House Bill No. 134
Introduced By j. johnson
By Request of the Teachers' Retirement Board
A Bill for an Act entitled: "An Act generally revising the laws relating to the teachers' retirement system; defining "termination", "termination pay", and "vested"; providing termination pay options; clarifying that teachers' retirement system provisions must comply with federal tax laws regarding qualified plan status; clarifying the distribution of benefits to beneficiaries; clarifying certain definitions; clarifying definitions related to compensation used to determine benefits; clarifying that family law orders affecting distribution of benefits may not be entered unless approved by the teachers' retirement board; generally revising language referring to annuities; revising provisions related to the transfer of service from the public employees' retirement system; clarifying certain service provisions; clarifying disposition of unclaimed accounts; revising certain withdrawal and optional allowance provisions; revising payment commencement provisions; revising certain disability retirement and reinstatement from disability provisions; clarifying postretirement provisions; amending sections 19-20-101, 19-20-104, 19-20-208, 19-20-305, 19-20-409, 19-20-412, 19-20-503, 19-20-602, 19-20-603, 19-20-605, 19-20-702, 19-20-703, 19-20-706, 19-20-711, 19-20-712, 19-20-713, 19-20-715, 19-20-801, 19-20-804, 19-20-902, 19-20-903, 19-20-904, 19-20-905, 19-20-1001, and 19-20-1002, MCA; and providing an immediate effective date and a retroactive applicability date."
STATEMENT OF INTENT
A statement of intent is required for this bill because [section 3] gives the teachers' retirement board authority to adopt administrative rules.
The legislature finds that it is beneficial to maintain the teachers' retirement system as a qualified plan under Internal Revenue Code regulations. Therefore, it is the intent of the legislature that statutory provisions governing the teachers' retirement system be subject to federal tax law applicable to public retirement plans. The legislature intends that the board make rules useful and necessary to ensure compliance with federal law and necessary to maintain a federal tax qualified plan status.
Be it enacted by the Legislature of the State of Montana:
NEW SECTION. Section 1. Earned compensation -- part-time service. The earned compensation of a member who retired under 19-20-802 or 19-20-804 and had less than 3 consecutive years of full-time service during the 5 years preceding the member's retirement is the compensation that the member would have earned in the final 3 years had the member's part-time service been full-time service. To determine the compensation that the member would have earned, the compensation reported must be divided by the part-time service credited to the member's account.
NEW SECTION. Section 2. Termination pay. If a member receives termination pay at the time of termination and elects to retire at that time, the member shall select one of the following options:
(1) The member may use termination pay in the calculation of the member's average final compensation. The member and the employer shall pay contributions to the retirement system as determined by the board to adequately compensate the system for the additional retirement benefit. The contributions must be made at the time of termination.
(2) The member may use a yearly amount of termination pay added to each of the 3 consecutive years' salary used in the calculation of the member's average final compensation. To determine the amount of termination pay used in the calculation of average final compensation, termination pay must be divided by the total number of years of creditable service to determine a yearly amount. The member and the employer shall pay contributions on the termination pay according to the rates provided for in 19-20-602 and 19-20-605(1).
(3) The member may exclude the termination pay from the average final compensation. A contribution is not required of either the member or the employer, and any contributions made under 19-20-602 and 19-20-605 must be refunded.
NEW SECTION. Section 3. Retaining qualified plan status -- board rulemaking authority. If a provision in this chapter conflicts with a qualification requirement in section 401 of the Internal Revenue Code applicable to public retirement systems and consequent federal administrative regulations, the provision is either ineffective or must be interpreted to conform to the federal qualification requirements and allow the system to retain tax-deferred status. The board may adopt rules to implement this section.
NEW SECTION. Section 4. Effect of no designation or no surviving beneficiary. (1) If a beneficiary is not designated or if no designated beneficiary survives the payment recipient, the estate of the payment recipient is the beneficiary and is entitled to any lump-sum payment or retirement benefit accrued but not received prior to the death of the payment recipient. If the estate would not be probated but for the amount due from the retirement system, all of the amount due must be paid directly, without probate, to the surviving next of kin of the deceased or to the guardians of the survivor's estate, share and share alike.
(2) Payment must be made in the same order in which the following groups are listed:
(a) husband or wife;
(b) children;
(c) father and mother;
(d) grandchildren;
(e) brothers and sisters; or
(f) nieces and nephews.
(3) A payment may not be made to a person included in any of the groups listed in subsection (2) if at the date of payment there is a living person in any of the groups preceding the group of which the person is a member, as listed. Payment must be made upon receipt from the person of an affidavit, upon a form supplied by the system, that there are no living individuals in the groups preceding the group of which the person is a member and that the estate of the deceased will not be probated.
(4) The payment must be in full and complete discharge and acquittance of the board and system on account of the member's or payment recipient's death.
Section 5. Section 19-20-101, MCA, is amended to read:
"19-20-101. Definitions. As used in this chapter, unless the context clearly indicates otherwise, the following definitions apply:
(1) "Accumulated contributions" means the sum of all the amounts deducted from the compensation of a member or paid by a member and credited to the member's individual account in the annuity savings fund, together with interest. Regular interest must be computed and allowed to provide a benefit at the time of retirement.
(2) "Actuarial equivalent" means a benefit of equal value when computed, with regular interest, on the basis of the 1971 Group Annuity Mortality Table, with ages set back 4 years and an interest rate of 8% compounded annually.
(3) "Annuity" means the payments made to a beneficiary for life that are derived from a member's accumulated
contributions.
(4) "Annuity reserve" means the present value of all payments to be made on account of a member's annuity computed,
with regular interest, on the basis of the mortality tables adopted by the retirement board.
(5) (a) "Average final compensation" means the average of the a member's earned compensation of a member during the 3
consecutive years of full-time service or as provided under [section 1] that yield the highest average and on which
contributions have been made as required by 19-20-602 or 19-20-413. If amounts defined in subsection (6)(b) have been
converted by an employer to earned compensation for all members and have been continuously reported as earned
compensation in a like amount for at least the 5 fiscal years preceding the member's retirement, the amounts may be
included in the calculation of average final compensation. If amounts defined in subsection (6)(b) have been reported as
earned compensation for less than 5 fiscal years or if the member has been given the option to have amounts reported as
earned compensation, any amounts reported in the 3-year period that constitute average final compensation must be
included in average final compensation as provided under [section 2(2)].
(b) In determining a member's retirement allowance under 19-20-802 or 19-20-804, the compensation for each year of the
3 years that make up the average final compensation may not be greater than 110% of the previous year's compensation
included in the calculation of average final compensation or the earned compensation reported to the retirement system,
whichever is less, except as provided by rule by the retirement board.
(c) Earned compensation in excess of the amount specified in subsection (5)(b) is considered termination pay as provided
in subsection (5)(d).
(d) If the earned compensation includes any termination pay, the member shall select one of the following options:
(i) use the total termination pay in the calculation of the average final compensation. The member and the employer shall
pay contributions to the retirement system as are determined by the board to adequately compensate the system for the
additional retirement benefit. The contributions must be made at the time the termination pay is received.
(ii) use a yearly amount of termination pay added to each of the 3 consecutive years' salary used in the calculation of the
average final compensation if the member has 4 or more years of service with the employer from which the termination pay
was received. The amount of compensation used in the calculation of average final compensation must be divided by the
total number of years of creditable service to determine a yearly amount. The member and the employer shall pay
contributions on the termination pay according to the rates provided for in 19-20-602(1) and 19-20-605(1).
(iii) exclude the termination pay from the average final compensation. No contribution is required of either the employer or
member, and contributions made under 19-20-602 and 19-20-605 must be refunded.
(e) For purposes of this subsection (5), termination pay includes any form of termination pay or any lump-sum payment for
deferred compensation, sick leave, or accumulated vacation credit, or any other payment for time not worked other than
compensation received while on sick leave or authorized leave of absence.
(6)(4) "Beneficiary" means a person in receipt of a pension, annuity, retirement allowance, or other benefit provided by the
retirement system formally designated by a member, retiree, or benefit recipient to receive a retirement allowance or
payment upon the death of the member, retiree, or benefit recipient.
(7)(5) "Creditable service" is that service defined by 19-20-401.
(8)(6) (a) "Earned compensation" means, except as limited by 19-20-715, remuneration, exclusive of maintenance,
allowance, and expenses, paid for services by a member out of funds controlled by an employer, as defined under this
chapter, before any tax-deferred pretax deductions allowed under the Internal Revenue Code are deducted from the
member's compensation, exclusive of maintenance, allowances, and expenses. The earned compensation is remuneration
that would have been paid to a member for full-time service but was not paid to the member because of a reduction in
compensation, pay, or salary due to a temporary absence, provided that the retirement system receives the contribution
required by 19-20-413. The earned compensation of a member who had less than 3 consecutive years of full-time service
during the 5 years preceding the member's retirement is the compensation, pay, or salary that the member would have
earned had the member's part-time service been full-time service. The earned compensation of a member who is awarded a
disability retirement allowance prior to the completion of a full year is the compensation, pay, or salary that the member
would have received had the member completed the full year, except that any termination pay, as defined in subsection
(5)(e), received by the member is limited to the amount actually paid and is not the amount that the member would have
earned had the member completed the full year.
(b) Earned compensation does not mean:
(i) direct employer premium payments on behalf of members for health or dependent care expense accounts or any employer contribution for health, medical, pharmaceutical, disability, life, vision, dental, or any other insurance;
(ii) any direct employer payment or reimbursement for professional membership dues; maintenance; housing; day care; or automobile, travel, lodging, or entertaining expenses; or any similar payment for any form of maintenance, allowance, or expenses;
(iii) the imputed value of health, life, or disability insurance or any other fringe benefits; or
(iv) any noncash benefit provided by an employer to or on behalf of an employee.
(c) Earned compensation does not include lump-sum payments in respect to unused, accumulated sick or annual leave, excess leave balance payments, or bonuses or any sort of early retirement incentive or severance payment contingent upon the employee terminating employment.
(d) Adding a direct employer-paid or noncash benefit to an employee's contract or subtracting the same or like amount as a pretax deduction is considered a fringe benefit and not earned compensation.
(9)(7) "Employer" means the state of Montana, the trustees of a district, or any other agency or subdivision of the state that
employs a person who is designated a member of the retirement system.
(10)(8) "Full-time service" means service that is full-time and that extends over a normal academic year of at least 9
months. With respect to those members employed by the office of the superintendent of public instruction, any other state
agency or institution, or the office of a county superintendent, full-time service means service that is full-time and that
totals at least 9 months in any year.
(11)(9) "Member" means a person who has an individual account in the annuity savings fund. An active member is a person
included under the provisions of 19-20-302. An inactive member is a person included under the provisions of 19-20-303.
(12)(10) "Part-time service" means service that is less than full-time or that totals less than 9 months in any a normal
academic year. Part-time service must be credited in the proportion that the actual time worked bears compares to full-time
service.
(13) "Pension" means the payments made to a beneficiary for life that are paid out of the pension accumulation fund.
(14) "Pension reserve" means the present value of all payments to be made on account of a pension computed, with regular
interest, on the basis of the mortality tables adopted by the retirement board.
(15)(11) "Prior service" means employment of the same nature as service defined in subsection (20) but rendered before
September 1, 1937.
(16)(12) "Regular interest" means interest at 4% per annum a year compounded annually or at such other a rate as may be
set by the retirement board in accordance with 19-20-501(2).
(17)(13) "Retirement allowance" means the annuity plus the pension a payment due monthly to a person who has qualified
for service or disability retirement or due to a beneficiary as provided in 19-20-1001.
(18)(14) "Retirement board" or "board" means the retirement system's governing board provided for in 2-15-1010.
(19)(15) "Retirement system" or "system" means the teachers' retirement system of the state of Montana provided for in
19-20-102.
(20)(16) "Service" means the performance of instructional duties or related activities that would entitle the person to active
membership in the retirement system under the provisions of 19-20-302.
(17) "Termination" means that the member has severed the employment relationship with the member's employer and all, if any, payments due upon termination of employment, including but not limited to accrued sick and annual leave balances, have been paid to the member.
(18) "Termination pay" means any form of termination pay made at the time of retirement or death; payments contingent on the employee terminating employment; any lump-sum payment for deferred compensation, sick leave, or accumulated vacation credit; or any other payment for time not worked other than compensation received while on sick leave or authorized leave of absence.
(19) "Vested" means that a member has been credited with at least 5 full years of membership service upon which contributions have been made, as required by 19-20-602 and 19-20-605, and who has a right to a future retirement benefit."
Section 6. Section 19-20-104, MCA, is amended to read:
"19-20-104. Guarantee by state. Regular interest charges payable, the creation and maintenance of reserves in the
pension accumulation fund, and the maintenance of annuity reserves accumulated contributions in the annuity reserve
savings fund, as provided for in this chapter, and the payment of all annuities, pensions retirement allowances, refunds, and
other benefits granted under the retirement system are obligations of the state of Montana."
Section 7. Section 19-20-208, MCA, is amended to read:
"19-20-208. Duties of employer. Each employer shall:
(1) pick up the contribution of each employed member employed by him at the rate prescribed by 19-20-602 and transmit
the contribution each month to the secretary executive director of the retirement board;
(2) pay transmit to the secretary executive director of the retirement board the employer's contribution prescribed by
19-20-605, at the time that the employee contributions are transmitted to the secretary;
(3) keep records and, as required by the retirement board, furnish information to the board that is required in the discharge of the board's duties;
(4) upon the employment of a person who is required to become a member of the retirement system, inform him the person
of his the rights and obligations relating to the retirement system;
(5) whenever applicable, inform an employee of his the right to elect to participate in the optional retirement program
under Title 19, chapter 21;
(6) at the request of the retirement board, certify the names of all persons who are eligible for membership or who are
members of the retirement system; and
(7) notify the retirement board of the employment of a person eligible for membership and forward his the person's
membership application to the board.;
(8) if the employer has converted to earned compensation amounts excluded from earned compensation, for each retiring member, certify to the board the amounts reported to the system in each of the 5 years preceding the member's retirement."
Section 8. Section 19-20-305, MCA, is amended to read:
"19-20-305. Alternate payees -- family law orders. (1) A participant in a retirement system may have the participant's rights modified or recognized by a family law order.
(2) For purposes of this section:
(a) "participant" means a member, retiree, or an actual or potential beneficiary, survivor, or contingent annuitant of the retirement system designated pursuant to this chapter; and
(b) "family law order" means a certified copy of a judgment, decree, or order of a court of with competent jurisdiction
under Title 40 concerning child support, parental support, spousal maintenance, or marital property rights that includes a
transfer of all or a portion of a participant's payment rights in a retirement system to an alternate payee in compliance with
this section.
(3) A family law order must identify an alternate payee by full name, current address, and social security number. An alternate payee's rights and interests granted in compliance with this section are not subject to assignment, execution, garnishment, attachment, or other process. An alternate payee's rights or interests may be modified only by a family law order amending the family law order that established the right or interest.
(4) A family law order may not require:
(a) a type or form of benefit, option, or payment not available to the affected participant under the appropriate retirement system; or
(b) an amount or duration of payment greater than that available to a participant under the appropriate retirement system.
(5) A family law order may only provide for payment to an alternate payee as follows:
(a) Service retirement benefit payments or withdrawals of member contributions may be apportioned by directing payment of a percentage of the amount payable or payment of a fixed amount of no more than the amount payable to the participant.
(b) The maximum amount of disability or survivorship benefits that may be apportioned to alternate payees is the monthly benefit amount that would have been payable on the date of termination of service if the member had retired without disability or death.
(c) Retirement benefit adjustments for which a participant is eligible after retirement may be apportioned only if existing benefit payments are apportioned. The adjustments must be apportioned in the same ratio as existing benefit payments.
(d) Payments must be limited to the life of the appropriate participant. The duration of payments to an alternate payee may be further limited only to a specified maximum time, the life of the alternate payee, or the life of a specified participant. Payments to an alternate payee may be limited to a specific amount per month if the number of payments is specified. The alternate payee's rights and interests survive the alternate payee's death and may be transferred by inheritance.
(e) The participant may be required to choose a specified form of benefit payment or designate a beneficiary or contingent annuitant if the retirement system allows for that option.
(6) The board may assess a participant or an alternate payee for all costs of reviewing and administering a family law order, including reasonable attorney fees. The board may adopt rules to implement this section.
(7) A court may not enter a family law order relating to payments by the system unless terms of the proposed order have been approved by the board."
Section 9. Section 19-20-409, MCA, is amended to read:
"19-20-409. Transfer of service credits and contributions from public employees' retirement system. (1) An active member may at any time before retirement make a written election with the retirement board to qualify in the teachers' retirement system all of the member's previous creditable service in the public employees' retirement system. The amount that must be paid to the retirement system to qualify this service under this section is the sum of subsections (2) and (3).
(2) In addition to the amounts directly paid or transferred by the member under subsection (3), the The public employees'
retirement system shall transfer to the teachers' retirement system an amount equal to 72% of the amount payable by the
member.
(3) The member shall pay either directly or by transferring contributions on account with the public employees' retirement system an amount equal to the member's accumulated contributions at the time that active membership was terminated, plus accrued interest. Interest must be calculated from the date of termination until payment is received by the retirement system, based on the interest tables in use by the public employees' retirement system.
(4) A member who qualifies service from the public employees' retirement system in the teachers' retirement system must complete 5 years of membership service in the teachers' retirement system to qualify or purchase military service, out-of-state teaching service, employment while on leave, and private school employment.
(5) The retirement board shall determine the service credits that may be transferred.
(6) If an active member who also has creditable service in the public employees' retirement system before becoming a member of the teachers' retirement system dies before qualifying this service in the teachers' retirement system and if the member's service credits from both systems, when combined, entitle the member's beneficiary to a death benefit, the payment of the death benefit is the liability of the teachers' retirement system. Before payment of the death benefit, the public employees' retirement board must transfer to the teachers' retirement system the contributions necessary to qualify this service in the teachers' retirement system as provided in subsections (2) and (3).
(7) If the retirement board determines that an individual's membership was erroneously classified and reported to the
public employees' retirement system, the member's accumulated contributions and service, together with employer
contributions plus interest, must be transferred to the teachers' retirement system and any employee and employer
contributions due as calculated in 19-20-602 and 19-20-605, respectively, are the liability of the employee and the
employing entity where the error occurred, respectively. For the period of time that the employer contributions are held by
the public employees' retirement system, interest paid on employer contributions transferred under this subsection must be
calculated at the short-term investment pool rate earned by the board of investments in the fiscal year preceding the transfer
request."
Section 10. Section 19-20-412, MCA, is amended to read:
"19-20-412. Election to purchase additional service. (1) (a) Except as provided in subsection (3), a member with 5 years or more of creditable service may make a written election with the retirement board to purchase, for the purpose of calculating the member's retirement allowance, 1 year of additional service for:
(i) each 5 years of service on which contributions have been made as required under the provisions of 19-20-602; and
(ii) each 5 years of membership service as defined in Title 19, chapter 3, for which contributions have been made as required under the provisions of 19-20-409.
(b) A maximum of 5 years of additional service may be purchased under this section. A part-time member may purchase additional service on a prorated basis.
(2) (a) To purchase additional service under this section, a member shall contribute, in a lump-sum payment or in installments as agreed upon by the member and the retirement board, an amount equal to:
(i) the combined employer and employee rate on July 1, 1989, or the combined rate in effect at the time the member is eligible to purchase the service, whichever date is later, multiplied by the member's earned compensation for full-time service as provided in subsection (2)(b); and
(ii) interest at a rate of 8% compounded annually from July 1, 1989, or from the date at which the member is eligible to purchase the service, whichever date is later.
(b) The earned compensation used in calculating the cost of purchasing additional service under this section is:
(i) for the first year of service purchased, the member's earned compensation for full-time service for the 1988-89 school year or for the member's fifth year of service, whichever year is later;
(ii) for the second year of service purchased, the member's earned compensation for full-time service for the 1988-89 school year or for the member's 10th year of service, whichever year is later;
(iii) for the third year of service purchased, the member's earned compensation for full-time service for the 1988-89 school year or for the member's 15th year of service, whichever year is later;
(iv) for the fourth year of service purchased, the member's earned compensation for full-time service for the 1988-89 school year or for the member's 20th year of service, whichever year is later; and
(v) for the fifth year of service purchased, the member's earned compensation for full-time service for the 1988-89 school year or for the member's 25th year of service, whichever year is later.
(3) A member who became a member prior to July 1, 1989, and who is eligible to purchase creditable service under 19-3-504, 19-3-510, 19-3-512, 19-3-513, 19-20-402, 19-20-403, 19-20-408, 19-20-410, or 19-20-411 may not purchase additional service under this section unless the member elects in writing to:
(a) waive eligibility to purchase creditable service under sections referred to in subsection (3); and
(b) apply the accumulated contributions made under sections referred to in subsection (3) to the cost of additional service purchased under this section.
(4) Additional service purchased under this section may not be used to qualify a member for service retirement."
Section 11. Section 19-20-503, MCA, is amended to read:
"19-20-503. Transfer of dormant savings account or unclaimed accounts. (1) The retirement board may, in its
discretion, transfer the amount in the annuity savings account of an inactive member to the pension accumulation fund if
the account has been dormant for a period of 7 years. No A right of the member may not be jeopardized by such the
transfer, and the amount shall must be transferred back to the member's annuity savings account upon his the member's
request.
(2) Retirement benefits must be claimed within 5 years of the date of the member's death. If the named beneficiary for the account or the heirs at law fail to claim and accept the benefits, the member's account balance reverts to the pension trust fund."
Section 12. Section 19-20-602, MCA, is amended to read:
"19-20-602. Annuity savings fund -- member's contribution. The annuity savings fund is a fund in which the
contributions for the members to provide for their annuities retirement allowance or benefits must be accumulated in
individual accounts for each member. The normal contribution of each member is 7.044% of the member's earned
compensation. Contributions to and payments from the annuity savings fund must be made in the following manner:
(1) (a) Each employer, pursuant to section 414(h)(2) of the federal Internal Revenue Code of 1954, as amended and applicable on July 1, 1985, shall pick up and pay the contributions that would be payable by the member under this section for service rendered after June 30, 1985.
(b) The member's contributions picked up by the employer must be designated for all purposes of the retirement system as the member's contributions, except for the determination of a tax upon a distribution from the retirement system. These contributions must become part of the member's accumulated contributions but must be accounted for separately from those previously accumulated.
(c) The member's contributions picked up by the employer must be payable from the same source as is used to pay compensation to the member and must be included in the member's earned compensation as defined in 19-20-101. The employer shall deduct from the member's compensation an amount equal to the amount of the member's contributions picked up by the employer and remit the total of the contributions to the retirement board.
(d) The deductions must be made notwithstanding that the minimum compensation provided by law for a member may be reduced by the deductions. Each member is considered to consent to the deductions prescribed by this section, and payment of salary or compensation less the deductions is a complete discharge of all claims for the services rendered by the member during the period covered by the payment, except as to the benefits provided by the retirement system.
(2) In addition to the normal contributions and subject to the approval of the retirement board, a member may redeposit in the annuity savings fund, by a single payment or by an increased rate of contribution, an amount equal to accumulated contributions that the member has previously withdrawn, plus interest in the amount the contributions would have earned had the contributions not been withdrawn.
(3) The accumulated contributions of a member withdrawn by the member or paid to the member's estate or to the member's designated beneficiary in event of the member's death must be paid from the annuity savings fund. Upon the retirement of a member, the member's accumulated contributions must be transferred from the annuity savings fund to the pension accumulation fund."
Section 13. Section 19-20-603, MCA, is amended to read:
"19-20-603. Withdrawal of accumulated contributions -- options. Any An inactive member electing to do so or any a
person whose membership terminates without a prospect or anticipation that the member will return to work for an
employer within 60 days of termination may withdraw the member's or person's accumulated contributions from the
annuity account savings fund in the retirement system in accordance with the following provisions:
(1) An inactive member under the provisions of subsection (1) or (3) of 19-20-303(1) or (3) may elect, without right of
revocation, to withdraw the member's accumulated contributions. If the member does not withdraw the accumulated
contributions, the member remains an inactive member of the retirement system with the right to qualify for its benefits.
(2) Upon recovery from a disabling illness or separation from the armed forces, any a person qualifying as an inactive
member under the provisions of 19-20-303(2) may withdraw the member's accumulated contributions unless the member
returns to active membership.
(3) Any A person whose membership terminates under the provisions of 19-20-304(4) may withdraw the person's
accumulated contributions.
(4) Upon written request, a terminating member may have the payment of the all or any portion of the member's
accumulated contributions split. The tax-deferred portion of the contributions may be paid directly to an individual
retirement account or other rolled over or transferred into another qualified plan designated by the member, and the other.
The portion not rolled over or transferred must be paid directly to the terminating member. The board shall provide forms
for making the written request. The terminating member is responsible for correctly designating an account or plan eligible
to receive the tax-deferred amount in order to continue the tax-deferred status of the amount."
Section 14. Section 19-20-605, MCA, is amended to read:
"19-20-605. Pension accumulation fund -- employer's contribution. The pension accumulation fund is the fund in
which the reserves for payment of pensions and annuities retirement allowances and benefits must be accumulated and
from which pensions, annuities, retirement allowances and benefits must be paid to or on account of beneficiaries credited
with prior service retirees or their beneficiaries. Contributions to and payments from the pension accumulation fund must
be made as follows:
(1) Each employer shall pay into the pension accumulation fund an amount equal to 7.47% of the earned compensation of each member employed during the whole or part of the preceding payroll period.
(2) If the employer is a district or community college district, the trustees shall budget and pay for the employer's contribution under the provisions of 20-9-501.
(3) If the employer is the superintendent of public instruction, a public institution of the state of Montana, a unit of the Montana university system, or the Montana state school for the deaf and blind, the legislature shall appropriate to the employer an adequate amount to allow the payment of the employer's contribution.
(4) If the employer is a county, the county commissioners shall budget and pay for the employer's contribution in the manner provided by law for the adoption of a county budget and for payments under the budget.
(5) All interest and other earnings realized on the money of the retirement system shall must be credited to the pension
accumulation fund, and the amount required to allow regular interest on the annuity savings fund shall must be transferred
to that fund from the pension accumulation fund.
(6) All pensions, annuities, and benefits must be paid from the pension accumulation fund.
(7) The retirement board may, in its discretion, transfer from the pension accumulation fund an amount necessary to cover
expenses of administration."
Section 15. Section 19-20-702, MCA, is amended to read:
"19-20-702. Optional allowances. (1) Until the first payment on account of any benefit becomes normally due, any
member may elect to receive one of the optional allowances described in subsection (2) in lieu of the normal form of
retirement allowance, which is provided for in part 8 of this chapter and 19-20-902 and part 8 of this chapter. If a member
dies within 30 days after retirement, the member's election to receive an optional allowance is void and the member's death
will be considered as that of an active member.
(2) An optional allowance is the actuarial equivalent of the member's service retirement or disability retirement allowance at the time of the member's retirement effective date and provides an allowance payable to the member throughout the member's lifetime and, upon the member's death, an allowance payable to the person that the member nominated by written designation, duly acknowledged and filed with the retirement board at the time of the member's retirement, in accordance with one of the following options:
(a) Option A--the optional allowance will be paid to the member throughout the member's lifetime and, upon the member's death, continue throughout the lifetime of the member's designated beneficiary.
(b) Option B--the optional allowance will be paid to the member throughout the member's lifetime, and upon the member's death, one-half of the optional allowance will be continued throughout the lifetime of the member's designated beneficiary.
(c) Option C--the optional allowance will be paid to the member throughout the member's lifetime, and upon the member's death, two-thirds of the optional allowance will be continued throughout the lifetime of the member's designated beneficiary.
(d) Option D--some other benefit will be paid either to the member or the member's surviving designated beneficiary in
accordance with provisions approved by the retirement board Period certain and life--a retirement allowance will be paid
for a certain period of time or for the member's lifetime, whichever is greater.
(i) The member shall elect one of the following certain time periods:
(A) 10 years if the member is 75 years of age or younger at the time of retirement; or
(B) 20 years if the member is 65 years of age or younger at the time of retirement.
(ii) At the time of retirement, the member shall file with the board a written nomination of beneficiaries to receive payments if the member dies before the end of the certain period elected. Unless limited by a family law order, the nominated beneficiary may be changed by the member at any time by filing with the board a written notice designating different beneficiaries.
(3) (a) Upon written request to the retirement board, a retired member whose effective date of retirement is before October 1, 1993, and who is receiving an optional retirement allowance may designate a different beneficiary, select a different option, or convert the member's optional retirement allowance to a regular retirement or disability allowance if:
(i) the original beneficiary has died; or
(ii) the member has been divorced from the original beneficiary and the original beneficiary has not been granted the right to receive the optional retirement allowance as part of the divorce settlement.
(b) Upon receipt of the request, the board shall actuarially adjust the member's monthly retirement or disability allowance to reflect the change.
(4) Effective on the first of the month following receipt of notification of the death of a person nominated as the designated
beneficiary under subsection (2) (2)(a), (2)(b), or (2)(c), any optional retirement allowance that is effective after October 1,
1993, will revert to the full normal form of retirement allowance available at the time of retirement. The normal form of
retirement allowance available must be increased by the value of any postretirement adjustments received by the member
since the effective date of retirement. The retired member may, within 180 days of the death of the designated beneficiary,
file a written application with the board to designate a different beneficiary and to select an actuarially equivalent optional
allowance. The optional allowance is effective on the first day of the month following receipt of the retiree's application."
Section 16. Section 19-20-703, MCA, is amended to read:
"19-20-703. Payments to be monthly. (1) All pensions and annuities shall retirement allowances must be paid in equal
monthly installments.
(2) The retirement allowance may commence:
(a) no earlier than the first day of the month following the member's termination date or on the first day of the month following the date when the member first becomes eligible, whichever date is later; or
(b) if requested by the inactive member in writing:
(i) on the first day of a later month; or
(ii) on the first day of the month following the member's 60th birthday."
Section 17. Section 19-20-706, MCA, is amended to read:
"19-20-706. Exemption from taxation and legal process. Except as provided in 19-20-305, the pensions, annuities,
retirement allowances or any other benefits accrued or accruing to any person under the provisions of the retirement system
and the accumulated contributions and cash and securities in the various funds of the retirement system are:
(1) exempted from any state, county, or municipal tax of the state of Montana except for:
(a) a retirement allowance received in excess of $3,600 or adjusted by an amount determined pursuant to 15-30-111(2)(c)(ii); or
(b) a withdrawal paid under 19-20-603 of a member's contributions picked up by an employer after June 30, 1985, as provided in 19-20-602;
(2) not subject to execution, garnishment, attachment by trustee process or otherwise, in law or equity, or any other process; and
(3) unassignable except as specifically provided in this chapter."
Section 18. Section 19-20-711, MCA, is amended to read:
"19-20-711. Eligibility for postretirement adjustment. (1) Except as provided in subsection (2), a member retiree or
beneficiary is eligible to receive a postretirement adjustment as provided in 19-20-713 if he the retiree is receiving a:
(a) service retirement allowance and is 55 years of age or older on or before June 30 in the year that the postretirement
adjustment is made; or
(b) disability or survivorship allowance.
(2) A member retiree or beneficiary is ineligible to receive a postretirement adjustment under subsection (1) unless he the
retiree or beneficiary has been receiving a monthly service, disability, or survivorship allowance for at least 24 consecutive
months on or before June 30 in the year that the adjustment is made."
Section 19. Section 19-20-712, MCA, is amended to read:
"19-20-712. Funding for postretirement adjustment -- reserve fund. (1) At the end of each fiscal year, the board shall
determine the total investment income earned minus unrealized gains or losses on the retirement fund for that fiscal year.
From this amount, the board shall subtract the:
(a) actuarial amount required to fund the retirement system for the fiscal year amount equivalent to the actuarially required
investment yield; and
(b) retirement system's administrative and investment expenses for the fiscal year.
(2) (a) From the remainder obtained in subsection (1), the board shall calculate the amount of investment income earned on that portion of the retirement fund balance representing retired members.
(b) The board shall deposit the amount calculated in subsection (2)(a) in a reserve fund.
(3) Subject to the restrictions contained in subsections (4) and (5), the board shall annually use 90% of the amount in the
reserve fund provided for in subsection (2)(b) to pay a postretirement adjustment to eligible members retirees or
beneficiaries under 19-20-713.
(4) If the amount in the reserve fund is insufficient to provide an average monthly postretirement adjustment of at least $1 under 19-20-713, an adjustment may not be made in that calendar year.
(5) The amount available for payment of the postretirement allowance is limited to an amount that would provide a
percentage increase in the average service, disability, or survivorship allowance of all eligible members retirees, when
combined with the postretirement adjustment, that is equal to or less than the percentage increase for the previous calendar
year in the annual average consumer price index for urban wage earners and workers compiled by the bureau of labor
statistics, United States department of labor, or its successor agency."
Section 20. Section 19-20-713, MCA, is amended to read:
"19-20-713. Payment and amount of postretirement adjustment. (1) Effective January 1 of each year that funds are
available under 19-20-712, a member retiree or beneficiary eligible under 19-20-711 shall receive a postretirement
adjustment in the form of a monthly benefit payable for life.
(2) The board shall calculate the amount of the postretirement allowance payable to an eligible member retiree or
beneficiary by:
(a) dividing the amount available under 19-20-712(3) for payment of the postretirement allowance by the total
accumulated years of service for all eligible members retirees and beneficiaries;
(b) multiplying the quotient obtained in subsection (2)(a) by the member's retiree's total years of service;
(c) dividing the product obtained in subsection (2)(b) by a factor for calculating a monthly annuity retirement allowance
from actuarial tables adopted by the board; and
(d) applying the provisions contained in subsections (3) and (4).
(3) If a member retiree had elected to receive an optional retirement allowance, the amount of his the retiree's
postretirement allowance must be adjusted by the appropriate optional factor.
(4) If more than one beneficiary is receiving a member's retiree's retirement allowance, the postretirement adjustment must
be divided in the same manner as the member's retiree's retirement allowance."
Section 21. Section 19-20-715, MCA, is amended to read:
"19-20-715. Compensation limit. (1) Compensation in excess of the limitations set forth in section 401(a)(17) of the Internal Revenue Code must be disregarded for individuals who are not eligible employees. The limitation on compensation for eligible employees may not be less than the amount that was allowed to be taken into account under this chapter on July 1, 1993. For purposes of this section, an eligible employee is an individual who was a member in the retirement system prior to July 1, 1996.
(2) In determining a member's retirement allowance under 19-20-802 or 19-20-804, the compensation reported in each year of the 3 years that make up the average final compensation may not be greater than 110% of the previous year's compensation included in the calculation of average final compensation or the earned compensation reported to the retirement system, whichever is less, except as provided by rule by the retirement board.
(3) Earned compensation in excess of the amount specified in subsection (2) is considered termination pay and must be included in the calculation of average final compensation as provided in [section 2]. "
Section 22. Section 19-20-801, MCA, is amended to read:
"19-20-801. Eligibility for superannuation service retirement. A member who has at least 5 full years of creditable
service, whose last 5 years of creditable service were in this state, and who has attained the age of 60 or has been credited
with full-time or part-time service in 25 or more years may retire from service if he the member has terminated
employment in all positions from which the member is eligible to retire and files with the retirement board his a written
application setting forth the fact of his the member's retirement."
Section 23. Section 19-20-804, MCA, is amended to read:
"19-20-804. Allowance for superannuation service retirement. (1) Upon superannuation retirement, a termination, an
eligible member shall must receive a retirement allowance consisting of a pension which, together with an annuity,
provides a retirement allowance equal to one-sixtieth of his the member's average final compensation, as limited by
19-20-715, multiplied by the sum of the number of years of creditable service, service transferred under 19-20-409, and
additional service purchased under 19-20-412.
(2) Any Except as provided in subsection (3), a retired member may be employed as a part-time or substitute teacher in
Montana and may earn, without loss of retirement benefits, an amount not to exceed the greater of:
(a) one-third of the sum of his the member's average final compensation plus normal annual salary increases for teaching
personnel employed by the school district, state agency, political subdivision, or university unit that employed the member
at the time of retirement; or
(b) one-third of the median of the average final compensation for members retired during the preceding fiscal year as determined by the retirement board.
(3) If an early-retired member under 19-20-802 is reemployed with the same employer within 30 days from the member's effective date of retirement or if the early-retired member is guaranteed reemployment with the same employer, the member must be considered to have continued in the status of an active member and not to have separated from service. Any retirement allowance payments received by the member must be repaid to the system, together with interest, at the actuarially assumed rate, and the retirement allowance must be terminated."
Section 24. Section 19-20-902, MCA, is amended to read:
"19-20-902. Allowance for disability retirement. (1) Upon retirement for disability, a member must receive a disability retirement allowance equal to the greater of:
(1)(a) one-sixtieth of the member's average final compensation multiplied by the sum of the number of years of creditable
service, service transferred under 19-20-409, and additional service purchased under 19-20-412, if the retirement allowance
exceeds one-fourth of the member's average final compensation; or
(2)(b) a pension that, together with the member's annuity, provides a total retirement allowance equal to one-fourth of the
member's average final compensation.
(2) The earned compensation in the year of termination that is included in the calculation of average final compensation of a member who is awarded a disability retirement allowance prior to the completion of a full year is the compensation, pay, or salary that the member would have received under the member's contract had the member completed the full year. Any termination pay received by the member is limited to the amount actually paid and is not the amount that the member would have earned had the member completed the full year."
Section 25. Section 19-20-903, MCA, is amended to read:
"19-20-903. Medical examination of disability retiree. (1) Once each year during the first 5 years following the
retirement of a member on a disability retirement allowance and once in every 3-year period thereafter, the retirement board
may require and, upon the beneficiary's application, shall permit a disability beneficiary benefit recipient who has not yet
attained the age of 60 to undergo a medical examination by a physician or physicians designated by the retirement board.
The examination shall must be made at the place of residence of the beneficiary benefit recipient or other place mutually
agreed upon. Based on the examination, the board shall determine whether the disabled member is unable, by reason of
physical or mental incapacity, to perform the essential elements of the position held by the member when the member
retired. If the board determines that the member is not incapacitated, the member's retirement benefit must be canceled. If
the member disagrees with the board's determination, the member may request the board to reconsider its action. The
request for reconsideration must be made in writing within 60 days after the receipt of the notice of the status change.
(2) A member whose disability retirement benefit is canceled because the board has determined that the member is no longer incapacitated must be given preference by the member's former employer for the position held at the time of retirement or for a comparable position that becomes available within 1 year of cancellation of the disability retirement. The member may agree to accept an offer of employment by an employer. Employment in any capacity by an employer terminates any right granted by this section. The fact that the former employee was retired on disability may not prejudice any right to reinstatement to duty that the former employee may have or claim to have. This section does not affect any requirement for the former employee to meet or to be able to meet professional certification and licensing standards unrelated to the previous disability, otherwise necessary for reinstatement to duty.
(2)(3) Should If a disability beneficiary benefit recipient who has not yet attained the age of 60 refuse refuses to submit to
a medical examination as required in subsection (1), his the recipient's allowance may be discontinued until his withdrawal
of such the refusal, and should his. If a refusal continue continues for 1 year, all his rights in and to his a disability pension
may be revoked by the retirement board."
Section 26. Section 19-20-904, MCA, is amended to read:
"19-20-904. Adjustment of allowance. (1) If (1) (a) Except as provided by subsection (1)(b), if a retiree receiving a
disability beneficiary retirement allowance is engaged in or is able to engage in a gainful occupation paying more than the
difference between the beneficiary's retiree's retirement allowance and the beneficiary's retiree's average final compensation
or the difference between the median salary of those members retired during the preceding fiscal year and the beneficiary's
retiree's retirement allowance, whichever is greater, the retirement allowance must be reduced to an amount that, together
with the amount earnable by the beneficiary retiree, is equal to the beneficiary's retiree's average final compensation or the
median salary of those members retired during the preceding fiscal year, whichever is greater.
(b) If a disabled retiree is reemployed with the same employer within 30 days from the member's effective date of retirement or if the retired member is guaranteed reemployment with the same employer, the member must be considered to have continued in the status of an active member and not to have separated from service. Any retirement allowance payments received by the member must be repaid to the system, together with interest, at the actuarially assumed rate, and the retirement benefit must be terminated.
(2) If the beneficiary's disabled retiree's earning capacity is changed later, the beneficiary's retirement allowance may be
further modified, but the new allowance may not exceed the retirement allowance originally granted or an amount that,
when added to the amount earnable by the beneficiary retiree, equals the beneficiary's retiree's average final compensation.
(3) The board may, in its discretion, require a recipient of a disability retirement allowance to annually submit an earning statement and any documentation necessary to support the earnings of the recipient.
(4) A beneficiary restored to active service at a salary less than the average final compensation upon the basis of which the
beneficiary was retired may not become a member of the retirement system while receiving a reduced benefit."
Section 27. Section 19-20-905, MCA, is amended to read:
"19-20-905. Cancellation of allowance and restoration of membership. (1) If a disability beneficiary under age 60 is
restored to active service at a compensation not less than his average final compensation, his disabled retiree is employed
full-time in a capacity that would otherwise meet the eligibility requirements of active membership, as provided under
19-20-302, the retiree's retirement allowance shall must cease and he. If the retiree is employed by an employer covered
under this chapter, the retiree shall again become an active member of the retirement system. Any prior service certificate
on the basis of which his the member's service was computed at the time of his the member's disability retirement shall
must be restored to full force, and upon his the member's subsequent retirement, he shall the member must be credited with
such the prior service and all his subsequent service as a member.
(2) If he the member is restored to active service membership on or after the attainment of the age of 55 years, his pension
the member's retirement allowance upon subsequent retirement may not exceed the pension retirement allowance that he
the member would have received had he the member remained in service during the period of his the member's previous
retirement or the sum of the pension which he retirement allowance that the member was receiving immediately prior to his
the member's last restoration to service and the pension retirement allowance that he the member would have received on
account of his the member's service since his the member's last restoration had he the member entered service at that time
as a new member."
Section 28. Section 19-20-1001, MCA, is amended to read:
"19-20-1001. Allowances for death of member. (1) If a member dies before retirement, his the member's accumulated
contributions shall must be paid to his the member's estate or such to a person as he the member may have nominated by a
written designation in a manner prescribed by the board and filed with the retirement board prior to his the member's death
in the manner prescribed by the board.
(2) (a) In lieu of benefits provided for in subsection (1), if the deceased member qualified by reason of service for a
retirement benefit, the nominated beneficiary nominated by the deceased member may elect to receive a monthly life
annuity retirement allowance. The monthly life annuity shall retirement allowance must be determined as prescribed in
19-20-804(1) and section 5, Chapter 549, Laws of 1981, in the same manner as if the member elected option A provided for
in 19-20-702(2)(a).
(b) In the event that payments made to an annuitant a recipient do not equal the amount of the member's accumulated
contributions prior to before the annuitant's member's death, the difference between the total annuity retirement allowance
payments made and the amount of the accumulated contributions shall at the time of the member's death must be paid to the
beneficiary.
(3) If the deceased member had 5 or more years of creditable service and was an active member in the state of Montana
within 1 year prior to his before the member's death, a lump-sum death benefit of $500 is payable to his the member's
designated beneficiary.
(4) If a deceased member had 5 or more years of creditable service and was an active member in the state of Montana
within 1 year prior to his the member's death, the sum of $200 per a month shall must be paid to each minor child of the
deceased member until such the child reaches his 18th birthday 18 years of age."
Section 29. Section 19-20-1002, MCA, is amended to read:
"19-20-1002. Payments upon death of retiree. (1) In the event of the death of a member after retirement, a death benefit
of $500 is payable to his the designated beneficiary.
(2) In the event that payments made to an annuitant a benefit recipient do not equal the amount of the member's
accumulated contributions prior to before the annuitant's death member's retirement, the difference between the total
retirement allowance paid and the amount of the accumulated contributions shall must be paid to the beneficiary.
(3) If a deceased member had 5 or more years of creditable service and was retired at the time of his death, the sum of $200
per a month shall must be paid to each minor child of the deceased member retiree until such the child reaches his 18th
birthday 18 years of age."
NEW SECTION. Section 30. Codification instruction. (1) [Section 1] is intended to be codified as an integral part of Title 19, chapter 20, part 8, and the provisions of Title 19, chapter 20, part 8, apply to [section 1].
(2) [Sections 2 and 4] are intended to be codified as an integral part of Title 19, chapter 20, part 7, and the provisions of Title 19, chapter 20, part 7, apply to [sections 2 and 4].
(3) [Section 3] is intended to be codified as an integral part of Title 19, chapter 20, part 1, and the provisions of Title 19, chapter 20, part 1, apply to [section 3].
NEW SECTION. Section 31. Coordination instruction. If ___Bill No. ____ [LC 0553] is passed and approved and if it includes sections that amend 19-20-711 through 19-20-713, then [sections 18 through 20 of this act], amending 19-20-711 through 19-20-713, are void.
NEW SECTION. Section 32. Retroactive applicability. [Section 9] applies retroactively, within the meaning of 1-2-109, to all occurrences on or after January 1, 1995.
NEW SECTION. Section 33. Effective date. [This act] is effective on passage and approval.
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