Illinois. Univc—Commiifee on university retirement syshm Recommerdatioos..]^IIJ9dl Return this book on or before the Latest Date stamped below. A charge is made on all overdue books. University of Illinois Library Digitized by the Internet Archive in 2013 http://archive.org/details/recommendationsrOOuniv RECOMMENDATIONS RELATING TO RETIREMENT AND DEATH BENEFIT SYSTEM of the University of Illinois and other State educational institutions and agencies Important Note ; This material is tentative, and is distributed solely for the purpose of discus- sion within the University of Illinois, and other interested institutions and agencies. Internal and Confidential February 1.1, 19^1 UNJV; UNIVERSITY OF ILLINOIS REVISED RECOMMENDATIONS FOR CHANGES IN THE UNIVERSITY RETIREMENT AND DEATH BENEFIT SYSTEM The Committee on the Retirement System for the past several weeks has been carefully considering the comments and suggestions of members of the University Staff on the tentative plan presented by it und^r date of June 18, 19^0 and sub- mitted to the Faculty in October I9U0. During this consideration the possibility has arisen of securing legis- lation setting up a retirement system for the University and possibly the other institutions of higher education in the State concurrently with legislation for a more or less similar system for employees in other state departments and agencies. The Committee has carefully considered the advantages and disadvantages of such a procedure in comparison with a plan of outside insurance company contracts originally proposed, and has reached the conclusion that, as a practical matter, if a satisfactory legislative plan for a self -managed fund can be worked out, and its passage in that form secured, it would be better for the University to take advantage of that opportunity. An effort would be made to leave the way open for covering the obligations by outside contracts if at a future time such a procedure was found to be advantageous. There is submitted herewith for consideration a tentative draft of the provisions which the Committee feels should be included in any legislation of this kind. This draft has been reviewed with similar committees of the State Teachers' Colleges and State Scientific Surveys. To facilitate the work of the Committee in the preparation of a legislative bill, the Board of Trustees has engaged the services of Mr. Arthur S. Hansen, Consulting Actuary, who is also the Consulting Actuary of the Legisla- tive Counoil which is carrying on the study of the entire problem for the General Assembly. The enclosed outline takes account of his recommendations and sugges- tions, but it must be considered tentative and may be subject to some changes after the completion of the actuarial studies and financial estimates. If such changes are major in character, they will be submitted for further consideration. To secure consideration of this matter in the present General Assembly, early decision and action on the part of the University are essential. Committee on University Retirement System A f R. Crathorne F. G. Dickinson G. W, Goble A. J. Harno G. D. Tuttle February 11, 19^1 Lloyd Morey, Chairman UNIVERSITY OF ILLINOIS RECOMMENDATIONS OF THE RETIREMENT COMMITTEE FOR A BILL FOR AN ACT OF THE GENERAL ASSEMBLY TO PROVIDE RETIREMENT AND OTHER BENEFITS FOR STAFF MEMBERS OF THE UNI- VERSITY OF ILLINOIS AND OTHER STATE EDUCATIONAL DIVISIONS. Revised February 11, I9U1 A. Eligibility and Participation The term "staff member" shall include all members of the educational, adminis- trative, secretarial, clerical, mechanical and labor staffs who are on perma- nent and continuous employment. Members of the faculty employed in successive academic years shall be held to be in continuous employment even though their cash compensation is paid in or for less than 12 months of any academic year. All present staff members who, on September 1, 19^1* have attained age 30 are to be included in the plan effective September 1, 19^1 , and those now under age 30 may elect to be included in the Plan and make contributions to the fund. Present staff now under age 30 are to come under the plan on the September 1 following their 30th birthday. New staff members under age 30 may accept the plan on accepting a position but must accept the plan on the September 1 following their 30th birthday. New staff over age 30 are to be included immediately on accepting a position. B. Contributions I. All persons on accepting the plan shall contribute to the fund at the established rate as long as they remain staff members, and in active service. II. Contributions from staff members shall be the same as that required of other state employees covered by a similar plan, probably 3 l/2$, and shall be at the same rate for all persons, regardless of salary, except as hereinafter provided (paragraphs III and V). III. The State shall contribute for staff members at the same rate as for other state employees (probably 7$) on any income within a maximum salary (pro- bably $3 000) set by other state plans. On any portion of compensation in excess of such maximum salary, the contributions probably will be the same from staff member and state, but not over 5$ from the staff member, IV. Extra compensation paid for summer teaching or for any other extra service not covered by the regular annual salary shall not be included in the computation of contributions. V. There shall be no contributions from either staff member or State on any salary in excess of salary used in determining maximum benefits hereinafter set in Section "C". VI. The provisions of this paragraph shall not apply in cases of total and permanent disability. During leaves of absence without pay, there shall be no required contributions from either staff member or state; however, the staff member may elect to continue his regular contributions, in which case, the regular contri- butions from the state also shall be made. -2- During leaves of absence with pay (either part or full), contributions shall be made on the basis of the amount of salary paid during leave, but on election by the staff member, contributions from both staff member and state shall be on the basis of the full salary rate. C. Income Benefits I. The minimum total retirement income for each present staff member who, on September 1, 19^1 has attained age 30 or who on September 1, 19^1 has not attained age 30 but who prior to December 1, 19^1 elects to accept the plan effective September 1, I9kl, shall, at age 68, be (a) the annuity income provided by the total accumulations to his credit on retirement, and (b) a supplemental benefit, if any is necessary to bring the total retirement income to that stipulated in the plan adopted by the Board of Trustees of the University of Illinois in 1925, as amended. The determination of the total retirement income, of the annuity income, and of the necessary supplemental benefit shall be on a straight life annuity basis on the designated mortality table and shall be subject to all the conditions and restrictions of the 1925 plan of the University of Illinois except that the maximum retirement allowance set for staff members other than deans and other administrative officers and the President shall be increased at the rate of $100 per year until the maximum for deans and other administrative officers is reached. II. Present staff members under age 30 who do not accept the plan as provided above and new staff members shall receive such income as is provided by the total accumulation to their credit on retirement. III. Suitable income benefits shall be paid to a staff member in the event of his becoming totally and permanently disabled while in the active service of the University, and these benefits shall not be less adequate than those provided by the 1925 plan of the University of Illinois. All disability benefits shall be paid by the State and shall not be a charge against the accumulation of contributions of the staff member. A tentative suggestion as to disability benefits is as follows: In the event of total and permanent disability during the first year of service, the staff member shall receive an income equal to 25$ of his salary during the continuance of such disability. This percentage shall be increased two thirds of one percent for each year of service preceding disability, the maximum disability income being 50$ of salary paid during the last past academic year, not to exceed the maximum salaries indicated in paragraph B-V. In addition, the State would continue all scheduled contributions from both staff member and State until the staff member reached the minimum retirement age, at which time the staff member would be retired and receive 3uch income as would be available to him in the event of regular retirement at that age. IV. Payment of all benefits shall be authorized by the Board of Trustees of the University of Illinois and shall be made by that Board or by an agency selected by that Board. V. Payment of all supplemental benefits shall be from the current expense budgets of the individual institutions. ' ' • -3- D. Death Benefits I. Staff members participating in the plan. a. In the event of death prior to retirement, the designated beneficiary- shall receive the total accumulations to his credit, including those of the State, plus a payment from the institution in the amount, if any, necessary to provide a total death benefit of one year's salary of not less than $2 000 nor more than $5 000. b. In the event of death after retirement, the designated beneficiary shall receive the amount, if any, payable under the type of annuity income chosen plus a payment from the institution of one-half of one year's supplemental benefit, but in every case, the minimum payment from the institution shall be $500. II. Employees on regular and continuous employment not eligible for or not participating in the plan. Each institution shall provide from current appropriations death benefits equal to one year's salary of not less than $1 000 nor more than $3 000. III. Group insurance. Consideration shall be given by each institution to the possibility of providing group insurance for persons desiring additional insurance protection. E. Withdrawal Provisions upon termination of service prior to retirement and for causes other than disability . I. Before completing 5 years of service a. On termination of service, the staff member shall receive in cash the amount of his own contributions plus 50% of the total interest credited to his account if this total amount is less than $500. b. If the total amount as computed above equals or exceeds $300, he shall have the option of leaving it on deposit to be accumulated at the rate of interest earned by the Fund, subject to withdrawal at any time, but in any event payable at death or at age 55 whichever occurs first. II. After 5 or more years of service. On or after termination of service, the individual may elect to receive in cash the amount of his contributions plus 50% of the total interest credited to his account. If such cash settlement is not made prior to age 55, he shall on election at or after age 55 but prior to or at age 68 receive an annuity income if the total accumulations to his credit are sufficient to provide an income of $10 per month on the type of income chosen, otherwise, settlement shall be in one sum. In the event of the death of the individual after termination of service but before receiving any settlement, (either income or lump sum) the total accumulations to his credit on the date of death shall be paid to the \ beneficiary in one sum. In the event of the death of the individual after beginning to receive annuity income payments, the death benefit shall be that, if any, payable under the type of annuity income being paid. F. Retirement Age Retirement at any specified age shall be understood as occurring on the September 1 following that birthday. The minimum optional retirement age shall be 55 and the maximum or compulsory retirement age shall be 68 except as hereinafter provided. In exceptional cases, the governing board of any institution covered by this Bill shall be empowered to continue in active service any staff member on a year-to-year basis. The maximum or compulsory retirement age shall not become operative in the Teachers Colleges until September 1, 19^5* In event of retirement prior to age 68, any staff member who has accepted the Plan shall receive the income provided by the total accumulations to his credit on the date of retirement, and, in the case of a present staff member, the supplemental benefit provided in section "C" above, which shall be the actuarial equivalent at the voluntary retirement age on a life annuity basis on the designated mortality table of the supplemental benefit which would have been payable at age 68, based on the assumption that there would have been no increases in salary between the voluntary retirement age and age 68. In exceptional cases and for substantial cause, retirement hereunder may be permitted by the Board at any time after a staff member reaches 65 years of age, without reduction in the amount of supplemental benefit to be paid, G. Options at Retirement Any supplemental benefit which shall become payable on the retirement of a staff member shall be payable as a Straight Life Annuity. On retirement the individual shall elect to use the total accumulations to his credit to provide one of the following types of annuity income: 1. Straight Life 2. Refund 3 . Survivorship H. Persons now on Retirement All persons now receiving a retirement income or who shall retire on or before September 1, 19^+1 shall receive such benefits as are provided by present institutional plans, and all such payments shall be made from current expense budgets of the individual institutions. I# Present Plans The plan adopted by the Board of Trustees of the University of Illinois in 1925, as amended, and the plan of the State Teachers Colleges, shall be discontinued except as provided in Section "H" above. J« Institutions and Agencies to be Included All staff members (as defined in Section A) of the following institutions of the State of Illinois are to be provided for in this Bill: University of Illinois State Teachers Colleges State Geological, Natural History and Water Surveys . : - ■ • • . ' -5- K. Transfers between pension funds o f institutions, departments or agencies of the State of Illinois * In the event of the transfer of a staff member of an institution covered by this Bill or any other similar Plan nov in operation, or any other similar Bill hereinafter enacted, to another institution, department, or agency covered by a state plan, the total accumulations to his credit shall be transferred ts the Fund of the institution to which he transfers, and thereafter shall be subject to all regulations governing that Fund. L. Management The management of the plan shall be vested in the Board of Trustees of the University of Illinois as trustee of the Retirement Fund. Suitable administra- tive committees chosen from the staffs of all institutions covered by the plan shall be provided to deal with specific problems which arise in connection with the staffs of these institutions. The Trustee of the Fund shall be limited to those investments stipulated in the Illinois Insurance Code, Section 125, part 3» M. Expenses of Administration An adequate amount for expenses of administration shall be appropriated by the state in addition to the contributions stipulated herein. N. Adjustment for Federal Social Security Provision should be made for suitable adjustment in the event that Federal Social Security is amended to include the institutions and agencies covered by this Bill. February 11, 19U1 r ■ ■ ' Digest of Legislative Bill for University Retirement System PARTICIPATION Employers: University of Illinois, Normal School Board, 5 Teachers' Colleges, 3 State Surveys. Employees: Applies only to persons on permanent and continuous employment. Present Staff age 30 or over to participate at once, balance on attaining age 30 or prior elec- tion. New Staff participate on accepting a position or attaining age 30, whichever occurs later. REVENUE Employee Contributions: 3^4% of total salary. State Contributions: Amount necessary to provide (1) Retirement Annuity of twice that provided by Employee's Contributions, (2) Disability Benefits, (3) Death Benefits, (4) Expense of Administration, also supplemental benefits for present staff" to cover past service. BENEFITS Retirement Annuities: After age 55 and before age 68 (70 in Teachers' Colleges until 1945) annuity provided by employees' contributions, employers' contributions, and sup- plemental credits for present employees sufficient at age 68 to bring total to 50% of Final Rate of Earnings. Reversionary Annuities: Employee may use credit to provide annuity for beneficiary, not to exceed income to employee. Disability Benefits: 50% of salary as disability income, payable until retirement income would equal disability income, then placed on retirement. Death Benefits: Accumulated employee's contributions, plus additional to provide one year's salary of not less than $2,000 or more than $5,000. After retirement, excess of ac- cumulations over annuity payments received, 6 months supplemental benefit, or $500, whichever is greater. Beneficiary Annuities: Employee or beneficiary may elect that death benefit be paid as income, if sufficient, to provide $10 monthly; or as an immediate cash benefit and an annuity. Separation Withdrawal Benefits: Accumulated employee's contributions may be taken in cash if not employed by other state agency or if not entitled to Retirement Annuity. (Over) - -rut- UN/vtRs/ry ADMINISTRATION Board: The Board of Trustees of the University Retirement System — to consist of three members from the Board of Trustees of the University of Illinois, one member from the Normal School Board, and the Director of Registration and Education, ex-officio. Powers and Duties of the Board: The Board shall be fully responsible for administra- tion of the System and investment of funds, and shall be the custodian of all cash and securities belonging to the System. Duties of the State Auditor of Public Accounts: Draw warrants for payment of funds appropriated to this System in accordance with vouchers of the Board. Duties of Director of Finance: Approve vouchers for agencies subject to it, drawn in accordance with the Act. Duties of Civil Service Commission: Approve vouchers for Civil Service employees drawn in accordance with the Act. Duties of Employers: Indicate on payroll vouchers amount of each employee's con- tribution, net amount payable to each employee, and total amount of employees' contributions. Special Funds: Employers to make contributions from special or trust funds under their control, subject to rules governing such funds. Investment of Assets: Board may invest in: 1. Obligations of the United States or obligations guaranteed by the United States. 2. Obligations of states or certain political subdivisions with restrictions on indebtednesses, and which have not defaulted on indebtedness. 3. Notes or bonds secured by first mortgages, with certain further restrictions. 4. First mortgage bonds of corporations, with certain further restrictions. MISCELLANEOUS Authorizations: Deductions from payrolls authorized in consideration of vested inter- est in benefits provided by this System. Obligations of State: Obligated to provide funds for the benefits specified in this Act. Assignments: None permitted. Reinsurance: Board permitted to reinsure any benefits in legal reserve life insurance companies. April 23, 1941 f