Status Update: Legislative Action to Revert to 6% Rule is Now Imminent

Jun 6, 2019

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On April 16, 2019, we issued a Law Alert to inform school districts and community colleges about three bills introduced by the legislature to amend the TRS and SURS Articles of the Illinois Pension Code to revert back to the 6% rule for end-of-career earnings increases for participants.

Legislative Action to Revert to 6% Rule

While none of those bills made their way to the Governor’s desk with the change from 3% to 6%, the Budget Implementation Bill (“BIMP”) (Senate Bill 1814) was amended on May 31, 2019 to include provisions to revert back to the 6% rule.  The amendment passed both chambers on June 2, 2019, and the BIMP is on its way to the Governor’s desk for signature.  All signs point to the Governor signing the BIMP, and this may occur as early as this week.  Once signed, the return to the 6% rule will be effective immediately.  Sound familiar?  This is exactly what happened one year ago to date when the law of the land suddenly changed from 6% to 3%. 

The reversion back to the 6% limit on end-of-career earnings increases does not mean that employers must grant increases equal to 6%.  However, it does provide employers with a deeper safety net before being subject to an additional employer contribution to the applicable pension system for exceeding the statutory maximum on end-of- career earnings increases, which can be very costly for public institutions.  Presuming the Governor signs the BIMP, the renewed law of the land for TRS and SURS will by the 6% threshold for end-of-career earnings increases for participants.  While increases above 6% would not be prohibited, such will result in an additional employer contribution.

Robbins Schwartz will provide additional updates following action by the Governor.  It is possible that TRS and/or SURS may issue a new guidance document regarding this change as well.  We stand ready to answer questions as to how this change may affect your institution.