Senate Bill 1831 Signed Into Law; IMRF Releases Initial Guidance

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As discussed in a prior alert, Senate Bill 1831 was set to impose a penalty on employers that contribute to the Illinois Municipal Retirement Fund (IMRF) for certain end-of-career salary increases for IMRF-covered employees. On August 26, 2011, the Governor signed Senate Bill 1831 into law (now Public Act 97-0609), and IMRF released its initial guidance on the Act on August 31. The initial guidance from IMRF (General Memorandum 620, and an accompanying FAQ) provides answers to a number of frequently asked questions concerning the Act, but a number of questions remain. Franczek Radelet is working with staff from IMRF to understand the impact of the Act on public employers, but several important points arise from the initial IMRF guidance including the following.

• The “penalty” is simply an acceleration of a portion of the employer contribution to IMRF that would have to be paid by the employer to IMRF anyways (to fund member pensions). Therefore, the penalty is referred to by IMRF as an “accelerated payment” because the present value of excess earnings (over 6%) must be paid within 3 years, rather than the typical amortization period established by IMRF.

• Earnings increases paid before January 1, 2012 are not subject to accelerated payments under the Act.

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