3% Cap Rules Now Final
Speaking of Public Act 100-587, school districts by now should be well-aware that the legislature passed and Governor Rauner signed into law a new, lower threshold of 3% for pension penalties. Although the law was effective June 4, the rules interpreting and defining that law were not immediately adopted or published. The rules were finally incorporated within the new administrative code published online late fall (about November 20). The rules may be reviewed in their entirety here:
Of particular note, school districts should observe the following:
- A school district under a collective bargaining agreement adopted and executed before June 4, 2018, it is exempt from the 3% limitation, but only to the extent that employees are covered by that agreement or an individual contract. For teachers not covered by collective bargaining agreements or contracts, TRS will accept employment policies in effect prior to June 4, 2018 as evidence of a contractual agreement under which salary increases paid shall be exempt from employer contributions under. Payments made to employees operating under an employment policy in effect prior to June 4, 2018 will be exempt from the 3% cap if notice was provided as required by the employment policy prior to June 4, 2018 and payments are made pursuant to the term of the policy prior to June 30, 2022.
- A contract loses its grandfathered status if:
- There is an increase to existing salary or sick leave enhancement during the term of the contract or the addition of a new salary or sick leave enhancement; or
- There is a renegotiated increase to salary unless there is a salary reopener in the original grandfathered agreement pursuant to very specific terms; or
- The parties fail to comply with the collective bargaining agreement or policy as-drafted.
- The exemptions from employer contributions provided under for those members who notify their employer of the intent to retire under the terms of an exempt (grandfathered) contract or collective bargaining agreement but do not receive such incentives until after the expiration of the contract or collective bargaining agreement shall cease no later than four consecutive school years after the expiration of the contract or collective bargaining agreement. Schools should be careful to assess their contracts and collective bargaining agreements carefully to be sure that an employee's election of retirement incentive is compliant both with the rule and the terms of such agreement or policy.
Because TRS is the arbiter of disputes over the meaning and applicability of its rules, it is imperative that a school unsure of the meaning or applicability of its incentive or situation to the law and rules carefully review both and not make assumptions or rely on prior practices as sole information as to how the new law will affect those increases.