PENCD-SURS-DEFERRED RETIREMENT

Illinois General Assembly - Full Text of HB4892

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HB4892 - 104th General Assembly

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB4892

Introduced , by Rep. Katie Stuart

SYNOPSIS AS INTRODUCED:

40 ILCS 5/15-203 new

Amends the State Universities Article of the Illinois Pension Code.
Creates a deferred retirement option plan (DROP) for certain participating
employees who are eligible to retire under the Article, have never
received a retirement annuity from the System, and are active participants
in the System. Provides that, during the period of the DROP, the System
shall credit to a notional account on behalf of the DROP member an amount
equal to the monthly amount of retirement annuity the DROP member would
otherwise be eligible to receive had the DROP member retired on the date of
the election. Provides that an eligible member may elect to participate in
the DROP for a period not to exceed 5 years from the date of election.
Requires a DROP member to terminate employment with the employer upon
expiration of their participation in the DROP. Sets forth other provisions
concerning interest on the account; termination of the DROP;
contributions; administrative costs; transfer of administrative
responsibility to the State Treasurer; and the tax-qualified status of the
System.
LRB104 17874 RPS 31310 b

A BILL FOR

HB4892
LRB104 17874 RPS 31310 b
1

AN ACT concerning public employee benefits.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Illinois Pension Code is amended by adding
5
Section 15-203 as follows:

6

(40 ILCS 5/15-203 new)
7

Sec. 15-203.
Deferred retirement option plan.

8

(a) As used in this Section:
9

"Deferred retirement option plan" or "DROP" means the plan
10
created under this Section that provides an alternative method
11
of benefit accrual in the System.
12

"DROP member" means an eligible member who makes an
13
election to participate in the DROP no later than July 1, 2030.
14

"Eligible member" means a participating employee who, at
15
the time of election in the DROP:
16

(1) is otherwise eligible to retire under this Article
17

with a benefit under the traditional benefit package or
18

the portable benefit package under this Article;
19

(2) has never received a retirement annuity from the
20

System; and
21

(3) is an active participant as an employee in the
22

System.
23

(b) The DROP shall be made available to eligible members

HB4892
- 2 -
LRB104 17874 RPS 31310 b
1
no later than July 1, 2027.
2

(c) Eligible members must make the election to participate
3
in the DROP in writing with the System in a form acceptable to
4
the System. The System must process the election and begin
5
crediting an account on behalf of the member as soon as is
6
practicable after the election has been received by the
7
System.
8

(d) An eligible member may elect to participate in the
9
DROP for a period not to exceed 5 years from the date of
10
election.
11

(e) During the period of the DROP, the System shall credit
12
to a notional account on behalf of the DROP member an amount
13
equal to the monthly amount of retirement annuity the DROP
14
member would otherwise be eligible to receive had the DROP
15
member retired on the date of the election under this Section,
16
less any amounts required to be deducted under State or
17
federal law, including, but not limited to, payments required
18
under a Qualified Illinois Domestic Relations Order under
19
Section 1-119. Any automatic annual increases that would have
20
otherwise been applied to the DROP member's benefit had the
21
DROP member elected to retire instead of participating in the
22
DROP shall accrue to the DROP member's monthly payment placed
23
into the account prior to the expiration of the DROP and shall
24
otherwise apply to the DROP member's annuity upon expiration
25
of the DROP. The account shall be held on behalf of the DROP
26
member.

HB4892
- 3 -
LRB104 17874 RPS 31310 b
1

(f) DROP members shall make contributions to the System
2
during their participation in the DROP in an amount equal to
3
the employee contributions that would otherwise be required if
4
the DROP member were an active participant of the System.
5
Those amounts shall be credited to the DROP account.
6

(g) The amounts credited to the DROP account shall be held
7
in notional accounts by the System. Any interest accrued by
8
the System in holding the DROP account shall be used by the
9
System to offset any administrative costs of managing the DROP
10
program and shall reduce the amounts collected by the System
11
under subsection (l). Any interest accrued that is greater
12
than the administrative costs shall otherwise be used to
13
offset the costs of the System.
14

(h) Upon expiration or termination of the DROP member's
15
participation in the DROP, the account balance shall be paid
16
to the DROP member as a lump sum. The System shall provide
17
options for the transfer of the account consistent with its
18
fiduciary duty and any applicable State or federal law. An
19
expiration or termination of a DROP member's participation in
20
the DROP may not occur after January 1, 2036.
21

(i) The DROP election is irrevocable, and the DROP member
22
may not access the account prior to termination or expiration
23
of the DROP member's participation in the DROP. The DROP
24
member must terminate employment with the employer upon
25
expiration of the DROP member's participation in the DROP. The
26
DROP member's participation in the DROP shall terminate prior

HB4892
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LRB104 17874 RPS 31310 b
1
to the expiration date:
2

(1) if the DROP member terminates employment with the
3

employer prior to the expiration of the designated DROP
4

period;
5

(2) if the DROP member becomes eligible for and begins
6

collecting a disability benefit from the System; or
7

(3) upon the death of the DROP member.
8

Upon termination or expiration of the DROP period, the
9
System shall commence the DROP member's retirement annuity
10
from the System.
11

(j) The DROP member shall be considered in active service
12
for purposes of eligibility for death and disability benefits.
13
For purposes of the employer, the DROP member shall be
14
considered an active employee of the employer.
15

The DROP member shall not accrue additional service credit
16
in the System while participating in the DROP, whether service
17
accruals, future pay increases, active cost of living
18
adjustments, or promotions. Additionally, the DROP member
19
shall not be eligible to purchase service credit under this
20
Article. Any amounts due to an alternate payee under a
21
Qualified Illinois Domestic Relations Order (QILDRO) under
22
Section 1-119 shall be calculated at the time of the DROP
23
election and such amounts shall be payable at the time of
24
election. If the DROP member's designated beneficiary
25
predeceases the DROP member, and the DROP member dies before
26
designating a new beneficiary, the DROP member's DROP account

HB4892
- 5 -
LRB104 17874 RPS 31310 b
1
shall be paid to the DROP member's estate.
2

(k) It is intended that the DROP shall not jeopardize the
3
tax-qualified status of the System. The Board shall have the
4
authority to adopt rules and regulations necessary or
5
appropriate for the DROP to maintain compliance with
6
applicable federal laws and regulations. Notwithstanding any
7
other provision in this Article, all benefits provided under
8
the DROP shall be subject to the requirements and limits of the
9
Internal Revenue Code.
10

(l) The costs of administering the DROP account shall be
11
the exclusive responsibility of the DROP member. The System
12
shall pay any reasonable administrative cost of the account
13
and shall reduce the balance of the DROP account in an amount
14
determined by the System to meet all costs of the account.
15

(m) The Board may transfer the administrative
16
responsibility of the DROP program to the State Treasurer on
17
an affirmative vote of the Board.

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