PEN CD-CHICAGO-AUTO ENROLLMENT

104th Regular Session Introduced by Sara Feigenholtz and 2 co-sponsors

Automatically enroll new Chicago police, fire, and municipal employees in a pre-tax retirement plan with 3% default contributions and opt-out rights.

Purpose / Intent

To require automatic enrollment of new members of the Chicago Police, Chicago Fire, and Chicago Municipal pension articles into a federal tax‑qualified pre‑tax retirement plan, while preserving members’ ability to opt out. The measure aims to increase retirement savings participation among newly hired municipal public safety and other city employees.

Key provisions

Adds new sections to the Illinois Pension Code (40 ILCS 5/5‑239; 5/6‑231; 5/8‑244.5):

Beginning January 1, 2026, any person who becomes a member of the Chicago Police, Chicago Firefighter, or Chicago Municipal pension articles on or after that date shall be automatically enrolled into a federal tax‑qualified pre‑tax retirement plan permitted by state and federal law.
A newly enrolled member must be informed of the option to opt out within 30 days after hire.
If the member does not choose another option, the default employee contribution rate is 3% of the member’s salary.
The plan administrator may automatically increase member contributions by up to 1 percentage point per year; members may opt out of these automatic increases.

Amends the State Mandates Act (30 ILCS 805/) by adding Section 8.49:

Declares the mandate created by this bill an "exempt mandate" — i.e., no state reimbursement is required for implementation.

Effective date: the Act takes effect upon becoming law; the automatic‑enrollment requirement applies to members hired on or after January 1, 2026.

Who is affected

Primary: Individuals who become members (new hires) of the Chicago Police, Chicago Fire, and Chicago Municipal pension systems on or after Jan 1, 2026.

Secondary: City payroll and human resources departments, pension/plan administrators, and any third‑party plan vendors who will implement enrollment and contribution changes.

Implementation and procedural notes

The bill establishes only enrollment mechanics and contribution defaults; it does not specify a single plan provider or plan design beyond the requirement that the plan be a federal tax‑qualified pre‑tax retirement plan allowed under Illinois and federal law.

Employers/plan administrators must notify eligible new members of the opt‑out right within 30 days and must implement default 3% contributions unless another arrangement is selected.

The administrator’s authority to institute up to 1% annual automatic contribution increases requires systems to support gradual escalation and member opt‑outs.

The State Mandates Act amendment means local entities would not be eligible for state reimbursement of costs associated with implementing the new requirement.

Potential operational impacts (non‑exhaustive)

Payroll and HR system changes to support automatic enrollment, default 3% pretax deductions, and optional annual escalation.

Communications and enrollment materials to inform new hires of the opt‑out right and plan details.

Administrative work for plan sponsors to select/operate a qualifying tax‑deferred plan if one is not already in place.

For full statutory text and exact wording, see the bill language adding Sections 5‑239, 6‑231, and 8‑244.5 to the Illinois Pension Code and the new State Mandates Act provision (30 ILCS 805/8.49).

Bill