Bill
HB 2709
Creates a limited pilot allowing some Illinois school districts to use a single vendor for 457(b) plans, with participant protections and a 10% district cap.
Status & context
- Bill number: HB 2709 (adds Section 16-207 to the Illinois Pension Code, 40 ILCS 5)
- Introduced: February 2025 (filed by Rep. Michael J. Kelly; Read first time March 18, 2025). Re-referred to Rules Committee (Rule 19(a)) after referral to Public Education and Appropriations‑Pensions & Personnel.
- Note: the provided document also contains an unrelated Arizona appropriation text for a different HB 2709. This summary focuses on the Illinois pension / 457(b) proposal (PEN CD‑TRS‑457 PLANS).
Purpose and intent
- Create a limited pilot allowing school districts that offer a 457(b) deferred compensation plan through a single vendor to use that single‑vendor plan to satisfy requirements of Public Act 102‑540, while adding participant protections and conflict‑of‑interest controls.
Key provisions
- New statutory section: 40 ILCS 5/16‑207 (titled “457(b) plans offered through a single vendor”).
- Pilot cap: the single‑vendor option is limited to no more than 10% of school districts statewide.
- Plan requirements (local single‑vendor plans must):
- Not impose surrender charges.
- Not include annuities.
- Permit participants to transfer or roll over funds to the supplemental savings plan offered by the System (i.e., the State system) without cost and at times instructed by the employee.
- Fiduciary standard: when choosing a single vendor for the pilot, the plan sponsor’s overriding consideration must be that decisions are made solely in the best interests of plan participants and beneficiaries.
- Conflict‑of‑interest and ethical rules for “interested parties” (defined to include certain district employees, school board members, elected representatives, and immediate family living with them):
- May not have any financial interest in the plan other than as a participant.
- Must avoid outside business interests with vendors under consideration and must disclose such interests to the school board and selected bargaining representatives.
- Must not accept gifts, preferential treatment, or benefits that could affect or appear to affect vendor selection.
- Must act honestly and ethically in the best interests of plan participants in dealings with the vendor.
- May not take employment with a chosen (or under‑consideration) vendor during their involvement and for one year after.
- Vendor prohibition: no vendor may offer a plan under this section if any individual employed by or working for that vendor gives anything of value to an employee who participates in the vendor selection.
- Sunset/inoperative date: the section becomes inoperative on and after January 1, 2031.
Who is affected
- Primary: public school districts that operate or may operate 457(b) deferred compensation plans, district employees and plan participants (including teachers and other staff), school boards and bargaining representatives, and vendors offering 457(b) plans.
- Secondary: the State System that operates the supplemental savings plan (receives rollovers/transfers).
Potential impacts and considerations
- Provides an avenue for some districts to rely on a single vendor while adding protections designed to reduce conflicts of interest and preserve participant portability (rollovers to the System).
- The ban on surrender charges and annuities and the transfer/rollover right protect participant liquidity and portability.
- The 10% cap, gift/COI rules, disclosure and one‑year post‑service employment restriction aim to limit vendor capture and undue influence; enforcement mechanisms and oversight details are not specified in the text provided.
- The pilot’s sunset (2031) limits its long‑term effect unless extended or made permanent by future legislation.
If you want, I can:
- Draft a short one‑page briefing for school boards explaining compliance steps, or
- Extract the specific compliance/disclosure language into a checklist for “interested parties.”
Compiled from official sources — confirm details with the bill’s official record.
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