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SB 1896

PEN CD-STATE SYS-FUNDING

104th Regular Session Introduced by Rob Martwick

Establishes Illinois pension oversight and funding bodies, plus a temporary 0.5% individual and 0.7% corporate surcharge (2026–2034) to ensure funding and pay benefit-change costs.

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Bill Summary · SB 1896

Summary — SB 1896 (PEN CD‑STATE SYS‑FUNDING)

Status: Enacted (introduced Feb 6, 2025; signed by Governor June 20, 2025; effective Sept 1, 2025)

Purpose
- Establishes new governance, oversight, and dedicated funding mechanisms to monitor and secure State funding for Illinois’ major State‑funded public pension systems and to assure payment of benefit change costs.
- Creates a temporary income tax surcharge (2026–2034) to provide revenue dedicated to those pension funding purposes.

Key provisions

  1. New governance and oversight bodies (Illinois Pension Code — Article 1B)

    • State‑Funded Retirement Systems Council (the Council)
      • Comprised of one representative appointed by the trustees of each State‑Funded Retirement System.
      • Public body subject to Open Meetings and FOIA.
      • Authority to hire staff/contractors and enter contracts.
      • Role: appoint and oversee the Pension Funding Trustee and, with the Trustee and Auditor General, monitor and verify State pension funding.
    • Office of the Pension Funding Trustee (the Trustee)
      • Appointed by the Council (at least 3 affirmative Council votes).
      • Duty to monitor/verify State contributions to the State‑Funded Retirement Systems, access financial and actuarial information, and publish periodic reports (at least annually).
      • Trustee appointment and activities are communicated to Governor, GOMB, Treasurer, Comptroller, legislative leaders, and Auditor General.

  2. Definitions and funding mechanics for benefit changes

    • Introduces definitions such as “Benefit Change Cost” and “Inactive Benefit Change Cost” and prescribes actuarial amortization rules (generally 15 fiscal years; special rules for changes taking effect 2041–2055).
    • If pension plan benefits are expanded/ enhanced after Sept 30, 2025 while the income tax surcharge is in effect, the State must fund the actuarially determined Benefit Change Cost through fiscal year 2055. The Auditor General, in consultation with the Trustee, will reexamine and redetermine those costs at least once every 3 years until FY2055.

  3. Minimum State contribution formula (beginning FY2026)

    • Establishes a minimum contribution requirement for the State‑funded systems equal to the sum of the “Base Contribution” plus the “Benefit Change Contribution Amount.” (Text establishes the formula; detailed definitions and calculations for the Base Contribution appear in the full statute.)

  4. Auditor General role and certification

    • Requires Auditor General review and certification of certain pension cost determinations and reporting of Benefit Change Costs to the Council, Trustee, Governor, key fiscal officers, and legislative leaders.

  5. Surcharge revenue and Budget Stabilization transfers

    • Creates an income tax surcharge for taxable years 2026–2034:
      • Individuals, trusts, and estates: additional 0.5% of net income.
      • Corporations: additional 0.7% of net income.
    • Proceeds are dedicated for purposes set out in the Act and may be transferred via the Budget Stabilization Act as specified.
    • The State pledges not to divert these surcharge proceeds for other uses while the statute is in effect.

  6. Legal protections and waivers

    • Waives sovereign immunity for purposes of the Council (i.e., permits certain legal actions related to the Council’s duties).
    • Pledges the State will not alter or limit certain rights of the Council, Trustee, Auditor General, or the retirement systems under this Act, or change contribution formulas in a way that would reduce required State contributions before systems reach full funding.

Who is affected
- The State‑Funded Retirement Systems (listed in the bill): e.g., General System, State Employees’ Retirement System, State Universities Retirement System, Teachers’ Retirement System, Judges’ Retirement System, and related systems created under the Illinois Pension Code.
- State government fiscal officers and budget process (Governor’s Office of Management & Budget, Comptroller, Treasurer).
- Taxpayers: individuals, trusts, estates, and corporations during taxable years 2026–2034 (subject to surcharge).
- Actuaries, Auditor General, and newly created Trustee office and Council members.

Timing and procedural notes
- Effective date: Sept 1, 2025.
- Surcharge applies to taxable years 2026 through 2034.
- Benefit Change Cost funding obligations apply to benefit changes enacted after Sept 30, 2025 while surcharge is in effect; reexamination of costs occurs at least every 3 years through FY2055.
- The bill requires intergovernmental agreements and reporting between the Trustee, Council, retirement systems, and fiscal officers.

Potential impacts (summary)
- Raises dedicated revenue via a temporary tax surcharge to strengthen pension funding and ensure benefit change costs are explicitly funded.
- Creates independent oversight and verification structures intended to increase transparency and accountability for State pension contributions.
- Increases administrative requirements (new offices, actuarial reporting, Auditor General certifications).
- Imposes additional tax burdens on individuals and corporations during 2026–2034 to support pension funding.

Compiled from official sources — confirm details with the bill’s official record.

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