MINUTES. Trustee Dennis Cullen physically returned to the meeting at 3:00 p.m. APPROVAL OF MINUTES

Transcription

1 MINUTES Meeting of the Legal & Legislative Committee of the Board of Trustees of the State Universities Retirement System Thursday, June 7, 2018, 2:15 p.m. Northern Trust Global Conference Center 1 st Floor 50 S. LaSalle St., Chicago, Illinois The following trustees were present: Mr. Tom Cross, Chair; Mr. Aaron Ammons, Dr. John Engstrom, Dr. J. Fred Giertz, Mr. Paul R.T. Johnson Jr., Mr. Craig McCrohon and Dr. Steven Rock. Others present: Mr. Martin Noven, Executive Director; Ms. Bianca Green, General Counsel; Ms. Tara Myers, Chief Financial Officer; Mr. Douglas Wesley, Chief Investment Officer; Ms. Ellen Hung, Deputy CIO; Ms. Brenda Dunn, Director of Human Resources; Ms. Suzanne Mayer, Chief Benefits Officer; Ms. Kristen Houch, Legislative Liaison; Ms. Kelly Carson and Ms. Annette Ackerman, Executive Assistants; Ms. Mary Pat Burns of Burke, Burns & Pinelli; and Mr. Steve Zahn of Zahn Governmental Solutions. Legal & Legislative Committee roll call attendance was taken. Trustee Cozzi, absent; Trustee Cross, present; Trustee Giertz, present; Trustee Johnson, present; and Trustee Rock, present. Trustee Dennis Cullen physically returned to the meeting at 3:00 p.m. APPROVAL OF MINUTES Trustee Tom Cross presented the minutes from the Legal and Legislative Committee meeting of March 9, Trustee Paul R.T. Johnson made the following motion: That the minutes from the March 9, 2018 Legal and Legislative Committee meeting be approved as presented. Trustee Steven Rock seconded and the motion carried with all trustees present voting in favor. CHAIRPERSON S REPORT Trustee Cross did not have a formal chairperson s report. RULEMAKING AND COMPLIANCE UPDATES

2 Approval of the July 2018 Regulatory Agenda Ms. Bianca Green presented the July 2018 Regulatory Agenda for approval. She noted that twice each year, in January and July, a regulatory agenda must be filed with the Secretary of State s Office in Springfield. Trustee Rock moved: That the July 2018 Regulatory Agenda be approved and filed as presented. Trustee Johnson seconded and the motion carried with all trustees present voting in favor. A copy of the July 2018 Regulatory Agenda is incorporated as part of these minutes as Exhibit 1. Status of Pending Rules Ms. Green stated the pending rules have made it through the second notice requirement at JCAR and have now been adopted and are ready to be published as approved. Ms. Green noted that SURS staff has suspended the rulemakings regarding Senate Bill 2654 until final disposition of the proposed statute is complete. A copy of the staff memorandum titled Rulemaking Status Update is included as part of these minutes as Exhibit 2. Trustee Election Issues As requested at the April 2018 meeting, Ms. Green discussed an inconsistency in the current statute regarding the composition of the SURS board. Ms. Green provided options for the board to decide how they would like to proceed. After deliberation, it was determined that Ms. Green would draft new language in the proposed legislative change to include an effective date of July 15, Trustee Johnson moved: That the board of trustees direct Ms. Green, Ms. Mary Pat Burns and Ms. Kristen Houch to draft changes to the proposed legislation as discussed by the board. Trustee Cross seconded and the motion carried with the majority of trustees present voting in favor; Trustee Rock abstained. A copy of the staff memorandum titled Proposed Trustee Election Changes is incorporated as part of these minutes as Exhibit 3. Compliance Stop Light Report Ms. Green directed the committee to the updated stop light report which shows that SURS is in compliance with its reporting requirements. A copy of the report titled May Compliance Report is incorporated as part of these minutes as Exhibit 4.

3 CLOSED SESSION Trustee Fred Giertz moved that the Legal & Legislative Committee go into closed session pursuant to 2(c)(11) of the Open Meetings Act. Trustee Craig McCrohon seconded and the motion carried in a roll call vote: Trustee Cozzi - absent Trustee Cross - aye Trustee Giertz - aye Trustee Johnson - aye Trustee Rock - aye RETURN TO OPEN SESSION Upon motion by Trustee Rock that was seconded by Trustee Cross and carried, the board of trustees resumed the meeting in open session. LEGISLATIVE UPDATE Legislative Liaison Ms. Kristen Houch and Mr. Steve Zahn of Zahn Governmental Solutions provided the legislative update. Ms. Houch discussed the fiscal year 2019 budget, noting the changes impacting SURS members while providing more details regarding House Bill As the discussion ensued, Ms. Houch and Mr. Zahn addressed questions raised by the trustees. Ms. Houch also highlighted the status of other bills impacting SURS members; including House Bill 4684, Senate Bill 2954, House Bill 5137 and House Bill Ms. Houch stated that the House and Senate have adjourned for the spring session and will resume in November. A copy of the reports titled June 2018 Legislative Update, and June 2018 Legislative Summaries, are incorporated as a part of these minutes as Exhibit 5 and Exhibit 6. PUBLIC COMMENT There were no public comments presented to the Legal and Legislative Committee. There was no further business before the committee and Trustee Johnson moved that the meeting be adjourned. The motion was seconded by Trustee Rock and carried with all trustees present voting in favor. Respectfully submitted, MMN:kc Mr. Martin Noven Secretary, Board of Trustees

4 Exhibit 1 MEMORANDUM To: Legal & Legislative Committee From: Bianca T. Green, General Counsel Albert J. Lee, Associate General Counsel Re: July 2018 Regulatory Agenda Date: May 31, 2018 This memorandum summarizes the rulemaking topics appearing on the proposed July 2018 Regulatory Agenda. Section 5-60 of the Illinois Administrative Procedures Act (5 ILCS ) requires each agency to submit a regulatory agenda for publication in the Illinois Register by January 1 and July 1 of each year. The aim of the regulatory agenda is to solicit public comment on future rulemakings that the agency is considering, but for which no First Notice has yet been submitted to the Illinois Register. SURS is not required to promulgate rules appearing in the agenda, and is not prohibited from proposing rules not appearing in the agenda. 1. Add Section Definition of Employee to implement Public Act , effective January 1, 2017, regarding the definition of "employee" under Section of the Illinois Pension Code. Public Act , effective January 1, 2017, granted the SURS Board with the authority to make the final determination as to who is an "employee" for purposes of participation in SURS under new Section (k) of the Illinois Pension Code. Additionally, Public Act authorized the Board to promulgate rules on the topic. Prior to this legislation, SURS operated in conformity with the Fourth Appellate District's decision under Wargo v. State Universities Retirement System, 106 Ill. App. 3d 930 (1982), that held that employers were to construe who was an "employee", rather than the Board. 2. Amend Section Effective Beneficiary Designations to address electronic execution and submission of beneficiary designation forms. SURS currently accepts beneficiary designations in the form of original, paper submissions with handwritten signatures. Many members do not have valid beneficiary designations on file. In the absence of a designated death beneficiary, death benefits are payable to the member's estate. Estate distributions follow statutory descent and distribution rules that may not reflect the member's intent. SURS is considering rulemaking that permits the electronic execution and submission of beneficiary designation forms through secure, online means to increase the uptake of beneficiary designations among its membership. Beneficiary designations that require notarizations (e.g., when naming someone other than the spouse as the primary beneficiary under the Portable and Self-Managed Plans) would continue to be submitted in paper format.

5 Memo to Legal & Legislative Committee July 2018 Regulatory Agenda May, 2018 Page 2 of 2 Exhibit 1 3. Amend Section Making Preliminary Estimated Payments to include procedures for holding payments when the member has not responded to informational requests, and to terminate the benefit after a period of noncompliance with the request. This amendment would apply Section of the Illinois Pension Code (Item #6, below) to Preliminary Estimated Payments (PEPs). SURS begins paying PEPs on the 1st of the month on or following the effective date of retirement while benefits are being calculated and employment information is being verified with employers. Pursuant to Section (c) of the Illinois Pension Code, the rulemaking would permit PEPs to be suspended if an annuitant is unresponsive to informational requests necessary for the finalization of the benefit after 90 days of the request. 4. Amend Section Overpayment Recovery to address de minimis revisions to benefit calculations and deductions for overpayments of less than $100. This amendment would address small overpayments that are generated from revisions in benefits. These revisions may occur if an employer is delayed in submitting earnings or termination information, or if such data is revised by an employer. The rulemaking would create a de minimis rule that would allow staff to write off small overpayments balances of less than $ Promulgate rules to establish acceptable documentary evidence for demographic information such as birth dates and marital status. Currently, SURS accepts government-issued forms of identification and documentation to substantiate birth dates and marital status. The rulemaking under consideration would provide procedures in cases where SURS needs substantiation from members and beneficiaries living in foreign countries that may not have the same types of official documentation available in the U.S. Furthermore, the rulemaking may address topics such as identity verification and the substitute notarial requirements for members residing overseas. 6. Promulgate rules to provide specific definitions and procedures to implement 40 ILCS 5/ (concerning information requests necessary for the proper administration of the System and suspensions/penalties for non-compliance). In the event that a participant, beneficiary, or annuitant fails to respond to a request for information that is necessary for the calculation, payment, or finalization of any SURS benefit within 90 days of the request, Section (c) of the Illinois Pension Code permits SURS to "immediately cease processing the benefit and may not pay any additional benefit payment until the requested information is provided." The rulemaking would provide more specificity as to the situations in which an information request would trigger the suspension and any potential exemptions. Staff Recommendation: That the Legal & Legislative Committee approve the July 2018 Regulatory Agenda substantially in the form presented for publication in the Illinois Register.

6 Exhibit 1 ILLINOIS REGISTER STATE UNIVERSITIES RETIREMENT SYSTEM JULY 2018 REGULATORY AGENDA a) Part (Heading and Code Citation): Universities Retirement (80 Ill. Adm. Code 1600) 1) Rulemaking: A) Description: The System anticipates rulemaking affecting the following: Add Section Definition of Employee to implement Public Act , effective January 1, 2017, regarding the definition of "employee" under Section of the Illinois Pension Code. Amend Section Effective Beneficiary Designations to address electronic execution and submission of beneficiary designation forms. Amend Section Making Preliminary Estimated Payments to include procedures for holding payments when the member has not responded to informational requests, and to terminate the benefit after a period of non-compliance with the request. Amend Section Overpayment Recovery to address de minimis revisions to benefit calculations and deductions for overpayments of less than $100. Promulgate rules to establish acceptable documentary evidence for demographic information such as birth dates and marital status. Promulgate rules to provide specific definitions and procedures to implement 40 ILCS 5/ (concerning information requests necessary for the proper administration of the System and suspensions/penalties for non-compliance). B) Statutory Authority: Article 15 of the Illinois Pension Code, 40 ILCS 5/ C) Scheduled meeting/hearing dates: Written comments may be submitted during the 45-day public comment period following publication of the proposed rule in the Illinois Register. No public hearings are anticipated. D) Date agency anticipates First Notice: Spring through Fall 2018 E) Effect on small businesses, small municipalities or not for profit

7 Exhibit 1 ILLINOIS REGISTER STATE UNIVERSITIES RETIREMENT SYSTEM JULY 2018 REGULATORY AGENDA corporations: None F) Agency contact person for information: Bianca T. Green, General Counsel State Universities Retirement System 1901 Fox Drive Champaign, IL Telephone (217) bgreen@surs.org Fax: (217) G) Related rulemakings and other pertinent information: Other Amendments may be necessary based on emergent issues.

8 Exhibit 2 MEMORANDUM To: Legal & Legislative Committee From: Bianca T. Green, General Counsel Albert J. Lee, Associate General Counsel Date: June 4, 2018 Re: Rulemaking Status Update This memorandum provides an update as to the status of currently pending rulemaking efforts at SURS. 1. Rules Concerning Earnings, the 6% Rule, and the Governor's Salary Rule (42 Ill. Reg. 3715, Feb. 23, 2018) This proposed rulemaking makes amendments to Sections (concerning the definition of pensionable "earnings", (concerning the 6% Rule), and adds a new Section (concerning the Governor's Salary Rule) to Title 80 of the Illinois Administrative Code. The amendments seek to implement changes to the Illinois Pension Code brought by Public Act , effective January 1, 2017, by addressing how repurchased earnings credits that were lost due to a furlough or voluntary pay reduction agreement affect pensionable "earnings" and the calculation of employer contributions under the 6% Rule. They also implement the Governor's Salary Rule under Public Act , effective July 6, 2017, and seek to clarify statutory ambiguities pertaining to the measurement year and the way full-time equivalent earnings are calculated. JCAR considered the rulemaking in Second Notice at its May 15, 2018, meeting and issued a determination of "No Objection", which permits SURS to proceed with final adoption upon filing a notice of adoption with the Secretary of State. 2. Rules Concerning Earnings Limits under the 6% Rule and Governor's Salary Rule This proposed rulemaking adds a new Section to Title 80 of the Illinois Administrative Code that seeks to clarify that the "full-time equivalent earnings" used under the 6% Rule and the Governor's Salary Rule should not exceed any applicable earnings limits (i.e., the IRS 401(a)(17) compensation limit and/or the Tier 2 earnings limit). The Board approved the rulemaking for filing with JCAR at its April 19, 2018, meeting. 3. Recent Legislative Developments on the Governor's Salary Rule Among other things, the aforementioned rulemakings seek to address statutory difficulties with the Governor's Salary Rule as it was enacted under Public Act , including the ambiguity of the measurement year as well as administrative and policy issues surrounding the use of "full-time equivalent" earnings. In a parallel effort to address these issues, SURS submitted Board-approved language to the General Assembly in SB 2954 (Sen. Omar Aquino).

9 Legal & Legislative Committee Rulemaking Status Update June 4, 2018 Page 2 of 2 Exhibit 2 SB 2954 passed both houses of the General Assembly on May 30, 2018, and we expect it will be sent to the Governor for approval soon. Because SB 2954's enactment would cause the Governor's Salary Rule-related rulemakings to become either redundant or contrary to law, SURS staff has suspended the rulemakings until SB 2954's final disposition in the legislative process.

10 Exhibit 3 MEMORANDUM To: Legal & Legislative Committee From: Albert J. Lee, Associate General Counsel Date: April 18, updated Re: Legislative Proposals Concerning Change in Trustee Status Section (g) relates to the issue of what happens when the status of a SURS trustee changes during their term. This statute is ambiguous because it only refers to a change in status for an appointed trustee. After receiving an inquiry on the proper construction of Section (g), SURS sought guidance from the Office of the Attorney General, who issued an informal opinion dated November 9, The AG s office concluded that "section of the Illinois Pension Code is ambiguous and recommended that "SURS pursue legislation to clarify the General Assembly's intent with regard to whether active participant members should be permitted to continue to serve on the System's board of trustees after a mid-term change in status." Attached are two legislative proposals for consideration by the Board: Option 1 resolves the ambiguity in favor of disqualifying elected trustees who incur a change in status during their 6-year term Option 2 resolves the ambiguity in favor of permitting elected trustees to continue serving for the remainder of their 6-year terms despite incurring a change in status. Also provided are proposed administrative rules that could arguably be used to address the issue if approved by JCAR. However, staff is recommending a specific statutory change to fully address the issue moving forward.

11 Exhibit 3 OPTION 1 PROPOSED LEGISLATION DISQUALIFICATION OF ELECTED TRUSTEES UPON CHANGE IN STATUS (40 ILCS 5/15-159) (from Ch /2, par ) Sec Board created. (a) A board of trustees constituted as provided in this Section shall administer this System. The board shall be known as the Board of Trustees of the State Universities Retirement System. (b) (Blank). (c) (Blank). (d) Beginning on the 90th day after April 3, 2009 (the effective date of Public Act 96-6), the Board of Trustees shall be constituted as follows: (1) The Chairperson of the Board of Higher Education, who shall act as chairperson of this Board. (2) Four trustees appointed by the Governor with the advice and consent of the Senate who may not be members of the system or hold an elective State office and who shall serve for a term of 6 years, except that the terms of the initial appointees under this subsection (d) shall be as follows: 2 for a term of 3 years and 2 for a term of 6 years. (3) Four active participants of the system to be elected from the contributing membership of the system by the contributing members, no more than 2 of which may be from any of the University of Illinois campuses, who shall serve for a term of 6 years, except that the terms of the initial electees shall be as follows: 2 for a term of 3 years and 2 for a term of 6 years. (4) Two annuitants of the system who have been annuitants for at least one full year, to be elected from and by the annuitants of the system, no more than one of which may be from any of the University of Illinois campuses, who shall serve for a term of 6 years, except that the terms of the initial electees shall be as follows: one for a term of 3 years and one for a term of 6 years. For the purposes of this Section, the Governor may make a nomination and the Senate may confirm the nominee in advance of the commencement of the nominee's term of office. (e) The 6 elected trustees shall be elected within 90 days after April 3, 2009 (the effective date of Public Act 96-6) for a term beginning on the 90th day after that effective date. Trustees shall be elected thereafter as terms expire for a 6-year term beginning July 15 next following their election, and such election shall be held on May 1, or on May 2 when May 1 falls on a Sunday. The board may establish rules for the election of trustees to implement the provisions of Public Act 96-6 and for future elections. Candidates for the participating trustee shall be nominated by petitions in writing, signed by not less than 400 participants with their addresses shown opposite their names. Candidates for the annuitant trustee shall be nominated by petitions in writing, signed by not less than 100 annuitants with their addresses shown opposite their names. If there is more than one qualified nominee for each elected trustee, then the board shall conduct a secret ballot election by mail for that trustee, in accordance with rules as established by the board. If there is only one qualified person nominated by petition for each elected trustee, then the election as required by

12 this Section shall not be conducted for that trustee and the board shall declare such nominee duly elected. A vacancy occurring in the elective membership of the board shall be filled for the unexpired term by the elected trustees serving on the board for the remainder of the term. Nothing in this subsection shall preclude the adoption of rules providing for internet or phone balloting in addition, or as an alternative, to election by mail. (f) A vacancy in the appointed membership on the board of trustees caused by resignation, death, expiration of term of office, or other reason shall be filled by a qualified person appointed by the Governor for the remainder of the unexpired term. (g) Trustees (other than the trustees incumbent on June 30, 1995 or as provided in subsection (c) of this Section) shall continue in office until their respective successors are appointed and have qualified, except that a trustee appointed elected to one of the participant positions shall be disqualified immediately upon the termination of his or her status as a participant and a trustee appointed elected to one of the annuitant positions shall be disqualified immediately upon the termination of his or her status as an annuitant receiving a retirement annuity. (h) Each trustee must take an oath of office before a notary public of this State and shall qualify as a trustee upon the presentation to the board of a certified copy of the oath. The oath must state that the person will diligently and honestly administer the affairs of the retirement system, and will not knowingly violate or willfully permit to be violated any provisions of this Article. Each trustee shall serve without compensation but shall be reimbursed for expenses necessarily incurred in attending board meetings and carrying out his or her duties as a trustee or officer of the system. (Source: P.A , eff ) Exhibit 3

13 Exhibit 3 OPTION 2 PROPOSED LEGISLATION CONTINUATION OF ELECTED TRUSTEES DESPITE CHANGE IN STATUS (40 ILCS 5/15-159) (from Ch /2, par ) Sec Board created. (a) A board of trustees constituted as provided in this Section shall administer this System. The board shall be known as the Board of Trustees of the State Universities Retirement System. (b) (Blank). (c) (Blank). (d) Beginning on the 90th day after April 3, 2009 (the effective date of Public Act 96-6), the Board of Trustees shall be constituted as follows: (1) The Chairperson of the Board of Higher Education, who shall act as chairperson of this Board. (2) Four trustees appointed by the Governor with the advice and consent of the Senate who may not be members of the system or hold an elective State office and who shall serve for a term of 6 years, except that the terms of the initial appointees under this subsection (d) shall be as follows: 2 for a term of 3 years and 2 for a term of 6 years. (3) Four active participants of the system to be elected from the contributing membership of the system by the contributing members, no more than 2 of which may be from any of the University of Illinois campuses, who shall serve for a term of 6 years, except that the terms of the initial electees shall be as follows: 2 for a term of 3 years and 2 for a term of 6 years. (4) Two annuitants of the system who have been annuitants for at least one full year, to be elected from and by the annuitants of the system, no more than one of which may be from any of the University of Illinois campuses, who shall serve for a term of 6 years, except that the terms of the initial electees shall be as follows: one for a term of 3 years and one for a term of 6 years. For the purposes of this Section, the Governor may make a nomination and the Senate may confirm the nominee in advance of the commencement of the nominee's term of office. (e) The 6 elected trustees shall be elected within 90 days after April 3, 2009 (the effective date of Public Act 96-6) for a term beginning on the 90th day after that effective date. Trustees shall be elected thereafter as terms expire for a 6-year term beginning July 15 next following their election, and such election shall be held on May 1, or on May 2 when May 1 falls on a Sunday. The board may establish rules for the election of trustees to implement the provisions of Public Act 96-6 and for future elections. Candidates for the participating trustee shall be nominated by petitions in writing, signed by not less than 400 participants with their addresses shown opposite their names. Candidates for the annuitant trustee shall be nominated by petitions in writing, signed by not less than 100 annuitants with their addresses shown opposite their names. If there is more than one qualified nominee for each elected trustee, then the board shall conduct a secret ballot election by mail for that trustee, in accordance with rules as established by the board. If there is only one qualified person nominated by petition for each elected trustee, then the election as required by

14 this Section shall not be conducted for that trustee and the board shall declare such nominee duly elected. A vacancy occurring in the elective membership of the board shall be filled for the unexpired term by the elected trustees serving on the board for the remainder of the term. Nothing in this subsection shall preclude the adoption of rules providing for internet or phone balloting in addition, or as an alternative, to election by mail. (f) A vacancy in the appointed membership on the board of trustees caused by resignation, death, expiration of term of office, or other reason shall be filled by a qualified person appointed by the Governor for the remainder of the unexpired term. (g) Trustees (other than the trustees incumbent on June 30, 1995 or as provided in subsection (c) of this Section) shall continue in office until their respective successors are appointed or elected and have qualified to serve as trustees,. except that a A qualifying trustee who has been appointed elected to one of the participant positions shall be disqualified immediately upon the termination of his or her status as a participant and a trustee appointed or to one of the annuitant positions shall not be disqualified immediately upon the termination of his or her status as an active participant or an annuitant receiving a retirement annuity and may continue to serve on the board for the remainder of the term to which he or she was elected. (h) Each trustee must take an oath of office before a notary public of this State and shall qualify as a trustee upon the presentation to the board of a certified copy of the oath. The oath must state that the person will diligently and honestly administer the affairs of the retirement system, and will not knowingly violate or willfully permit to be violated any provisions of this Article. Each trustee shall serve without compensation but shall be reimbursed for expenses necessarily incurred in attending board meetings and carrying out his or her duties as a trustee or officer of the system. (Source: P.A , eff ) Exhibit 3

15 Exhibit 3 OPTION 3 PROPOSED LEGISLATION DISQUALIFICATION OF ELECTED TRUSTEES UPON CHANGE IN STATUS (New) Section XX Disqualification of Elected Trustees Section (g) of the Code provides that a trustee appointed to one of the participant positions shall be disqualified immediately upon the termination of his or her status as a participant and a trustee appointed to one of the annuitant positions shall be disqualified immediately upon the termination of his or her status as an annuitant receiving a retirement annuity. [40 ILCS 5/15-159(g)]. The foregoing clause under Section (g) of the Code shall apply to trustees who have been elected to Board membership under paragraphs (3) and (4) of Section (d) of the Code, and who shall immediately vacate his or her position upon such disqualification. The remaining elected trustees shall fill the vacancy for the unexpired term pursuant to Section (e) of the Code and Section OPTION 4 PROPOSED RULEMAKING CONTINUATION OF ELECTED TRUSTEES DESPITE CHANGE IN STATUS (New) Section XX Continuation of Elected Trustees Despite Change in Status Section (g) of the Code provides that a trustee appointed to one of the participant positions shall be disqualified immediately upon the termination of his or her status as a participant and a trustee appointed to one of the annuitant positions shall be disqualified immediately upon the termination of his or her status as an annuitant receiving a retirement annuity. [40 ILCS 5/15-159(g)]. The foregoing clause under Section (g) of the Code shall not apply to trustees who have been elected to Board membership under paragraphs (3) and (4) of Section (d) of the Code. Any elected trustee whose status changes during their six-year term shall be allowed to complete said term.

16 Exhibit 4 MAY COMPLIANCE REPORT (2018) Complete/Next due > 30 days Due < 30 days Past Due/Missed Report Owner: Compliance Officer * indicates new requirement/change in requirement EOQ= End of Quarter EOM=End of Month Department Report Filed With Frequency Statute/Rule Last Filed Next Due Status Notes Administration Travel Exception Report IHETCB Quarterly 80 IL /4/2018 7/31/2018 Administration Drivers License & Insurance Certification U of I Annual 625 ILCS 5/7-203 & JCAR 44 Sec /10/2017 6/30/2018 Administration Certification of Board Training Requirement DFPR-Public Pension/Insurance Div Annual 40 ILCS 5/1/ /30/2017 6/30/2018 Administration Notice of Regularly Scheduled Board Meetings SURS Lobby and SURS website Annual 5 ILCS Dec-18 Dec-19 Administration Oath of Office Internal Ad Hoc 40 ILCS 5/15-159(h) As needed As needed Administration Disclosure of Appointee Interest in State Contracts SOS Ad Hoc 5 ILCS 420/3A.30 As needed As needed Administration Trustee Indemnification Agreements Internal & Fiduciary Council Ad Hoc 40 ILCS 5/1-107 & Board Governance Bylaws 1.1 As needed As needed Administration IPad User Agreements Internal Ad Hoc Internal Requirement As needed As needed Audit Deceased Annuitant Reporting Internal Quarterly 30 ILCS 805/8.40 2/23/2018 6/30/2018 Audit Fiscal Year Audit Completion Report Internal - Filed with the Executive Directo Annual Fiscal Control & Auditing Act 9/1/2017 9/30/2018 Audit FCIAA Internal Control Certification Auditor General Annual FCIAA 4/24/2018 5/1/2019 Audit Two Year Audit Plan Internal/ ED approval/a & R Committee Annual 30 ILCS 10/2003 6/30/2017 6/30/2018 Audit Submission of System Audit (due after FY end) Governor - submitted by SURS and by th Annual State Auditing Act and 30 ILCS FY17-1/19/2018 FY18 5/3-14 and 40 ILCS 5/ Finance CAFR Internal Annual 40 ILCS 5/ /17/ /31/2018 Finance PA / Financial Comptroller Annual (by 10/15) GAAP Reporting Standards Board Act 9/29/2017 9/30/2018 Finance Public Accountability Report Comptroller Annual (by 10/15) SAMS 10/13/ /15/2018 Finance IRS Form 941-Employer Fed Tax Return Form IRS Quarterly IRS CODE 4/11/2018 7/31/2018 Finance IRS Form 945 Annual Return of Witheld Federal Tax IRS Annual IRS Code 1/30/2018 1/30/2019 Finance Cash Receipts and Disbursement Reports Comptroller Quarterly SAMS 4/30/2018 7/31/2018 Finance Agency Fixed Asset Report Comptroller Quarterly SAMS 4/11/2018 7/31/2018 Finance Accounts Receivable Comptroller Quarterly SAMS 4/20/2018 7/31/2018 Finance Report on SMP Participation Rate COGFA Annual 40 ILCS 5/15 10/21/ /1/2018 Finance Cert. of State Contribution and CIP Governor, CMS, and Comptroller Annual (final by 1/15) 40 ILCS 5/14A 1/3/2018 1/15/2019 Finance Department of Insurance Report Pension Division of Illinois Dept. of Ins. Annual 40 ILCS 5/1A /7/ /31/2018 Finance IRS Form 1099R (FIRE) IRS Annual IRS CODE 2/28/2018 2/28/2019 Finance IRS 1042: Withholding US income of Foreign Persons IRS Annual IRS CODE 2/17/2018 3/15/2019 Finance Report on Voluntary Deductions Comptroller Annual (by 3/31) 5 ILCS 340/8 1/10/2018 3/31/2019 Finance Comptroller Agency Invoice Comptroller Annual PA /21/ /1/2018 Finance Fee Imposition Report Comptroller Annual by 9/1 15 ILCS 405/16.2 7/29/2017 7/31/2018 Finance 5 year review of 90% funding target COGFA 5 years 40 ICLS /31/ /31/2020 Finance Certification of Overpayments Internal and Board of Trustees Determined Internally 80 Ill Adm. Code Sec As needed As needed Finance IRS W-3 IRS Annual IRS Code 1/26/2018 1/31/2019 Finance Information to COGFA COGFA Ad Hoc/At will 40 ILCS 5/ As needed As needed Finance Debt Transparency Report Comptroller Monthly (due on the 10th) 30 ILCS 105/9.08 5/1/2018 6/10/2018 Finance/Mem Serv Fin. Stmts to Participants/ Serv. Cred Stmts Annuitants As requested 40 ILCS 5/ Ongoing ongoing Finance/Mem Serv Reports to Reciprocals Recip Systems As requested 40 ILCS 5/ Ongoing ongoing Human Resources Separation Report State Universities Civil Service System Monthly (w/n 10 days EOM) Civil Service Rule /14/2018 6/10/2018 Human Resources Monthly Wage Report IDES taxnet Online Monthly (EXCEPT 1/4/7/10) IDES PA /29/2018 6/30/2018 Human Resources Quarterly (1/31, 4/30, IDES taxnet Online IDES PA Form UI-3/40 7/31/10/31 4/17/2018 7/31/2018 Human Resources Report of Employee Served State Universities Civil Service System Quarterly (w/n 10 days EOQ) Civil Service Rule /4/2018 7/10/2018 Human Resources Exempt Employees Report State Universities Civil Service System Quarterly 110 ILCS 70/36 4/4/2018 7/10/2018 Human Resources Occupational Ethnic and Gender Report State Universities Civil Service System Quarterly (w/n 10 days EOQ) Civil Service Rule /4/2018 7/10/2018 Human Resources Agency Workforce Report Secretary of State; Office of Governor Annual 5 ILCS 410/20 12/26/ /31/2018 Human Resources TA-2 Legislative Audit Commission Bi-Annually St. Fin. Act 30 ILCS 105/12-3 1/12/2018 7/15/2018 Human Resources I-9 Eligibility Internal In File Ad Hoc w/n 20 days of hire Dept. Homeland Security Time of Hire As needed Human Resources SSA 1945 Internal In File Ad Hoc w/n 20 days of hire SSA Time of Hire As needed Investments Investment Update Report Online Surs.org 75 days after month end Internal procedure - monthly Feb filed 5/14/18 March due 6/30/18 Investments Investments Information Report - Monthly Online Surs.org Monthly (by the 15th) 30 ILCS 237/10 PA /14/2018 6/15/2018 Investments Report to Gov. on MWDB Firms/HR/Vendors Governor Annual 40 ILCS 5/ /1/2017 1/1/2019 Investments Consultant Report on MWDB searches SURS Board of Trustees Annual 40 ILCS 5/ Both - 11/20/17 1/1/2019 Investments Consultant Report on Economic Opportunities SURS Board of Trustees Annual 40 ILCS 5/ Both - 11/20/17 1/1/2019 Investments Quinquennial Rep. US Owned Foreign Securities** Federal Reserve Bank 5 years 22 USC Sec Not required for 2017 *required threshold for reporting not met for 2017 Investments Restricted Companies Divestiture Reporting* Illinois Investment Policy Board Annual 40 ILCS 5/ /1/2018 4/1/2019 Investments Illinois Finance Entity/High Risk Home Loan Act Cert. DFPR-Public Pension/Insurance Div Annual 40 ILCS 5/ ; PA /19/2017 7/31/2018 Investments Invest in Illinois Governor Annual PA /24/2017 9/1/2018 Investments Annual SEC ADV's from Financial managers SEC Annual-120 days from FY endus Investment Advisors Act of 194 4/1/2018* 4/30/2019* *not all managers are required to file by 4/1 Investments Investment Manager Fee Disclosure SURS.org website Quarterly 40 ILCS 5/ Dec. filed 3/26/2018 March due 6/30/2018 Investments Written Investment Policies Illinois Department of Insurance Ad Hoc 40 ILCS 5/ As needed As needed Investments IS Policy Exemptions, Forms and Contract Summaries Illinois Procurement Policy Board Ad Hoc 40 ILCS 5/ As needed As needed Investments Required disclosure for Consultants - MWDB Internal - Report to Compliance Annual 40 ILCS 5/ /4/2017 1/1/2019 Investments Qualified FOF Mgmt. Services Contract Summaries SURS.org website Ongoing 40 ILCS 5/ As needed As needed Investments Annual Certification of Fiduciary Duty and Insurance Internal on file Annual contract provision 9/6/2017 9/1/2018 Investments Ethics Training for Registered Lobbyists Secretary of State Annual 25 ILCS Complete 2018 Legal & Ethics Lobbying Expenditure Report (20th) Secretary of State Monthly 25 ILCS 170/6 5/16/2018 6/20/2018 1

17 Exhibit 4 MAY COMPLIANCE REPORT (2018) Legal & Ethics Lobbying Expenditure Report (5th) Secretary of State Monthly 25 ILCS 170/6 5/1/2018 6/1/2018 Legal & Ethics Statement of Economic Interests (Board and Execs) Secretary of State Annual 5 ILCS 420/4A-101 5/1/2018 5/1/2019 Legal & Ethics Annual Ethics Training for Trustees Internal-Cert of Completion to EO Annual 5 ILCS 430/5-10 6/30/2017 6/30/2018 Legal & Ethics Ethics Training Plan/Ethics Training State Employees- Office of the Inspector General Annual 5 ILCS 430/5-10 Part 1- staff only online 4/17/2017 6/30/2018 Legal & Ethics ARDC Registration ARDC Annual 128 Ill.2d 351, 538 NE 2d /31/2017 7/31/2018 Legal & Ethics FOIA Officer Training & Annual Certification IAG Annual 5 ILCS 140/3.5 Dec-17 12/31/2018 Legal & Ethics Ethics Officer Designation Notice IL Executive Ethics Commission As Needed/Ad Hoc 2 IL As needed as needed Legal & Ethics Revolving Door Policy Sign off Executive Inspector General As Needed/Ad Hoc 5 ILCS 430/ Time of Hire As needed Legal & Ethics Ex Parte Communications Reports Executive Ethics Commission As Needed/Ad Hoc 5 ILCS 430/5-50 9/13/2017 As needed Legal & Ethics OMA Trustee Training IAG One Time 5 ILCS 120/1.05 current various dates As needed Legal & Ethics QILDRO Forms Electronically Available SURS.org website Ongoing requirement 40 ILCS 5/1-119 current as updated Legal & Ethics OMA Officer Training IAG Annual 5 ILCS 120/1.05 MPB 12/27/ /31/2018 Legal & Ethics Annual Completed Ethics Training and Reporting- OEIG Annual 5 ILCS 430/5-10 Staff and Board -online & paper format 1/24/ /31/2018 Legal & Ethics Ethics Orientation for State of Illinois Employees-Paper OEIG W/n 30 days of hire 5 ILCS 430/5-10 As needed As needed Legal & Ethics Cybersecurity Training for Staff and Trustees Dept. of Innovation and Technology Annual 20 ILCS 450/25 NEW Due by 6/30/18 Legal & Ethics Sexual Harassment Training for Staff and Trustees OEIG Annual 5 ILCS 450/ NEW Calendar Year 2018 Legal & Ethics 2

18 Exhibit 5 Spring Session 2018 FY 2019 Budget House Bill 109 Fiscal Year 2019 Budget Sponsors Representative Gregory Harris and Senator John J. Cullerton HB 109 appropriates $1,585,109,800 for the annual required State contribution to SURS for Fiscal Year Of this amount, $1,370,109,800 is appropriated from the General Revenue Fund, and $215,000,000 is appropriated from the State Pensions Fund. The certified Fiscal Year 2019 State contribution to SURS is $1,655,154,000. HB 109 also appropriates $4,390,811 from the Education Assistance Fund for the State contribution to the College Insurance Program ( CIP ) for Fiscal Year The certified Fiscal Year 2019 State contribution to CIP is $4,390,811. As it relates to SURS, HB 109 is identical to HA #1 to HB 860 of the 100 th General Assembly. HB 109 takes effect on July 1, Status: Governor Rauner signed into law as Public Act on June 4, 2018 (House: ; Senate: ). House Bill 3342 FY 2019 Budget Implementation Sponsors Representative Gregory Harris and Senator Heather A. Steans HB 3342 creates the FY2019 Budget Implementation Act. It authorizes the use of money in the State Pensions Fund as part of the annual required State contribution to SURS for FY It also amends the State Employees Retirement System, State Universities Retirement System, and Teachers Retirement System articles of the Illinois Pension Code to provide two types of accelerated pension benefit payment options under each System: (1) an accelerated pension benefit payment in lieu of a pension benefit for vested inactives and (2) an accelerated pension benefit payment for Tier 1 members who accept a reduced and delayed automatic annual increase in retirement annuities and survivors annuities. The SURS Board of Trustees must establish an implementation date for each accelerated pension benefit payment option by Board resolution. The Board must endeavor to make the options available as soon as possible after the effective date of the legislation. The

19 Exhibit 5 SURS Board of Trustees must adopt any rules, including emergency rules, necessary to implement the accelerated pension benefit payments. Accelerated Pension Benefit Payment In Lieu Of Pension Benefit for Vested Inactives Beginning on the implementation date established by the SURS Board of Trustees, SURS must offer each eligible person the opportunity to irrevocably elect to receive an amount determined by SURS to be equal to 60% of the present value of his or her pension benefits in lieu of receiving any pension benefit from SURS. The term pension benefit means the benefits under SURS, or the General Provisions Article of the Illinois Pension Code as it relates to the benefits under SURS, including any anticipated annual increases, that an eligible person is entitled to upon attainment of the applicable retirement age. It also includes any applicable survivors benefits, disability benefits, or disability retirement annuity benefits. SURS must calculate, using actuarial tables and other assumptions adopted by the SURS Board of Trustees, the present value of pension benefits for each eligible person upon his or her request in writing to the System. SURS cannot perform more than one calculation per eligible member in a State fiscal year. The offer must specify the dollar amount that the eligible person will receive if he or she so elects and must expire when a subsequent offer is made to the eligible person. SURS must make a good faith effort to contact every eligible person to notify him or her of the election and the amount of the accelerated pension benefit payment. To be eligible for the accelerated pension benefit payment, the person must: (1) have terminated service; (2) have accrued sufficient service credit necessary for retirement (i.e., 5 years for Tier 1 members and 10 years for Tier 2 members); (3) have not received a retirement annuity under SURS; (4) have not made the election as a Tier 1 member to accept a reduced automatic annual increase in retirement in exchange for an accelerated pension benefit payment; and (5) not be a participant in the Self-Managed Plan. The accelerated pension benefit payment must be deposited into a tax qualified retirement plan or account identified by the eligible person at the time of the election. An eligible person may irrevocably elect to receive an accelerated pension benefit payment in lieu of any pension benefit from SURS between the implementation date established by the SURS Board of Trustees and June 30, A person who elects to receive an accelerated pension benefit payment cannot elect to proceed under the Retirement Systems Reciprocal Act with respect to service under SURS. Upon payment of an accelerated pension benefit payment from SURS, the person forfeits all accrued rights and credits in SURS and no other benefit can be paid from SURS based on those forfeited rights and credits. However, an eligible person who receives an accelerated pension benefit payment will still be eligible for any applicable retiree health insurance benefits.

20 Exhibit 5 If a person who has received an accelerated pension benefit payment from SURS returns to participation under SURS, any benefits under SURS earned as a result of that return to participation must be based solely on his or her credits and creditable service arising from the return to participation. Upon return to participation, the person must be considered a new employee subject to all of the qualifying conditions for participation and eligibility for benefits applicable to new employees. The accelerated pension benefit payment cannot be repaid to SURS, and the forfeited rights and credits cannot under any circumstances be reinstated. Accelerated Pension Benefit Payment for Tier 1 Members Who Accept Reduced and Delayed Automatic Annual Increases in Retirement Annuities and Survivor Annuities Beginning on the implementation date established by the SURS Board of Trustees and until June 30, 2021, SURS must implement an accelerated pension benefit payment option. SURS must calculate, using actuarial tables and other assumptions adopted by the Board, an accelerated pension benefit payment amount for an eligible person upon his or her request in writing to SURS and must offer that eligible person the opportunity to irrevocably elect to have his or her automatic annual increases in retirement annuity, as well as in any survivor annuity, reduced and delayed in exchange for the accelerated pension benefit payment. SURS cannot perform more than one calculation per eligible person in a State fiscal year. The election must be made before any retirement annuity is paid to the eligible person, and the eligible survivor, spouse, or contingent annuitant, as applicable, must consent to the election. The accelerated pension benefit payment is a lump-sum payment equal to 70% of the difference of: (1) the present value of the Tier 1 automatic annual increases in the retirement annuity and survivor annuity; and (2) the present value of the reduced and delayed automatic annual increases in the retirement annuity and survivor annuity. The reduced and delayed automatic annual increase in retirement annuity is calculated at 1.5% of the originally granted retirement annuity and begins on the January 1 occurring on the later of age 67 or the first anniversary of the annuity start date. (Currently, a Tier 1 retiree receives a compounding automatic annual increase in his or her retirement annuity equal to 3% of the annuity, beginning on the January 1 occurring after retirement, prorated for the first year.) The reduced and delayed automatic annual increase in survivor annuity is calculated at 1.5% of the survivor s original annuity benefit payable and begins on the January 1 occurring on or after the date the annuity begins or the January 1 occurring after the first anniversary of the annuity benefit start date. (Currently, a survivor of a Tier 1 retiree receives a compounding automatic annual increase in his or her annuity benefit equal to 3% of his or her annuity benefit, beginning on the January 1 occurring on or after the date the annuity benefit begins.)

21 Exhibit 5 To be eligible for the accelerated pension benefit, the person must: (1) be a Tier 1 member; (2) have submitted an application for a retirement annuity from SURS; (3) meet the age and service credit requirements necessary for retirement under SURS (i.e., be any age with 30 years of service credit, age 55 with 8 years of service credit, age 62 with 5 years of service credit, or the special vesting for the Police/Fire formula); (4) have not received a retirement annuity under SURS; (5) have not made the election to receive an accelerated pension benefit payment in lieu of any pension benefit from SURS; and (6) not be a participant in the Self-Managed Plan. The accelerated pension benefit payment must be deposited into a tax qualified retirement plan or account identified by the eligible person at the time of election. An eligible person may make the election to receive an accelerated pension benefit payment in exchange for a reduced and delayed automatic annual increase in retirement annuity and survivor annuity from SURS between the implementation date established by the SURS Board of Trustees and June 30, If an annuitant who has received an accelerated pension benefit payment from SURS returns to participation under SURS then the calculation of any future automatic annual increase in retirement annuity must be calculated at the reduced and delayed rate. The accelerated pension benefit payment cannot be repaid to SURS. Funding and Payment of Accelerated Pension Benefit Payments HB 3342 amends the General Obligation Bond Act to authorize the issuance of $1 billion in State Pension Obligation Acceleration Bonds for the purpose of making accelerated pension benefit payments under SERS, SURS, and TRS. The proceeds of the bonds, minus the amounts for bond sale expenses, must be deposited directly into the State Pension Obligation Acceleration Bond Fund, and the Comptroller and Treasurer must, as soon as practical, make accelerated pension benefit payments under SERS, SURS, and TRS. The State Pension Obligation Acceleration Bond Fund is created as an unappropriated fund outside of the State Treasury that can only be used for the purpose of making accelerated pension benefit payments under SERS, SURS, and TRS, or for the payment of principal and interest due on State Pension Obligation Acceleration Bonds. There is a continuing appropriation of all amounts necessary for these purposes. SURS must submit vouchers to the State Comptroller for payment of accelerated pension benefit payments. The State Comptroller shall pay the amounts of the vouchers from the State Pension Obligation Acceleration Bond Fund to SURS, and SURS must deposit the amounts into the applicable tax qualified plans or accounts. HB 3342 amends the State Pension Funds Continuing Appropriation Act to provide that, if for any reason the aggregate appropriations made available are insufficient to meet the levels required for the payment of principal and interest due on State Pension Obligation