House Bill No. 142

Introduced By kasten

By Request of the Board of Regents



A Bill for an Act entitled: "An Act extending the Montana university system optional retirement program to university system employees otherwise eligible for membership under the public employees' retirement system; assigning to the board of regents the duty to consider allowing the transfer of funds for terminating program participants; allowing current employees covered by the public employees' retirement system an option; providing that newly hired employees shall join the optional retirement program; establishing contribution rates; amending sections 19-21-101, 19-21-102, 19-21-103, 19-21-201, 19-21-202, and 19-21-203, MCA; and providing an effective date."



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



Section 1.  Section 19-21-101, MCA, is amended to read:

"19-21-101.   Authority to establish optional retirement program. (1) The board of regents may establish an optional retirement program, as provided in this chapter, for:

(a) the administrative officers and members of the instructional and scientific staff of the Montana university system; and

(b) Montana university system employees otherwise eligible to be covered under the public employees' retirement system.

(2) The program may be an independent plan or part of a larger plan with respect to some or all of the benefits provided.

(3) The benefits under the program must be provided through individual annuity contracts, either fixed or variable, or a combination thereof of contracts, issued to and owned by the participants in the program."



Section 2.  Section 19-21-102, MCA, is amended to read:

"19-21-102.   Definition of teachers' retirement system Definitions. In this chapter,:

(1) "teachers' retirement system" means the teachers' retirement system provided for in Title 19, chapter 20; and

(2) "public employees' retirement system" means the public employees' retirement system provided for in Title 19, chapter 3."



Section 3.  Section 19-21-103, MCA, is amended to read:

"19-21-103.   Duties of board of regents. The board of regents shall:

(1)  provide for the administration of the program;

(2)  designate the company or companies from which the contracts are to be purchased and approve the form and content of the contracts, taking into consideration the:

(a)  nature and extent of the rights and benefits to be provided by the contracts for participants and their beneficiaries;

(b)  relationship of these rights and benefits to the amount of contributions to be made;

(c)  suitability of these rights and benefits to the needs of the participants and the interests of the Montana university system in the recruitment and retention of administrative officers, and members of the instructional and scientific staff, and other employees; and

(d)  ability of the designated company or companies to provide these rights and benefits; and

(e) appropriateness of permitting terminated participants to transfer the funds in their optional retirement program annuity contracts to another qualified plan."



Section 4.  Section 19-21-201, MCA, is amended to read:

"19-21-201.   Participation in program. (1) Except as provided in subsection (2),:

(a) academic and professional administrative personnel with individual contracts under the authority of the board of regents are eligible for and may elect to participate in the optional retirement program instead of the teachers' retirement system. This election must be exercised:

(a)(i)  before January 1, 1988, for an eligible person hired before July 1, 1987;

(b)(ii)  within 90 days after entry into service or before January 1, 1988, whichever is later, for a person hired in an eligible position on or after July 1, 1987; and

(c)(iii)  within 30 days after receiving written notice of eligibility or before January 1, 1988, whichever is later, for an employee who becomes eligible to participate in the optional retirement program by reason of appointment, promotion, transfer, or reclassification to an eligible position.

(b) employees of the Montana university system who are members of the public employees' retirement system may elect to participate in the optional retirement program. This election must be exercised:

(i)  before January 1, 1998, for an eligible person hired before July 1, 1997;

(ii) within 90 days after entry into service or before January 1, 1998, whichever is later, for a person hired in an eligible position on or after July 1, 1997; and

(iii) within 30 days after receiving written notice of eligibility or before January 1, 1998, whichever is later, for an employee who becomes eligible to participate in the optional retirement program by reason of appointment, promotion, transfer, or reclassification to an eligible position.

(2)  (a) An eligible person hired on or after July 1, 1993, or January 1, 1998, in the case of a person who would otherwise be eligible for membership in the public employees' retirement system, shall become a member of the optional retirement plan unless the person is, on the date hired, an active, inactive, or retired member of a public retirement system created in Title 19, chapter 3 or 20.

(b)  A person hired who is a member of a public retirement system created in Title 19, chapter 3 or 20, shall elect to:

(i)  remain with the retirement system of which the person is a member on the date hired; or

(ii) become a member of the optional retirement plan.

(c)  A person eligible to make an election under this subsection (2) shall exercise the election within 30 days of being hired.

(3)  The election must be exercised by filing a written notice with the teachers' retirement system or the public employees' retirement system, whichever is applicable, and the disbursing officer of the employer. The For persons eligible under subsection (1)(a), the election is effective as of the date that the notice is filed or January 1, 1988, whichever is later. For persons eligible under subsection (1)(b), the election is effective as of the date that the notice is filed or January 1, 1998, whichever is later.

(4)  If an eligible officer, employee, or staff member fails to exercise the election, as provided by this section, that person must shall remain or become a member of the teachers' retirement system or the public employees' retirement system, whichever is applicable.

(5)  An election under this section is not effective unless the notice filed with the disbursing officer of the employer is accompanied by an appropriate application, if one is required, for the issuance of a contract or contracts under the program."



Section 5.  Section 19-21-202, MCA, is amended to read:

"19-21-202.   Effect on rights under teachers' retirement system and public employees' retirement system. (1) An election under 19-21-201 to participate in the optional retirement program is a waiver of all rights and benefits under the teachers' or public employees' retirement system except as provided in this section.

(2)  A member of the teachers' or public employees' retirement system who elects to participate in the optional retirement program is considered, for the purpose of determining eligibility for rights and benefits under that system, to be no longer employed in a capacity that allows active membership in that system as of the effective date of the election. Thereafter After the date of election, the member is considered an inactive member of the retirement system if qualified under 19-3-401 or 19-20-303, with the rights and privileges provided under 19-3-318 or 19-20-603(1), as applicable. A member who elects to participate in the optional retirement program who does not qualify as an inactive member under 19-3-401 or 19-20-303 is considered a terminated member of the retirement system under 19-2-601 or 19-20-304(4), as applicable.

(3)  A person who elects to participate in the optional retirement program is ineligible to be an active member of the teachers' or public employees' retirement system while continuously employed in a position eligible to participate in the optional retirement program."



Section 6.  Section 19-21-203, MCA, is amended to read:

"19-21-203.   Contributions. (1) (a) Each optional retirement program participant shall contribute an amount equal to the member's contribution required under 19-20-602 or, in the case of participants otherwise eligible for membership in the public employees' retirement system, the contribution required under 19-3-315.

(b) The board of regents shall contribute an amount that, when added to the participant's contribution, is equal to 12% of the participant's earned compensation.

(2)  (a) On or after July 1, 1997, the The board of regents may:

(i)  reduce the participant's contribution rate established in subsection (1) to an amount not less than 6% of the participant's earned compensation; and

(ii) increase the employer's contribution rate to an amount not greater than 6% of the participant's earned compensation.

(b)  The sum of the participant's and employer's contributions made under subsection (2)(a) must remain at 12% of the participant's earned compensation.

(3)  The board of regents shall determine whether the participant's contribution is to be made by salary reduction under section 403(b) of the Internal Revenue Code of 1954 or by employer pick-up under section 414(h)(2) of that code.

(4)  The disbursing officer of the employer or other official designated by the board of regents shall pay both the participant's contribution and the appropriate portion of the regents' contribution to the designated company or companies for the benefit of the participant.

(5)  (a) The board of regents shall contribute the amounts specified in subsection subsections (5)(b) and (5)(c) to the teachers' retirement system or to the public employees' retirement system, whichever is applicable, to discharge the obligation incurred by the employees of the Montana university system who elect or who are required to become members of the optional retirement plan. The contributions paid by the board are for the past service liability incurred by active, inactive, and retired members of the teachers' retirement system or the public employees' retirement system, whichever is applicable, and must be consistent with the requirements of 19-21-111.

(b)  (i) Beginning July 1, 1993, through June 30, 1997, the contributions to be made by the board of regents to the teachers' retirement system must equal 2.503% of earned compensation attributable to optional retirement participants eligible under 19-21-201(1)(a).

(ii) Beginning July 1, 1997, the contribution rate to the teachers' retirement system must be adjusted, pursuant to 19-20-201, based on the actual experience of the members of the Montana university system who are members of the teachers' retirement system, and must be set at a rate sufficient to amortize the past service liability of the university system members by July 1, 2033.

(c) (i) Beginning January 1, 1998, through June 30, 2003, the contributions to be made by the board of regents to the public employees' retirement system must equal 1.40% of earned compensation attributable to optional retirement program participants eligible pursuant to 19-21-201(1)(b).

(ii) Beginning July 1, 2003, the contribution rate to the public employees' retirement system must be adjusted, pursuant to 19-2-405 and this section, based on the actual experience of university system employees who are members of the public employees' retirement system, and must be sufficient to amortize the past service liability of the university system members by July 1, 2043."



NEW SECTION. Section 7.  Effective date. [This act] is effective July 1, 1997.

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