New Supplemental Savings Plan Offered by Teachers’ Retirement System
Feb 17, 2021
In 2018, the Illinois legislature amended the Illinois Pension Code to add a requirement that the Teachers’ Retirement System of Illinois (TRS) provide an optional defined contribution benefit to all eligible members of TRS. The legislature’s purpose in enacting this amendment was to offer eligible teachers a “low cost, uniform, high performing” savings plan to supplement their current retirement savings options. Neither teachers nor school districts are required to contribute to the Supplemental Savings Plan, though the statute provides both the option to do so.
The statutory language and legislative history do not explicitly require school districts to approve a Participation Agreement related to their participation in the Supplemental Savings Plan with TRS. TRS states that this Participation Agreement “must be completed and returned by every employer in order to meet the requirements of ILCS 5/16-204.” TRS’ position is based on Section 457(b) of the Internal Revenue Code, which requires an employer to approve a participation agreement as a prerequisite for employee participation in an approved plan. In addition, TRS relies on the language of 5/16-204, which states that eligible teachers must be able to participate in the defined contribution benefit created by TRS. The only way to effectively provide that option is to read an implicit obligation of school districts’ participation. Therefore, even if a school district offers another optional defined contribution plan to its employees, it is required to enter into a separate agreement with TRS to facilitate employees’ statutory right to participate in the TRS’ Supplemental Savings Plan.
TRS previously directed districts to complete and return the participation agreement located on the TRS website on or before March 31, 2021. However, in a supplemental publication released today, TRS indicated that these participation agreements should be completed and returned “as soon as possible.” (See the supplemental guidance here.) The TRS forms should be carefully reviewed prior to adoption, particularly with regard to employer contributions. In addition, employers should remember that conferral of this new benefit may result in requests to bargain over its impact, even if the benefit does not require the employer to contribute to the plan.
We are monitoring TRS communications and will share any updates or clarifications as they become available.
For further assistance regarding the new TRS Supplemental Savings Plan and its impact on school districts, please contact any Robbins Schwartz attorney.