IL SB3278

Creates a new "Tier 3 participant" classification for General Assembly Retirement System members who first become participants on or after January 1, 2017.

Requires the System to establish a defined contribution plan by July 1, 2016, exclusively for Tier 3 participants, excluding them from the traditional pension plan available to Tier 1 and Tier 2 participants.

Provides State contributions at 25% of employee contributions, capped at a maximum 2% of participant salary, with 3-year vesting requirement for State contributions.

Requires the defined contribution plan to offer multiple investment options (including Illinois State Board of Investment options), various payout options for retirees and survivors, and optional defined disability benefits.

Designates the Illinois State Board of Investment as plan sponsor and requires the System to report progress to the Governor and General Assembly by January 15, 2016, with plan implementation contingent on receiving qualified plan status from the Internal Revenue Service.