General Memo 620

Recent Public Act signed into law: P.A. 97-0609

August 31, 2011

P.A. 97-0609: Accelerated payments (AP); Pension Impact Statements; 125% rule expanded; Retiree return-to-work changes; Exception to IMRF participation requirements; Open Meetings Act

Open Meetings Act

• Posting information regarding member compensation

Dear Authorized Agent:

On August 26, 2011, the governor signed Senate Bill 1831 (Public Act 97-0609). This law makes several changes to the IMRF statute and amends the Open Meetings Act. The new provisions have various effective dates that are noted below.

Please note: P.A. 97-0609 includes provisions that were also included in bills recently signed into law (P.A. 97-0272, P.A. 97-0273, P.A. 97-0319, and P.A. 97-0328). Those new Public Acts provide for earlier implementation dates than for some of the provisions provided in P.A. 97-0609.

Provisions that are included in both P.A. 97-0609 and prior Public Acts are not described here, but can be found in General Memoranda 617 and 618.

IMRF Statute

1. Employer action/payment required as a result of certain earnings increases
   
   1. Accelerated Payment: Employers are required to immediately pay that portion of the present value of a pension attributable to earnings increases exceeding the greater of 6% or 1.5 times the increase in the CPI-Urban as of the previous September

      Effective date: January 1, 2012

      Applies to earnings increases paid on or after January 1, 2012, to members retiring on or after February 1, 2012

      NOTE: This new law differs from the immediate payment required by school districts for earnings increases paid to TRS members.

      Old Law: Not applicable

      New Law: When a member applies for a pension, IMRF calculates the member’s final rate of earnings. For pensions with an effective date of February 1, 2012, and later, IMRF will compare each 12 months’ earnings within the final rate of earnings period with the earnings for the previous 12 months.

      NOTE: Although this new law applies to members retiring on or after February 1, 2012, only earnings increases paid after January 1, 2012 are subject to the limit.

      IMRF will identify any year in which the member’s earnings are more than the previous 12 months’ earnings by the greater of 6% or 1.5 times the increase in the Consumer Price Index-Urban (as of the previous September).

      IMRF will calculate the present value of the member’s pension with and without the earnings increases that exceed the limit. The member’s employer will be required to pay that portion of the present value attributable to earnings increases that exceed the limit (“Accelerated Payment”).

      After receiving the Accelerated Payment invoice from IMRF, employers may dispute the increase by providing documentation of any exemption within 30 days or pay the amount due without interest within 90 days. After 90 days, employers will be charged 7.50% interest. The full amount must be paid within three years.

      Earnings increases exempted from this limit are those resulting from

      • Overload or overtime
      • An increase in the number of hours required to be worked
      • Standard employment promotions resulting in increased responsibility and workload
      • [Legislation effective August 25, 2017, added an additional exemption for vacation time payout.]
      Also exempted from the earnings increase limit:
      • Earnings increases for members who are more than 10 years from retirement eligibility.
        Earnings increases paid under contracts or collective bargaining agreements entered into, amended or renewed before January 1, 2012
      • Earnings increases attributable to personnel policies adopted by the governing body before January 1, 2012, and applicable only to members who were participating in IMRF before January 1, 2012.

        Personnel policies eligible for this exemption must:

        • Be in writing, and
        • Specifically exempt earnings increases that would trigger an Accelerated Payment for employees hired on or after a specific date (but no later than 1/1/2012), and
        • Be formally adopted by the employer’s governing body on or before 1/1/2012.
        IMRF developed a Frequently Asked Questions about this topic.
   2. Pension Impact Statement: Employers are required to request a “Pension Impact Statement” from IMRF before increasing the earnings of certain members by 12% or more

      Effective date: January 1, 2012

      Old Law: Not applicable

      New Law: Before an IMRF employer can increase the earnings of an officer, executive, or manager by 12% or more, the employer must request from IMRF a written “Pension Impact Statement.”

      The statement will provide the

      • Effect the earnings increase could have on the member’s pension
      • Estimated “Accelerated Payment,” the amount the employer would be required to pay immediately: that portion of the present value of the pension attributable to salary increases exceeding 6% or 1.5 times the increase in the Consumer Price Index-Urban as of the previous September if the member retired

      Employers will be required to sign and return the Pension Impact Statement to IMRF.

      NOTE: This new provision does not apply to earnings increases for members who are more than 10 years from retirement eligibility.
      The following earnings increases are exempted from this requirement. Earnings increases:
      • Resulting from standard employment promotions resulting in increased responsibility and workload
      • Resulting from an increase in the number of hours required to be worked
      • Paid under contracts or collective bargaining agreements entered into, amended or renewed before January 1, 2012
2. Final rate of earnings: Expand 125% rule:

   Expands the 125% rule to apply to last 24 months in the final rate of earnings period

   Effective date: January 1, 2012

   Applies to members first participating in IMRF or a reciprocal retirement system on or after January 1, 2012

   For retirement purposes, a member’s final rate of earnings (FRE) is the highest total earnings during any 96 consecutive months (Tier 2) within the member’s last 10 years of IMRF service divided by 96.

   Old Law: If the member’s earnings for any of the last three months were more than 25% greater than the highest earnings in any of the previous 93 months, IMRF reduced those earnings when we calculated the FRE.

   New Law: If a member’s earnings for any of the last 24 months are more than 25% greater than the highest earnings in any of the previous 72 months, IMRF will reduce those earnings when we calculate the FRE.

3. Retired IMRF members returning to work

   1. Suspend the pension of a retired member who performs services on a contractual basis with a former IMRF employer

      Effective date: January 1, 2012

      Applies to members first participating in IMRF or a reciprocal retirement system on or after January 1, 2012; does not apply to SLEP members

      Old Law: Retired members could perform services for a former IMRF employer if the retiree was returning as an independent contractor. The member’s pension payments would continue.

      New Law: If a retired member performs services for his or her former IMRF employer on a contractual basis, the member’s pension will be suspended during that contractual service.

      The retired member must inform IMRF and his or her former employer that he/she is receiving an IMRF pension and is returning to work on a contractual basis.

      If the retired member does not inform IMRF and his/her employer, the retired member will be guilty of a Class A misdemeanor and required to pay a $1,000 fine.

      Once the contractual work ends, the retired member’s pension will resume.

   2. Members who retire under ERI and return to work as auxiliary police officers are not subject to ERI restrictions

      Effective date: August 26, 2011

      Applies to all members

      Old Law: if a member retired under the Early Retirement Incentive (ERI), he or she could not return to work for an IMRF employer in any capacity (see exception below). If the member did return, he or she would lose the ERI enhancements and be required to repay IMRF any pension payments the retiree would not have been entitled to receive without the ERI.

      Exception under old law: A member who retired under ERI can hold an elected position and continue to receive his or her ERI pension if the member chooses to not participate in IMRF and the member's pension is not based on any service earned in that position during any term of office.

      New Law: Creates an additional exception. An ERI retiree can return to work for an IMRF employer as an auxiliary police officer appointed pursuant to Section 3.1-30-5 of the Illinois Municipal Code. The retiree will not lose the ERI enhancements.

4. Exception to IMRF participation requirement

   Certain employees who are required to participate in a union pension plan do not participate in IMRF

   Effective date: August 26, 2011

   Applies to (see below)

   Old Law: Employees who worked in a position that met or exceeded the employer’s hourly standard were required to participate in IMRF.

   New Law: Excludes from IMRF participation any employee who:

   1. Is employed by a theatre, arena, or convention center and
   2. The theatre, arena, or convention center is located in Cook County
   3. The municipality is an IMRF employer and
   4. The employee contributes (or is eligible to contribute) to a Taft-Hartley (union) pension plan established on or before June 1, 2011.

   Employees who meet these criteria but are currently participating in IMRF will continue to participate.

Open Meetings Act

• Posting information regarding member compensation

  Effective date: January 1, 2012

  Applies to all IMRF employers and their employees (including those not participating in IMRF)

  Old Law: Not applicable

  New Law:

  1. Within six days of approving its budget, an IMRF employer must post the total compensation package for each employee receiving a total compensation package that exceeds $75,000 a year.
  2. At least six days before an IMRF employer approves an employee’s total compensation package that will equal or exceed $150,000 a year, the employer must post the total compensation package for that employee.

     For this statute, “total compensation package” is defined as salary, employer-paid health insurance premiums, housing allowance, vehicle allowance, clothing allowance, bonuses, loans, vacation days which will be earned in that year and sick days which will be earned in that year.

     If an employer maintains a website, it can post the information on its website or post the information available at its main office. If it chooses to post at its office, it must post on its website on how to access the information.

     If the employer does not have a website, it must post the above information at its main office.

     Because this new law revises the Open Meetings Act and not the Pension Code, if you have any questions about its implementation, please contact the Illinois Attorney General.

Questions?

If you have any questions regarding the information presented in this memorandum, please send us a secure electronic message or call an IMRF Member Services Representative at 1-800-ASK-IMRF (1-800-275-4673), 7:30 a.m. to 5:30 p.m., Monday through Friday.