Second Regular Session H.B. 2007
COMMITTEE ON FINANCIAL INSTITUTIONS AND RETIREMENT
SENATE AMENDMENTS TO H.B. 2007
(Reference to House engrossed bill)
Strike everything after the enacting clause and insert:
"Section 1. Section 38-727, Arizona Revised Statutes, is amended to read:
38-727. Eligibility; options
A. 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.
(b) For 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 elected as provided in paragraph 8 subsection B 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. 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 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. B. 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 who elected on or before July 31, 2000 to participate in a tax deferred annuity and deferred compensation program established pursuant to article 5 of this chapter shall continue to participate in that tax deferred annuity and deferred compensation program pursuant to this subsection. 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 elected to participate in a tax deferred annuity and deferred compensation program: pursuant to this paragraph,
1. The election is irrevocable and constitutes a waiver of all benefits provided by ASRS, except for any benefits accrued by the employee before the 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,
2. The employee's employer shall pay an amount equal to five per cent of the employee's base salary directly to the tax deferred annuity and deferred compensation 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 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 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 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, on or before July 31, 2000, the state elected official elects elected not to participate in the plan, or the Arizona state retirement system or the defined contribution retirement plan option pursuant to article 8 of this chapter, the state elected official may and elected instead to participate in a tax deferred annuity and deferred compensation program established pursuant to article 5 of this chapter, the state elected official shall continue to participate in that tax deferred annuity and deferred compensation program. If the state elected official chooses elected to participate in such a tax deferred annuity and deferred compensation 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, within twenty days after filing a completed application with the fund manager, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:
1. If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.
2. If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:
(a) 5.0 to 5.9 years of credited service, twenty-five per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
(b) 6.0 to 6.9 years of credited service, forty per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
(c) 7.0 to 7.9 years of credited service, fifty-five per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
(d) 8.0 to 8.9 years of credited service, seventy per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
(e) 9.0 to 9.9 years of credited service, eighty-five per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
(f) 10.0 or more years of credited service, one hundred per cent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.
C. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection B of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection B of this section plus interest at a rate determined by the fund manager for each year computed from and after the member's termination of employment.
D. If the amount prescribed in subsection B or C of this section 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 the amount prescribed in subsection B or C of this section 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.
E. 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.
F. Notwithstanding subsection E 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 previously withdrawn pursuant to subsection B or C 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 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.
G. 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 38-874, Arizona Revised Statutes, is amended to read:
38-874. Effect of participation
A. Except as provided in sections 38‑727
and 38‑804:
1. Any benefits provided pursuant to the provisions of this article shall be in addition to any other benefits provided by law for any employees of this state and shall be supplemental to the provisions of the state retirement system provided pursuant to title 38, chapter 5, article 2.
B. 2. Any income deferred under a plan established pursuant to this article shall be included as regular compensation for the purpose of computing the retirement and pension benefits earned by any employee participating in such plan.
Sec. 4. Repeal
Section 38-951, Arizona Revised Statutes, is repealed.
Sec. 5. Section 38-952, Arizona Revised Statutes, is amended to read:
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 governing committee established by section 38-871 shall administer, manage and operate the defined contribution retirement plan option. The fund manager governing committee 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. 2. 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. 3. Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the protection of the option.
Sec. 6. Section 38-953, Arizona Revised Statutes, is amended to read:
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 governing committee 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.
Sec. 7. Section 38-954, Arizona Revised Statutes, is amended to read:
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 A 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. Such
an election authorizes the state officer's or employee's employer to make reductions
or deductions in the state officer's or employee's salary.
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.
B. The
department of administration shall initiate salary reductions or deductions for
the defined contribution retirement plan option as directed by each state
officer or employee participating in the option.
C. Any salary deferred under the defined contribution retirement plan option shall be included as regular compensation or salary for the purpose of computing the retirement and pension benefits earned by any state officer or employee participating in the option.
Sec. 8. Section 38-955, Arizona Revised Statutes, is amended to read:
38-955. Contributions
A. An elected official or exempt A state officer or employee who participates in the defined contribution retirement plan option shall contribute an amount equal to two and sixty-six hundredths three 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. B. Although designated as employee contributions, all employee contributions made pursuant to subsection A 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.
C. In addition to the amounts contributed pursuant to subsection A, each active participant may elect to make after-tax contributions to the defined contribution retirement plan option. These contributions shall be elected in writing, shall be in multiples of one per cent and, when combined with the amounts contributed pursuant to subsection A, shall not be more than the limits prescribed in section 415(c) of the internal revenue code, as amended. A participant may change the amount of the contributions elected under this subsection as prescribed by the procedures established by the governing committee.
Sec. 9. Section 38-956, Arizona Revised Statutes, is amended to read:
38-956. Vesting
Employer contributions and earnings are fully vested after one year. Employee monies Contributions and earnings on contributions made pursuant to this article are immediately vested. Nonvested monies are applied to partially offset the administrative costs of the option.
Sec. 10. Laws 1999, chapter 329, section 8 is amended to read:
Sec. 8. Legislative intent
The legislature intends that the fund manager governing committee established by section 38-871, Arizona Revised Statutes, 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 governing committee determines that contracts with multiple vendors would be financially prudent.
Sec. 11. Termination of the tax deferred annuity and deferred
compensation program pilot
Sections 38-727 and 38-804, Arizona Revised Statutes, as amended by this act, terminate the pilot program option for legislative employees and state elected officials to elect to participate in a tax deferred annuity and deferred compensation program pursuant to title 38, chapter 5, article 5, Arizona Revised Statutes, in lieu of participation in the Arizona state retirement system pursuant to title 38, chapter 5, article 2, Arizona Revised Statutes. All legislative employees and state elected officials who elected to participate in a deferred tax annuity and deferred compensation program pursuant to section 38-727 or 38-804, Arizona Revised Statutes, on or before July 31, 2000 shall continue to participate in that option pursuant to the irrevocable election made by the employee or state elected official and the employer shall continue to make contributions as prescribed in sections 38‑727 and 38-804, Arizona Revised Statutes.
Sec. 12. Transfer of actuarial accrued liability of certain state elected officials' who are subject to term limits
Beginning on December 1, 2000 through January 7, 2001, a state elected official who is subject to term limits and who is a contributing member of the elected officials' retirement plan established by title 38, chapter 5, article 3, Arizona Revised Statutes, may request in writing to the fund manager that the fund manager transfer to the defined contribution retirement plan option established by title 38, chapter 5, article 8, Arizona Revised Statutes, an amount equal to the state elected official's actuarial accrued liability computed by the elected officials' retirement plan's actuary. 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 in the annual valuation preceding the transfer."
Amend title to conform
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