APPROVAL OF MINUTES. Chairman Tom Cross presented the minutes from the Legal & Legislative Committee meetings of June 7, 2018.

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1 MINUTES Meeting of the Legal & Legislative Committee of the Board of Trustees of the State Universities Retirement System Thursday, September 13, 2018, 4:15 p.m. State Universities Retirement System Main Conference Room 1901 Fox Dr., Champaign, IL The following trustees were present: Mr. Tom Cross, Chair; Mr. Aaron Ammons, Mr. Mark Cozzi, Mr. Dennis Cullen, Dr. John Engstrom, Dr. Fred Giertz, Mr. Craig McCrohon, Dr. Steven Rock, Ms. Lisa Schumacher and Mr. Collin Van Meter. Others present: Mr. Martin Noven, Executive Director; Mr. Doug Wesley, Chief Investment Officer; Ms. Bianca Green, General Counsel; Ms. Tara Myers, Chief Financial Officer; Ms. Suzanne Mayer, Chief Benefits Officer; Mr. Albert Lee, Associate General Counsel; Ms. Emily Vock, Associate General Counsel; 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 Cross, present; Trustee Cozzi, present; Trustee Giertz, present; and Trustee Rock, present. APPROVAL OF MINUTES Chairman Tom Cross presented the minutes from the Legal & Legislative Committee meetings of June 7, Trustee Steven Rock made the following motion: That the minutes from the June 7, 2018 Legal & Legislative Committee meeting be approved as presented. Trustee Fred Giertz seconded and the motion carried with all trustees present voting in favor. APPROVAL OF CLOSED SESSION MINUTES Chairman Cross presented the closed session minutes from the Legal & Legislative Committee meetings of June 7, Trustee Rock made the following motion: That the closed session minutes from the June 7, 2018 Legal & Legislative Committee be approved and be opened. Trustee Aaron Ammons seconded and the motion carried with all trustees present voting in favor.

2 CHAIRPERSON S REPORT Trustee Cross did not have a formal chairperson s report. LEGISLATIVE UPDATE Legislative Liaison Ms. Kristen Houch and Mr. Steve Zahn of Zahn Governmental Solutions provided the legislative update. Ms. Houch summarized bills recently signed into law and bills introduced in the General Assembly since June 1, Ms. Houch stated that the Senate Special State and Pension Fund Investments will hold hearings on October 16 and 17, 2018, in Chicago and the General Assembly will return to Springfield for veto session on November and November 27-29, A copy of the reports titled September 2018 Bill Summaries and September 2018 Legislative Update are incorporated as part of these minutes as Exhibit 1 and Exhibit 2. IRS ISSUE REGARDING BUYOUTS Mr. Albert Lee provided a summary of a situation identified by the Legal Department regarding Tier I AAI Buyout Election and SURS processing of Preliminary Estimated Payments (PEP). Mr. Lee explained why SURS provides PEP payments to members while their retirement claims are in the process of being finalized. It was advised by outside tax counsel that the payment of PEPs before a SURS retiree makes an irrevocable election to take a Tier I AAI Buyout could be viewed by the Internal Revenue Service as a violation of the non-increasing annuity rule under the Required Minimum Distribution regulation for Section 401(a)(9) of the Internal Revenue Code. Mr. Lee explained several options for the board s consideration. After further discussion it was determined that SURS would submit a Private Letter Ruling request to the IRS for direction on this issue. Trustee Fred Giertz moved: That staff is directed to address the issue of paying Preliminary Estimated Payments prior to a retiree making a final election to receive a Tier I AAI Buyout by seeking a Private Letter Ruling from the Internal Revenue Service. Trustee Rock seconded and the motion carried with the majority of trustees present voting in favor; Trustee Cozzi abstained. A copy of the staff memo titled Tier I AAI Buyout Election and PEP Issue is incorporated as part of these minutes as Exhibit 3. Status of Pending Rules RULEMAKING AND COMPLIANCE UPDATES Mr. Lee updated the group on the status of rulemaking approved by the board that has been filed with JCAR. Mr. Lee stated that Public Act made significant changes to the Governor s Salary Rule and due to these changes, SURS staff contacted JCAR to ask that the Governor s

3 Salary Rule language in Section be removed from Second Notice publication so that the remaining rulemaking sections could be adopted without having to withdraw the rulemaking in its entirety. JCAR is expected to consider the question of whether SURS can resubmit the Second Notice rulemaking without including Section at its next meeting on September 18, A copy of the staff memo titled Rulemaking Update is incorporated as part of these minutes as Exhibit 4. Compliance Stop Light Report Ms. Green discussed the updated compliance stop light report which shows that SURS is in compliance with its reporting requirements. A copy of the report titled Compliance Stop Light Report is incorporated as part of these minutes as Exhibit 5. Proposed Legislative Change Regarding Trustee Status Change Ms. Bianca Green presented a legislative proposal concerning a change in elected trustee status. Ms. Green reminded trustees that at the June 2018 Legal & Legislative Committee meeting, staff was directed to draft proposed legislation to apply to trustees elected after July 15, 2018 that will clarify that an employee-elected or annuitant-elected member of the board of trustees would be disqualified from serving as an elected trustee upon the termination of his or her respective status as a participating employee or an annuitant. After further discussion, staff was directed to present a revised proposal during the next Legal & Legislative Committee meeting. A copy of the report titled Trustee Status Change is incorporated as part of these minutes as Exhibit 6. PUBLIC COMMENT There were no public comments presented to the Legal & Legislative Committee. There was no further business before the committee and Trustee Cozzi moved that the meeting be adjourned. The motion was seconded by Trustee Giertz and carried with all trustees present voting in favor. Respectfully submitted, MMN:kc Mr. Martin Noven Secretary, Board of Trustees

4 Exhibit 1 Spring Session 2018 Public Acts House Bill 4412 Retirement System Senior Administrative Staff Composition Sponsors Representative Carol Ammons and Senator Elgie R. Sims, Jr. HB 4412 amends the General Provisions article of the Illinois Pension Code. It requires each retirement system, pension fund, and investment board to make its best efforts to ensure that the racial and ethnic makeup of its senior administrative staff represents the racial and ethnic makeup of its membership. HB 4412 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on August 17, 2018 as Public Act ; Passed Both Houses on May 31, 2018 (House: ; Senate: ). House Bill 4684 SURS Comptroller Intercept Sponsors Representative Robert Martwick and Senator Omar Aquino HB 4684 amends the State Universities Retirement System s article of the Illinois Pension Code. It enhances SURS ability to obtain delinquent employer payments that are owed under the law by intercepting them through the State Comptroller and/or the county treasurer for the county in which the employer is located. Under current law, SURS has the ability to obtain delinquent employer payments through the State Comptroller under the return to work law for affected annuitants (Section ) and under legal requirements that employers provide information necessary for the administration of the System and employer audits (Sections and ). HB 4684 permits SURS to obtain delinquent employer payments under these laws from the county treasurer of the county in which the employer is located. HB 4684 also permits SURS to obtain delinquent employer payments through the State Comptroller and/or the county treasurer for amounts owed under other employer contribution laws, such as those pertaining to the 6% Rule (Section (g)), the Governor s Salary Rule (Section (j-5)), employer normal cost contributions from certain employers (Section (b)), employee contributions that are picked-up by the employer (Sections and ), and employer contributions under the Self-Managed Plan (Section ).

5 Exhibit 1 HB 4684 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on August 20, 2018 as Public Act ; Passed Both Houses on May 23, 2018 (House: ; Senate: ). House Bill 5019 Withholdings for Tuition Programs and ABLE Accounts Sponsors Representative Natalie A. Manley and Senator Melinda Bush HB 5019 amends the State Salary and Annuity Withholding Act. It allows an employee or annuitant to authorize the withholding of a portion of his or her salary, wages, or annuity for investment purchases made as a participant or contributor to qualified tuition programs established pursuant to Section 529 of the Internal Revenue Code or qualified ABLE programs established pursuant to Section 529A of the Internal Revenue Code. (Under current law, an employee or annuitant may authorize the withholding of a portion of his or her salary, wages, or annuity for investment purchases made as a participant in College Savings Programs established pursuant to Section a of the School Code.) HB 5019 also makes other changes. HB 5019 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on August 10, 2018 as Public Act ; Passed Both Houses on May 24, 2018 (House: ; Senate: ). House Bill 5137 SURS and TRS Supplemental Defined Contribution Plans Sponsors Representative Robert Martwick and Senator Dan McConchie HB 5137 amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code. HB 5137 requires SURS to offer a defined contribution benefit to active members of the System, as soon as practicable after the effective date of the legislation. The defined contribution benefit must be an optional benefit to any member who chooses to participate. The defined contribution benefit must collect optional employee and optional employer contributions into an account and offer investment options to the participant. The benefit must be operated in full compliance with any applicable State and federal laws, and SURS must utilize generally accepted practices in creating and maintaining the benefit for the best interest of the participants. SURS may use funds from the employee and employer contributions to defray any and all costs of creating and maintaining the benefit. SURS must produce an annual report on the participation in the benefit and must make the report public. HB 5137 takes effect immediately upon becoming law.

6 Exhibit 1 Status: Governor Rauner signed into law on August 10, 2018 as Public Act ; Passed Both Houses on May 24, 2018 (House: ; Senate: ). House Bill 5447 First 2018 General Revisory Sponsors Representative Barbara Flynn Currie and Senator William R. Haine HB 5447 creates the First 2018 General Revisory Act. As it relates to SURS, HB 5447 amends the General Provisions article of the Illinois Pension Code related to disclosures from investment consultants. It changes references from "minority owned" to "minorityowned" and "female owned" to "women-owned." It also changes a reference from "female" to "woman." Finally, it changes a reference from the "Business Enterprise for Minorities, Females, and Persons with Disabilities Act" to the "Business Enterprise for Minorities, Women, and Persons with Disabilities Act." HB 5447 also makes other changes. HB 5447 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on August 14, 2018 as Public Act ; Passed Both Houses on May 29, 2018 (House: ; Senate: ). House Bill 5611 Department of Innovation and Technology Act Sponsors Representative Jaime M. Andrade, Jr. and Senator Iris Y. Martinez HB 5611 creates the Department of Innovation and Technology Act. HB 5611 establishes that the Department of Central Management Services is an employer with respect to persons employed by the State Board of Higher Education in positions with the Illinois Century Network as of June 30, 2004 who remain continuously employed after that date by the Department of Central Management Services in positions with the Department of Innovation and Technology. This change reflects the statutory codification of the Department of Innovation and Technology under HB HB 5611 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on July 20, 2018 as Public Act ; Passed Both Houses on May 21, 2018 (House: ; Senate: ). Senate Bill 2954 SURS and TRS Governor s Salary Rule Correction Sponsors Senator Omar Aquino and Representative Robert Martwick SB 2954 amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code to correct the Governor s Salary Rule that was enacted by the General Assembly as part of Public Act Specifically, it removes

7 Exhibit 1 the requirement that SURS use an employee s full-time equivalent earnings for purposes of the calculation, changes the term academic/school year to State fiscal year, clarifies that SURS will not double-charge on normal cost amounts previously paid by the employer during the State fiscal year, gives SURS the ability to recover delinquent amounts under the law, and makes the changes apply retroactively to the effective date of Public Act SB 2954 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on July 20, 2018 as Public Act ; Passed Both Houses on May 30, 2018 (Senate: ; House: ). Senate Bill 3046 TRIP and CIP Re-Enrollment Sponsors Senator Andy Manar and Representative Jehan Gordon-Booth SB 3046 amends the State Employees Group Insurance Act of It allows eligible community college benefit recipients to enroll or re-enroll in the College Insurance Program (CIP) during any applicable annual open enrollment period and as otherwise permitted by the Department of Central Management Services. Additionally, it provides that the community college benefit recipient cannot be deemed ineligible to participate in CIP solely by reason of having made a previous election to disenroll or otherwise not participate in CIP. SB 3046 makes the same changes for eligible TRS benefit recipients under the Teachers Retiree Health Insurance Program (TRIP). Currently, an eligible community college benefit recipient can opt-out of CIP at any time. Once a community college benefit recipient elects not to participate in CIP, he or she cannot re-enroll in CIP, unless: (1) he or she experiences involuntary termination of his or her health insurance coverage; or (2) he or she turns 65 years of age. SB 3046 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on August 21, 2018 as Public Act ; Passed Both Houses on May 30, 2018 (Senate: ; House: ). Bills Introduced Since June 1, 2018 House Bill 5926 No Investments in Companies that Contract to Shelter Migrant Children Sponsors Representative Elizabeth Hernandez

8 Exhibit 1 HB 5926 amends the General Provisions article of the Illinois Pension Code to prohibit the state-funded retirement systems from investing in companies that contract to shelter migrant children. HB 5926 defines contract to shelter migrant children as entering into a contract with the federal government to shelter migrant children under the federal Unaccompanied Alien Children Program or a substantially similar federal program. Specifically, HB 5926 adds companies that contract to shelter migrant children to the list of restricted companies under the Illinois Pension Code. By July 1, 2019, the Illinois Investment Policy Board must make its best efforts to identify all companies that contract to shelter migrant children and include those companies in the list of restricted companies distributed to each state-funded retirement system. These efforts must include the following, as appropriate in the Illinois Investment Policy Board s judgment: (1) reviewing and relying on publicly available information regarding companies that contract to shelter migrant children, including information provided by nonprofit organizations, research firms, and government entities; (2) contacting asset managers contracted by the statefunded retirement systems that invest in companies that contract to shelter migrant children; (3) contacting other institutional investors that have divested from or engaged with companies that contract to shelter migrant children; and (4) retaining an independent research firm to identify companies that contract to shelter migrant children. Under existing law, each state-funded retirement system must adhere to the following procedures for restricted companies: (1) the retirement system must identify those companies on the list of restricted companies in which the retirement system owns direct holdings and indirect holdings; (2) the retirement system must instruct its investment advisors to sell, redeem, divest, or withdraw all direct holdings of restricted companies from the retirement system s assets under management in an orderly and fiduciarially responsible manner within 12 months after the company s most recent appearance on the list of restricted companies; and (3) the retirement system may not acquire securities of restricted companies. These requirements for divestiture do not apply to the retirement system s indirect holdings or private market funds. The Illinois Investment Policy Board must submit letters to the managers of those investment funds containing restricted companies requesting that they consider removing the companies from the fund or create a similar actively managed fund having indirect holdings devoid of the companies. If the manager creates a similar fund, the retirement system must replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. Furthermore, a retirement system may cease from divesting in companies if clear and convincing evidence shows that the value of investments in such companies becomes equal to or less than 0.5% of the market value of all assets under management by the retirement system. For any cessation of divestment, the retirement system must provide a written notice to the Illinois Investment Policy Board in advance of the cessation of divestment, setting forth the reasons and justification, supported by clear and convincing evidence, for its decision to cease divestment. HB 5926 takes effect immediately upon becoming law.

9 Exhibit 1 Status: Filed with the House Clerk on July 2, House Bill 5937 Repeal 3% Rule and Re-Enact 6% Rule Sponsors Representative Phelps Finnie HB 5937 amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code. HB 5937 repeals the 3% rule and re-enacts the 6% rule. Specifically, HB 5937 repeals provisions requiring employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 3% during an employee s final rate of earnings period to SURS. The 3% rule became effective for academic years beginning on or after July 1, HB 5937 re-enacts provisions requiring employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% during an employee s final rate of earnings period to SURS. The 6% rule was effective for academic years beginning on or after June 1, 2005 and before July 1, Under HB 5937, the employer must pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% (instead of 3%) to SURS. HB 5937 makes the same changes to TRS. HB 5937 takes effect immediately upon becoming law. HB 5937 is identical to SB 3622 of the 100 th General Assembly. Status: Filed with the House Clerk on August 2, Senate Bill 3622 Repeal 3% Rule and Re-Enact 6% Rule Sponsors Senator Dale Fowler SB 3622 amends the State Universities Retirement System and Teachers Retirement System articles of the Illinois Pension Code. SB 3622 repeals the 3% rule and re-enacts the 6% rule. Specifically, SB 3622 repeals provisions requiring employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 3% during an employee s final rate of earnings period to SURS. The 3% rule became effective for academic years beginning on or after July 1, SB 3622 re-enacts provisions requiring employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% during an employee s final rate of earnings period to SURS. The 6% rule was effective for academic years beginning on or after June 1, 2005 and before July 1, Under SB 3622,

10 Exhibit 1 the employer must pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% (instead of 3%) to SURS. SB 3622 makes the same changes to TRS. SB 3622 takes effect immediately upon becoming law. SB 3622 is identical to HB 5937 of the 100 th General Assembly. Status: Senate Referred to Senate Assignments July 25, 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 on June 4, 2018 as Public Act ; Passed Both Houses on May 31, 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

11 Exhibit 1 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 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 and delayed 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

12 Exhibit 1 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 may still be eligible for any applicable retiree health insurance benefits. 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 or after 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.)

13 Exhibit 1 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.) 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 meet 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.

14 Exhibit 1 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 Acceleration Bonds, there is a continuing appropriation of all amounts necessary for those purposes. 6% Rule Changed to 3% (Except for Certain Contracts and Collective Bargaining Agreements) Effective for academic years beginning on or after July 1, 2018 and for earnings paid to a participant under a contract or collective bargaining agreement entered into, amended, or renewed on or after the effective date of the legislation, the legislation reduces the 6% rule to 3%, requiring the employer to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 3% during the participant s final rate of earnings period. However, for earnings paid to a participant under a contract or collective bargaining agreement entered into, amended, or renewed before the effective date of the legislation, the employer will continue to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% during the participant s final rate of earnings period. Ends the 6% Rule and 3% Rule for Tier 2 Hybrid Plan Members and Tier 2 Defined Benefit Members Who First Participate in SURS after Implementation of the Optional Hybrid Plan HB 3342 provides that the 6% rule and the 3% rule do not apply to Tier 2 hybrid plan members and Tier 2 defined benefit members who first participate under SURS on or after the implementation date of the Optional Hybrid Plan. FY 2019 Recertification HB 3342 requires the SURS Board of Trustees, between June 15, 2019 and June 30, 2019, to recalculate and recertify the FY 2019 State contribution, taking into account the changes made by the legislation. The recertification must be based on the actuarial assumptions used to certify the original FY 2019 State contribution. The last monthly voucher for FY 2019 must be paid by the Comptroller after the recertification is submitted to the Governor, Comptroller, and General Assembly.

15 Exhibit 1 Effective Date HB 3342 takes effect immediately upon becoming law. Status: Governor Rauner signed into law on June 4, 2018 as Public Act ; Passed Both Houses on May 31, 2018 (House: ; Senate: ).

16 Exhibit 2 Bill Number SA #1 to SB 4 SA #2 to SB 4 SB 6 (ENRL) 100th General Assembly Sponsor Short Title Short Summary Notes Status Sen. Trotter Sen. Trotter Sen. Steans (Rep. G. Harris) SB 11 Sen. J. Cullerton State Pension Obligation Acceleration Bonds State Pension Obligation Acceleration Bonds FY 2018 Budget Pension Reform Adds language authorizing the Illinois Finance Authority to issue up to $250 million in State Pension Obligation Acceleration Bonds if the amount appropriated for accelerated pension benefit payments is less than the amount required for those payments. Creates a continuing appropriation for the payment of principal and interest due on State Pension Obligation Acceleration Bonds. Adds language authorizing the Illinois Finance Authority to issue up to $250 million in State Pension Obligation Acceleration Bonds if the amount appropriated for accelerated pension benefit payments is less than the amount required for those payments. Creates a continuing appropriation for the payment of principal and interest due on State Pension Obligation Acceleration Bonds. Appropriates $1,587,985,000 to SURS for the State contribution for FY 2018 ($1,372,985,000 from the General Revenue Fund and $215,000,000 from the State Pensions Fund). The FY 2018 certified State contribution to SURS is $1,753,685,000. Appropriates $4,133,336 from the Education Assistance Fund to the College Insurance Program ("CIP") for FY This amount is equal to the certified State contribution to CIP for FY Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 and FY 2019 State contributions to be recertified based on the changes in the legislation. Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. Requires employers to pay a contribution to SURS for the portion of earnings in excess of $140,000. Identical to SA #1 to SB 4 (Sen. Trotter) $250 million worth of bonds for buyout Amendment Tabled on 5/17/17 Amendment Tabled on 5/17/17 Became Public Act on 7/6/17 (Senate Override: ; House Override: ) Lost on 3rd Reading in the Senate ( ) on 2/8/17

17 Exhibit 2 Bill Number SB 16 (ENGR) 100th General Assembly Sponsor Short Title Short Summary Notes Status Sen. J. Cullerton (Rep. Durkin) Pension Reform Creates an optional hybrid plan for new members. Allows new members to elect to participate in Tier II. Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 and FY 2019 State contributions to be recertified based on the changes in the legislation. Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. Requires employers to pay a contribution to SURS for the portion of earnings in excess of $140,000. $250 million worth of bonds for buyout on 5/31/17; Passed the Senate on 5/17/17 SB 42 (ENRL) Sen. Trotter (Rep. G. Harris) FY 2018 Budget Implementation Act Authorizes the use of money in the State Pensions Fund as part of the FY 2018 State contribution to SURS. Creates an optional hybrid plan for: new participants of SURS on or after the implementation date of the optional hybrid plan; and current Tier II participants who irrevocably elect to participate in the optional hybrid plan. Requires the State to make additional contributions in FY 2018, FY 2019, and FY 2020 equal to 2% of the total payroll for each employee who participates in the optional hybrid plan or who participates in the Tier II plan in lieu of the optional hybrid plan. Requires prospective and retroactive smoothing of any changes in actuarial assumptions made to the State contribution since FY Requires recertification of the FY 2018 State contribution. Requires the employer to contribute the employer normal cost of the defined benefits of optional hybrid plan participants and participants who would have been in the optional hybrid plan but elected to participate in the Tier II plan, beginning in FY Requires the employer to pay the unfunded liability of the defined benefits of optional hybrid plan participants, participants who would have been in the optional hybrid plan but elected to participate in the Tier II plan, and participants who currently participate in the Tier II plan but elect to participate in the optional hybrid plan, beginning in FY Requires the employer to pay a 2% surcharge for optional hybrid plan participants and participants who would have been in the optional hybrid plan but elected to participate in the Tier II plan, beginning in FY Requires the employer to pay the employer normal cost of the portion of an employee's earnings that exceeds the amount of salary set for the Governor, for academic years beginning on or after July 1, Became Public Act on 7/6/17 (Senate Override: ; House Override: ) SA #1 to SB 363 Sen. Morrison No Pensions for Private Employment Prospectively prohibits a person from becoming a member or participant in any pension fund or retirement system with respect to private employment. Prohibits a person who first becomes a participant or member of a public pension fund or retirement system on or after the effective date of the legislation from establishing service credit under that fund or system with respect to private employment. Senate Re-Referred to Assignments 8/4/17

18 Exhibit 2 Bill Number SB 402 (ENRL) 100th General Assembly Sponsor Short Title Short Summary Notes Status Sen. J. Cullerton (Rep. Madigan) Sexual Harassment Reforms Establishes that all persons have a right to work in an environment free from sexual harassment. Prohibits the sexual harassment of any person, regardless of any employment relationship or lack thereof. Requires personnel policies to include: prohibitions on sexual harassment; processes for reporting allegations of sexual harassment; prohibitions on retaliation for reporting allegations of sexual harassment; the consequences of a violation of the prohibition on sexual harassment; and the consequences of filing a false report alleging sexual harassment. Requires each officer, member, employee, and each natural person required to register as a lobbyist to complete, at least annually, a sexual harassment training program. Imposes penalties for a violation of the prohibition on sexual harassment. Creates a hotline to report sexual harassment. Became Public Act on 11/16/17 (Senate: ; House: ) SA# 1 to SB 404 Sen. Steans Merge Illinois Educational Labor Relations Board into the Illinois Public Labor Relations Board Provides that remuneration received for serving as a member of the former Illinois Educational Labor Relations Board must be excluded from certain post-retirement earnings limitations and serving as a member of the former Illinois Educational Labor Relations Board is not deemed to be a return to employment for certain postretirement employment limitations. (Currently, remuneration received for serving as a member of the Illinois Educational Labor Relations Board must be excluded from certain post-retirement earnings limitations and serving as a member of the Illinois Labor Relations Board is not deemed to be a return to employment for certain post-retirement employment limitations.) Senate Re-Referred to Assignments 5/11/18; SA #1 Remains in Assignments on 4/10/18 SB 654 (ENGR) Sen. Biss (Rep. Nekritz) SURS Administrative and Technical Corrections Authorizes SURS to issue subpoenas in connection with an attempt to obtain information to assist in the collection of sums due to the System, all personal identifying information necessary for the administration of benefits, and the determination of the death of a benefit recipient or a potential benefit recipient. Codifies longstanding practices related to the administration of disability benefits and disability retirement annuities. Identical to HB 368 (Rep. Nekritz) House Referred to Rules Committee on 5/9/17; Passed the Senate on 5/5/17 SB 662 Sen. Hastings Pension Buyout Act Creates the Pension Buyout Act. Authorizes the Illinois Department of Central Management Services to enter into contracts with approved vendors to provide lump-sum payments to eligible SURS retirees pursuant to a pension buyout option. An eligible SURS retiree who elects a pension buyout option relinquishes all rights and benefits under the Illinois Pension Code in exchange for a lump-sum payment equal to the present value of his or her retirement annuity under SURS. Eligible SURS retirees who elect to participate in a pension buyout option will receive any applicable retiree health insurance benefits. $500 million worth of bonds for buyout Senate Re-Referred to Assignments 5/5/17 SB 778 Sen. Biss FOIA - Alternative Investment Contracts Establishes that the texts of new agreements entered into by a public pension fund or retirement system after January 1, 2018 to invest in a private equity fund, hedge fund, or absolute return fund are not exempt from disclosure under the Freedom of Information Act. However, trade secrets contained in the texts of such new agreements remain exempt under the Freedom of Information Act. Senate Re-Referred to Assignments 8/4/17

19 Exhibit 2 Bill Number SB 779 (ENGR) 100th General Assembly Sponsor Short Title Short Summary Notes Status Sen. Biss (Rep. Martwick) Alternative Investment Fund Contract and Fee Transparency Requires all pension funds, retirement systems, and investment boards to disclose the following information for each alternative investment fund: (1) all management fee waiver provisions; (2) all indemnification provisions; (3) all clawback provisions; and (4) the cover page and signature block of the agreement. Requires all pension funds, retirement systems, and investment boards to require their alternative investment fund external managers and general partners to disclose the following information annually for each alternative investment fund: (1) direct fees and expenses; (2) all other fees and expenses, including carried interest; (3) the amount of all management fee waivers; and (4) the total amount of portfolio holding fees. Disclosure of fee information may be satisfied by the completion of the Institutional Limited Partners Association ( ILPA ) template for the relevant category of investment for the applicable year. Similar to HA #1 to HB 163 (Rep. Halpin) on 5/31/18; Passed the Senate on 5/29/17 HA #1 to SB 779 Rep. Currie Shell Amendment Deletes the provisions of the engrossed bill. Amendment Tabled on 11/7/17 HA #2 to SB 779 Rep. Martwick Public Act Trailer Bill Omnibus Enables SURS to comply with IRS requirements when developing the defined contribution portion of the Optional Hybrid Plan created under Public Act Makes technical and administrative changes, codifies existing practices, and provides fiduciary protections to permit the implementation of Public Act Adopted in House Personnel and Pensions 11/7/17 SB 896 (ENGR) Sen. Althoff (Rep. Parkhurst) Survivors Felony Forfeiture Prohibits any benefits from being paid to a person who otherwise would receive a survivor benefit but is convicted of a felony relating to, arising out of, or in connection with the service of the employee from whom the benefit results. Applies to participants who enter service after the effective date of the legislation. Identical to HB 350 as Introduced (Rep. McSweeney) House Referred to Rules Committee on 4/27/17; Passed the Senate on 4/26/17 SA #1 to SB 1012 Sen. Righter Tier III Defined Contribution Plan Requires SURS to prepare and implement a Tier III Defined Contribution Plan for new members on or after July 1, 2018 and for Tier I and Tier II members who elect to participate in the Tier III Defined Contribution Plan. Identical to the Tier III DC Plan in HB 2405 (Rep. Ives) Senate Re-Referred to Assignments 8/4/17 SA #2 to SB 1012 Sen. Righter Tier III Defined Contribution Plan Requires SURS to prepare and implement a Tier III Defined Contribution Plan for new members on or after July 1, 2018 and for Tier I and Tier II members who elect to participate in the Tier III Defined Contribution Plan. Requires the Tier III Defined Contribution Plan to use the framework of the existing Self-Managed Plan. Similar to the Tier III DC Plan in HB 4057 (Rep. Ives) Senate Re-Referred to Assignments 8/4/17 SB 1345 (ENRL) Sen. Trotter (Rep. Martwick) Public Act Trailer Bill Tier Clarification Clarifies that individuals who first become members of SURS on or after January 1, 2011 and prior to the implementation date of the Optional Hybrid Plan will participate in SURS as Tier 2 members. Became Public Act on 12/08/17 (Senate: ; House: )

20 Exhibit 2 Bill Number SB 1714 (ENRL) 100th General Assembly Sponsor Short Title Short Summary Notes Status Sen. Clayborne (Rep. Turner) Investment Consultant Disclosures Requires investment consultants to make certain disclosures related to searches for investment services. Prohibits the board from awarding a contract without receiving these disclosures and requires the Board to consider these disclosures prior to the award of a contract. Requires investment consultants to disclose all compensation and economic opportunity received in the last 24 months by investment advisors retained by the Board. Requires investment consultants to disclose any compensation or economic opportunity received in the last 24 months by an investment advisor that is recommended for selection by the consultant. Prohibits a board from awarding a contract without receiving these disclosures. Became Public Act on 11/9/17 (Senate Override: ; House Override: ) SB 1798 Sen. Hastings No Investments in Expatriated Entities Prohibits the state-funded retirement systems from investing in expatriated entities. Authorizes the statefunded retirement systems to use shareholder activism prior to divestment. Nearly Identical to HB 3419 (Rep. Andrade) Senate Re-Referred to Assignments 8/4/17 SB 1801 Sen. Brady Supplemental Defined Contribution Plan SB 1820 Sen. McConchie Full and Partial Accelerated Pension Benefit Payment Options SB 2063 Sen. Brady Unbalanced Budget Response Act Requires the SURS Board of Trustees to establish and maintain a defined contribution plan to address the retirement preparedness gap for participants in a defined benefit plan who are not on track to maintain their standard of living in retirement. Authorizes an eligible person to irrevocably elect to receive an accelerated pension benefit payment, beginning January 1, The accelerated pension benefit payment consists of a one-time lump sum payment equal to 70 percent of the net present value of the eligible person s pension benefits in lieu of receiving any pension benefit from SURS. The accelerated pension benefit payment must be rolled into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended. Authorizes an eligible person to make a written election to receive a partial accelerated pension benefit payment in exchange for a reduction in pension benefits, beginning January 1, In the written election, the eligible person must specify the percentage by which pension benefits are reduced. However, an eligible person may not elect a percentage reduction of his or her pension benefits that would result in a partial accelerated pension benefit payment of less than $50,000. The partial accelerated pension benefit payment consists of a one-time lump sum payment equal to 70 percent of the elected percentage of the net present value of the eligible person s pension benefits. Identical to HB 3867 (Rep. Morrison) $250 million worth of bonds for buyout Creates the Unbalanced Budget Response Act. Authorizes the Governor to designate a contingency reserve to Identical to HB 3868 balance the budget. Allows the contingency reserve to consist of amounts appropriated from funds held by the (Rep. Durkin) State Treasurer to any agency for Fiscal Year 2017 and Fiscal Year 2018, including amounts appropriated under a statutory continuing appropriation (except for debt service, General State Aid, and early childhood education). Authorizes the Governor to delay payments under any statutory continuing appropriation, except for payments of debt service, for Fiscal Year 2017 and Fiscal Year Provides that any payment so delayed may be paid out of the next fiscal year s appropriation. Senate Referred to Assignments 2/9/17 Senate Referred to Assignments 2/9/17 Senate Re-Referred to Assignments 3/17/17

21 Exhibit 2 Bill Number SB th General Assembly Sponsor Short Title Short Summary Notes Status Sen. Sandoval No Investments in Businesses that Build A Border Wall Prohibits the state-funded retirement systems from investing in businesses that enter into a contract with the federal government for the purpose of building a wall along the border of Mexico and the United States of America. Similar to HB 3061 (Rep. Guzzardi) Senate Re-Referred to Assignments 5/5/17 SB 2164 Sen. Brady FY 2018 Governor Introduced Budget Appropriates $1,461,685,000 for the annual required State contribution to SURS for Fiscal Year Of this amount, $1,321,685,000 comes from the General Revenue Fund, and $140,000,000 comes from the State Pensions Fund. The certified Fiscal Year 2018 State contribution to SURS is $1,753,685,000. Appropriates $0 from the Education Assistance Fund for the State contribution to the College Insurance Program ( CIP ) for Fiscal Year The certified Fiscal Year 2018 State contribution to CIP is $4,133,336. Identical to HB 3926 (Rep. Durkin) Senate Referred to Assignments 2/22/17 SB 2172 Sen. Connelly Pension Reform Creates an optional Hybrid Plan for new members. Allows new members to elect to participate in Tier II. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 State contribution to be recertified based on the changes in the legislation. Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. Requires employers to pay a contribution to SURS for the portion of earnings in excess of $140,000. $250 million worth of bonds for buyout Senate Re-Referred to Assignments 4/7/17 SB 2173 Sen. Connelly Pension Reform Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Requires the FY 2019 State contribution to be recertified based on the changes in the legislation. Senate Re-Referred to Assignments 4/7/17

22 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number SB 2181 Sen. Brady FY 2017 and FY 2018 Budget Implementation Act Creates the FY 2017 and FY 2018 Budget Implementation Act. Authorizes the use of money in the State Pensions Fund as part of the annual required State contribution to SURS for FY Ends the continuing appropriation for the College Insurance Program ("CIP"). Establishes a state spending limitation for FY 2018 to FY 2022 of $36 billion annually, except for: (1) increases over amounts appropriated in FY 2018 as required by certifications of the state-funded retirement systems; (2) increases over amounts transferred in FY 2018 under the General Obligation Bond Act; or (3) increases over payments made in FY 2018 to cover state obligations of the State Employee Group Insurance Act of Provides that if the Auditor General reports that spending has exceeded the limitation and if the Governor has not been presented with a bill or bills passed by the General Assembly to reduce spending to a level that does not exceed the limitation, then the Governor may reduce spending by designating amounts to be set aside as a reserve from the amounts appropriated from the state general funds for all boards, commissions, agencies, institutions, authorities, colleges, universities, and bodies politic and corporate of the state (except for constitutional officers, the legislative and judicial branch, the Office of the Executive Inspector General, or the Executive Ethics Commission). Provides that the amounts placed in reserves cannot be transferred, obligated, encumbered, expended, or otherwise committed unless so authorized by law. Senate Referred to Assignments 3/28/17 SB 2182 Sen. Brady FY 2017 and FY 2018 Budget Appropriates $1,481,426,000 from the General Revenue Fund to SURS as part of the annual required State contribution for Fiscal Year Appropriates $4,309,111 from the General Revenue Fund for the College Insurance Program ("CIP") for Fiscal Year Appropriates $1,461,685,000 to SURS as part of the annual required State contribution for Fiscal Year 2018 ($1,306,685,000 from the General Revenue Fund and $155,000,000 from the State Pensions Fund). Appropriates $3,307,000 from the General Revenue Fund for the College Insurance Program ("CIP") for Fiscal Year Senate Referred to Assignments 3/28/17 SB 2194 Sen. Brady Pension Reform Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Requires the FY 2019 State contribution to be recertified based on the changes in the legislation. Senate Re-Referred to Assignments 8/4/17 SB 2195 Sen. Brady Pension Reform Creates an optional hybrid plan for new members. Allows new members to elect to participate in Tier II. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 State contribution to be recertified based on the changes in the legislation. Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. Requires employers to pay a contribution to SURS for the portion of earnings in excess of $140,000. Senate Re-Referred to Assignments 8/4/17

23 Exhibit 2 Bill Number SB th General Assembly Sponsor Short Title Short Summary Notes Status Sen. McCarter SURS Normal Cost Shift Requires the actual employer to pay the full employer s normal cost of the benefits earned by its employees to SURS on a payroll-by-payroll basis. Sets the employer normal cost rate as a percentage of earnings determined by SURS on a system-wide basis and certified by SURS to all employers for use in the applicable fiscal year. Requires recalculation and recertification of the required State contribution for the current fiscal year based on this change. Senate Referred to Assignments 4/27/17 SB 2198 Sen. Oberweis Re-Issuance of Authorizes the re-issuance of $2.2 billion worth of General Obligation Bonds to retire outstanding bonds issued Bonds to Retire FY to finance the Fiscal Year 2011 State contribution to the State-funded retirement systems Pension Bonds Senate Re-Referred to Assignments 5/12/17 SB 2205 Sen. McCarter State Pension Obligation Acceleration Bonds Authorizes the Illinois Finance Authority to issue up to $250 million in State Pension Obligation Acceleration Bonds if the amount appropriated for accelerated pension benefit payments is less than the amount required for those payments. Creates a continuing appropriation for the payment of principal and interest due on State Pension Obligation Acceleration Bonds. Authorizes the State to issue up to $7 billion worth of State General Obligation Restructuring Bonds for the purpose of paying vouchers (bills) incurred by the State prior to July 1, Limits state general funds spending for Fiscal Year 2018 through Fiscal Year 2025 to $ billion annually. Provides that if the Auditor General reports that spending has exceeded the limitation for the fiscal year, and if the General Assembly does not pass legislation to reduce spending to a level at or below the limitation, then the Governor may designate amounts to be set aside as a reserve from the amounts appropriated from the state general funds for all boards, commissions, agencies, institutions, authorities, colleges, universities, and bodies politic and corporate of the State (but not other constitutional officers, the legislative or judicial branch, the Office of the Executive Inspector General, or the Executive Ethics Commission). $250 million worth of bonds for buyout Senate Referred to Assignments 4/27/17 SB 2214 Sen. Brady FY 2017 and FY 2018 Budget Appropriates $1,481,426,000 from the General Revenue Fund as part of the FY 2017 State contribution to SURS. Appropriates $4,309,111 from the General Revenue Fund for the FY 2017 State contribution to CIP. Appropriates $1,461,685,000 for the FY 2018 State contribution to SURS. (Of this amount, $1,306,685,000 comes from the General Revenue Fund and $155,000,000 comes from the State Pensions Fund.) Appropriates $2,755,000 from the General Revenue Fund for the FY 2018 State contribution to CIP. Senate Referred to Assignments 6/15/17

24 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number SB 2217 Sen. Brady FY 2017 and FY 2018 Budget Implementation Act Creates the FY2017 and FY 2018 Budget Implementation Act. Extends the lapse period for FY 2017 until December 31, Authorizes the Governor to designate a contingency reserve from the amounts appropriated from funds held by the Treasurer for fiscal years 2018 through 2021 to any agency. Prohibits the Governor from designating a contingency reserve from amounts that have been appropriated: (1) for payment of debt service; (2) to the State Board of Education for evidence-based funding to the common schools; (3) to the State Board of Education for grants or aid for early childhood education; (4) for contributions to the Statefunded retirement systems; or (5) to the Attorney General, Secretary of State, Treasurer, Comptroller, or any legislative or judicial branch agency or office. Authorizes the use of money in the State Pensions Fund as part of the FY 2018 State contribution to SURS. Ends the continuing appropriation for the College Insurance Program at the end of Fiscal Year Establishes the State spending limitation for fiscal years 2018 through 2022 as $36 billion, except for: (1) increases over amounts as required to be paid to the State-funded retirement systems; (2) increases in amounts required to be transferred for the payment of principal and interest on bonds under the General Obligation Bond Act; or (3) increases in payments to the Health Insurance Reserve Fund necessary to cover state obligations of the State Employees Group Insurance Act of Provides that if State spending exceeds the limitation and if the Governor has not been presented with a bill or bills passed by the General Assembly to reduce State spending, the Governor may designate a reserve from the amounts appropriated from the State general funds for all boards, commissions, agencies, institutions, authorities, colleges, universities, and bodies politic and corporate of the State, but not other constitutional officers, the legislative or judicial branch, the office of the Executive Inspector General, or the Executive Ethics Commission. Prohibits amounts placed in reserves from being transferred, obligated, encumbered, expended, or otherwise committed unless so authorized by law. Establishes the FY 2018 State contribution to SURS as $1,461,685,000. Senate Referred to Assignments 6/15/17 SA #1 to SB 2669 Sen. Rooney Increase Standard Exemption after Offer-and- Consideration Pension Reform Increases the standard exemption from $2,050 to $3,600 after Senate Bill 16 of the 100th General Assembly takes effect. Modifies the calculation of the cost-of-living adjustment applied to the standard exemption to equal $3,600 times the percentage (if any) by which the Consumer Price Index for the preceding calendar year exceeds the Consumer Price Index for the calendar year prior to the calendar year in which Senate Bill 16 of the 100th General Assembly takes effect. Senate Re-Referred to Assignments 5/11/18; SA #1 Remains in Assignments 4/23/18

25 Exhibit 2 Bill Number SA #1 to SB th General Assembly Sponsor Short Title Short Summary Notes Status Sen. Brady Reduce Income Tax after Offer- and- Consideration Pension Reform Reduces the individual income tax from 4.95% to 4.7%, upon implementation of the offer-and-consideration pension reform elections made by Tier 1 employees in Senate Bill 16 of the 100th General Assembly. Senate Re-Referred to Assignments 4/27/18; SA #1 Remains in Assignments 4/23/18 SA #1 to SB 2807 Sen. Oberweis Right to Shop Act Creates the Right to Shop Act. Requires the Director of Central Management Services to conduct an analysis no later than one year from the effective date of the Act of the cost effectiveness of implementing an incentivebased program for enrollees and retirees of the State group health benefits plan offered under the State Employees Group Insurance Act of Requires a program found to be cost effective to be implemented as part of the next open enrollment. Senate Re-Referred to Assignments 5/11/18 SB 2954 (ENRL) SB 3046 (ENRL) Sen. Aquino (Rep. Martwick) SURS Governor's Salary Rule Correction Sen. Manar TRIP and CIP - Re- (Rep. Gordon- Enrollment Booth) SB 3073 Sen. Schimpf Accelerated Pension Benefit Payment Option Corrects the Governor s Salary Rule that was enacted by the General Assembly as part of Public Act for SURS and TRS. Removes the requirement that SURS use an employee s full-time equivalent earnings for purposes of the calculation, changes the term academic/school year to State fiscal year, clarifies that SURS will not double-charge on normal cost amounts previously paid by the employer during the State fiscal year, gives SURS the ability to recover delinquent amounts under the law, and makes the changes apply retroactively to the effective date of Public Act Allows eligible benefit recipients to enroll or re-enroll in the Teachers' Retiree Health Insurance Program (TRIP) or the College Insurance Program (CIP), as applicable, during any applicable annual open enrollment period and as otherwise permitted by the Department of Central Management Services. Provides that the benefit recipient cannot be deemed ineligible to participate solely by reason of having made a previous election to disenroll or otherwise not participate in TRIP or CIP, as applicable. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Gives each eligible person the opportunity to elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS. $250 million worth of bonds for buyout Became Public Act on 7/20/18 (Senate: ; House: ) Became Public Act on 8/21/18 (Senate: ; House: ) Senate Re-Referred to Assignments 5/3/18 SA #1 to SB 3073 Sen. Schimpf Accelerated Pension Benefit Payment Option Re-inserts the original legislation with the following change: it requires the accelerated pension benefit payment to be equal to 75 percent (instead of 70 percent) of the net present value of the eligible member s pension benefits. $250 million worth of bonds for buyout SA #1 Senate Re- Referred to Assignments 5/3/18

26 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number SB 3382 Sen. Brady FY 2019 Governor Introduced Budget Appropriates $1,554,498,000 for the annual required State contribution to SURS for Fiscal Year Of this amount, $1,414,498,000 is appropriated from the General Revenue Fund, and $140,000,000 is appropriated from the State Pensions Fund. The certified Fiscal Year 2019 State contribution is SURS is $1,655,154,000. Appropriates $0 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. Identical to HB 5404 (Rep. Durkin) Senate Referred to Assignments 2/16/18 HA #1 to SB 3531 Rep. G. Harris FY 2019 Budget Implementation Offers a buyout equal to 60% of the present value of pension benefits for vested inactives. Offers a buyout equal to 70% of the present value of the difference between the Tier 1 AAI and a reduced and delayed AAI (1.5% simple, delayed until the later of age 67 or 1 year after retirement) for Tier 1 members. Authorizes the issuance of $1 billion worth of bonds to finance the buyout payments under SERS, SURS, and TRS. Reduces the 6% rule to 3%. Requires recertification of the FY 2019 State contribution based on the changes made by the legislation and using the assumptions used to certify the original FY 2019 State contribution. As it relates to SURS, HA #1 to SB 3531 is identical to HA #2 to SB 3531 on 5/31/18 HA #2 to SB 3531 Rep. G. Harris FY 2019 Budget Implementation Offers a buyout equal to 60% of the present value of pension benefits for vested inactives. Offers a buyout equal to 70% of the present value of the difference between the Tier 1 AAI and a reduced and delayed AAI (1.5% simple, delayed until the later of age 67 or 1 year after retirement) for Tier 1 members. Authorizes the issuance of $1 billion worth of bonds to finance the buyout payments under SERS, SURS, and TRS. Reduces the 6% rule to 3%. Requires recertification of the FY 2019 State contribution based on the changes made by the legislation and using the assumptions used to certify the original FY 2019 State contribution. Identical to SA #3 to HB 3342 (Sen. Steans) on 5/31/18; HA #2 Recommended Be Adopted in House Executive 5/30/18 SB 3545 Sen. Manar No Investments in Major Opioid Manufacturers Prohibits the State-funded retirement systems from investing in major opioid manufacturers. By July 1, 2019, requires the Illinois Investment Policy Board to make its best efforts to identify all major opioid manufacturers and include those companies in the list of restricted companies distributed to each retirement system for this purpose. Senate Re-Referred to Assignments 4/13/18 SB 3622 Sen. Fowler Repeal 3% Rule and Re-Enact 6% Rule HB 109 (ENRL) Rep. G. Harris (Sen. J. Cullerton) FY 2019 Budget Requires employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% (instead of 3%) during an employee's final rate of earnings period to SURS. Appropriates $1,585,109,800 to SURS for the State contribution for FY 2019 ($1,370,109,800 from the General Revenue Fund and $215,000,000 from the State Pensions Fund). The FY 2019 certified State contribution to SURS is $1,655,154,000. Appropriates $4,390,811 from the Education Assistance Fund to the College Insurance Program ("CIP") for FY This amount is equal to the certified State contribution to CIP for FY Identical to HB 5937 (Rep. Phelps Finnie) Identical to HA #1 to HB 860 (Rep. G. Harris) Senate Referred to Assignments 7/25/18 Became Public Act on 6/4/18 (House: ; Senate: )

27 Exhibit 2 Bill Number HA #1 to HB th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Crespo FY 2018 General Services Budget Appropriates $1,622,785,000 to SURS for the State contribution for FY 2018 ($1,407,785,000 from the General Revenue Fund and $215,000,000 from the State Pensions Fund). The FY 2018 certified State contribution to SURS is $1,753,685,000. Appropriates $4,133,336 from the Education Assistance Fund to the College Insurance Program ("CIP") for FY This amount is equal to the certified State contribution to CIP for FY Identical to HA #2 to SB 6 (Rep. G. Harris) on 9/28/17; House Rules Committee Recommends Be Adopted (3-1-0) on 6/29/17 HA #1 to HB 163 Rep. Halpin Alternative Investment Fund Contract and Fee Transparency Creates the Investment Transparency Task Force to study, identify best available practices, and make recommendations by January 15, 2018 relating to: (1) disclosure of, and best practices related to, the portions of limited partnership agreements addressing indemnification provisions, clawback provisions, and management fee waivers; and (2) disclosure of fees and expenses incurred, including related fee waivers and portfolio holding fees. If a public pension fund, retirement system, or investment board adopts and implements the recommendations of the Task Force, and the General Assembly does not reject the recommendations of the Task Force by joint resolution during the 100th General Assembly, then the public pension fund, retirement system, or investment board is deemed in compliance with the legislation. However, if the Task Force does not adopt recommendations by January 15, 2018, the General Assembly rejects the recommendations of the Task Force, or the public pension fund, retirement system, or investment board fails to adopt and implement the recommendations of the Task Force, then alternative provisions of the legislation related to items (1) and (2) take effect. Similar to SB 779 (Sen. Biss) on 4/28/17 HB 299 (ENRL) Rep. Ammons (Sen. Biss) Return to Work for Affected Annuitants Exemption + SURS Administrative and Technical Corrections Allows SURS retirees who became affected annuitants between August 1, 2013 and May 31, 2015 and who receive annualized retirement annuities of less than $10,000 to return to work with a SURS-covered employer without the employer having to pay a contribution to SURS. Authorizes SURS to issue subpoenas in connection with an attempt to obtain information to assist in the collection of sums due to the System, all personal identifying information necessary for the administration of benefits, and the determination of the death of a benefit recipient or a potential benefit recipient. Codifies longstanding practices related to the administration of disability benefits and disability retirement annuities. Became Public Act on 12/8/17 (House: ; Senate: ) HB 315 Rep. Batinick Accelerated Pension Benefit Payment Option Requires SURS to offer each eligible person the opportunity to irrevocably elect to receive an accelerated pension benefit payment equal to 70 percent of the net present value of his or her pension benefits in lieu of receiving any pension benefit from SURS. The accelerated pension benefit payment must be rolled over into another retirement plan or account qualified under the Internal Revenue Code of 1986, as amended. Eligible members have between January 1, 2018 and July 1, 2018 to elect the accelerated pension benefit payment. Eligible members who irrevocably elect to receive an accelerated pension benefit payment will receive any applicable retiree health insurance benefits. $250 million worth of bonds for buyout on 3/31/17

28 Exhibit 2 Bill Number HB 350 (ENRL) HB 368 (ENGR) 100th General Assembly Sponsor Short Title Short Summary Notes Status Rep. McSweeney (Sen. Althoff) Rep. Nekritz (Sen. Biss) Survivors Felony Forfeiture SURS Administrative and Technical Corrections Prohibits any benefits from being paid to a person who otherwise would receive a survivor benefit but is convicted of a felony relating to, arising out of, or in connection with the service of the employee from whom the benefit results. Applies to participants who enter service after the effective date of the legislation. Prohibits any benefits from being paid to a person who is convicted of a felony relating to, arising out of, or in connection with a person s service as an employee under SURS. This change applies to individuals who first become participants in SURS on or after the effective date of the legislation. Authorizes SURS to issue subpoenas in connection with an attempt to obtain information to assist in the collection of sums due to the System, all personal identifying information necessary for the administration of benefits, and the determination of the death of a benefit recipient or a potential benefit recipient. Codifies longstanding practices related to the administration of disability benefits and disability retirement annuities. Identical to SB 654 (Sen. Biss) Became Public Act on 8/25/17 (House ; Senate ) Senate Re-Referred to Assignments 8/4/17; Passed the House on 3/7/17 HB 436 Rep. Ives Tier III Defined Contribution Plan Requires SURS to prepare and implement a Tier III defined contribution plan by July 1, Tier I participants and Tier II participants may make a voluntary, irrevocable election to become Tier III participants, stopping participation in the defined benefit plan and starting participation in the defined contribution plan for future service. Tier III participants may also irrevocably elect to terminate all participation in the defined benefit plan. Prohibits payments for unused sick or vacation time from counting towards the pensionable earnings of individuals who first become participants of SURS on or after the effective date of the legislation. Prohibits unused, unpaid sick time from counting towards the service credit of individuals who first become participants of SURS on or after the effective date of the legislation. Allows employees to opt-out of participation in SURS. Very similar to HB 445 (Rep. Ives) and Nearly Identical to HB 2405 (Rep. Ives) on 3/31/17 HB 445 Rep. Ives Tier III Defined Contribution Plan HB 669 Rep. Morrison Alternative Retirement Plan - Local Control of Benefits Requires SURS to prepare and implement a Tier III defined contribution plan by July 1, Tier I members and Tier II members may make a voluntary, irrevocable election to become Tier III members, stopping participation in the defined benefit plan and starting participation in the defined contribution plan for future service. Tier III members may also irrevocably elect to terminate all participation in the defined benefit plan. Allows employees to opt-out of participation in SURS. Authorizes the board of trustees of a community college district that is an employer covered under SURS to provide an alternative retirement plan, either in addition to or in lieu of the existing retirement plans under SURS, for its eligible new employees. The alternative retirement plan only applies to persons who have not participated in the existing plans under SURS. Participants in an alternative retirement plan are deemed to be participants in SURS. Very similar to HB 436 (Rep. Ives) but does not include prohibitions on sick time and vacation time from counting towards pensions Identical to HB 3069 (Rep. Morrison) on 3/31/17 on 4/13/18

29 Exhibit 2 Bill Number HB th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Morrison Employers Pay Pension Costs of Salary Increases above Inflation Establishes that, for academic years beginning on or after July 1, 2017, if a participant s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than the increase in CPI-U for any year during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS. Earnings increases under contracts or collective bargaining agreements entered into, amended, or renewed before the effective date of the legislation are exempt. Identical to HB 3175 (Rep. Sauer) on 3/31/17 HB 775 Rep. Lilly Climate Change Risk Minimization Policy Requires each pension fund and retirement system (except for downstate policemen s and firefighters pension funds) to develop a climate change risk minimization policy by December 31, If the retirement system or pension fund determines that increasing climate change poses a significant financial risk to its long-term value, then it may develop a policy on voting for shareholder resolutions and directors to advance corporate policies that minimize the long-term risk to assets from increased climate change. on 3/31/17 HA #1 to HB 860 HA #1 to HB 1292 HA #2 to HB 1292 HB 2371 (ENRL) Rep. G. Harris FY 2019 Budget Rep. Hoffman Separate SIU-C and SIU-E Rep. Hoffman Separate SIU-C and SIU-E Rep. Welch (Sen. Hunter) Cybersecurity Training Appropriates $1,585,109,800 to SURS for the State contribution for FY 2019 ($1,370,109,800 from the General Revenue Fund and $215,000,000 from the State Pensions Fund). The FY 2019 certified State contribution to SURS is $1,655,154,000. Appropriates $4,390,811 from the Education Assistance Fund to the College Insurance Program ("CIP") for FY This amount is equal to the certified State contribution to CIP for FY Designates both Southern Illinois University at Carbondale and Southern Illinois University at Edwardsville as participating employers under SURS. (Currently, Southern Illinois University is designated as a participating employer under SURS.) Allows any football coach employed by the Board of Trustees of Southern Illinois University at Carbondale and the Board of Trustees of Southern Illinois University at Edwardsville (currently, the Southern Illinois University System Board of Trustees) to participate in the American Football Coaches Retirement Trust. Designates both Southern Illinois University at Carbondale and Southern Illinois University at Edwardsville as participating employers under SURS. (Currently, Southern Illinois University is designated as a participating employer under SURS.) Allows any football coach employed by the Board of Trustees of Southern Illinois University at Carbondale and the Board of Trustees of Southern Illinois University at Edwardsville (currently, the Southern Illinois University System Board of Trustees) to participate in the American Football Coaches Retirement Trust. Requires every employee to annually undergo training by the Department of Innovation and Technology concerning cybersecurity. Establishes that the training may include, but need not be limited to, detecting phishing scams, preventing spyware infections and identity theft, and preventing and responding to data breaches. Identical to SA #2 to HB 109 (Sen. J. Cullerton) As it relates to SURS, HA #2 to HB 1292 is identical to HA #1 to HB HA #1 House Executive Committee Recommends Be Adopted on 5/30/18 on 4/27/18 on 5/31/18; HA #2 Adopted on 4/23/18 Became Public Act on 8/8/17 (House: ; Senate: )

30 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 2405 Rep. Ives Tier III Defined Contribution Plan HB 2491 Rep. Bennett QILDRO Calculations Requires SURS to prepare and implement a Tier III defined contribution plan for new participants by July 1, Tier I participants and Tier II participants may make a voluntary, irrevocable election to become Tier III participants, stopping participation in the defined benefit plan and starting participation in the defined contribution plan for future service. Tier III participants may also irrevocably elect to terminate all participation in the defined benefit plan. Prohibits payments for unused sick or vacation time from counting towards the pensionable earnings of individuals who first become participants of SURS on or after the effective date of the legislation. Prohibits unused, unpaid sick time from counting towards the service credit of individuals who first become participants of SURS on or after the effective date of the legislation. Allows an employee to opt-out of participation in SURS. Establishes that, for a QILDRO issued after January 1, 2018, the member s salary on the date the QILDRO was issued is the salary that must be used to calculate the amount of the benefit under the QILDRO. Nearly Identical to HB 436 (Rep. Ives) but requires all persons who first become participants in SURS on or after July 1, 2018 to participate in the Tier III defined contribution plan on 3/31/17 on 3/31/17 HB 2707 Rep. Wehrli Smoothing of Changes in Actuarial Assumptions HA #1 to HB 2707 HB 2758 Rep. Wehrli Rep. Sosnowski Smoothing of Changes in Actuarial Assumptions Overtime Pay Not Included in Pensions Requires any change in the actuarial assumptions that increases or decreases the required State contribution, including a change in assumed investment returns or mortality rates, that first applies in State Fiscal Year 2016 or thereafter, to be phased-in over a 5-year period beginning in the State Fiscal Year in which the actuarial change first applies or Fiscal Year 2018, whichever is later. Requires recertification of the State contribution for Fiscal Year Changes the 5-year smoothing requirement to a 3-year smoothing requirement. Prohibits pay to a participant in any pension fund or retirement system under the Illinois Pension Code for overtime performed on or after July 1, 2017 from being considered as pensionable salary, earnings, or compensation. on 3/31/17 on 3/31/17 on 3/31/17 HB 2759 HB 2760 Rep. Sosnowski Rep. Sosnowski Pensions Requires a retirement annuity to be suspended during employment for any person who first becomes a Suspended During member or participant of a pension fund or retirement system on or after January 1, 2018, is receiving a Reemployment retirement annuity under that system or fund, and becomes a member or participant under any other system or fund based on full-time employment. Requires the person s retirement annuity to resume (after recalculation, if necessary) upon termination of that employment. Self-Managed Plan Transfers to In-Plan Roth Accounts Requires all employees under the Self-Managed Plan to be provided options to establish, contribute to, and transfer any guaranteed or vested portion of their accounts, on any day, into qualified in-plan Roth accounts, without distribution. on 3/31/17 on 3/31/17

31 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 2902 Rep. Fortner Buyout Option + Tier III Authorizes the Illinois Department of Central Management Services to enter into contracts with approved vendors to provide lump sum payments to eligible retirees pursuant to a pension buyout option. A pension buyout option is a plan that authorizes an eligible retiree to relinquish all service credit, rights, and benefits under SURS in exchange for a lump sum payment equal to the present value of his or her retirement annuity. Requires SURS to prepare and implement a Tier III defined contribution plan by July 1, $500 million worth of bonds for buyout on 3/31/17 HB 2903 Rep. Fortner Buyout Option + Tier III Authorizes the Illinois Department of Central Management Services to enter into contracts with approved vendors to provide lump sum payments to eligible retirees pursuant to a pension buyout option. A pension buyout option is a plan that authorizes an eligible retiree to relinquish all service credit, rights, and benefits under SURS in exchange for a lump sum payment equal to the present value of his or her retirement annuity. Requires SURS to prepare and implement a Tier III defined contribution plan by July 1, $500 million worth of bonds for buyout; Nearly Identical to HB 2902 (Rep. Fortner) but allows eligible persons (instead of eligible retirees) to elect the pension buyout option on 3/31/17 HB 3055 Rep. D. Harris Tax on Retirement Income Taxes retirement income in excess of $75,000 if the taxpayer is younger than 65 years of age during the taxable year and retirement income in excess of $100,000 if the taxpayer is 65 years of age or older during the taxable year (including the taxable year in which the taxpayer turns 65 years of age). Similar to HB 3140 (Rep. D. Harris) on 3/31/17 HB 3061 HB 3069 HB 3140 Rep. Guzzardi No Investments in Companies that Build A Border Wall Rep. Morrison Alternative Retirement Plan - Local Control of Benefits Rep. D. Harris Tax on Retirement Income Prohibits the state-funded retirement systems from investing in companies that contract to build a border wall. Similar to SB 2091 (Sen. Sandoval) Authorizes the board of trustees of a community college district that is an employer covered under SURS to provide an alternative retirement plan, either in addition to or in lieu of the existing retirement plans under SURS, for its eligible new employees. The alternative retirement plan applies only to persons who have not participated in the existing plans under SURS. Participants in an alternative retirement plan are deemed to be participants in SURS. Taxes retirement income in excess of $80,000 if the taxpayer is younger than 65 years of age during the taxable year and retirement income in excess of $100,000 if the taxpayer is 65 years of age or older during the taxable year (including the taxable year in which the taxpayer turns 65 years of age). Identical to HB 669 (Rep. Morrison) Similar to HB 3055 (Rep. D. Harris) on 4/28/17 on 3/31/17 on 3/31/17

32 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 3175 Rep. Sauer Employers Pay Pension Costs of Salary Increases above Inflation Establishes that, for academic years beginning on or after July 1, 2017, if a participant s earnings exceed the amount of his or her earnings with the same employer for the previous academic year by more than the increase in CPI-U for any year during the final rate of earnings period, then the employer must pay the present value of the resulting increase in benefits to SURS. Earnings increases under contracts or collective bargaining agreements entered into, amended, or renewed before the effective date of the legislation are exempt. Identical to HB 671 (Rep. Morrison) on 3/31/17 HB 3258 Rep. Jimenez Retiree Health Insurance Benefits Without Annuity Allows members of the Portable Defined Benefit Plan and the Self-Managed Plan who take lump-sum distributions of their retirement benefits to receive retiree health insurance. on 3/31/17 HB 3342 (ENRL) Rep. G. Harris (Sen. Steans) FY 2019 Budget Implementation Offers a buyout equal to 60% of the present value of pension benefits for vested inactives. Offers a buyout equal to 70% of the present value of the difference between the Tier 1 AAI and a reduced and delayed AAI (1.5% simple, delayed until the later of age 67 or 1 year after retirement) for Tier 1 members. Authorizes the issuance of $1 billion worth of bonds to finance the buyout payments under SERS, SURS, and TRS. Reduces the 6% rule to 3%. Requires recertification of the FY 2019 State contribution based on the changes made by the legislation and using the assumptions used to certify the original FY 2019 State contribution. Identical to HA #1 and HA #2 to SB 3531 (Rep. G. Harris) Became Public Act on 6/4/18 (House: ; Senate: ) HB 3419 (ENRL) Rep. Andrade (Sen. Hastings) No Investments in Expatriated Entities HB 3475 Rep. Breen 30-Year Rolling Discount Rate Prohibits the state-funded retirement systems from investing in expatriated entities. Authorizes the statefunded retirement systems to use shareholder activism prior to divestment. Requires the discount rate to be the actual 30-year rolling rate of return experienced by the system, beginning in Fiscal Year Nearly Identical to SB 1798 (Sen. Hastings) Became Public Act on 11/9/17 (House Override: ; Senate Override: ) on 3/31/17 HB 3867 Rep. Morrison Supplemental Defined Contribution Plan Requires the SURS Board of Trustees to establish and maintain a defined contribution plan to address the retirement preparedness gap for participants in a defined benefit plan who are not on track to maintain their standard of living in retirement. Identical to SB 1801 (Sen. Brady) on 3/31/17

33 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 3868 Rep. Durkin Unbalanced Budget Response Act Creates the Unbalanced Budget Response Act. Authorizes the Governor to designate a contingency reserve to Identical to SB 2063 balance the budget. Allows the contingency reserve to consist of amounts appropriated from funds held by the (Sen. Brady) State Treasurer to any agency for Fiscal Year 2017 and Fiscal Year 2018, including amounts appropriated under a statutory continuing appropriation (except for debt service, General State Aid, and early childhood education). Authorizes the Governor to delay payments under any statutory continuing appropriation, except for payments of debt service, for Fiscal Year 2017 and Fiscal Year Provides that any payment so delayed may be paid out of the next fiscal year s appropriation. on 3/31/17 HB 3926 Rep. Durkin FY 2018 Governor Introduced Budget Appropriates $1,461,685,000 for the annual required State contribution to SURS for Fiscal Year Of this amount, $1,321,685,000 comes from the General Revenue Fund, and $140,000,000 comes from the State Pensions Fund. The certified Fiscal Year 2018 State contribution to SURS is $1,753,685,000. Appropriates $0 from the Education Assistance Fund for the State contribution to the College Insurance Program ( CIP ) for Fiscal Year The certified Fiscal Year 2018 State contribution to CIP is $4,133,336. Identical to SB 2164 (Sen. Brady) on 9/28/17 HB 4027 Rep. Durkin Pension Reform Creates an optional hybrid plan for new members. Allows new members to elect to participate in Tier II. Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 and FY 2019 State contributions to be recertified based on the changes in the legislation. Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. Requires employers to pay a contribution to SURS for the portion of earnings in excess of $140,000. $250 million worth of bonds for buyout; Identical to HB 4045 (Rep. Currie) on 1/3/18

34 Exhibit 2 Bill Number HB 4045 (ENGR) 100th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Martwick (Sen. J. Cullerton) Pension Reform Creates an optional hybrid plan for new participants on and after July 1, 2018 and current Tier II participants who elect to participate in the optional hybrid plan. Allows new participants to elect to participate in Tier II. Allows current Tier II members to elect to participate in the optional hybrid plan. Allows the SURS Board of Trustees, by resolution, to permit Tier I employees to voluntarily elect a reduced and delayed COLA. Tier I employees who voluntarily elect a reduced and delayed COLA will receive: (1) a consideration payment equal to 10% of their employee contributions made prior to the date of the election; and (2) a 10% reduction in their future employee pension contributions. Requires the consideration payment to be paid by SURS. Allows the Board of Trustees, by resolution, to create an accelerated pension benefit payment option for vested inactives in any year. Requires SURS to pay the accelerated pension benefit payments. Creates a voluntary defined contribution plan for up to 5% of Tier I employees by July 1, Provides that, if necessary, the FY 2019 State contribution must be recertified based on the changes in the legislation. Senate Placed on Calendar Order of 3rd Reading on 5/18/18; Passed the House on 6/28/17 HB 4055 Rep. Batinick Pension Reform Creates an optional hybrid plan for new members. Allows new members to elect to participate in Tier II. Creates an accelerated pension benefit payment option between January 1, 2018 and July 1, Creates a voluntary defined contribution plan for up to 5% of Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable). Phases-in changes in actuarial and investment assumptions over a 5-year period. Requires the FY 2018 State contribution to be recertified based on the changes in the legislation. Requires employers to pay the current value of the projected amount of benefits attributable to earnings increases in collective bargaining agreements and contracts entered into, amended, or renewed after the effective date of the legislation that are above the earnings under preceding contracts and collective bargaining agreements. $250 million worth of bonds for buyout House Referred to Rules Committee on 5/25/17 HB 4057 Rep. Ives Pension Reform Creates a Tier III Defined Contribution Plan for new members on or after July 1, 2018 and for Tier I and Tier II members who elect to participate in the Tier III Defined Contribution Plan. Requires the Tier III Defined Contribution Plan to use the framework of the existing Self-Managed Plan. Creates an accelerated pension benefit payment option between January 1, 2018 and July 1, Requires employers to pay the current value of the projected amount of benefits attributable to earnings increases in collective bargaining agreements and contracts entered into, amended, or renewed after the effective date of the legislation that are above the earnings under preceding contracts and collective bargaining agreements. For individuals who first become participants on and after the effective date of the legislation, prohibits payments for unused sick and vacation time from counting towards the final rate of earnings and prohibits service credit for unused sick leave. Allows employees to opt-out of participation in SURS. $250 million worth of House Referred to bonds for buyout; Rules Committee Similar to the Tier III DC on 5/29/17 Plan in SA #2 to SB 1012 (Sen. Righter) HB 4060 Rep. Skillicorn Pension Reform Creates a Tier III Defined Contribution Plan for new members on or after July 1, 2018 and for Tier I and Tier II members who elect to participate in the Tier III Defined Contribution Plan. Requires the Tier III Defined Contribution Plan to use the framework of the existing Self-Managed Plan. Creates an accelerated pension benefit payment option for up to 10% of eligible SURS members each year. $250 million worth of bonds for buyout House Referred to Rules Committee on 6/21/17

35 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 4064 Rep. Durkin Pension Reform Requires Tier I employees to choose between: (1) accepting a reduced and delayed COLA; or (2) keeping the Tier I COLA. Tier I employees who choose to accept the reduced and delayed COLA will have future earnings increases count towards their pensions, pay reduced employee contributions moving forward, and receive a payment equal to 10% of their employee contributions prior to the date of the election. Tier I employees who choose to keep the Tier I COLA will not have future earnings increases count towards their pensions. Requires the FY 2019 State contribution to be recertified based on the changes in the legislation. House Referred to Rules Committee on 6/21/17 HB 4065 Rep. Durkin Pension Reform Creates an optional hybrid plan for new members. Allows new members to elect to participate in Tier II. Creates an accelerated pension benefit payment option for vested inactives between January 1, 2018 and July 1, Creates a voluntary defined contribution plan for up to 5% of eligible Tier I employees. Requires the State contribution to be based on total payroll (including payroll that is not pensionable), but excluding payroll attributable to individuals in the voluntary defined contribution plan. Phases-in changes in actuarial and investment assumptions over a 5-year period (including changes that first applied in FY 2014, FY 2015, FY 2016, and FY 2017). Requires the FY 2018 State contribution to be recertified based on the changes in the legislation. Beginning in FY 2019, requires employers to pay: (1) the employer normal cost of the defined benefit portion of the optional hybrid plan or the defined benefit plan (as applicable), plus 2% (for optional hybrid plan employees and employees who elect to participate in Tier 2); plus (2) the amount to amortize any unfunded liability attributable to the employer's account (for the defined benefits of optional hybrid plan employees and employees who elect to participate in Tier 2); plus (3) the total amount of earnings in excess of $140,000 for each employee multiplied by the level percentage of payroll for SURS to become 90% funded by FY Requires employers to pay the present value of any benefit increases attributable to earnings increases above CPI-U during the final rate of earnings period. House Referred to Rules Committee on 6/21/17 HB 4371 Rep. Martwick State Serial Long Term Pension Obligation Bonds Provides for the issuance of $ billion of State Serial Long Term Pension Obligation Bonds to make payments to the State pension systems on a pro-rated basis in an amount sufficient to bring the actuarially accrued unfunded liability of each individual fund to a 90% level. Requires the State Employees Retirement System, State Universities Retirement System, and Teachers Retirement System to each establish a designated investment fund for 36% of the bond proceeds received from any issuance of State Serial Long Term Pension Obligation Bonds for the purpose of taking advantage of interest arbitrage from the bond proceeds and for making debt service contributions related to the bonds. Creates a continuing appropriation for the payment of principal and interest due on State Serial Long Term Pension Obligation Bonds. House Referred to Rules Committee on 1/30/18 HB 4411 Rep. Ammons No Lobbyists for Multiple Pension Systems Prohibits the State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, Chicago Teachers Pension Fund, and Illinois State Board of Investment from entering into a contract for lobbying services with a lobbyist who represents one of the other aforementioned retirement systems or investment boards. on 5/1/18

36 Exhibit 2 Bill Number HA #1 to HB 4411 HB 4412 (ENRL) HB 4413 (ENGR) SA #1 to HB 4413 HB th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Ammons Rep. Ammons (Sen. Sims) Rep. Ammons (Sen. Manar) Sen. Manar Rep. Ammons No Lobbyists for Multiple Pension Systems Retirement System Senior Administrative Staff Composition Public Broadcast of Pension System Board Meetings Adds language to the legislation that would prohibit a direct relative of a member of the General Assembly from serving on the board of a retirement system, board of a pension fund, or investment board under the Illinois Pension Code. Requires each retirement system, pension fund, or investment board to make its best efforts to ensure that the racial and ethnic makeup of its senior administrative staff represents the racial and ethnic makeup of its membership. Requires any open meeting of the board of trustees of a retirement system or pension fund or any committee established by a retirement system or pension fund to be broadcast to the public and maintained in real-time on the retirement system or pension fund s website using a high-speed Internet connection. Requires the requirement system or pension fund to make both audio and video available for the broadcast and maintenance of such meetings. Provides an effective date of January 31, Public Broadcast Exempts Downstate Policemen s Pension Funds and Downstate Firefighters' Pension Funds from the of Pension System requirements of the legislation. Board Meetings Pension System Requires appointments to the position of executive director or chief investment officer to be made with the Executive Director advice and consent of the Senate. and CIO Senate Confirmation HA #1 Re-Referred to House Rules 5/1/18 Became Public Act on 8/17/18 (House: ; Senate: ) Postponed in Senate State Government 5/29/18; Passed the House on 4/18/18 SA #1 Postponed in Senate State Government 5/29/18 on 5/1/18 HB 4684 (ENRL) Rep. Martwick (Sen. Aquino) SURS Comptroller Intercept Enhances SURS ability to obtain delinquent employer payments that are owed under the law by intercepting them through the State Comptroller and/or the county treasurer for the county in which the employer is located. Identical to SB 2954 (Sen. Aquino) Became Public Act on 8/20/18 (House: ; Senate: )

37 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 4839 Rep. Ives Pension Reform Creates a Tier III Defined Contribution Plan for new members on or after July 1, 2019 and for Tier I and Tier II members who elect to participate in the Tier III Defined Contribution Plan. Requires the Tier III Defined Contribution Plan to use the framework of the existing Self-Managed Plan. Creates an accelerated pension benefit payment option between January 1, 2019 and July 1, Requires employers to pay the current value of the projected amount of benefits attributable to earnings increases in collective bargaining agreements and contracts entered into, amended, or renewed after the effective date of the legislation that are above the earnings under preceding contracts and collective bargaining agreements. For individuals who first become participants on and after the effective date of the legislation, prohibits payments for unused sick and vacation time from counting towards the final rate of earnings and prohibits service credit for unused sick leave. Allows employees to opt-out of participation in SURS. Repeals provisions under Public Act related to the Optional Hybrid Plan. $250 million worth of bonds for buyout; Similar to HB 4057 on 4/13/18 HB 5013 Rep. Spain Downstate Police and Firefighters Investment Consolidation Increases the amount of the annual compliance fee paid by public pension funds and retirement systems (except for Downstate Police and Firefighters Pension Funds) to the Department of Insurance from $8,000 to $16,000. (Increases the amount of the annual compliance for Downstate Police and Firefighters Pension Funds from 2 basis points to 4 basis points of the total assets of the pension fund, but not more than $16,000.) Extends laws governing penalties for non-compliance with the Illinois Pension Code to apply to any pension fund (currently, such laws only apply to any governmental unit) that is subject to any law establishing a pension fund or retirement system for the benefit of employees of the governmental unit. on 4/13/18 HB 5019 (ENRL) Rep. Manley (Sen. Bush) Withholdings for Tuition Programs and ABLE Accounts HB 5028 Rep. Meier 50% of Hydraulic Fracturing Revenues to Fund Pensions Allows an employee or annuitant to authorize the withholding of a portion of his or her salary, wages, or annuity for investment purchases made as a participant or contributor to qualified tuition programs established pursuant to Section 529 of the Internal Revenue Code or qualified ABLE programs established pursuant to Section 529A of the Internal Revenue Code. Requires 50 percent of the moneys received from hydraulic fracturing to be paid into the Pension Relief Fund and to be used to make required employer contributions required to the State Employees Retirement System, State Universities Retirement System, and Teachers Retirement System. Became Public Act on 8/10/18 (House: ; Senate: ) on 4/13/18 HB 5114 Rep. Hays SURS Tier 2 Police Officer and Firefighter Retirement Age Provides that a Tier 2 member who has at least 20 years of service in SURS as a police officer or firefighter can retire at age 60 under the alternative formula for police officers and firefighters. House Referred to Rules Committee on 2/16/18

38 Exhibit 2 Bill Number HB 5137 (ENRL) HB th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Martwick (Sen. McConchie) Rep. Martwick SURS and TRS Supplemental Defined Contribution Plans Governor s Salary Rule Full-Time Equivalent Elimination HB 5404 Rep. Durkin FY 2019 Governor Introduced Budget Creates optional, supplemental defined contribution plans under SURS and TRS. Eliminates the requirement that the Governor s salary rule applies to a participant s earnings as determined on a full-time equivalent basis. Appropriates $1,554,498,000 for the annual required State contribution to SURS for Fiscal Year Of this amount, $1,414,498,000 is appropriated from the General Revenue Fund, and $140,000,000 is appropriated from the State Pensions Fund. The certified Fiscal Year 2019 State contribution is SURS is $1,655,154,000. Appropriates $0 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. Identical to SB 3382 (Sen. Brady) Became Public Act on 8/10/18 (House: ; Senate: ) House Referred to Rules Committee on 2/16/18 House Referred to Rules Committee on 2/16/18 HB 5447 (ENRL) Rep. Currie (Sen. Haine) First 2018 General Revisory Act Creates the First 2018 General Revisory Act. Establishes that the Act is not intended to make any substantive change in the law. Establishes that it reconciles conflicts that have arisen from multiple amendments and enactments and makes technical corrections and revisions in the law. Amends the General Provisions article of the Illinois Pension Code related to disclosures from investment consultants. Changes references from "minority owned" to "minority-owned" and "female owned" to "women-owned." Changes a reference from "female" to "woman." Changes a reference from the "Business Enterprise for Minorities, Females, and Persons with Disabilities Act" to the "Business Enterprise for Minorities, Women, and Persons with Disabilities Act." Makes other changes. Became Public Act on 8/14/18 (House: ; Senate: ) HB 5472 Rep. Martwick Accelerated Pension Benefit Payment Option Creates an accelerated pension benefit payment option for retirement-eligible Tier 1 members. Gives each eligible person the opportunity to accept the Tier 2 automatic annual increase in retirement in exchange for an accelerated pension benefit payment equal to 70% of the difference of the present value of the automatic annual increases on the Tier 1 member s retirement annuity under the Tier 1 formula and the present value of the automatic annual increases on the Tier 1 member s retirement annuity under the Tier 2 formula. No Bonds Provided for Buyout House Referred to Rules Committee on 2/16/18 HB 5611 (ENRL) Rep. Andrade (Sen. Martinez) Department of Innovation and Technology Act Establishes that the Department of Central Management Services is an employer with respect to persons employed by the State Board of Higher Education in positions with the Illinois Century Network as of June 30, 2004 who remain continuously employed after that date by the Department of Central Management Services in positions with the Department of Innovation and Technology. Makes other changes. Became Public Act on 7/20/18 (House: ; Senate: )

39 Exhibit 2 100th General Assembly Sponsor Short Title Short Summary Notes Status Bill Number HB 5674 Rep. Wehrli State-Funded Retirement Systems Annuitant Database HB 5850 Rep. Flowers No Investments in Ford Motor Company HB 5861 Rep. Hoffman Separate SIU-C and SIU-E HB 5877 Rep. Wallace Racial Discrimination and Harassment Reforms Requires each State-funded retirement system, by July 1, 2019, to establish and post on its website a searchable database of the names of all persons receiving an annuity from the System and the amount of the annuity paid by the System to that person each month. Requires each database to be updated on a monthly basis. Prohibits the state-funded retirement systems from investing in Ford Motor Company and its subsidiaries. By July 1, 2019, requires the Illinois Investment Policy Board to make its best efforts to identify all subsidiaries of the Ford Motor Company and include those companies in the list of restricted companies distributed to each retirement system for this purpose. Designates both Southern Illinois University at Carbondale and Southern Illinois University at Edwardsville as participating employers under SURS. (Currently, Southern Illinois University is designated as a participating employer under SURS.) Allows any football coach employed by the Board of Trustees of Southern Illinois University at Carbondale and the Board of Trustees of Southern Illinois University at Edwardsville (currently, the Southern Illinois University System Board of Trustees) to participate in the American Football Coaches Retirement Trust. Establishes that all persons have a right to work in an environment free from racial discrimination and harassment. Prohibits the racial discrimination and harassment of any person, regardless of any employment relationship or lack thereof. Requires personnel policies to include: prohibitions on racial discrimination and harassment; processes for reporting allegations of racial discrimination and harassment; prohibitions on retaliation for reporting allegations of racial discrimination and harassment; the consequences of a violation of the prohibition on racial discrimination and harassment; and the consequences of filing a false report alleging racial discrimination and harassment. Requires each officer, member, employee, and each natural person required to register as a lobbyist to complete, at least annually, a racial bias, discrimination, and harassment training program. Imposes penalties for a violation of the prohibition on racial discrimination and harassment. Creates a hotline to report racial discrimination and harassment. Creates a racial impact note. House Referred to Rules Committee on 2/16/18 House Referred to Rules Committee on 4/3/18 House Referred to Rules Committee on 4/13/18 Passed the House on 5/31/18 HB 5926 HB 5937 Rep. Hernandez Rep. Phelps Finnie No Investments in Companies that Contract to Shelter Migrant Children Repeal 3% Rule and Re-Enact 6% Rule Prohibits the state-funded retirement systems from investing in companies that contract to shelter migrant children. Defines contract to shelter migrant children as entering into a contract with the federal government to shelter migrant children under the federal Unaccompanied Alien Children Program or a substantially similar federal program. Requires employers to pay the present value of the resulting increase in benefits attributable to earnings increases in excess of 6% (instead of 3%) during an employee's final rate of earnings period to SURS. Identical to SB 3622 (Sen. Fowler) Filed with the House Clerk on 7/2/18 Filed with the House Clerk on 8/2/18

40 Exhibit 2 Bill Number HJRCA th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Sosnowski Repeal Pension Rights Repeals Article 13, Section 5 of the Illinois Constitution (commonly referred to as the Pension Protection Clause). Article 13, Section 5 of the Illinois Constitution states: Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired. House Referred to Rules Committee on 1/27/17 HJRCA 44 Rep. Skillicorn No Tax on Retirement Income Amends Article 9, Section 3 of the Illinois Constitution to prohibit the taxation of retirement income by the State of Illinois. Defines retirement income as income derived from a pension or any other retirement plan. (Under current law, retirement income is deducted from income that is taxed by the State of Illinois.) House Referred to Rules Committee on 4/17/18 SR 113 Sen. T. Cullerton Oppose Tax on Retirement Income Resolves that the Illinois Senate believes that the Illinois Income Tax Act should not be amended to permit taxing retirement income. Senate Re-Referred to Assignments 8/4/17 SR 545 Sen. Rezin Oppose Pension Cost Shift to Local Employers SR 1413 Sen. T. Cullerton SA #1 to SR 1413 HR 27 Sen. T. Cullerton Rep. McSweeney Oppose Pension Cost Shift to Local Employers Oppose Pension Cost Shift to Local Employers Oppose Pension Cost Shift to Local Employers Resolves that the Illinois Senate believes that an educational pension cost shift is financially wrong and would only serve to shift pension burdens from the state to the status of an unfunded mandate. Resolves that the Illinois Senate believes that an educational pension cost shift is financially wrong and would only serve to shift pension burdens from the State to the status of an unfunded mandate. Resolves that the Illinois Senate urges the General Assembly not to impose an educational pension cost shift as it would only serve to shift pension burdens from the State to the status of an unfunded mandate. Resolves that the Illinois House of Representatives believes that an educational pension cost shift is financially wrong and would only serve to shift pension burdens from the state to the status of an unfunded mandate. Senate Referred to Assignments 5/26/17 Senate Placed on Calendar Order of Secretary's Desk Resolutions on 3/14/18 Recommended Be Adopted as Amended in Senate Education Committee (12-0-0) on 3/14/18 on 9/28/17 HR 29 Rep. McSweeney Oppose Tax on Retirement Income Resolves that the Illinois House of Representatives believes that the Illinois Income Tax Act should not be amended to permit taxing retirement income. on 9/28/17

41 Exhibit 2 Bill Number HR th General Assembly Sponsor Short Title Short Summary Notes Status Rep. Skillicorn Oppose Pension Cost Shift to Local Employers Resolves that the normal cost of pensions for Illinois educators is the responsibility of the state and the General Assembly should not use the current budget crisis as a reason to shift its financial responsibility for state pension costs to local taxpayers. on 9/28/17 HR 76 Rep. Flowers Urge Repeal of Federal Offsets Resolves that the Illinois House of Representatives urges the U.S. Congress to introduce and pass legislation that eliminates both the Government Pension Offset and the Windfall Elimination Provision. Resolution Adopted on 6/22/17 HR 542 Rep. Flowers Urge Solution to Windfall Elimination Problems HJR 106 Rep. McSweeney Oppose Tax on Retirement Income Resolves that the Illinois House of Representatives urges President Trump and the United States Congress to continue to work to find a solution to the problems created by the Windfall Elimination Provision. Resolves that the House of Representatives and Senate of the State of Illinois believe that the Illinois Income Tax Act should not be amended to permit taxing retirement income. on 12/15/17 House Assigned to Revenue and Finance Committee Income Tax Subcommittee on 4/19/18

42 Exhibit 3 MEMORANDUM To: Legal & Legislative Committee From: Albert J. Lee, Associate General Counsel Date: September 12, 2018 Re: Tier 1 AAI Buyout Election and PEP Issue Public Act added Section of the Illinois Pension Code that permits new Tier 1 retirees to elect an accelerated pension benefit payment (a.k.a. Tier 1 AAI Buyout) that equals 70% of the difference between the present values of future retirement and survivor automatic annual increases (AAI) under a 3% annually compounding AAI versus a delayed 1.5% simple interest AAI. The Tier 1 AAI Buyout election is only permitted for non-smp Tier 1 members who submit an application for retirement, meet the age and service requirements for retirement, have not received any retirement annuity, and have not elected a buyout under Section If a Tier 1 AAI Buyout is elected, then the retiree will receive the delayed 1.5% simple interest AAI on all retirement and survivor benefits. The election opportunity expires on June 30, SURS will be required to calculate upon request (once per fiscal year) the amount of the Tier 1 AAI Buyout offer using actuarial tables and other assumptions adopted by the Board. To calculate the Tier 1 AAI Buyout amount, the retirement claim must use verified earnings and service data gathered from employers, some of which cannot be obtained until after the member retires from employment. The typical retirement claim finalization process may take from three weeks up to six months after the retirement date for this reason. Due to this time lag, SURS implemented a long-standing Preliminary Estimated Payment (PEP) program to help SURS retirees meet their living expenses during the retirement claim processing period. PEPs are intended to approximate about 80% to 90% of the retirement annuity amount without taking into account unverified current year earnings, vacation payments, unused sick leave credits, Reciprocal credits, or service credit purchases. The PEPs are paid as of the first of the month on or immediately following the retirement date. After the retirement claim is finalized, the retiree receives a makeup check for the difference between the PEPs and the finalized retirement annuity payments that would have been made upon retirement. Outside tax counsel has advised SURS that the payment of PEPs before a SURS retiree makes an irrevocable election to take a Tier 1 AAI Buyout could be viewed by the Internal Revenue Service (IRS) as a violation of the non-increasing annuity rule under the Required Minimum Distribution regulations for Section 401(a)(9) of the Internal Revenue Code. In 2015, the IRS published its intent to pass regulations under Section 401(a)(9) that would prohibit annuitants from electing a lump-sum acceleration of their annuity payments. The potential solutions to this issue would entail either (1) eliminating PEPs before a SURS retiree irrevocably elects to take a Tier 1 AAI Buyout or (2) requiring SURS retirees to make the irrevocable Tier 1 AAI Buyout election based on estimated figures, rather than finalized figures. Neither solution is

43 Legal & Legislative Committee Tier 1 AAI Buyout Election and PEP Issue September 12, 2018 Page 2 of 2 Exhibit 3 ideal. The first solution could put members who wish to consider the buyout option under financial hardship, or at the very least, make the consideration of the buyout option less palatable for many retirees. The second solution would require retirees to make an election based on estimated retirement figures that would be likely to differ from the finalized figures after all earnings and service information have been verified. Staff recommends that SURS submit a Private Letter Ruling request with the IRS with the aim of obtaining a favorable ruling on the practice of paying PEPs until the SURS retiree has made an irrevocable election to take a Tier 1 AAI Buyout. Outside tax counsel has advised Staff that there is a significant likelihood that the IRS would rule favorably given the policy aims of the non-increasing annuity rule. The non-increasing annuity rule and the 2015 rulemaking notice appear to have the policy intent of protect annuitants who are well into their annuity payment schedules from making ill-advised decisions to cashout the remainder of their lifetime annuity incomes. By contrast, the timing of the Tier 1 AAI Buyout election in relation to the PEPs do not implicate such policy concerns. Rather than seeking to cashout annuitants who have been receiving annuity payments, the Tier 1 AAI Buyout election is essentially an election as to the form of annuity benefit that is to be paid from the outset of retirement. Under either election, the annuitant will continue receiving annuity benefits. Furthermore, the timing of the election is merely a product of administrative processing delays. Staff Recommendation That Staff is directed to address the issue of paying preliminary estimate payments (PEPs) prior to a retiree making a final Tier 1 AAI Buyout election by: 1. Seeking a Private Letter Ruling from the Internal Revenue Service on the issue of whether paying PEPs can be made to SURS retirees before their irrevocable Tier 1 AAI Buyout election is made. 2. Eliminate PEPs to retirees until an irrevocable Tier 1 AAI Buyout election is made. 3. Require SURS retirees to make irrevocable Tier 1 AAI Buyout elections based on estimated retirement figures.

44 Exhibit 4 SEPTEMBER 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 /3/ /31/2018 Administration Drivers License & Insurance Certification U of I Annual 625 ILCS 5/7-203 & JCAR 44 Sec /10/2018 6/30/2019 Administration Certification of Board Training Requirement DFPR-Public Pension/Insurance Div Annual 40 ILCS 5/1/ /29/2018 6/30/2019 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 9/12/ /31/2018 Audit Fiscal Year Audit Completion Report Internal - Filed with the Executive Director Annual Fiscal Control & Auditing Act 9/12/2018 9/30/2019 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 6/27/2018 6/30/2019 Audit Submission of System Audit (due after FY end) Governor - submitted by SURS and by the Annual State Auditing Act and 30 ILCS 5/3-14 and 40 ILCS 5/ FY17-1/19/2018 Finance CAFR Internal Annual 40 ILCS 5/ /17/ /31/2018 Finance Comptroller Annual (by 10/15) PA / Financial GAAP Reporting Standards Board Act prelim sent 9/28/2018 final due 10/15/2018 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 7/19/ /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 7/31/ /31/2018 Finance Agency Fixed Asset Report Comptroller Quarterly SAMS 7/26/ /31/2018 Finance Accounts Receivable Comptroller Quarterly SAMS 7/26/ /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 7/26/2018 7/31/2019 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 9/4/ /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 /11/ /10/2018 Human Resources Monthly Wage Report IDES taxnet Online Monthly (EXCEPT 1/4/7/10) IDES PA /18/ /30/2018 Human Resources Quarterly (1/31, 4/30, IDES taxnet Online IDES PA Form UI-3/40 7/31/10/31 7/10/ /31/2018 Human Resources Report of Employee Served State Universities Civil Service System Quarterly (w/n 10 days EOQ) Civil Service Rule /9/ /10/2018 Human Resources Exempt Employees Report State Universities Civil Service System Quarterly 110 ILCS 70/36 7/9/ /10/2018 Human Resources Occupational Ethnic and Gender Report State Universities Civil Service System Quarterly (w/n 10 days EOQ) Civil Service Rule /9/ /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 7/5/2018 1/15/2019 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 June filed 9/7/18 July due 9/30/18 Investments Investments Information Report - Monthly Online Surs.org Monthly (by the 15th) 30 ILCS 237/10 PA /14/ /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 FY18 1

45 Exhibit 4 SEPTEMBER COMPLIANCE REPORT (2018) Investments Quinquennial Rep. US Owned Foreign Securities** Federal Reserve Bank Only upon request 5 years 22 USC Sec *required threshold for reporting not met for Next reporting year will be in 2022 and only if we meet the reporting Not required for 2018 threshold. 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 /30/2018 7/31/2019 Investments Invest in Illinois Governor Annual PA /30/2018 9/1/2019 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 require Investments Investment Manager Fee Disclosure SURS.org website Quarterly 40 ILCS 5/ June filed 9/28/ /31/2018 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 8/16/2018 9/1/2019 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 9/17/ /20/2018 Legal & Ethics Lobbying Expenditure Report (5th) Secretary of State Monthly 25 ILCS 170/6 9/4/ /5/2018 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 6/30/2018 6/30/2019 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 4/30/2018 6/30/2019 Legal & Ethics ARDC Registration ARDC Annual 128 Ill.2d 351, 538 NE 2d /31/2018 7/31/2019 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- Staff OEIG Annual 5 ILCS 430/5-10 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 6/30/2018 6/30/2019 Legal & Ethics Sexual Harassment Training for Staff and Trustees OEIG Annual 5 ILCS 450/ NEW Calendar Year

46 Exhibit 4 SEPTEMBER COMPLIANCE REPORT (2018) 3

47 Exhibit 4 SEPTEMBER COMPLIANCE REPORT (2018) ed to file by 4/1 4

48 Exhibit 5 MEMORANDUM To: Legal & Legislative Committee From: Albert J. Lee, Associate General Counsel Date: September 5, 2018 Re: Rulemaking Update As of September 5, 2018, SURS has one pending rulemaking (42 Ill. Reg (2/23/2018)). The rulemaking seeks to amend Section (concerning the definition of pensionable "earnings") and Section (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 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. The new section seeks to implement the Governor's Salary Rule under Public Act , effective July 6, 2017, and clarify statutory ambiguities pertaining to the measurement year and the way full-time equivalent earnings are calculated. The Second Notice version of the rulemaking was approved for adoption by the Joint Administrative Rules ( JCAR ) at its May 15, 2018 hearing. On July 20, 2018, Governor Bruce Rauner signed SB 2954 into law as Public Act Public Act made significant changes to the Governor s Salary Rule under Section (j-5) of the Illinois Pension Code, including removing the requirement that earnings be compared against the Governor s salary on a full-time equivalent basis. SURS staff contacted JCAR and requested that new Section (Governor s Salary Rule) be removed from Second Notice so that the other sections could be adopted without having to withdraw the rulemaking in its entirety. In response, JCAR staff has permitted SURS to resubmit the Second Notice rulemaking without Section for consideration by JCAR at its next meeting on September 18, SURS will adopt the remaining sections after JCAR approves the rulemaking without Section Proposed rulemakings implementing the Governor s Salary Rule as amended by Public Act are anticipated to come before the Board in December 2018 along with other rulemakings, including those implementing the buyout legislation and the 3% Rule recently enacted under Public Act , effective June 4, 2018.

49 Exhibit 6 MEMORANDUM To: Legal & Legislative Committee From: Albert J. Lee, Associate General Counsel Date: August 24, 2018 Re: Legislative Proposal Concerning Change in Elected Trustee Status Section (g) of the Illinois Pension Code governs the disqualification of a SURS trustee upon incurring a mid-term change in status as an active participant or an annuitant. The provision in question was originally enacted when all trustees were appointed by the Governor. Unfortunately, when the legislature updated the statute to reflect the new composition of the SURS board members, it failed to specify that the disqualification language only applied to elected trustees. The Office of the Attorney General advised the Board in an informal opinion dated November 9, 2017 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." (See copy of the Attorney General s letter dated 11/9/17 attached as Exhibit A ). During the June 7, 2018 Legal & Legislative Committee meeting, the Committee members directed the SURS Legal Department to draft proposed legislation for trustees elected after July 15, 2018, to clarify that an employee-elected or annuitant-elected member of the Board would be disqualified from serving as an elected trustee upon the termination of his or her respective status as a participating employee or an annuitant. The proposed legislation replaces the term active participant with the term participating employee, which has a statutory definition under Section and already encompasses the understood meaning of active participant (that is, persons who are actively employed with a SURS-covered employer). The proposed legislation does not affect any elected trustees who were incumbent as of July 15, Any trustee incumbent as of July 15, 2018 who has incurred a change in status after having been elected will continue to serve in the same position to which he or she was elected throughout the remainder of his or her term. Staff Recommendation: That the Board authorize the SURS Legal Department to pursue a legislative change to Section substantively in the form presented in Exhibit B.

50 EXHIBIT A INFORMAL OPINION LETTER FROM THE OFFICE OF THE ATTORNEY GENERAL NOVEMBER 9, 2017 Exhibit 6

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