Board Resolution 2022-08-08

WHEREAS, section 7-198 of the Illinois Pension Code authorizes the Board of Trustees of the Illinois Municipal Retirement Fund to establish rules necessary or desirable for the efficient administration of the Fund; and

WHEREAS, section 7-172(k) of the Pension Code provides for the Accelerated Payment of pension costs attributable to earnings increases over the previous year, paid during the Final Rate of Earnings period, of more than the higher of 6% or 1.5 times the CPI-U; and

WHEREAS, it is necessary to adopt rules for the efficient administration of section 7-172(k).

THEREFORE BE IT RESOLVED that the following administrative rules be and are hereby adopted by the Board of Trustees:

1. The employer contribution required under section 7-172(k) ("Accelerated Payment") shall be determined as follows:
1. Member has only one employer during the Final Rate of Earnings ("FRE") period:
1. Calculate the member's retirement annuity using earnings as reported and determine its present value;
2. Calculate the member's retirement annuity excluding excess earnings and determine its present value;
3. Subtract the present value of (b) from the present value of (a);
4. The result from (c) is the amount of the required Accelerated Payment;
5. For purposes of this rule, "excess earnings" are defined as: the amount, if any, of reported earnings in any of the 12-month periods in the FRE period that exceed the previous 12 months by the greater of 6% or 1.5 times the Consumer Price Index-Urban. (The CPI-U is determined per paragraph B, below.) Excess earnings are determined on a 12-month basis.
6. For purposes of this rule, the "Final Rate of Earnings" period for a Tier 1 member is 48 months and shall consist of four 12-month periods. The Final Rate of Earnings period for a Tier 2 member is 96 months and shall consist of eight 12- month periods.
2. Member has more than one employer during the FRE period:
1. The employer that paid the excess earnings (defined in A.1.e., above) will be responsible for the Accelerated Payment.
2. If more than one employer paid excess earnings, the Accelerated Payment will be split based on the proportion of excess earnings from each employer compared to the total excess earnings.
2. If 1.5 times the Consumer Price Index-Urban (CPI-U), as announced in September, is greater than 6%, that greater amount will be used to determine excess earnings for each of the 12-month periods that begin between January and December of the following calendar year. The CPI-U for each year (as announced in September) will be considered only for the 12-month periods beginning during January and December of the following calendar year.
3. If a member's retirement annuity is calculated pursuant to section 7-142(a)(1)(a) of the Pension Code, an employer contribution under section 7-172(k) is not required.
4. If the FRE is calculated with earnings from employment covered by another participating system under Article 20 of the Pension Code (Retirement Systems Reciprocal Act), no Accelerated Payment will be assessed for any earnings attributable to that employment.
5. The exceptions as set forth in 40 ILCS 5/7-172(k) shall not be considered when determining excess earnings.
6. The required Accelerated Payment will be calculated when the member's retirement annuity is processed and paid. The employer will be billed and will have 90 days to make the Accelerated Payment interest free. After 90 days, interest will accrue at the assumed rate of return. In any case, the payment must be made within 3 years. For purposes of determining the 90-day interest free grace period and the three-year payment period, an employer shall be deemed to have received a bill for the Accelerated Payment on the first day of the month following the bill date indicated on the bill. Increases in the present value of less than $5,000 shall not require an immediate employer payment but will be funded with and in the same manner as the present value of the entire pension.
7. An employer may dispute the amount of the Accelerated Payment by applying in writing for a recalculation within 30 days of the receipt of the bill. Unless the recalculation results in a change to the original amount billed, the request for a recalculation shall not extend the 90-day grace period.
8. An employer may claim an exemption to the Accelerated Payment by filing an exemption form with IMRF within the 30-day dispute period. The exemption claim must include documentation sufficient to substantiate the exemption. Acceptable documentation includes, but is not limited to, copies of the following:
1. the CBA;
1. Increases paid pursuant to a provision of a CBA in effect before 1/1/2012, but after that CBA expired, are exempt if the pre-requisite for the increase occurs during the period covered by the CBA.
2. Increases paid pursuant to personal services contracts entered into, amended or renewed prior to 1/1/2012 are exempt during the term of the contract, if the contract term conforms to all applicable statutory limitations. If there are no statutory limits on the contract term, and the term of a contract exceeds that of the appointing authority and is an attempt to bind successors in matters incident to their own administration and responsibilities, such contract may not be used for purposes of an exemption.
2. the personal services contract;
3. Board minutes adopting personnel policies;
1. Personnel policies eligible for this exemption must:
1. be in writing, and
2. specifically exclude from those payments that would trigger the Accelerated Payment employees hired on or after a certain date (but no later than 1/1/2012), and
3. be formally adopted by the employer's governing body on or before 1/1/2012.
4. time sheets, check stubs or other statements related to employee hours and wages;
5. Board minutes or other official announcements of promotions.
9. An employer may appeal an unfavorable staff determination regarding a claimed exemption to the IMRF Board of Trustees Benefit Review Committee. The 90-day grace period for interest free payments will not be tolled during the appeal process.
10. Increases paid on or before January 1, 2012 are exempt from the Accelerated Payment.
11. Retroactive earnings paid in a lump sum upon settlement of a collective bargaining agreement will be allocated back to the period the compensation was earned if that lump sum payment results in an accelerated payment charge.