§ 1405 — Financing Benefits for Employees of Local Governments

A. 1. For the year 1978 and for each calendar year thereafter, contributions shall accrue and become payable, pursuant to Section 1400, by each governmental entity (other than the State of Illinois and its wholly owned instrumentalities) referred to in clause (B) of Section 211.1, upon the wages paid by such entity with respect to employment after 1977, unless the entity elects to make payments in lieu of contributions pursuant to the provisions of subsection B. Notwithstanding the provisions of Sections 1500 to 1510, inclusive, a governmental entity which has not made such election shall, for liability for contributions incurred prior to January 1, 1984, pay contributions equal to 1 percent with respect to wages for insured work paid during each such calendar year or portion of such year as may be applicable. As used in this subsection, the word "wages", defined in Section 234, is subject to all of the provisions of Section 235. 2. An Indian tribe for which service is exempted from the federal unemployment tax under Section 3306(c)(7) of the Federal Unemployment Tax Act may elect to make payments in lieu of contributions in the same manner and subject to the same conditions as provided in this Section with regard to governmental entities, except as otherwise provided in paragraphs 7, 8, and 9 of subsection B. B. Any governmental entity subject to subsection A may elect to make payments in lieu of contributions, in amounts equal to the amounts of regular and extended benefits paid to individuals, for any weeks which begin on or after the effective date of the election, on the basis of wages for insured work paid to them by the entity during the effective period of such election. Notwithstanding the preceding provisions of this subsection and the provisions of subsection D of Section 1404, with respect to benefit years beginning prior to July 1, 1989, any adjustment after September 30, 1989 to the base period wages paid to the individual by any employer shall not affect the ratio for determining payments in lieu of contributions of a governmental entity which has elected to make payments in lieu of contributions. Provided, however, that with respect to benefit years beginning on or after July 1, 1989, the governmental entity shall be required to make payments equal to 100% of regular benefits, including dependents' allowances, and 100% of extended benefits, including dependents' allowances, paid to an individual with respect to benefit years beginning during the effective period of the election, but only if the governmental entity: (a) is the last employer as provided in Section 1502.1 and (b) paid to the individual receiving benefits, wages for insured work during his base period. If the governmental entity described in this paragraph meets the requirements of (a) but not (b), with respect to benefit years beginning on or after July 1, 1989, it shall be required to make payments in an amount equal to 50% of regular benefits, including dependents' allowances, and 50% of extended benefits, including dependents' allowances, paid to an individual with respect to benefit years beginning during the effective period of the election. 1. Any such governmental entity which becomes an employer on January 1, 1978 pursuant to Section 205 may elect to make payments in lieu of contributions for not less than one calendar year beginning with January 1, 1978, provided that it files its written election with the Director not later than January 31, 1978. 2. A governmental entity newly created after January 1, 1978, may elect to make payments in lieu of contributions for a period of not less than one calendar year beginning as of the first day with respect to which it would, in the absence of its election, incur liability for the payment of contributions, provided that it files its written election with the Director not later than 30 days immediately following the end of the calendar quarter in which it has been created. 3. A governmental entity which has incurred liability for the payment of contributions for at least 2 calendar years, and is not delinquent in such payment and in the payment of any interest or penalties which may have accrued, may elect to make payments in lieu of contributions beginning January 1 of any calendar year, provided that it files its written election with the Director prior to such January 1, and provided, further, that such election shall be for a period of not less than 2 calendar years. 4. An election to make payments in lieu of contributions shall not terminate any liability incurred by a governmental entity for the payment of contributions, interest or penalties with respect to any calendar quarter (or month, as the case may be) which ends prior to the effective period of the election. 5. The termination by a governmental entity of the effective period of its election to make payments in lieu of contributions, and the filing of and subsequent action upon written notices of termination of election, shall be governed by the provisions of paragraphs 5 and 6 of Section 1404A, pertaining to nonprofit organizations. 6. With respect to benefit years beginning prior to July 1, 1989, wages paid to an individual during his base period by a governmental entity which elects to make payments in lieu of contributions for less than full time work, performed during the same weeks in the base period during which the individual had other insured work, shall not be subject to payments in lieu of contribution (upon such employer's request pursuant to the regulation of the Director) so long as the employer continued after the end of the base period, and continues during the applicable benefit year, to furnish such less than full time work to the individual on the same basis and in substantially the same amount as during the base period. If the individual is paid benefits with respect to a week (in the applicable benefit year) after the employer has ceased to furnish the work hereinabove described, the governmental entity shall be liable for payments in lieu of contributions with respect to the benefits paid to the individual after the date on which the governmental entity ceases to furnish the work. 7. An Indian tribe may elect to make payments in lieu of contributions for calendar year 2003, provided that it files its written election with the Director not later than January 31, 2003, and provided further that it is not delinquent in the payment of any contributions, interest, or penalties. 8. Failure of an Indian tribe to make a payment in lieu of contributions, or a payment of interest or penalties due under this Act, within 90 days after the Department serves notice of the finality of a determination and assessment shall cause the Indian tribe to lose the option of making payments in lieu of contributions, effective as of the calendar year immediately following the date on which the Department serves the notice. Notice of the loss of the option to make payments in lieu of contributions may be protested in the same manner as a determination and assessment under Section 2200 of this Act. 9. An Indian tribe that, pursuant to paragraph 8, loses the option of making payments in lieu of contributions may again elect to make payments in lieu of contributions for a calendar year if: (a) the Indian tribe has incurred liability for the payment of contributions for at least one calendar year since losing the option pursuant to paragraph 8, (b) the Indian tribe is not delinquent in the payment of any liabilities under the Act, including interest or penalties, and (c) the Indian tribe files its written election with the Director not later than January 31 of the year with respect to which it is making the election. C. As soon as practicable following the close of each calendar quarter, the Director shall mail to each governmental entity which has elected to make payments in lieu of contributions a Statement of the amount due from it for all the regular and extended benefits paid during the calendar quarter, together with the names of its workers or former workers and the amounts of benefits paid to each of them during the calendar quarter with respect to benefit years beginning prior to July 1, 1989, on the basis of wages for insured work paid to them by the governmental entity; or, with respect to benefit years beginning after June 30, 1989, if such governmental entity was the last employer as provided in Section 1502.1 with respect to a benefit year beginning during the effective period of the election. All of the provisions of subsection B of Section 1404 pertaining to nonprofit organizations, not inconsistent with the preceding sentence, shall be applicable to payments in lieu of contributions by a governmental entity. D. The provisions of subsections C through F, inclusive, of Section 1404, pertaining to nonprofit organizations, shall be applicable to each governmental entity which has elected to make payments in lieu of contributions. E. 1. If an Indian tribe fails to pay any liability under this Act (including assessments of interest or penalty) within 90 days after the Department issues a notice of the finality of a determination and assessment, the Director shall immediately notify the United States Internal Revenue Service and the United States Department of Labor. 2. Notices of payment and reporting delinquencies to Indian tribes shall include information that failure to make full payment within the prescribed time frame: a. will cause the Indian tribe to lose the exemption provided by Section 3306(c)(7) of the Federal Unemployment Tax Act with respect to the federal unemployment tax; b. will cause the Indian tribe to lose the option to make payments in lieu of contributions.

Legislative History

(Source: P.A. 97-689, eff. 6-14-12.)