributions by appropriations to the System of the employer contributions required for employees who participate in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 15-165. The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement those procedures described in subsection (c) of Section 15-165 to obtain the required funding from the General Revenue Fund.

(i) (Blank) Termination. The self-managed plan authorized under this Section may be terminated by the System, subject to the terms of any relevant contracts, and the System shall have no obligation to reestablish the self-managed plan under this Section. This Section does not create a right to continued participation in any self-managed plan set up by the System under this Section. If the self-managed plan is terminated, the participants shall have the right to participate in one of the other retirement programs offered by the System and receive service credit in such other retirement program for any years of employment following the termination.

(j) Vesting; Withdrawal; Return to Service. A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) completion of 5 years of service with an employer described in Section 15-106; (2) the death of the participating employee while employed by an employer described in Section 15-106, if the participant has completed at least 1 1/2 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed, the participant shall be considered a new employee. If a former participant again becomes a participating employee (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all such rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(k) Benefit amounts. If an employee who is vested in employer contributions terminates employment, the employee shall be entitled to a benefit which is based on the account values attributable to both employer and employee contributions and any investment return thereon.

If an employee who is not vested in employer contributions terminates employment, the employee shall be entitled to a benefit based solely on the account values attributable to the employee's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions which are forfeited shall be held in escrow by the company investing those contributions and shall be used as directed by the System for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participating employees.

(Source: P.A. 93-347, eff. 7-24-03.)

(40 ILCS 5/15-198.1 new)

Sec. 15-198.1. New benefit increases. To the extent that the changes made to this Article by this amendatory Act of the 96th General Assembly authorizing the System to offer a self-managed plan are determined to be a new benefit increase within the meaning of Section 15-198, the changes made by this amendatory Act are exempt from the provisions of subsection (d) of Section 15-198.

(40 ILCS 5/16-104.1 new)

Sec. 16-104.1. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 16-132 through 16-136.4; disability benefits payable under Sections 16-149 through 16-149.5; survivor's benefits payable directly from the System, as provided in Sections 16-140 through 16-143.1; and contribution refunds, as provided in Sections 16-138, 16-143.2, and 16-151.

(40 ILCS 5/16-104.2 new)

Sec. 16-104.2. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 16-158.2. The self-managed plan also includes disability benefits, as provided in Sections 16-149 through 16-149.5 (but disregarding disability retirement annuities under Section 16-149.2). The self-managed plan does not include retirement annuities or survivor's benefits payable directly from the System as provided in Sections 16-132 through 16-136.4, Sections 16-140 through 16-143.1, and Section 16-149.2, or refunds determined under Sections 16-138, 16-143.2, and 16-151.

(40 ILCS 5/16-131.7 new)

Sec. 16-131.7. Retirement program elections.

(a) For the purposes of this Act:

"Eligible member" means a either a currently eligible member or a newly eligible member.

"Currently eligible member" means a member who is employed by an employer on the date on which the employer first offers to its employees the self-managed plan as an alternative to the traditional benefit package.

"Newly eligible member" is a member who first becomes employed by an employer after the date on which the employer first offers its members the self-managed plan as an alternative to the traditional benefit package.

(b) Effective as of the date that an employer adopts the self-managed plan as described in Section 16-158.2 as an alternative to the traditional benefit package, each of that employer's currently eligible members shall be given the choice to elect which retirement program he or she wishes to participate in with respect to all periods of covered employment occurring on and after the effective date of the employee's election. The retirement program election made by a currently eligible member must be made in writing, in the manner prescribed by the System, and within the time period described in this Section.

If a currently eligible member elects the self-managed plan, then that election is irrevocable. If a currently eligible member who elected to participate or participated by default in the traditional benefit plan terminates employment under this Article, then the member, upon his or her subsequent re-employment under this Article, may make an election under this Section.

A currently eligible member who fails to make an election under this Section shall, by default, participate in the traditional benefit package.

(c) A currently eligible member may elect to participate in the traditional benefit package or the self-managed plan.

A currently eligible member must make this election within 5 years after the effective date of the employer's adoption of the self-managed plan or, in the case of a currently eligible member who terminates employment under this Article, within 6 months after his or her re-employment under this Article.

A newly eligible member is automatically enrolled in the self-managed plan under Section 16-158.2.

(d) If a currently eligible member elects to participate in the self-managed plan, the System shall fund their account as stated in subsection (f) of Section 16-158.2. Employer contributions to the self-managed plan shall commence as of the first pay period that begins after the System receives the member's election.

(e) A currently eligible member shall be provided with written information prepared or prescribed by the System that describes the member's retirement program choices. The eligible member shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(40 ILCS 5/16-152) (from Ch. 108 1/2, par. 16-152)

Sec. 16-152. Contributions by members.

(a) Each member shall make contributions for membership service to this System as follows:

(1) Effective July 1, 1998, contributions of 7.50% of salary towards the cost of the retirement annuity. Such contributions shall be deemed "normal contributions".

(2) Effective July 1, 1969, contributions of 1/2 of 1% of salary toward the cost of the automatic annual increase in retirement annuity provided under Section 16-133.1.

(3) Effective July 24, 1959, contributions of 1% of salary towards the cost of survivor benefits. Such contributions shall not be credited to the individual account of the member and shall not be subject to refund except as provided under Section 16-143.2.

(4) Effective July 1, 2005, contributions of 0.40% of salary toward the cost of the early retirement without discount option provided under Section 16-133.2. This contribution shall cease upon termination of the early retirement without discount option as provided in Section 16-176. The contributions made under this paragraph (4) shall be used by the System to fund benefits under Sections 16-149 through 16-149.5 for those that participate in the self-managed plan.

(b) The minimum required contribution for any year of full-time teaching service shall be $192.

(c) Contributions shall not be required of any annuitant receiving a retirement annuity who is given employment as permitted under Section 16-118 or 16-150.1.

(d) A person who (i) was a member before July 1, 1998, (ii) retires with more than 34 years of creditable service, and (iii) does not elect to qualify for the augmented rate under Section 16-129.1 shall be entitled, at the time of retirement, to receive a partial refund of contributions made under this Section for service occurring after the later of June 30, 1998 or attainment of 34 years of creditable service, in an amount equal to 1.00% of the salary upon which those contributions were based.

(e) A member's contributions toward the cost of early retirement without discount made under item (a)(4) of this Section shall not be refunded if the member has elected early retirement without discount under Section 16-133.2 and has begun to receive a retirement annuity under this Article calculated in accordance with that election. Otherwise, a member's contributions toward the cost of early retirement without discount made under item (a)(4) of this Section shall be refunded according to whichever one of the following circumstances occurs first:

(1) The contributions shall be refunded to the member, without interest, within 120 days after the member's retirement annuity commences, if the member does not elect early retirement without discount under Section 16-133.2.

(2) The contributions shall be included, without interest, in any refund claimed by the member under Section 16-151.

(3) The contributions shall be refunded to the member's designated beneficiary (or if there is no beneficiary, to the member's estate), without interest, if the member dies without having begun to receive a retirement annuity under this Article.

(4) The contributions shall be refunded to the member, without interest, within 120 days after the early retirement without discount option provided under Section 16-133.2 is terminated under Section 16-176.

(Source: P.A. 93-320, eff. 7-23-03; 94-4, eff. 6-1-05.)

(40 ILCS 5/16-158.2 new)

Sec. 16-158.2. Self-managed plan.

(a) The General Assembly finds that it is important for schools to be able to attract and retain the most qualified employees and that in order to attract and retain these employees, schools should have the flexibility to provide a defined contribution (self-managed) plan for eligible members. Accordingly, the Teachers' Retirement System of the State of Illinois is hereby authorized to establish and administer a self-managed plan, which shall offer participating members the opportunity to accumulate assets for retirement through a combination of member and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination of fixed and variable. The plan must be qualified under the Internal Revenue Code of 1986.

(b) Each employer subject to this Article shall adopt the self-managed plan established under this Section. This election is irrevocable. An employer's election to adopt the self-managed plan makes available to the eligible members of that employer the elections described in Section 16-131.7.

The Teachers' Retirement System of the State of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and adopt any rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State, to the employers, or to a combination of both.

(c) Selection of service providers and funding vehicles. The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participating members and employers;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of employees.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the System.

(d) Participants in the program must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the employer guarantees any of the investments in the participant's account balances.

(e) A currently eligible member, as defined in Section 16-131.7, must make a written election to participate in the self-managed plan in accordance with the provisions of Section 16-131.7 and the procedures established by the System. Participation in the self-managed plan shall begin on the first day of the month immediately following the month in which the currently eligible member's election is filed with the System or when a newly eligible member, as defined in Section 16-131.7, enters the System, but not sooner than the effective date of the self-managed plan. The System shall make the self-managed plan available under this Article by January 1, 2011. A member's participation in the traditional retirement package under this Article shall terminate on the date that participation in the self-managed plan begins.

A member who has elected to participate in the self-managed plan under this Section must continue participation while he or she remains a member, and may not participate in the traditional benefit package while employed by that employer or any other employer under this Article.

Participation in the self-managed plan under this Section shall constitute membership in the Teachers' Retirement System of the State of Illinois.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) If, at the time an employee elects to participate in the self-managed plan, the employee has rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the employee an opening account balance in the self-managed plan, equal to (i) the amount of the contribution refund that the employee would be eligible to receive under Section 16-143.2 and 16-151 if the employee terminated employment on that date and elected a refund of contributions, plus (ii) an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned, provided that the total opening account balance does not exceed 7.6% of that participant's salary for that year, plus interest. The interest used in this subsection (f) is calculated as the average annual rate of return that the System has earned over the past 20 fiscal years and is compounded. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax-free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the employee's opening account balance.

(g) Notwithstanding any other provision of this Article, a member may not purchase or receive service or service credit applicable to the traditional benefit package under this Article for any period during which the member was a participant in the self-managed plan established under this Section.

(h) The self-managed plan shall be funded by contributions from participants in the self-managed plan and employer contributions as provided in this Section.

The contribution rate for participants in the self-managed plan under this Section shall be equal to the member contribution rate for all participants in the System, as provided in Section 16-152. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. A participant in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up the contributions required under Section 16-152. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a member have the option of receiving these amounts in cash. Members may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules prescribed by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned had the participant chosen to enroll in the traditional benefit plan.

An amount of employer contribution, not exceeding 1% of the participating member's salary, shall be used for the purpose of providing the disability benefits of the System to the member. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of member contributions to be allocated during that plan year for providing disability benefits for members in the self-managed plan. The provisions of this paragraph shall be administered in conjunction with the provisions of Section 16-132.

The State of Illinois shall make contributions by appropriations to the System of the employer contributions required for participants in the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 16-158. The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement those procedures described in subsection (b-1) of Section 16-158 to obtain the required funding from the Common School Fund.

(i) A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) attainment of at least 5 years of creditable service under this Article; (2) the death of the participating member while employed under this Article, if the participant has completed at least 1.5 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed under this Article, the participant shall be considered a new member. If a former participant in the self-managed plan again becomes a member (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all such rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(j) If a member participating in the self-managed plan who is vested in employer contributions terminates employment, the member shall be entitled to a benefit that is based on the account values attributable to both employer and member contributions and any investment return thereon.

If a member participating in the self-managed plan who is not vested in employer contributions terminates employment, the member shall be entitled to a benefit based solely on the account values attributable to the member's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participants in the self-managed plan.

(40 ILCS 5/16-203.1 new)

Sec. 16-203.1. New benefit increases. To the extent that the changes made to this Article by this amendatory Act of the 96th General Assembly authorizing the System to offer a self-managed plan are determined to be a new benefit increase within the meaning of Section 16-203, the changes made by this amendatory Act are exempt from the provisions of subsection (d) of Section 16-203.

(40 ILCS 5/18-105.1 new)

Sec. 18-105.1. Traditional benefit package. "Traditional benefit package" means the defined benefit retirement program maintained by the System, which includes retirement annuities payable directly from the System, as provided in Sections 18-124 through 18-125.1; disability retirement annuities payable under Sections 18-126 and 18-126.1; survivor's annuities payable directly from the System, as provided in Section 18-123 and Sections 18-128 through 18-128.1 and Section 18-128.3; and contribution refunds as provided in Section 18-129.

(40 ILCS 5/18-105.2 new)

Sec. 18-105.2. Self-managed plan. "Self-managed plan" means the defined contribution retirement program maintained by the System, as described in Section 18-133.2. The self-managed plan also includes disability benefits, as provided in Section 18-126.1. The self-managed plan does not include retirement annuities or survivor's annuities payable directly from the System, as provided in Section 18-123, Sections 18-124 through 18-126, Sections 18-128 through 18-128.1, and Section 18-128.3 or refunds determined under Section 18-129.

(40 ILCS 5/18-123.3 new)

Sec. 18-123.3. Retirement program elections.

(a) For the purposes of this Section:

"Eligible participant" means either a currently eligible participant or a newly eligible participant.

"Currently eligible participant" means a participant who is employed as a judge on the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

"Newly eligible participant" means a participant who first becomes employed as a judge after the date on which the System first offers the self-managed plan as an alternative to the traditional benefit package.

(b) When the System offers to participants the self-managed plan as an alternative to the traditional benefit package, each currently eligible participant shall be given the choice to elect which retirement program he or she wishes to participate in with respect to all periods of covered employment occurring on or after the effective date of the participant's election. The retirement program election made by a currently eligible participant must be made in writing, in the manner prescribed by the System, and within the time period described in this Section.

If a currently eligible participant elects the self-managed plan, then that election is irrevocable. If a currently eligible participant who elected to participate or participated by default in the traditional benefit plan terminates employment under this Article, then the participant, upon his or her subsequent re-employment under this Article, may make an election under this Section.

A currently eligible participant who fails to make an election under this Section shall, by default, participate in the traditional benefit package.

(c) A currently eligible participant may elect to participate in the traditional benefit package or the self-managed plan.

A currently eligible participant must make this election within 5 years after the effective date of the employer's adoption of the self-managed plan or, in the case of a currently eligible participant who terminates employment under this Article, within 6 months after his or her re-employment under this Article.

A newly eligible participant is automatically enrolled in the self-managed plan under Section 18-133.2.

(d) If a currently eligible participant elects to participate in the self-managed plan, the System shall fund their account as stated in subsection (f) of Section 18-133.2. Employer contributions to the self-managed plan shall commence as of the first pay period that begins after the System receives the member's election.

(e) A currently eligible participant shall be provided with written information prepared or prescribed by the System that describes the participant's retirement program choices. The eligible participant shall be offered an opportunity to receive counseling from the System prior to making his or her election. This counseling may consist of videotaped materials, group presentations, individual consultation with an employee or authorized representative of the System in person or by telephone or other electronic means, or any combination of these methods.

(40 ILCS 5/18-133) (from Ch. 108 1/2, par. 18-133)

Sec. 18-133. Financing; employee contributions.

(a) Effective July 1, 1967, each participant is required to contribute 7 1/2% of each payment of salary toward the retirement annuity. Such contributions shall continue during the entire time the participant is in service, with the following exceptions:

(1) Contributions for the retirement annuity are not required on salary received after 18 years of service by persons who were participants before January 2, 1954.

(2) A participant who continues to serve as a judge after becoming eligible to receive the maximum rate of annuity may elect, through a written direction filed with the Board, to discontinue contributing to the System. Any such option elected by a judge shall be irrevocable unless prior to January 1, 2000, and while continuing to serve as judge, the judge (A) files with the Board a letter cancelling the direction to discontinue contributing to the System and requesting that such contributing resume, and (B) pays into the System an amount equal to the total of the discontinued contributions plus interest thereon at 5% per annum. Service credits earned in any other "participating system" as defined in Article 20 of this Code shall be considered for purposes of determining a judge's eligibility to discontinue contributions under this subdivision (a)(2).

(3) A participant who (i) has attained age 60, (ii) continues to serve as a judge after becoming eligible to receive the maximum rate of annuity, and (iii) has not elected to discontinue contributing to the System under subdivision (a)(2) of this Section (or has revoked any such election) may elect, through a written direction filed with the Board, to make contributions to the System based only on the amount of the increases in salary received by the judge on or after the date of the election, rather than the total salary received. If a judge who is making contributions to the System on the effective date of this amendatory Act of the 91st General Assembly makes an election to limit contributions under this subdivision (a)(3) within 90 days after that effective date, the election shall be deemed to become effective on that effective date and the judge shall be entitled to receive a refund of any excess contributions paid to the System during that 90-day period; any other election under this subdivision (a)(3) becomes effective on the first of the month following the date of the election. An election to limit contributions under this subdivision (a)(3) is irrevocable. Service credits earned in any other participating system as defined in Article 20 of this Code shall be considered for purposes of determining a judge's eligibility to make an election under this subdivision (a)(3).

(b) Beginning July 1, 1969, each participant is required to contribute 1% of each payment of salary towards the automatic increase in annuity provided in Section 18-125.1. However, such contributions need not be made by any participant who has elected prior to September 15, 1969, not to be subject to the automatic increase in annuity provisions.

(c) Effective July 13, 1953, each married participant subject to the survivor's annuity provisions is required to contribute 2 1/2% of each payment of salary, whether or not he or she is required to make any other contributions under this Section. Such contributions shall be made concurrently with the contributions made for annuity purposes.

Notwithstanding any provision in this subsection (c) to the contrary, in the case of an employee who participates in the self-managed plan under Section 18-133.2, contributions for survivor's annuity shall be used to fund benefits under Section 18-133.2.

(Source: P.A. 91-653, eff. 12-10-99.)

(40 ILCS 5/18-133.2 new)

Sec. 18-133.2. Self-managed plan.

(a) The General Assembly finds that it is important to be able to attract and retain the most qualified judges and that in order to attract and retain these judges, the System should have the flexibility to provide a defined contribution (self-managed) plan for eligible participants. Accordingly, the Judges Retirement System of Illinois is hereby authorized to establish and administer a self-managed plan, which shall offer participants the opportunity to accumulate assets for retirement through a combination of participant and employer contributions that may be invested in mutual funds, collective investment funds, or other investment products and used to purchase annuity contracts, either fixed or variable or a combination thereof. The plan must be qualified under the Internal Revenue Code of 1986.

(b) The Board shall adopt the self-managed plan established under this Section. An employer's election to adopt the self-managed plan makes available to the eligible participants of that employer the elections described in Section 18-133.2.

The Judges Retirement System of Illinois shall be the plan sponsor for the self-managed plan and shall prepare a plan document and prescribe such rules and procedures as are considered necessary or desirable for the administration of the self-managed plan. Consistent with its fiduciary duty to the participants and beneficiaries of the self-managed plan, the Board of Trustees of the System may delegate aspects of plan administration as it sees fit to companies authorized to do business in this State.

(c) The System shall solicit proposals to provide administrative services and funding vehicles for the self-managed plan from insurance and annuity companies and mutual fund companies, banks, trust companies, or other financial institutions authorized to do business in this State. In reviewing the proposals received and approving and contracting with no fewer than 2 and no more than 7 companies, the Board of Trustees of the System shall consider, among other things, the following criteria:

(1) the nature and extent of the benefits that would be provided to the participants;

(2) the reasonableness of the benefits in relation to the premium charged;

(3) the suitability of the benefits to the needs and interests of the participants and the employer;

(4) the ability of the company to provide benefits under the contract and the financial stability of the company; and

(5) the efficacy of the contract in the recruitment and retention of judges.

The System shall periodically review each approved company. A company may continue to provide administrative services and funding vehicles for the self-managed plan only so long as it continues to be an approved company under contract with the Board.

In addition to the companies approved by the System under this subsection (c), the System may offer its participants an investment fund managed by the System.

(d) Participants who are under the self-managed plan must be allowed to direct the transfer of their account balances among the various investment options offered, subject to applicable contractual provisions. The participant shall not be deemed a fiduciary by reason of providing such investment direction. A person who is a fiduciary shall not be liable for any loss resulting from such investment direction and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. Neither the System nor the State guarantees any of the investments in the participant's account balances.

(e) A currently eligible participant, as defined in Section 18-123.3, must make a written election to participate in the self-managed plan in accordance with the provisions of Section 18-133.2 and the procedures established by the System. Participation in the self-managed plan shall begin on the first day of the month immediately following the month in which the currently eligible participant's election is filed with the System or when a newly eligible participant, as defined in Section 18-123.3, enters the System, but not sooner than the effective date of the self-managed plan. The System shall make the self-managed plan available under this Article by January 1, 2011. A participant's participation in the traditional retirement package under this Article shall terminate on the date that participation in the self-managed plan begins.

A participant who has elected to participate in the self-managed plan under this Section must continue participation while employed as a judge, and may not participate in the traditional benefit package administered by the System under this Article while employed as a judge.

Participation in the self-managed plan under this Section shall constitute membership in the Judges Retirement System of Illinois.

A participant under this Section shall be entitled to the benefits of Article 20 of this Code.

(f) If, at the time a participant elects to participate in the self-managed plan, the participant rights and credits in the System due to previous participation in the traditional benefit package, the System shall establish for the participant an opening account balance in the self-managed plan, equal to (i) the amount of the contribution refund that the participant would be eligible to receive under Section 18-129 if the participant terminated employment on that date and elected a refund of contributions, plus (ii) an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned, provided that the total opening account balance does not exceed 7.6% of that participant's salary for that year, plus interest. The interest used in this subsection (f) is calculated as the average annual rate of return that the System has earned over the past 20 fiscal years and is compounded. The System shall transfer assets from the defined benefit retirement program to the self-managed plan, as a tax-free transfer in accordance with Internal Revenue Service guidelines, for purposes of funding the participant's opening account balance.

(g) Notwithstanding any other provision of this Article, a participant may not purchase or receive service or service credit applicable to the traditional benefit package under this Article for any period during which the participant was covered under the self-managed plan established under this Section.

(h) The self-managed plan shall be funded by contributions from participants participating in the self-managed plan and State contributions as provided in this Section.

The contribution rate for persons participating in the self-managed plan under this Section shall be equal to the participant contribution rate for other participants in the System, as provided in Section 18-133. This required contribution shall be made as an employer pick-up under Section 414(h) of the Internal Revenue Code of 1986 or any successor Section thereof. Any employee participating in the System's traditional benefit package prior to his or her election to participate in the self-managed plan shall continue to have the employer pick up that contribution. However, the amounts picked up after the election of the self-managed plan shall be remitted to and treated as assets of the self-managed plan. In no event shall a participant have the option of receiving these amounts in cash. Participants may make additional contributions to the self-managed plan in accordance with procedures prescribed by the System, to the extent permitted under rules prescribed by the System.

The program shall provide for State contributions to be credited to each self-managed plan participant in an amount equal to the regular employer contribution that would be required to fund the actual regular cost incurred for each year of service credit earned had the participant chosen to enroll in the traditional benefit plan.

An amount of participant contribution, not exceeding 1% of the participant's salary, shall be used for the purpose of providing the disability benefits of the System to the employee. Prior to the beginning of each plan year under the self-managed plan, the Board of Trustees shall determine, as a percentage of salary, the amount of participant contributions to be allocated during that plan year for providing disability benefits for participants in the self-managed plan. The provisions of this paragraph shall be administered in conjunction with the provisions of Section 18-124.

The State of Illinois shall make contributions by appropriations to the System of the employer contributions required for participants who are covered under the self-managed plan under this Section. The amount required shall be certified by the Board of Trustees of the System and paid by the State in accordance with Section 18-140. The System shall not be obligated to remit the required employer contributions to any of the insurance and annuity companies, mutual fund companies, banks, trust companies, financial institutions, or other sponsors of any of the funding vehicles offered under the self-managed plan until it has received the required employer contributions from the State. In the event of a deficiency in the amount of State contributions, the System shall implement those procedures described in subsection (b) of Section 18-140 to obtain the required funding from the General Revenue Fund.

(i) A participant in the self-managed plan becomes vested in the employer contributions credited to his or her accounts in the self-managed plan on the earliest to occur of the following: (1) attainment of 5 years of service credit; (2) the death of the participant while employed as a judge, if the participant has completed at least 1.5 years of service; or (3) the participant's election to retire and apply the reciprocal provisions of Article 20 of this Code.

A participant in the self-managed plan who receives a distribution of his or her vested amounts from the self-managed plan while not yet eligible for retirement under this Article (and Article 20, if applicable) shall forfeit all service credit and accrued rights in the System; if subsequently re-employed as a judge, the participant shall be considered a new employee. If a former participant again becomes a participating employee (or becomes employed by a participating system under Article 20 of this Code) and continues as such for at least 2 years, all such rights, service credits, and previous status as a participant shall be restored upon repayment of the amount of the distribution, without interest.

(j) If a participant who is vested in employer contributions terminates employment, the participant shall be entitled to a benefit which is based on the account values attributable to both employer and participant contributions and any investment return thereon.

If a participant who is not vested in employer contributions terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the participant's contributions and any investment return thereon, and the employer contributions and any investment return thereon shall be forfeited. Any employer contributions which are forfeited shall be held in escrow by the company investing those contributions and shall be used, as directed by the System, for future allocations of employer contributions or for the restoration of amounts previously forfeited by former participants who again become participating employees.

(40 ILCS 5/18-169.1 new)

Sec. 18-169.1. New benefit increases. To the extent that the changes made to this Article by this amendatory Act of the 96th General Assembly authorizing the System to offer a self-managed plan are determined to be a new benefit increase within the meaning of Section 18-169, the changes made by this amendatory Act are exempt from the provisions of subsection (d) of Section 18-169.

Section 99. Effective date. This Act takes effect upon becoming law.