1. Serving Employees of Illinois Community Colleges and Universities State Universities Retirement System 1 Pension Reform (PA98-599) PensionReform– 03.06.14

2. The following information is for informational purposes only Uncertainties regarding PA98-599 (pension reform/SB1) still exist Further legislation or the outcome of pending lawsuits could result in changes Serving Employees of Illinois Community Colleges and Universities2 IMPORTANT

3. DISCLAIMER Serving Employees of Illinois Community Colleges and Universities3 On the advice of counsel, SURS is unable to provide specific advice about the implications of the new law with respect to individual situations. All responses to questions are the opinions of SURS staff and professionals and should not be considered definitive representations of SURS. All SURS responses to any questions, or comments from SURS, are subject to modification by a court interpretation of the applicable provisions of the newly enacted law.

4. PA98-599 (Pension Reform/SB1) Signed by Governor Quinn on December 5, 2013 Changes primarily impact SURS members who are in Tier I Tier I members are participants with SURS or another eligible Illinois retirement system who certified prior to 01/01/11. Serving Employees of Illinois Community Colleges and Universities 4 IMPORTANT

5. Employee Contributions Retirement Age Eligibility Maximum Pensionable Earnings Cap Effective Rate of Interest Money Purchase Actuarial Changes Automatic Annual Increase (AAI) New Defined Contribution Plan Funding Changes Closed to new private employers as of June 1, 2014 CHANGES Serving Employees of Illinois Community Colleges and Universities 5

6. Effective date July 1, 2014 Traditional & Portable Plans - 7% 6% “normal” retirement 1% survivor (Traditional) or portability (Portable) Police/Firefighter - 8.5% 7.5% “normal” retirement 1% survivor Self-Managed Plan - 8% No change EMPLOYEE CONTRIBUTIONS Serving Employees of Illinois Community Colleges and Universities 6 Tier I

7. RETIREMENT AGE ELIGIBILITY Serving Employees of Illinois Community Colleges and Universities 7 Tier I If a member retires on or after July 1, 2014, the retirement age is delayed based on age as of June 1, 2014 Age 46 and olderNo delay Age 454 months delay Age 448 months delay Age 4312 months delay Ages 42-32Additional 4 months for each year under age 43 (e.g. Age 42 would be 16 months delay) Less than age 3260 months (5 years) delay Also applies to Police/Firefighter eligibility 30 & Out – no change

8. Effective June 1, 2014 Greater of: Adjusted Tier II earnings limitation $110,631.26 for FY2015 Annualized salary as of June 1, 2014 SURS is using actual FY2014 earnings (07/01/13-06/30/14) Includes overtime, overloads, and summer Annualized salary immediately before the expiration, renewal, or amendment of a collective bargaining agreement in effect on June 1, 2014 MAXIMUM PENSIONABLE EARNINGS Serving Employees of Illinois Community Colleges and Universities 8 Tier I

9. Tied to U.S. 30-yr. Treasury Bond rates plus 0.75% as of July 1, 2014 U.S. 30-yr. Treasury Bond rate as of January 8, 2014 was 3.9% Change will affect: Actuarial Factors Money Purchase Formula Calculations Waivers Refunds Lump-Sum Retirements Service Credit Purchases Overpayments EFFECTIVE RATE OF INTEREST (ERI) Serving Employees of Illinois Community Colleges and Universities 9 Tier I & II

10. Effective July 1, 2014 Lower effective rate of interest (ERI) will result in changes to actuarial assumptions Based on estimated changes to actuarial factors, approximate 20-30% decrease to Money Purchase calculation SURS continues to calculate other formulas SURS will pay the highest benefit MONEY PURCHASE ACTUARIAL CHANGES Serving Employees of Illinois Community Colleges and Universities 10 Tier I

11. Serving Employees of Illinois Community Colleges and Universities CURRENT FACTORS Money Purchase Formula* Calculation: Assumes member is age 60 years 0 months Normal Retirement Contributions & Interest $153,950 State Employer Match($153,950 x 1.4) +$215,531 Total Normal Contributions & Interest at Retirement =$369,481 Current Actuarial Factor (eff. July 2,2012) ÷ 129.943 Monthly Retirement Benefit=$ 2,843 *Money Purchase Formula not applicable if certification date is on or after July 1, 2005 11 Tier I

12. Serving Employees of Illinois Community Colleges and Universities FUTURE ESTIMATED FACTORS Money Purchase Formula* Calculation: Assumes member is age 60 years 0 months Normal Retirement Contributions & Interest $153,950 State Employer Match($153,950 x 1.4) +$215,531 Total Normal Contributions & Interest at Retirement =$369,481 Estimated Actuarial Factor (eff. July 1, 2014) ÷ 173.725 Monthly Retirement Benefit=$ 2,126 *Money Purchase Formula not applicable if certification date is on or after July 1, 2005 12 Tier I

13. Money purchase annuity will never be lower than the money purchase annuity the retiree would have received had he/she retired during the fiscal year preceding June 1, 2014 Member must meet all eligibility requirements on or before June 30, 2013 Unpaid sick leave and vacation not used in this calculation Applies to the monthly annuity only Does not apply to excess waivers due to maximum benefit MINIMUM MONEY PURCHASE Serving Employees of Illinois Community Colleges and Universities 13 Tier I

14. SURS will also calculate all other applicable formulas: General Formula House Bill Minimum Police/Firefighter SURS will pay highest benefit to member OTHER FORMULAS Serving Employees of Illinois Community Colleges and Universities 14

15. GENERAL FORMULA (2.2% Calculation) Serving Employees of Illinois Community Colleges and Universities Age at retirement = 60 years 28 years service credit Final Average Earnings= $48,350 Calculation of Benefit: 28 yrs x 2.2% = 61.6% Annual Benefit: 61.6% x $48,350 = $29,783 Monthly Benefit: $29,783 ÷ 12 = $2,481 15

16. FORMULA COMPARISON Serving Employees of Illinois Community Colleges and Universities 16 Tier I Based on current factors $2,843 Based on future estimated factors $2,126 Minimum Money Purchase Annuity (06/30/13) $2,500 General Formula $2,481

17. Applies to all Tier I members (current and future retirees) First new increase effective January 1, 2015 First increase is prorated based on the number of months retired AAI skipping applies if retired on or after July 1, 2014 Survivor and disability recipients AAI is unchanged AUTOMATIC ANNUAL INCREASE (AAI) Serving Employees of Illinois Community Colleges and Universities 17 Tier I

18. New AAI is 3% of the lesser of the following: Total annual annuity (including any previous AAI), or Total years of service x $1,000* *Each year, starting January 1, 2016, $1,000 multiplier will be adjusted by the Consumer Price Index for Urban Consumers (CPI-U) AAI CALCULATION Serving Employees of Illinois Community Colleges and Universities 18 Tier I

19. Annual retirement annuity on January 1, 2015, is $42,000 Years of service – 22.00 AAI calculation is lesser of the following: AAI EXAMPLE Serving Employees of Illinois Community Colleges and Universities 19 1.22 years of service x $1,000 = $22,000 $22,000 x 3% = $660 annual increase OR 2.$42,000 total annual annuity $42,000 x 3% = $1,260 annual increase Tier I Member’s annual increase would be $660.00

20. AAI SKIPPING BASED ON AGE Serving Employees of Illinois Community Colleges and Universities 20 Tier I Based on member’s age on June 1, 2014 Age 50 or more: Skip 2 nd AAI Age 47-49: Skip 2 nd, 4 th, and 6 th AAI Age 44-46: Skip 2 nd, 4 th, 6 th, and 8 th AAI Less than Age 44: Skip 2 nd, 4 th, 6 th, 8 th, and 10 th AAI AAI skipping applies to all Tier I members who retire on or after July 1, 2014

21. Many unknowns at this time; more details to be determined Subject to IRS approval Available for 5% of Tier I members who were active on June 1, 2014 First-come-first-serve basis New plan available no sooner than July 1, 2015 NEW DEFINED CONTRIBUTION PLAN Serving Employees of Illinois Community Colleges and Universities 21 Tier I

22. Tier I member elects to “freeze” current defined benefit plan benefit accruals Employee contributions credited to the new defined contribution account will be reduced to cover the “cost” of the plan Cost of the plan will be shared among the participating members Employer match will range from 3% to the normal cost of the defined benefit plans State of Illinois will adjust the rate annually NEW DEFINED CONTRIBUTION PLAN Serving Employees of Illinois Community Colleges and Universities 22 Tier I

23. New employees hired on or after June 1, 2014 No vacation pay included in calculations No unused/unpaid sick leave included as service credit VACATION & SICK LEAVE Serving Employees of Illinois Community Colleges and Universities 23

24. PA98-599 incorporates funding changes that will allow the state to payoff 100% of the Unfunded Accrued Actuarial Liability (UAAL) by 2044 Changes include, but not limited to: State must make annual payments on time or SURS Board can sue Retirement systems to receive two forms of supplemental payments until SURS is 100% funded For more information regarding funding changes visit: www.surs.org FUNDING CHANGES Serving Employees of Illinois Community Colleges and Universities 24

25. 30-year state contributions savings estimated to be $29.279 billion* (SURS only) *This figure is based on a 12/20/2013 SURS actuarial study on the fiscal impact of PA98-599 FISCAL IMPACT Serving Employees of Illinois Community Colleges and Universities 25

26. SEVERABILITY The following are an inseverable block: New AAI and AAI skipping Employee contributions and employer funding 10% Pension savings and pension stabilization fund New defined contribution plan New defined contribution plan-related provisions in the Retirement Systems Reciprocal Act All other provisions are severable from the rest: Retirement age delays Maximum pensionable earnings cap Effective rate of interest Unused vacation/sick leave Private employers 26

27. Official effective date of PA98-599 is June 1, 2014 Effective June 1, 2014 Pensionable earnings cap No unused vacation or sick leave for new hires No private employers Effective July 1, 2014 Effective rate of interest (ERI) Employee contribution rate Retirement age Funding changes Effective January 1, 2015 New AAI starts but skipping applies to retirements on or after July 1, 2014 Effective no earlier than July 1, 2015 New defined contribution plan opens EFFECTIVE DATES RECAP Serving Employees of Illinois Community Colleges and Universities 27

28. EMPLOYMENT AFTER RETIREMENT Serving Employees of Illinois Community Colleges and Universities 28 No changes with PA98-599 No limitations for non SURS-covered employment SURS-covered employment 60-day waiting period Earnings limitation Before age 60, monthly limitation Age 60+, annual limitation Does not apply to Self-Managed Plan Further employer restrictions may apply Contact your employer for more information

29. Eligibility Must be eligible to retire before 07/01/14 Limit one request per 12-month period Type of Estimates Written Appointment Due to unprecedented demand SURS is offering Group Counseling Sessions beginning March 21 Individual counseling sessions are very limited at this time Process Complete retirement estimate form online, or Contact SURS to initiate request Submit completed form to SURS Call SURS to schedule RETIREMENT ESTIMATES Serving Employees of Illinois Community Colleges and Universities 29

30. BENEFIT SUMMARY STATEMENT: PAGE 1 Serving Employees of Illinois Community Colleges and Universities 30

31. BENEFIT SUMMARY STATEMENT: PAGE 2 Serving Employees of Illinois Community Colleges and Universities 31

32. BENEFIT SUMMARY STATEMENT: PROJECTED RETIREMENT ANNUITY Serving Employees of Illinois Community Colleges and Universities 32

33. HOW TO CONTACT US SURS 1901 Fox Drive Champaign, IL 61820 Serving Employees of Illinois Community Colleges and Universities 33 (800) 275-7877 (217) 378-8800 www.surs.org

34. SURS WEBSITE Serving Employees of Illinois Community Colleges and Universities 34

35. DISCLAIMER On the advice of counsel, SURS is unable to provide specific advice about the implications of the new law with respect to individual situations. All responses to questions are the opinions of SURS staff and professionals and should not be considered definitive representations of SURS. All SURS responses to any questions, or comments from SURS, are subject to modification by a court interpretation of the applicable provisions of the newly enacted law. Serving Employees of Illinois Community Colleges and Universities35