Illinois House Ponders Changes to Downstate Teacher Pensions

Two measures before the Illinois House of Representatives would make adjustments to the pension system that serves public school teachers in most of Illinois. 

The bills would amend the Downstate Teacher Article of the Illinois Pension Code. That code concerns pensions for teachers in “downstate” Illinois; namely, the part of the state outside of Chicago. 

The legislation concerns automatic enrollment and auto escalation for alternative qualifying plans and would create a deferred retirement option plan (DROP) for certain participants who are eligible to retire and meet other criteria.

HB 3138 

Rep. Stephanie A. Kifowit (D-Aurora) introduced HB 3138 on Feb. 16, 2023, but no action was taken. It was re-assigned to the Personnel & Pensions Committee on Jan. 31, 2024.

The bill would amend a provision in the Downstate Teacher Article of the Illinois Pension Code that requires the teachers’ pension system to automatically enroll certain employees in its defined contribution benefit. It would provide an exception for employees whose school district provides an alternative qualifying plan. 

In finer detail, it would provide that the alternative qualifying plan would be required to abide by the automatic enrollment procedures and automatic increase in contribution provisions applicable to the pension system's DC benefit. It also would require a school district that has an alternative qualifying plan to file a letter of compliance, passed by resolution of the school board, with the pension system. 

HB 5498

Rep. Jackie Haas (R-Kankakee) introduced HB 5498 on Feb. 9, 2024; it was referred to the Personnel & Pensions Committee on March 5, 2024.

HB 5498 would amend the Illinois Pension Code to create the Deferred Retirement Option Article. That would provide a deferred retirement option plan (DROP) for certain participants under the Downstate Teacher Article who are eligible to retire and meet other criteria. 

The bill would establish a DROP administered by the State Treasurer for pension funds or retirement systems that are required to establish a DROP and elect to transfer administrative responsibility for the DROP to the State Treasurer. It also sets forth provisions concerning interest on the account, termination of the DROP, contributions, administrative costs, and a DROP advisory board. 

HB 5498 also provides that:

• a participant in the DROP could elect to participate for up to five years;
• on the effective date of the member's election, the pension system would credit the member's account on a monthly basis—for as long as the member participates in the DROP—an amount equal to the monthly amount of retirement annuity the member would otherwise be eligible to receive had the member retired on the date of the election; and
• the DROP member would be considered to be in active service for purposes of participation in a collective bargaining agreement, for health care benefits, and for other purposes.

Effective Dates

Both measures provide that they would be effective immediately upon enactment. 

Hearings

The Personnel & Pensions Committee is set to hold a hearing on both bills on March 14.