2023 Illinois Compiled Statutes › Chapter 40 - PENSIONS › 40 ILCS 5/ - Illinois Pension Code. › Article 24 - Public Employees' Deferred Compensation

(40 ILCS 5/Art. 24 heading)
ARTICLE 24.  
		PUBLIC EMPLOYEES'
DEFERRED COMPENSATION
(40 ILCS 5/24-101) (from Ch. 108 1/2, par. 24-101)
Sec. 24-101. 
		
		Notwithstanding any law to the contrary, the State of
Illinois or any unit of local government or school district may enter
into a written contract with any of its employees to defer a part of
their gross compensation and may invest such funds in any
such manner as prescribed by the deferred compensation program adopted
by it under this Article.  Compensation deferred pursuant to a deferred
compensation program adopted under this Article shall not exceed the amount
of compensation allowed to be deferred without being subject to income tax
in the year in which it is earned, pursuant to Section 457 of the United
States Internal Revenue Code or laws supplementary or amendatory thereto.
It is hereby declared to be in the public interest to provide public employees
with a plan for the deferral of compensation and the accrual of income and
gain thereon if such deferred compensation be invested, and to encourage
the continued service of public employees by making available such benefits to them.
(Source: P.A. 82-145.)
(40 ILCS 5/24-102) (from Ch. 108 1/2, par. 24-102)
Sec. 24-102. 
As used in this Article, "employee" means any person,
including a person elected, appointed or under contract, receiving
compensation from the State or a unit of local government or school
district for personal services rendered, including salaried persons. However, "employee", for the purposes of the State Employees Deferred Compensation Plan established under Section 24-104, does not include a person employed by an employer under Section 15-106 who first becomes a participant of the retirement system under Article 15 on or after July 1, 2023 unless the person has made an election to defer compensation into the State Employees Deferred Compensation Plan under a written agreement and the deferral election is in effect as of June 30, 2023. A health care provider who elects to participate in the State Employees Deferred Compensation Plan established under Section 24-104 of this Code shall, for purposes of that participation, be deemed an "employee" as defined in this Section.
As used in this Article, "health care provider" means a dentist, physician, optometrist, pharmacist, or podiatric physician that participates and receives compensation as a provider under the Illinois Public Aid Code, the Children's Health Insurance Act, or the Covering ALL KIDS Health Insurance Act.
As used in this Article, "compensation" includes compensation received
in a lump sum for accumulated unused vacation, personal leave or sick leave, with the exception of health care providers. "Compensation" with respect to health care providers is defined under the Illinois Public Aid Code, the Children's Health Insurance Act, or the Covering ALL KIDS Health Insurance Act.
Where applicable, in no event shall the total of the amount of deferred compensation of an
employee set aside in relation to a particular year under the Illinois
State Employees Deferred Compensation Plan and the employee's
nondeferred compensation for that year exceed the total annual salary or
compensation under the existing salary schedule or classification plan
applicable to such employee in such year; except that any compensation
received in a lump sum for accumulated unused vacation, personal leave or sick
leave shall not be included in the calculation of such totals.
(Source: P.A. 102-540, eff. 8-20-21.)
(40 ILCS 5/24-103) (from Ch. 108 1/2, par. 24-103)
Sec. 24-103. 
		
		The deferred compensation program established by this
Article shall exist and serve in addition to other retirement, pension and
benefit systems established by the State, units of local government or
school districts. Any compensation deferred under such a plan shall
continue to be included as regular compensation for the purpose of
computing the retirement and pension benefits earned by any employee, to
the extent that such inclusion is not inconsistent with the other
applicable Articles of this Code.
(Source: P.A. 84-878.)
(40 ILCS 5/24-104) (from Ch. 108 1/2, par. 24-104)
Sec. 24-104. State Employees Deferred Compensation Plan. In this Section, "Plan" means the State Employees Deferred Compensation Plan.
The Illinois State Board of Investment created under Article 22A of this Act shall develop and establish a deferred compensation plan for employees of the State which shall be known as the State Employees Deferred Compensation Plan. The Plan shall provide for the Board to review proposed investment offerings and shall require that only investments determined to be acceptable by the Board may be used for investing compensation deferred.
The Plan shall include appropriate provisions pertaining to its day to day operation providing for methods of electing to defer income, methods of changing the amount of income to be deferred, methods of selecting from among investment options available under the plan and such other provisions as may be appropriate.
In administering the Plan, the Board shall require that the Plan recordkeeper agree that, in performing services with respect to the Plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the Plan or the Plan's participants to solicit the Plan's participants for the purpose of cross-selling non-Plan products and services, unless in response to a request by a Plan participant; and (ii) will not promote, recommend, endorse, or solicit Plan participants to purchase any financial products or services outside of the Plan, except that links to parts of the recordkeeper's website that are generally available to the public, are about commercial products, and may be encountered by a Plan participant in the regular course of navigating the recordkeeper's website will not constitute a violation of this item (ii).
The Plan shall provide for the preparation, and distribution from time to time to all eligible State employees, of pamphlets describing the Plan and outlining the options and opportunities available to State employees under the Plan.
The Plan established under this Section shall not be implemented or amended until the Board is satisfied that compensation deferred under the Plan is not subject to income tax for the year in which it is earned and that the taxation of such compensation will be deferred until the time of its distribution to the employee.
The Board shall also review and oversee the administration of the Plan.
(Source: P.A. 103-552, eff. 8-11-23.)
(40 ILCS 5/24-104.1) (from Ch. 108 1/2, par. 24-104.1)
Sec. 24-104.1. 
		
		The Plan developed under Section 24-104 shall also provide
for the recovery of the expenses of its administration by charging such
expenses against the earnings from investments or by charging fees equitably
prorated among the participating State employees or by such other appropriate
and equitable method as the Board shall determine.  Different methods for
recovery of administrative expenses may be provided in relation to different
types of investment programs and the Board may provide for the allocation
of administration expenses among varying types of programs for this purpose.
All sums advanced by appropriation to the State Board of Investment
for the costs of the development and establishment of the Plan shall be
repaid to the State Treasury not later than June 30, 1986, without interest.
The Plan shall provide for such repayment and may, for that purpose, provide
for the recovery of the development and establishment costs by amortizing
them as a part of the administrative expenses of the Plan over a period
of years ending not later than June 30, 1986.
(Source: P.A. 79-384.)
(40 ILCS 5/24-104.2)
Sec. 24-104.2. Health care providers; tax-exempt status. Health care providers may participate in the Illinois State Employees Deferred Compensation Plan to the extent that the health care providers' participation does not interfere with the Plan's tax-exempt status under the Internal Revenue Code.
(Source: P.A. 96-806, eff. 7-1-10.)
(40 ILCS 5/24-105) (from Ch. 108 1/2, par. 24-105)
Sec. 24-105. 
The State Employees Deferred Compensation Plan shall be
administered by the Department of Central Management Services
subject to the general
supervision of the Illinois State Board of Investment. Participation in
such plan shall be by a specific written agreement between each such
employee and the State which agreement shall provide for the deferral of
such amount of compensation as requested by the employee. With each
distribution of compensation to a participating employee, the employee
shall receive a memorandum of the amount by which his gross compensation
for the period involved is reduced by reason of the deferment of
compensation, which amount shall not be included as a part of his gross
compensation as to that period.
Funds retained by the State as deferred compensation pursuant to a
written deferred compensation agreement between the State and
participating employees, may be invested in such investments as are
deemed acceptable by the Illinois State Board of Investment including,
but not limited to, life insurance or annuity contracts or mutual funds.
All such insurance, annuities, mutual funds, or other such investments
utilized under this Plan shall have been reviewed and selected by the
Board based on a competitive bidding process as established by such
specifications and considerations as are deemed appropriate by the
Board. Nothing in this Section should be construed as requiring a
limitation on the number and variety of insurance, annuity or mutual
fund contracts which may be selected as a result of this bidding
process.  The State Board of Investment may also invest any funds retained
by the State pursuant to a written deferred compensation agreement between
the State and participating employees in share accounts or share certificate
accounts of State or federal credit unions, the accounts of which are insured
as required by The Illinois Credit Union Act or the Federal Credit Union
Act, as applicable. If a participating employee fails to direct the investment of amounts deferred into the various investment options offered to the participant, the amounts deferred shall be invested in the Plan's default investment fund and the investment shall be deemed to have been made at the participant's investment direction.  Any income and gain resulting from the investment of
a deferred compensation account may be paid to the participant as additional
compensation
for continued service during the period of participation or be used in part
for administrative expenses, all in accordance with the plan.  Such investments
and payments shall not be construed to be prohibited uses of the general
assets of the State.
(Source: P.A. 101-277, eff. 1-1-20.)
(40 ILCS 5/24-105.1)
Sec. 24-105.1. Changes in federal law.
(a) To the extent that federal law or
regulations which require a governmental employer to own the assets of its
deferred compensation plan are changed to allow plans established under Section
457 of the Internal Revenue Code to hold their assets in trust, a custodial
account, an annuity contract, an insurance contract or some other contract, the
Department of Central Management Services and units of local government with
plans established under Section 24-107 shall within a reasonable time amend
their plans accordingly.
(b) To the extent that federal law or
regulations have been changed to allow plans established under Section
457 of the Internal Revenue Code to be amended to allow designated Roth contributions and in-plan rollovers to designated Roth accounts, the
Department of Central Management Services and units of local government with
plans established under Section 24-107 shall within a reasonable time amend
their plans accordingly.
(Source: P.A. 98-491, eff. 1-1-14.)
(40 ILCS 5/24-105.2)
Sec. 24-105.2. Automatic enrollment for certain employees. The Department of Central Management Services shall automatically enroll in the State Employees Deferred Compensation Plan any employee who, on or after July 1, 2020, becomes an active member or participant of a retirement system created under Article 2, 14, or 18. Any agency with employees subject to automatic enrollment must systematically provide the employee data necessary for enrollment to the Department of Central Management Services or its designee. An employee automatically enrolled under this Section shall have 3% of his or her pre-tax gross compensation for each compensation period deferred into his or her deferred compensation account. The Board may increase the default percentage amount of compensation deferred into employee accounts.
An employee hired on or after January 1, 2024 shall be automatically enrolled in the Plan beginning the first day of the pay period following the close of the notice period, unless the employee elects otherwise within the notice period. During the notice period, an employee may elect to not participate in the Plan or to increase or reduce the amount of pre-tax gross compensation deferred. For the purposes of this Section, "notice period" means a reasonable period of time after the employee is provided with an automatic enrollment notice as required under Section 414(w) of the Internal Revenue Code of 1986, as amended. An employee who has been automatically enrolled in the Plan may elect, within 90 days after enrollment, to withdraw from the Plan and receive a refund of amounts deferred, plus or minus any applicable earnings, investment fees, and administrative fees. An employee making such an election shall forfeit all employer matching contributions, if any, made prior to the election. Any refunded amount shall be included in the employee's gross income for the taxable year in which the refund is issued.
An employee hired on or after July 1, 2020 and before January 1, 2024 shall have 30 days from the start date of employment to elect to not participate in the deferred compensation plan or to elect to increase or reduce the amount of pre-tax gross compensation deferred. An employee shall be automatically enrolled in the Plan beginning the first day of the pay period following the employee's thirtieth day of employment.  An employee who has been automatically enrolled in the Plan may elect, within 90 days of enrollment, to withdraw from the Plan and receive a refund of amounts deferred, plus or minus any applicable earnings, investment fees, and administrative fees. An employee making such an election shall forfeit all employer matching contributions, if any, made prior to the election. Any refunded amount shall be included in the employee's gross income for the taxable year in which the refund is issued.
As soon as practicable, the Board shall establish annual, automatic increases to employee contribution rates for employees who are automatically enrolled in the Plan pursuant to this Section. The amount of automatic annual increases in any 12-month period shall not exceed 1% of compensation. Employees may elect to not receive automatic annual increases in a manner described by the Board.
(Source: P.A. 102-219, eff. 7-30-21; 103-552, eff. 8-11-23.)
(40 ILCS 5/24-106) (from Ch. 108 1/2, par. 24-106)
Sec. 24-106. 
		
		
		The State or the unit of local government or school district under a
deferred compensation program shall be obligated at any point in time
solely for the then current value of the particular fixed or variable life
insurance or annuity contract, mutual funds or other investment purchased
on behalf of any employee.
(Source: P.A. 78-1277.)
(40 ILCS 5/24-107) (from Ch. 108 1/2, par. 24-107)
Sec. 24-107. Local government plans.
(a) Any unit of local government or school district may
establish for its employees a deferred compensation plan.
Participation shall be by written agreement between each employee and
the legislative authority of the unit of local government or school
district providing for the deferral of such compensation and the
subsequent investment and administration of such funds.
(b) Any unit of local government may establish an employer-funded
money purchase retirement plan for those of its full time employees who are
not eligible to participate in any pension fund or retirement system
established under Articles 2 through 18 of this Code.  Contributions to the
plan shall be made by the unit of local government only from general
purpose funds not derived from real property taxes imposed by the unit, at
a rate to be determined from time to time by the unit of local government.
However, the rate of employer contribution shall be (i) the same for all
employees participating in the plan, and (ii) not more than 10% of the
employee's salary.
Any benefits accruing to the participants in a retirement plan
established under this subsection shall be protected from impairment in
accordance with Article XIII, Section 5 of the Illinois Constitution.
However, the unit of local government establishing such a plan may
terminate it at any time, unless it has otherwise contractually agreed
with its participating employees.
(c) The agency or department designated by the unit of local government
or school district to establish and administer a plan or program authorized
under subsection (a) or (b) of this Section may invest the assets of the
plan in investments deemed appropriate by the agency or
department, including but not limited to life insurance or annuity
contracts, and share or share certificate accounts of State or federal
credit unions, the accounts of which are insured as required by the
Illinois Credit Union Act or the Federal Credit Union Act, whichever is
applicable.  The payment of employer contributions to a retirement
plan established under subsection (b), and investment and
payment to a participant of deferred compensation and income or gain
thereon, if any, shall not be construed to be prohibited uses of the
general assets of the unit of local government or school district.
This Section does not limit the power or authority of any unit of
local government, school district or any institution supported in whole
or in part by public funds to establish and administer any other
deferred compensation plans that may be authorized by law and deemed
appropriate by the officials of such subdivisions or institutions.
(d) In administering the deferred compensation plans authorized under this Section, the governing board or administrators of the sponsoring unit of local government or school district shall require that the deferred compensation plan recordkeeper agree that, in performing services with respect to the deferred compensation plan, the recordkeeper: (i) will not use information received as a result of providing services with respect to the deferred compensation plan or the deferred compensation plan's participants to solicit the participants in the deferred compensation plan for the purpose of cross-selling nonplan products and services, unless in response to a request by a participant in the deferred compensation plan; and (ii) will not promote, recommend, endorse, or solicit participants in the deferred compensation plan to purchase any financial products or services outside of the deferred compensation plan, except that links to parts of the recordkeeper's website that are generally available to the public, are about commercial products, and may be encountered by a Plan participant in the regular course of navigating the recordkeeper's website will not constitute a violation of this item (ii).
(Source: P.A. 103-552, eff. 8-11-23.)
(40 ILCS 5/24-108) (from Ch. 108 1/2, par. 24-108)
Sec. 24-108. 
		
		In the event that any fireman is transferred to a municipal
fire department as a consequence of the absorption of a fire protection
district occurring prior to January 1, 1980, and such fireman has entered
into a deferred compensation and/or annuity contract with the absorbing
municipality pursuant to Section 24-101, then notwithstanding Section 4-142,
such municipality may make contributions to the deferred compensation or
annuity program on such fireman's behalf, and any such contributions made
prior to the effective date of this amendatory Act of 1981 are hereby validated.
(Source: P.A. 82-179.)
(40 ILCS 5/24-109) (from Ch. 108 1/2, par. 24-109)
Sec. 24-109. 
		Football Coaches.
(a) Any football coach employed by the Board of Trustees of Chicago State
University, the Board of Trustees of Eastern Illinois University, the Board of
Trustees of Governors State University, the Board of Trustees of Illinois State
University, the Board of Trustees of Northeastern Illinois University, the
Board of Trustees of Northern Illinois University, the Board of Trustees of
Western Illinois University, the University of Illinois
Board of Trustees, or the Southern Illinois University System Board of
Trustees, may participate in the American Football Coaches Retirement Trust
in accordance with the conditions of that Trust, of this Section, and of
applicable federal law.
(b) A football coach who elects to participate in the Trust may defer a
part of his compensation as a coach by making employee contributions to the
Trust.  Amounts deferred by the coach under this Section shall be deemed a
part of the coach's compensation for purposes of participation in the State
Universities Retirement System but, in accordance with the U.S. Internal
Revenue Code of 1986, shall not be included in the computation of federal
income taxes withheld on behalf of the coach.  The employing institution of
higher education shall not make any employer contributions to the Trust on
behalf of the coach.
(c) A football coach who participates in the Trust may not participate
in any other program of deferred compensation under this Article during any
year in which he makes contributions to the Trust.
(d) Participation in the Trust shall be administered by
the institution of higher education that employs the
coach.  Each such institution shall report annually to the General
Assembly on the status of the Trust and
participation under this Section.
(e) The right to participate in the Trust that is granted by this
Section is subject to future limitation, and shall not be deemed to be a
pension benefit that is protected from impairment under Section 5 of
Article XIII of the Illinois Constitution.
(Source: P.A. 90-14, eff. 7-1-97.)