Purpose

Allows school district employees to participate in federal tax sheltered annuity plans and allows the use of public funds to purchase annuities or pay deferred compensation.

Background

Current statutes allow employees of school districts, accommodation school employees, employees of the community college districts, employees of the universities and all other certificated and noncertificated employees of the schools of Arizona to participate in the 403b federal tax sheltered annuity plan. This is the supplemental defined contribution (DC) plan for employees in the field of education. There is no allowance for employer matching of employee contributions since public funds cannot be used to purchase or contribute to this plan.

The strike-everything amendment to H.B.2553 allows employees of education institutions in Arizona to participate in other, more flexible federal tax sheltered annuity plans and allows employers to use public funds to match employee contributions.

There is an unknown fiscal impact to state, county, district and other funds dependent on the programs initiated by individual school or community college districts.

Provisions

1. Allows employees of school districts to participate in federal tax sheltered annuity plans instead of just the 403b plan.

2. Eliminates the prohibition against using public funds to purchase any annuity or to pay any deferred compensation.

3. Provides for a general effective date.

House Action Senate Action

ED 2/19/01 DP 8-0-1-1 Health 4/3/01 DP 7-0-1-0

APPROP 2/27/01 DP 12-0-0-4

3^rd Read 3/12/01 DP 48-5-7-0

GH/ac