House Bill No. 458
Introduced By _______________________________________________________________________________
A Bill for an Act entitled: "An Act freezing the current public employees' retirement system; creating a defined contribution retirement plan for new employees; providing current members with an option; establishing contribution rates; allowing the public employees' retirement board to adopt rules; superseding the unfunded mandate laws; amending section
19-3-103, MCA; and providing an immediate effective date."
STATEMENT OF INTENT
A statement of intent is required for this bill because the bill gives the public employees' retirement board authority to adopt administrative rules.
Be it enacted by the Legislature of the State of Montana:
NEW SECTION. Section 1. Short title. [Sections 1 through 12] may be cited as "The Public Employees' Defined Contribution Act".
NEW SECTION. Section 2. Definitions. Unless the context requires otherwise, as used in [sections 1 through 12], the following definitions apply:
(1) "Board" means the public employees' retirement board established in 2-15-1009.
(2) "Compensation" means compensation as defined in 19-3-108.
(3) "Division" means the public employees' retirement division of the department of administration.
(4) "Employee" means an employee as defined in 19-2-303.
(5) "Employer" means an employer as defined in 19-3-108.
(6) "Member" means an employee who elects to become a member of Plan II under [section 5(2)] or who is an employee hired on or after July 1, 1997.
(7) "Plan II" means the defined contribution retirement plan provided for under the provisions of [sections 1 through 12].
(8) "Public employees' retirement system" means the public employees' retirement system established in 19-3-103.
NEW SECTION. Section 3. Establishment of plan. (1) There is a defined contribution retirement plan to become effective July 1, 1997. This plan may be referred to as "Plan II".
(2) Subject to the provisions of [sections 1 through 12], Plan II must be a defined contribution retirement plan.
(a) Plan II may be an independent plan or part of a larger plan with respect to some or all of the benefits provided.
(b) The benefits under Plan II must be provided through individual annuity contracts, either fixed or variable, or a combination of contracts, issued to and owned by the members.
NEW SECTION. Section 4. Administration -- duties of board. The board shall:
(1) provide for the administration of Plan II;
(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 members 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 members and the interests of the employers; and
(d) ability of the designated company or companies to provide these rights and benefits.
NEW SECTION. Section 5. Membership. (1) All employees hired on or after July 1, 1997, are required to become members of Plan II on the first day of employment by an employer and shall file with the division in a manner prescribed by the board information affecting the employee's status as a member.
(2) A member of the public employees' retirement system may elect to join Plan II by submitting a written election to the division. This election must be made before December 31, 1997, and in a manner prescribed by the board.
NEW SECTION. Section 6. Member contributions. Each member shall contribute to Plan II a minimum of 6%, up to a maximum of 8%, of the member's compensation, notwithstanding federally established maximum limits.
NEW SECTION. Section 7. Employer contributions. (1) Each employer shall contribute to Plan II 5% of each member's compensation.
(2) Subject to [section 8], each employer shall contribute to the public employees' retirement system 2.7% of each member's compensation for the unfunded liabilities of the system.
NEW SECTION. Section 8. Actuarial valuation -- rulemaking authority to change contributions. (1) The board, through its regular biennial actuarial valuation of the public employees' retirement system, shall determine the dollar value of the past service liability of active, inactive, and retired public employees' retirement system members as compared to contributions required to be made by the employer pursuant to [section 7(2)].
(2) If the board determines that the contribution established in [section 7(2)] does not amortize the public employees' retirement system unfunded liabilities over a 40-year period, then the board may increase, through administrative rule, the contribution rate established in [section 7(2)] to an amount that provides that the liabilities are paid off over a 40-year amortization schedule.
NEW SECTION. Section 9. Unfunded mandate law superseded. The provisions of [sections 1 through 12] expressly supersede and modify the unfunded mandate requirements of 1-2-112 through 1-2-116.
NEW SECTION. Section 10. Payment of benefits. Retirement, death, or other benefits may not be paid under Plan II. Benefits are payable to a member and the member's beneficiaries only by the designated company or companies in accordance with the terms of the contracts.
NEW SECTION. Section 11. Exemption from taxation, legal process, and assessments. All contracts, benefits, and contributions under Plan II and the earnings under Plan II are:
(1) except for a retirement allowance received in excess of $3,600 or adjusted by an amount determined pursuant to 15-30-111(2)(c)(ii), exempt from any state, county, or municipal tax;
(2) not subject to execution, garnishment, attachment, or other process;
(3) not covered or assessable by an insurance guaranty association; and
(4) unassignable except as specifically provided in the contracts.
NEW SECTION. Section 12. Rulemaking authority. The board may adopt rules to implement [sections 1 through 12].
Section 13. Section 19-3-103, MCA, is amended to read:
"19-3-103. Retirement system created -- system frozen. (1) A retirement system is created and established to become effective July 1, 1945, and to be known as the public employees' retirement system. The system is governed by the provisions of chapter 2 and this chapter.
(2) On and after July 1, 1997, an employee of an employer may not become a member of the public employees' retirement system."
NEW SECTION. Section 14. Codification instruction. [Sections 1 through 12] are intended to be codified as an integral part of Title 19, and the provisions of Title 19 apply to [sections 1 through 12].
NEW SECTION. Section 15. Effective date. [This act] is effective on passage and approval.