HB2169 - 451R - House Bill Summary

House of Representatives

HB 2169

supplemental defined contribution plans.

Sponsors: Representative Brimhall

X	Committee on Retirement & Government Operations
	Caucus and COW
	As Passed the House

HB 2169 establishes the supplemental Defined Contribution (DC) plan, repeals the optional DC retirement plan and terminates the tax-deferred annuity and deferred compensation pilot program.

History

Laws 1999, Chapter 329, section 6, established the optional DC retirement plan for state term limited elected officials and exempt state officers and employees, except state university officers and employees of the Department of Public Safety (DPS). The optional DC retirement plan is offered as an alternative to the benefits of the defined benefit (DB) plan.

The fund manager of the Public Safety Personnel Retirement System is required to administer and offer the optional DC retirement plan. The plan became effective December 1, 2000 and is funded by employee and employer matching (2.66%) contributions. A one-time election period that began December 1, 2000 and ended December 30, 2000 was initiated that required all eligible members to make an irrevocable election to transfer the actuarial accrued liability of the employee’s DB plan to the optional DC retirement plan. Anyone (qualified positions) hired after the effective date of the optional DC retirement plan has to elect, at the time of employment, to belong to the optional DC retirement plan, otherwise, they automatically become a member of their respective DB plan.

Laws, 1999, chapter 329, sections 1 and 2, established for state term-limited elected officials and employees of the Legislature an optional tax deferred annuity and deferred compensation plan (5% matching contribution plan) in lieu of participation in either the EORP or ASRS DB plan. Under this optional plan, only a state elected official subject to term limits or employee of the Legislature may elect this optional 5% plan at the time of employment.

Provisions

· Allows the Board or the Fund Manager to establish, administer, manage and operate a supplemental DC plan for all contributing members of the Arizona State Retirement System (ASRS), the Public Safety Personnel Retirement System (PSPRS), the Corrections Officer Retirement Plan (CORP) and the Elected Officials Retirement Plan (EORP).

· Authorizes the Board or the Fund Manager the authority to implement the supplemental DC plan that is in addition to the employees existing DB retirement plan and requires the employer to initiate salary deductions for the supplemental DC plan as directed by each employee.

· Allows the Board or the Fund Manager to employ services necessary for the operation and administration of the supplement DC plan, contract with multiple vendors, perform all acts necessary and proper for the protection of the plan and inter into intergovernmental agreements.

· Requires the supplemental DC plan to be a qualified governmental plan under section 401(a) of the Internal Revenue Code and requires the plan to be tax-exempt under section 501 of the Internal Revenue Code.

· Requires employee contributions to be considered picked-up by the employer, for tax purposes only, prior to being taxed and treated as employer contributions under section 414(h) of the Internal Revenue Code. The contributions picked-up may be made through a reduction in the employee’s salary or an offset against future salary increases or both.

· Specifies that an employee participating in the supplemental DC plan does not have the option of choosing to receive the contributions directly instead of the employer paying the amounts to the plan.

· Requires an employee, if electing to participate in the supplemental plan, to contribute at least 1% of the employee’s gross salary and irrevocably contribute for at least one year. Allows the employee to annually increase or decrease the contributions in increments of 1% up to the maximum allowed by law (25% of total contributions).

· Allows the employer to elect to match the pre-tax contributions made by the employee at a rate determined by the employer. The employer rate will be determined at the beginning of the employer’s budget cycle and shall terminate at the end of the budget cycle. The match must be uniform for all local government employees.

· Specifies that all contributions are immediately vested.

· Repeals title 38, chapter 5, article 8, the optional DC retirement plan.

· Terminates the tax-deferred annuity and deferred compensation pilot program and the optional DC retirement plan. However, those who have already elected to participate in these plans will continue to do so.

· Makes numerous technical and conforming changes.

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44th Legislature