Reference Title: financial institution income tax; interest

AN ACT
AMENDING SECTIONS 38-727, 38-804, 38-805, 38-808 AND 38-816, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARIZONA REVISED STATUTES, BY ADDING ARTICLE 8; RELATING TO RETIREMENT.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 38-727, Arizona Revised Statutes, is amended to read:

38-727 . Eligibility; elected officials' option

The following provisions apply to all employees hired on or after the effective date:

1. All employees and officers of this state and all officers and employees of political subdivisions establishing a retirement plan administered by the board pursuant to this article who as a result of state service or service for the political subdivision are included in agreements providing for their coverage under the federal old age and survivors insurance system are subject to this article, except that membership is not mandatory :

( a) On the part of any employee who is eligible and who elects to participate in the optional retirement programs established by the Arizona board of regents pursuant to the authority conferred by section 15-1628 or by a community college district board pursuant to authority conferred by section 15-1451 . or

(b) For an A STATE elected official who is subject to term limits, who is eligible for participation in ASRS because the STATE elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A and who elects not to participate in ASRS as provided in paragraph 7 of this section.

(c) FOR AN EMPLOYEE OF THE LEGISLATURE WHO ELECTS AS PROVIDED IN PARAGRAPH 8 OF THIS SECTION TO PARTICIPATE IN A TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PROGRAM ESTABLISHED PURSUANT TO ARTICLE 5 OF THIS CHAPTER IN LIEU OF PARTICIPATION IN ASRS.

(d) FOR EXEMPT STATE OFFICERS OR EMPLOYEES AS DEFINED IN SECTION 38-951 WHO ELECT TO PARTICIPATE IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION PURSUANT TO ARTICLE 8 OF THIS CHAPTER.

2. All employees and officers of political subdivisions whose compensation is provided wholly or in part from state monies and who are declared to be state employees and officers by the legislature for retirement purposes are subject, on legislative enactment, to this article and are members of ASRS.

3. Any member whose service terminates other than by death or withdrawal from membership is deemed to be a member of ASRS until the member's death benefit is paid.

4. Employees and officers shall not become members of ASRS and, if they are members immediately before becoming employed as provided by this section, shall have their membership status suspended while they are employed by state departments paying the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund for the period or periods payment of the employer contributions is not made by or on behalf of the departments.

5. Notwithstanding other provisions of this section, a temporary employee of the legislature whose projected term of employment is for not more than six months is ineligible for membership in ASRS. If the employment continues beyond six successive months, the employee may elect to either:

(a) Receive credit for service for the first six months of employment and establish membership in ASRS as of the beginning of the current term of employment if, within forty-five days after the first six months of employment, both the employer and the employee contribute to ASRS the amount that would have been required to be contributed to ASRS during the first six months of employment as if the employee had been a member of ASRS during those six months.

(b) Establish membership in ASRS as of the day following the completion of six months of employment.

6. A person who is employed in postgraduate training in an approved medical residency training program of an employer is ineligible for membership in ASRS.

7. An A STATE elected official who is subject to term limits and who is eligible for participation in ASRS because the STATE elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A may elect not to participate in ASRS. The election not to participate is specific for that term of office. The STATE elected official who is subject to term limits shall make the election in writing and file the election with ASRS within thirty days after the elected official's retirement plan mails the notice to the STATE elected official of the STATE elected official's eligibility to participate in ASRS. The election is effective on the first day of the STATE elected official's eligibility. If an A STATE elected official who is subject to term limits fails to make an election as provided in this paragraph, the STATE elected official is deemed to have elected to participate in ASRS. The election not to participate in ASRS is irrevocable and constitutes a waiver of all benefits provided by ASRS for the STATE elected official's entire term, except for any benefits accrued by the STATE elected official in ASRS for periods of participation prior to being elected to an office subject to term limits or any benefits expressly provided by law.

8. IN LIEU OF PARTICIPATION IN ASRS OR THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION PURSUANT TO ARTICLE 8 OF THIS CHAPTER, AN EMPLOYEE OF THE LEGISLATURE MAY ELECT PURSUANT TO THIS PARAGRAPH TO PARTICIPATE IN A TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PROGRAM ESTABLISHED PURSUANT TO ARTICLE 5 OF THIS CHAPTER. AN EMPLOYEE OF THE LEGISLATURE SHALL MAKE THE ELECTION IN WRITING AND FILE THE WRITTEN ELECTION WITH ASRS. IF AN EMPLOYEE OF THE LEGISLATURE ELECTS TO PARTICIPATE IN A TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PROGRAM PURSUANT TO THIS PARAGRAPH, THE ELECTION IS IRREVOCABLE AND CONSTITUTES A WAIVER OF ALL BENEFITS PROVIDED BY ASRS, EXCEPT FOR ANY BENEFITS ACCRUED BY THE EMPLOYEE BEFORE ELECTION PURSUANT TO THIS PARAGRAPH. IF AN EMPLOYEE OF THE LEGISLATURE ELECTS TO PARTICIPATE IN A TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PROGRAM PURSUANT TO THIS PARAGRAPH, THE EMPLOYEE'S EMPLOYER SHALL PAY AN AMOUNT EQUAL TO FIVE PER CENT OF THE EMPLOYEE'S BASE SALARY DIRECTLY TO THE PROGRAM IN LIEU OF EMPLOYER CONTRIBUTIONS TO ASRS.

Sec. 2. Section 38-804, Arizona Revised Statutes, is amended to read:

38-804 . Membership; termination; reinstatement of credited service

A. All elected officials are members of the plan, except that an A STATE elected official who is subject to term limits may elect not to participate in the plan. The STATE elected official who is subject to term limits shall make the election in writing and file the election with the fund manager within thirty days after notice in writing to the elected official of the elected official's eligibility THE STATE ELECTED OFFICIAL ASSUMES OFFICE . The election is effective on the first day of the STATE elected official's eligibility FOR THAT TERM OF OFFICE . The election not to participate is specific for that term of office. If an A STATE elected official who is subject to term limits fails to make an election as provided in this subsection, the STATE elected official is deemed to have elected to participate in the plan. The election not to participate in the plan is irrevocable and constitutes a waiver of all benefits provided by the plan for the STATE elected official's entire term, except for any benefits accrued by the STATE elected official in the plan for periods of participation prior to being elected to an office subject to term limits or any benefits expressly provided by law. The STATE elected official who elects not to participate in the plan shall participate in the Arizona state retirement system unless the STATE elected official makes an irrevocable election not to participate in the Arizona state retirement system as provided in section 38-727. IF THE STATE ELECTED OFFICIAL ELECTS NOT TO PARTICIPATE IN THE PLAN, THE ARIZONA STATE RETIREMENT SYSTEM OR THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION PURSUANT TO ARTICLE 8 OF THIS CHAPTER, THE STATE ELECTED OFFICIAL MAY PARTICIPATE IN A TAX DEFERRED ANNUITY AND DEFERRED COMPENSATION PROGRAM ESTABLISHED PURSUANT TO ARTICLE 5 OF THIS CHAPTER. IF THE STATE ELECTED OFFICIAL CHOOSES TO PARTICIPATE IN SUCH A PROGRAM, THE STATE ELECTED OFFICIAL'S EMPLOYER SHALL PAY AN AMOUNT EQUAL TO FIVE PER CENT OF THE STATE ELECTED OFFICIAL'S BASE SALARY DIRECTLY TO THE PROGRAM IN LIEU OF EMPLOYER CONTRIBUTIONS TO A PUBLIC RETIREMENT SYSTEM.

B. If a member ceases to hold office for any reason other than death or retirement, the member may withdraw the member's accumulated contributions from the plan and shall be paid, within twenty days after filing an application with the fund manager, the member's accumulated contributions as of the date of termination, less any benefit payments the member has received and any amount the member may owe to the plan. If the refund includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the fund manager. A member who receives a refund of the member's accumulated contributions from the plan or who elects a transfer pursuant to this subsection forfeits the member's credited service, and all rights to benefits under the plan and membership in the plan terminate.

C. If an elected official who has terminated the member's membership in the plan pursuant to subsection B of this section is subsequently elected or otherwise becomes eligible for membership in the plan pursuant to subsection A of this section, credited service only accrues from the date of the member's most recent eligibility as an elected official.

D. Notwithstanding subsection C of this section, if an elected official files a written election form with the fund manager within ninety days after the day of the member's reemployment as an elected official and repays the amount of the member's accumulated contributions previously withdrawn pursuant to subsection B of this section within one year after the date of the member's reemployment as an elected official, with interest on that amount at the rate of the net effective yield of the fund as published in the most recent annual report NINE PER CENT FOR EACH YEAR , compounded each year from the date of withdrawal to the date of repayment, credited service shall be restored. Credited service shall not be restored until complete repayment is made to the fund.

E. If a retired member subsequently becomes an elected official, contributions shall not be made by the retired member or the retired member's employer and credited service shall not accrue while the retired member is holding office, except that if a retired member subsequently becomes an elected official of the same office from which the member retired, the member shall not receive a pension, contributions shall not be made by the member or the member's employer and credited service shall not accrue while the member is holding office. If the elected official ceases to hold the same office, the elected official is entitled to receive the same pension the elected official was receiving when the elected official's pension was discontinued pursuant to this subsection. Nothing in this subsection prohibits a retired judge called by the supreme court to active duties of a judge pursuant to section 38-813 from receiving retirement benefits.

Sec. 3. Section 38-805, Arizona Revised Statutes, is amended to read:

38-805 . Normal retirement and early retirement pensions

A. A member who ceases to hold office is eligible for a normal retirement pension, if he THE MEMBER satisfies one of the following requirements:

1. Has attained age sixty-five with five or more years of credited service.

2. Has attained age sixty-two with ten or more years of credited service.

3. Has attained age sixty with twenty-five TWENTY or more years of credited service.

B. A member who has at least ten FIVE years of credited service and ceases to hold office as an elected official may take early retirement when he attains age fifty .

C. On normal or early retirement a retired member shall receive a pension computed pursuant to section 38-808, subsection B until his THE MEMBER'S death.

Sec. 4. Section 38-808, Arizona Revised Statutes, is amended to read:

38-808 . Pension payments; computation of amounts; termination

A. Plan retirement commences on the first day of the month following the date of the member's retirement or death. Pension payments shall be received on or about the first day of the month next following the member's plan retirement. The last pension payment shall be made as of the last day of the month in which the death of the retired member or the surviving spouse or minor children occurs. Pension payments shall not be made in advance.

B. The monthly pension shall be equal to one-twelfth of the following amount:

1. Four per cent of the member's average yearly salary multiplied by the member's credited service, not to exceed eighty per cent of the member's average yearly salary. This amount shall be reduced if the member takes early retirement pursuant to section 38-805, subsection B. The amount of reduction is three-twelfths of one per cent for each month the retired member's early retirement age precedes the member's normal retirement age pursuant to section 38-805, subsection A , EXCEPT THAT THE REDUCTION SHALL NOT BE MORE THAN THIRTY PER CENT .

2. A member who meets the requirements for a disability retirement pension shall receive a disability pension equal to four per cent of the member's average yearly salary multiplied by twenty years of credited service if the member has ten or more years of credited service, four per cent of the member's average yearly salary multiplied by ten years of credited service if the member has more than five OR MORE years of credited service but fewer than ten years of credited service or four per cent of the member's average yearly salary multiplied by five years of credited service if the member has fewer than five years of credited service.

C. If all pension payments terminate before an amount equal to the member's accumulated contributions has been paid, the difference between the member's accumulated contributions and the aggregate amount of pension payments shall be paid to the person or persons and in such shares as designated by the retired member in writing and filed with the fund manager. If the designated person or persons do not survive the retired member, the difference shall be paid to the estate of the retired member.

D. A member of the elected officials' retirement plan who retired on or after September 15, 1989 but before September 15, 1990 is entitled to receive a tax equity benefit allowance retroactive to the date of retirement consisting of a permanent increase of three per cent of the member's base benefit. The cost of the benefit increase is payable from the applicable employer cost of the plan.

Sec. 5. Section 38-816, Arizona Revised Statutes, is amended to read:

38-816 . Redemption of prior service

A. Any present active elected official who had previous service in this state as an elected official with an employer now covered by the plan before the effective date of participation and who has received a refund from a prior retirement system or plan on termination of employment before the elected official's application for redemption of prior service or who was not covered by a retirement system or plan during his THE ELECTED OFFICIAL'S prior elected official service may elect to redeem any part of the prior service by paying into the fund any amounts required under subsection B of this section. ANY PRESENT ACTIVE ELECTED OFFICIAL WHO HAS PREVIOUS SERVICE AS AN ELECTED OFFICIAL OF THIS STATE OR A CITY, TOWN OR COUNTY OF THIS STATE AND WHO WAS NOT COVERED BY A RETIREMENT SYSTEM OR PLAN DURING THAT SERVICE WHETHER OR NOT THE CITY, TOWN OR COUNTY IS AN EMPLOYER NOW COVERED BY THE PLAN MAY ELECT TO REDEEM ANY PART OF THE PRIOR SERVICE BY PAYING INTO THE FUND ANY AMOUNTS REQUIRED UNDER SUBSECTION B OF THIS SECTION.

B. Any present active elected official who elects to redeem any part of his THE prior service for which the elected official is deemed eligible by the fund manager under this section shall pay into the plan the amounts previously withdrawn by him THE ELECTED OFFICIAL as a refund of his THE ELECTED OFFICIAL'S accumulated contributions, if any, plus the additional amount, if any, THAT IS computed by the plan's actuary which AND THAT is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions adopted by the fund manager in accordance with section 38-803, subsection A, paragraph 2.

C. Upon approval by the city or town council GOVERNING BODY of an incorporated city or town which executes a joinder agreement under section 38-815, the city or town may pay into the fund all or any part of the amount sufficient to provide retirement benefits for elected officials or former elected officials for the time of service as an elected official of the city or town prior to the joinder agreement if no retirement benefits were in effect for elected officials during the time of service being redeemed under this section.

Sec. 6. Title 38, chapter 5, Arizona Revised Statutes, is amended by adding article 8, to read:

article 8. Defined contribution retirement plan option

38-951 . Definition of exempt state officers and employees

IN THIS ARTICLE, UNLESS THE CONTEXT OTHERWISE REQUIRES, "EXEMPT STATE OFFICERS OR EMPLOYEES" MEANS STATE OFFICERS AND EMPLOYEES WHO ARE EXEMPT FROM TITLE 41, CHAPTER 4, ARTICLES 5 AND 6, EXCEPT FOR OFFICERS OR EMPLOYEES OF STATE UNIVERSITIES AND DEPARTMENT OF PUBLIC SAFETY EMPLOYEES WHO ARE SUBJECT TO TITLE 41, CHAPTER 12, ARTICLE 10.

38-952 . Defined contribution retirement plan option; establishment; administration

A. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER, BEGINNING ON DECEMBER 1, 2000 EMPLOYERS OF STATE ELECTED OFFICIALS WHO ARE SUBJECT TO TERM LIMITS AND EMPLOYERS OF EXEMPT STATE OFFICERS AND EMPLOYEES SHALL OFFER THOSE STATE TERM-LIMITED ELECTED OFFICIALS AND EXEMPT STATE OFFICERS AND EMPLOYEES A DEFINED CONTRIBUTION RETIREMENT PLAN OPTION PURSUANT TO THIS ARTICLE.

B. THE FUND MANAGER ESTABLISHED PURSUANT TO SECTION 38-848 SHALL ADMINISTER, MANAGE AND OPERATE THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION. THE FUND MANAGER MAY:

1. EMPLOY SERVICES IT DEEMS NECESSARY, INCLUDING LEGAL SERVICES, FOR THE OPERATION AND ADMINISTRATION OF THE OPTION.

2. DELEGATE AUTHORITY TO THE ADMINISTRATOR EMPLOYED PURSUANT TO SECTION 38-848, SUBSECTION K, PARAGRAPH 6.

3. ADMINISTER THE OPTION THROUGH CONTRACTS WITH MULTIPLE VENDORS. A VENDOR SHALL HAVE HAD RESPONSIBILITY FOR INVESTMENT DECISION MAKING AS AN INSURANCE COMPANY INVESTMENT FUND, AN INVESTMENT DIVISION OF A BANK, A MUTUAL FUND, AN INVESTMENT ORGANIZATION, A PENSION FUND OR AN INVESTMENT ADVISOR DESIGNATED AS A CHARTERED FINANCIAL ANALYST BY THE INSTITUTE OF CHARTERED FINANCIAL ANALYSTS.

4. MAINTAIN RECORDS FOR THE OPERATION AND ADMINISTRATION OF THE OPTION.

5. PERFORM ALL ACTS, WHETHER OR NOT EXPRESSLY AUTHORIZED, THAT IT DEEMS NECESSARY AND PROPER FOR THE PROTECTION OF THE OPTION.

38-953 . Qualified plan; reservation to the legislature

A. THE LEGISLATURE INTENDS THAT THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION IS A QUALIFIED PLAN UNDER SECTION 401 OF THE INTERNAL REVENUE CODE, AS AMENDED, OR SUCCESSOR PROVISIONS OF LAW, AND THAT THE TRUST IS EXEMPT FROM TAXATION UNDER SECTION 501 OF THE INTERNAL REVENUE CODE. THE FUND MANAGER MAY ADOPT SUCH ADDITIONAL PROVISIONS TO THE OPTION AS ARE NECESSARY TO FULFILL THIS INTENT.

B. THE RIGHT TO MODIFY, AMEND OR REPEAL THIS ARTICLE OR ANY PROVISION OF THIS ARTICLE IS RESERVED TO THE LEGISLATURE.

38-954 . Participation election

A. STATE ELECTED OFFICIALS WHO ARE SUBJECT TO TERM LIMITS AND EXEMPT STATE OFFICERS AND EMPLOYEES MAY ELECT TO PARTICIPATE IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION. AN ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE SHALL MAKE THE ELECTION TO PARTICIPATE IN WRITING AND SHALL FILE THE ELECTION WITH THE RETIREMENT SYSTEM OR PLAN IN WHICH THE ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE IS A MEMBER AND THE DISBURSING OFFICER OF THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S EMPLOYER.

B. AN ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE SHALL MAKE THE ELECTION ON OR BEFORE THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S EFFECTIVE DATE OF EMPLOYMENT, OR, IF THE ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE IS A MEMBER OF THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN ON THE DATE THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION BECOMES EFFECTIVE, WITHIN THIRTY DAYS AFTER THE EFFECTIVE DATE OF THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION.

C. IF AN ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE WHO IS A MEMBER OF THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN ELECTS TO PARTICIPATE IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION WITHIN THIRTY DAYS AFTER THE EFFECTIVE DATE OF THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION, THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN, AS APPLICABLE, SHALL TRANSFER AN AMOUNT EQUAL TO THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S ACTUARIAL ACCRUED LIABILITY COMPUTED BY THE ACTUARY OF THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN, AS APPLICABLE. THE ACTUARIAL ACCRUED LIABILITY SHALL BE BASED ON THE SAME ACTUARIAL COST METHOD AND ASSUMPTIONS THAT WERE USED FOR COMPUTING THE FUNDING REQUIREMENTS OF THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN, AS APPLICABLE, IN THE ANNUAL ACTUARIAL VALUATION PRECEDING THE TRANSFER.

D. IF AN ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE FAILS TO MAKE AN ELECTION AS PROVIDED IN THIS SECTION, THE ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE IS DEEMED TO HAVE ELECTED TO PARTICIPATE IN THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN, AS APPLICABLE.

E. THE ELECTION TO PARTICIPATE IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION IS IRREVOCABLE AND CONSTITUTES A WAIVER OF ALL BENEFITS PROVIDED BY THE ELECTED OFFICIALS' RETIREMENT PLAN, THE ARIZONA STATE RETIREMENT SYSTEM, THE PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM OR THE CORRECTIONS OFFICER RETIREMENT PLAN, AS APPLICABLE. ALL ELECTED OFFICIALS AND EXEMPT STATE OFFICERS AND EMPLOYEES WHO ELECT TO PARTICIPATE IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION SHALL REMAIN PARTICIPANTS IN THE OPTION DURING THE CONTINUANCE OF EMPLOYMENT WITH THE EMPLOYER.

38-955 . Contributions

A. AN ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE WHO PARTICIPATES IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION SHALL CONTRIBUTE AN AMOUNT EQUAL TO TWO AND SIXTY-SIX HUNDREDTHS PER CENT OF THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S GROSS SALARY.

B. EMPLOYERS SHALL CONTRIBUTE TO EACH PARTICIPATING ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S ACCOUNT AN AMOUNT EQUAL TO TWO AND SIXTY-SIX HUNDREDTHS PER CENT OF THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S GROSS SALARY.

C. ALTHOUGH DESIGNATED AS EMPLOYEE CONTRIBUTIONS, ALL EMPLOYEE CONTRIBUTIONS MADE TO THE DEFINED CONTRIBUTION RETIREMENT PLAN SHALL BE PICKED UP AND PAID BY THE EMPLOYER IN LIEU OF CONTRIBUTIONS BY THE ELECTED OFFICIAL OR EXEMPT STATE OFFICER OR EMPLOYEE. THE CONTRIBUTIONS PICKED UP BY AN EMPLOYER MAY BE MADE THROUGH A REDUCTION IN THE ELECTED OFFICIAL'S OR EXEMPT STATE OFFICER'S OR EMPLOYEE'S SALARY OR AN OFFSET AGAINST FUTURE SALARY INCREASES, OR A COMBINATION OF BOTH. THE ELECTED OFFICIALS AND EXEMPT STATE OFFICERS AND EMPLOYEES PARTICIPATING IN THE DEFINED CONTRIBUTION RETIREMENT PLAN OPTION DO NOT HAVE THE OPTION OF CHOOSING TO RECEIVE THE CONTRIBUTED AMOUNTS DIRECTLY INSTEAD OF THE EMPLOYER PAYING THE AMOUNTS TO THE DEFINED CONTRIBUTION RETIREMENT PLAN. IT IS INTENDED THAT ALL EMPLOYEE CONTRIBUTIONS THAT ARE PICKED UP BY THE EMPLOYER AS PROVIDED IN THIS SUBSECTION SHALL BE TREATED AS EMPLOYER CONTRIBUTIONS UNDER SECTION 414( h ) OF THE INTERNAL REVENUE CODE, SHALL BE EXCLUDED FROM ELECTED OFFICIALS' AND EXEMPT STATE OFFICERS' AND EMPLOYEES' GROSS INCOME FOR FEDERAL AND STATE INCOME TAX PURPOSES AND ARE INCLUDABLE IN THE GROSS INCOME OF THE ELECTED OFFICIALS AND EXEMPT STATE OFFICERS AND EMPLOYEES OR THEIR BENEFICIARIES ONLY IN THE TAXABLE YEAR IN WHICH THEY ARE DISTRIBUTED. THE SPECIFIED EFFECTIVE DATE SHALL NOT BE BEFORE THE DATE THE DEFINED CONTRIBUTION RETIREMENT PLAN RECEIVES NOTIFICATION FROM THE INTERNAL REVENUE SERVICE THAT PURSUANT TO SECTION 414( h ) OF THE INTERNAL REVENUE CODE THE EMPLOYEE CONTRIBUTIONS PICKED UP SHALL NOT BE INCLUDED IN GROSS INCOME FOR INCOME TAX PURPOSES UNTIL THE TIME THAT THE PICKED UP CONTRIBUTIONS ARE DISTRIBUTED BY REFUND OR PENSION PAYMENTS.

38-956 . Vesting

EMPLOYER CONTRIBUTIONS AND EARNINGS ARE FULLY VESTED AFTER ONE YEAR. EMPLOYEE MONIES ARE IMMEDIATELY VESTED. NONVESTED MONIES ARE APPLIED TO PARTIALLY OFFSET THE ADMINISTRATIVE COSTS OF THE OPTION.

Sec. 7. Fiscal analysis

The joint legislative budget committee may perform a complete fiscal analysis of the defined contribution retirement plan option prescribed by this act. If the joint legislative budget committee performs the fiscal analysis, the joint legislative budget committee shall submit a written report of its findings to the speaker of the house of representatives, the president of the senate and the governor on or before December 1, 2001 and shall provide a copy of this report to the secretary of state and the director of the department of library, archives and public records. The fiscal analysis shall include an evaluation of the impact of the defined contribution retirement plan option on the elected officials' retirement plan, the Arizona state retirement system, the public safety personnel retirement system and the corrections officer retirement plan.

Sec. 8. Legislative intent

The legislature intends that the fund manager administer the defined contribution retirement plan option established by title 38, chapter 5, article 8, Arizona Revised Statutes, as added by this act, through contracts with multiple vendors if the fund manager determines that contracts with multiple vendors would be financially prudent.

APPROVED BY THE GOVERNOR MAY 19, 1999.

FILED IN THE OFFICE OF THE SECRETARY OF STATE MAY 19, 1999.