2007 Montana Legislature

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HOUSE BILL NO. 81

INTRODUCED BY R. HAMILTON

BY REQUEST OF THE TEACHERS' RETIREMENT BOARD

 

AN ACT GENERALLY REVISING TEACHERS' RETIREMENT SYSTEM LAWS; CLARIFYING THAT PARAPROFESSIONALS MUST BE MEMBERS OF THE TEACHERS' RETIREMENT SYSTEM; REQUIRING ELECTED COUNTY SUPERINTENDENTS TO FILE A MEMBERSHIP ELECTION FORM UNDER CERTAIN CIRCUMSTANCES; CLARIFYING THAT MEMBERS CANNOT CONCURRENTLY PARTICIPATE IN BOTH THE TEACHERS' RETIREMENT SYSTEM AND THE OPTIONAL RETIREMENT SYSTEM; REVISING THE REQUIREMENTS OF FAMILY LAW ORDERS TO PROVIDE FOR THE PAYMENT OF BENEFITS FOR THE LIFE OF THE ALTERNATE PAYEE; CLARIFYING THAT ONLY ACTIVE MEMBERS OR INACTIVE VESTED MEMBERS MAY PURCHASE SERVICE CREDIT; REQUIRING THAT ACCOUNTS REINSTATED FROM DORMANT STATUS INCLUDE INTEREST; PROVIDING FOR THE PAYMENT OF INTEREST ON CORRECTED ERRORS; CLARIFYING THE DATE OF TERMINATION FOR THE PURPOSE OF TERMINATION PAY; CLARIFYING THAT LUMP-SUM AMOUNTS DUE AN ESTATE MAY BE PAID TO THE PERSONAL REPRESENTATIVE OR EXECUTOR; REQUIRING EMPLOYERS TO USE THE SYSTEM'S ONLINE REPORTING SYSTEM FOR AUTHORIZING VOLUNTARY INSURANCE PREMIUM DEDUCTIONS; AMENDING SECTIONS 19-20-101, 19-20-104, 19-20-202, 19-20-302, 19-20-305, 19-20-414, 19-20-427, 19-20-501, 19-20-503, 19-20-602, 19-20-603, 19-20-605, 19-20-705, 19-20-716, 19-20-717, 19-20-731, 19-20-805, AND 19-20-1101, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

 

     Section 1.  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 account, 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 upon the basis of the mortality table and interest rate assumption set by the retirement board.

     (3)  "Average final compensation" means the average of a member's earned compensation during the 3 consecutive years of full-time service or as provided under 19-20-805 that yield the highest average and on which contributions have been made as required by 19-20-602. 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 19-20-716(1)(b).

     (4)  "Beneficiary" means one or more persons 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.

     (5)  "Creditable service" is that service defined by 19-20-401.

     (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 before any pretax deductions allowed under the Internal Revenue Code are deducted from the member's compensation.

     (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:

     (A)  professional membership dues;

     (B)  maintenance;

     (C)  housing;

     (D)  day care;

     (E)  automobile, travel, lodging, or entertaining expenses; or

     (F)  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)  Unless included pursuant to 19-20-716, earned compensation does not include termination pay.

     (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.

     (e)  Earned compensation does not include:

     (i)  compensation paid to a member from a plan for the deferral of compensation under section 457(f) of the Internal Revenue Code, 26 U.S.C. 457(f);

     (ii) payment for sick, annual, or other types of leave that is allowed to a member and that is accrued in excess of that normally allowed; or

     (iii) incentive or bonus payments paid to a member that are not part of a series of annual payments.

     (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.

     (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.

     (9)  "Internal Revenue Code" has the meaning provided in 15-30-101.

     (10) "Member" means a person who has an individual account in the annuity savings fund account. 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.

     (11) "Normal retirement age" means an age no earlier than the age at which the member is eligible to retire:

     (a)  by virtue of age, length of service, or both;

     (b)  without disability; and

     (c)  with the right to receive immediate retirement benefits without an actuarial reduction in the benefits.

     (12) "Part-time service" means service that is less than full-time or that totals less than 180 days in a normal academic year. Part-time service must be credited in the proportion that the actual time worked compares to full-time service.

     (13) "Prior service" means employment of the same nature as service but rendered before September 1, 1937.

     (14) "Regular interest" means interest at a rate set by the retirement board in accordance with 19-20-501(2).

     (15) "Retired member" means a person who has terminated employment that qualified the person for membership under 19-20-302 and who has received at least one monthly retirement benefit paid pursuant to this chapter.

     (16) "Retirement allowance" means a monthly payment due to a person who has qualified for service or disability retirement or due to a beneficiary as provided in 19-20-1001.

     (17) "Retirement board" or "board" means the retirement system's governing board provided for in 2-15-1010.

     (18) "Retirement system", "system", or "plan" means the teachers' retirement system of the state of Montana provided for in 19-20-102.

     (19) "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.

     (20) "Termination" or "terminate" means that the member has severed the employment relationship with the member's employer and that 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.

     (21) (a) "Termination pay" means any form of bona fide vacation leave, sick leave, severance pay, amounts provided under a window or early retirement incentive plan, or other payments contingent on the employee terminating employment and on which employee and employer contributions have been paid as required by 19-20-716.

     (b)  Termination pay does not include:

     (i)  amounts that are not wages under section 3121 of the Internal Revenue Code, determined without regard to the wage base limitation; and

     (ii) amounts that are payable to a member from a plan for the deferral of compensation under section 457(f) of the Internal Revenue Code, 26 U.S.C. 457(f).

     (22) "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.

     (23) "Written application" or "written election" means a written instrument, required by statute or the rules of the board, properly signed, and filed with the board, that contains all the required information, including documentation that the board considers necessary."

 

     Section 2.  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 account, and the maintenance of accumulated contributions in the annuity savings fund account, as provided for in this chapter, and the payment of all retirement allowances, refunds, and other benefits granted under the retirement system are obligations of the state of Montana."

 

     Section 3.  Section 19-20-202, MCA, is amended to read:

     "19-20-202.  Per diem and expenses of board members. The members of the retirement board shall serve without direct or indirect compensation except that each appointed member shall receive $50 per day and travel expenses, as provided for in 2-18-501 through 2-18-503, for each day in attendance at the meetings of such the board or in the execution of his duties as a member of the retirement board. All per diem and expenses paid under the provisions of this section shall must be paid from the expense fund account of the retirement system."

 

     Section 4.  Section 19-20-302, MCA, is amended to read:

     "19-20-302.  Active membership. (1) Unless otherwise provided by this chapter, the following persons must be active members of the retirement system:

     (a)  a person who is a teacher, principal, or district superintendent as defined in 20-1-101;

     (b)  a person who is an administrative officer or a member of the instructional or scientific staff of a unit of the Montana university system and who has not elected or is not required to participate in the optional retirement program under Title 19, chapter 21;

     (c)  a person employed as a speech-language pathologist, school nurse, paraprofessional who provides instructional support, or school psychologist or in a teaching capacity by the office of the superintendent of public instruction, the office of a county superintendent, a special education cooperative, a public institution of the state of Montana, the Montana state school for the deaf and blind, or a school district;

     (d)  a person who is an administrative officer or a member of the instructional staff of the board of public education;

     (e)  the superintendent of public instruction or a person employed in an instructional services capacity by the office of public instruction; and

     (f)  a person elected to the office of county superintendent of schools.

     (2)  A retired member elected to the office of county superintendent of schools or appointed to complete the term of an elected county superintendent of schools after July 1, 1995, is not eligible for optional membership in the public employees' retirement system under the provisions of 19-3-412 and may shall, within 30 days of taking office, elect file an irrevocable written election to become or to not become an active member of the teachers' retirement system. The retirement system membership of an elected county superintendent of schools as of June 30, 1995, must remain unchanged for as long as the person continues to serve in the capacity of county superintendent of schools.

     (3)  In order to be eligible for active membership, a person described in subsection (1) or (2) must:

     (a)  be employed in the capacity prescribed for the person's eligibility for at least 30 days in any fiscal year; and

     (b)  have the compensation for the person's creditable service totally paid by an employer.

     (4)  (a) A substitute teacher or a part-time teacher's aide:

     (i)  shall file an irrevocable written election determining whether to become an active member of the retirement system on the first day of employment; or

     (ii) is required to become an active member of the retirement system after completing 210 hours of employment in any fiscal year if the substitute teacher or part-time teacher's aide has not elected membership under subsection (4)(a)(i).

     (b)  Once a part-time teacher's aide becomes a member, the aide is required to remain an active member as long as the aide is employed in that capacity. Once a substitute teacher becomes a member, the substitute teacher is required to remain a member as long as the teacher is available for employment in that capacity.

     (c)  A person employed as a substitute teacher on July 1, 1999, who has not elected to become a member by that date shall file an irrevocable written election as required by subsection (4)(a)(i) on the first day of employment as a substitute in the next school year after July 1, 1999.

     (d)  A person employed as a part-time teacher's aide on July 1, 2001, who is not a member of the retirement system shall file an irrevocable written election as required by subsection (4)(a)(i) on the first day of employment as a part-time teacher's aide after July 1, 2001.

     (e)(c)  The employer shall give written notification to a substitute teacher or part-time teacher's aide on the first day of employment of the option to elect membership under subsection (4)(a)(i).

     (f)(d)  If a substitute teacher or part-time teacher's aide declines to elect membership during the election period, the teacher or part-time teacher's aide shall file a written statement with the employer waiving membership and the employer shall retain the statement.

     (5)  A school district clerk or business official may not become a member of the teachers' retirement system. A school district clerk or business official who is a member of the system on July 1, 2001, is required to remain an active member of the system while employed in that capacity, and any postretirement earnings from employment as a school district clerk or school business official are subject to the limit on earnings provided in 19-20-731.

     (6)  At any time that a person's eligibility to become a member of the retirement system is in doubt, the retirement board shall determine the person's eligibility for membership. All persons in similar circumstances must be treated alike.

     (7)  As used in this section, "part-time teacher's aide" means an individual who works less than 7 hours a day assisting a certified teacher in a classroom.

     (8) (a) An active member of the system concurrently employed in a position identified in subsection (1)(b) may not elect to participate in the optional retirement program under Title 19, chapter 21.

     (b) An employee of the Montana university system who is a participant in the optional retirement program under Title 19, chapter 21, and who is concurrently employed in a position identified in subsections (1)(a) or (1)(c) through (1)(f) is ineligible to be an active member of this system."

 

     Section 5.  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) "alternate payee" means the former spouse of the member or retiree, who is entitled to an actuarially equivalent portion or a fixed amount of the member's or retiree's retirement benefit;

     (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 with competent jurisdiction 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; and

     (c) "participant" means a member or retiree of the retirement system.

     (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 The service, disability, or survivor retirement benefit payments or withdrawals of member contributions may be apportioned to an alternate payee by directing payment of:

     (i) a percentage of the an actuarially equivalent amount payable; or

     (ii) payment of a fixed amount of no more than the amount payable to the participant. A fixed amount must be payable for a determinate period of time not greater than the life of 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.

     (b) (i) The actuarially equivalent service, disability, or survivor retirement benefit payable to the alternate payee must be calculated by taking the total years of service the benefit was earned during the marriage divided by the total years of creditable service used in the calculation of the retirement benefit, multiplied by a percentage share of the benefit payable to the alternate payee, multiplied by the total amount payable to the participant.

     (ii) The amount payable must be actuarially adjusted to provide a benefit payable for the alternate payee's lifetime.

     (c) The participant's benefit must be reduced by the amount determined under subsection (5)(b)(i).

     (6) The duration of payments to an alternate payee may be limited only to a specified maximum time or for the life of the alternate payee.

     (7) If a participant elects to withdraw the accumulated contributions and forfeit all rights to service, disability, or survivor benefits, the alternate payee is entitled to a percentage of the amount payable as determined by the formula in subsection (5)(b)(i).

     (8) Retirement benefit adjustments for which a participant is eligible after retirement must be apportioned in the same manner as determined under subsection (5)(b)(i).

     (9) Payments of monthly benefits to the alternate payee must commence on the latest of the following dates:

     (a) the date the participant begins receiving benefits; or

     (b) the first day of the month following receipt of a certified family law order.

     (6)(10) 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)(11) Each family law order establishing a final obligation concerning payments by the retirement system must contain a statement that the order is subject to review and approval by the board.

     (12) If the participant retired on a disability retirement benefit and the benefit is subsequently canceled pursuant to 19-20-903 or 19-20-905, the alternate payee's payments also terminate. When the participant again qualifies for retirement benefits, the amount payable to the alternate payee must be recalculated pursuant to this section."

 

     Section 6.  Section 19-20-414, MCA, is amended to read:

     "19-20-414.  Payment methods for purchase of service credit. (1) A An active or vested member who is eligible to purchase service under this chapter may at any time before retirement apply to purchase the service credit by making payment as provided in this section.

     (2)  Subject to subsection (3), service credit may be purchased by one or a combination of the following methods:

     (a)  a lump-sum payment;

     (b)  installment payments;

     (c)  direct rollover of eligible distributions from a retirement plan in section 402(c)(8)(B)(iii) or 402(c)(8)(B)(iv) of the Internal Revenue Code;

     (d)  rollover of a distribution from an individual retirement account or annuity described in section 408(a) or 408(b) of the Internal Revenue Code that is eligible to be rolled over and would otherwise be included in gross income;

     (e)  a direct trustee-to-trustee transfer from a governmental 457(b) deferred compensation plan or a 403(b) tax-sheltered annuity for permissive service credit, as defined in section 415(n) of the Internal Revenue Code.

     (3)  (a) The total amount transferred or rolled over to the retirement system pursuant to subsection (2) may not exceed the amount due to purchase the service.

     (b)  If, in the case of a transfer, the transferred account includes both tax-deferred and taxed amounts, the transferring agency shall identify the member's tax-deferred and taxed amounts at the time the transfer is made.

     (4)  To the extent permitted by section 401(a)(31) of the Internal Revenue Code and as limited by this section, the board shall accept a direct rollover of eligible distributions from another eligible retirement plan.

     (5)  If the member dies before having completed the payment required to purchase the service that the member had applied to purchase, the member's surviving spouse may, subject to the rules and regulations of the Internal Revenue Code, apply to complete the member's service purchase as provided in this section. The surviving spouse must apply to complete the payments and pay the balance due to the system prior to the distribution of benefits."

 

     Section 7.  Section 19-20-427, MCA, is amended to read:

     "19-20-427.  Redeposit of contributions previously withdrawn. In addition to the normal contributions required under 19-20-602, subject to the approval of the retirement board, and to the extent permitted by section 415(k)(3) of the Internal Revenue Code, a member may redeposit in the annuity savings fund account, by a single payment or by an increased rate of contribution, an amount equal to the accumulated contributions that the member has previously withdrawn, plus interest in the amount that the contributions would have earned had the contributions not been withdrawn. The redeposit must be made in accordance with 19-20-415."

 

     Section 8.  Section 19-20-501, MCA, is amended to read:

     "19-20-501.  Financial administration of money. The members of the retirement board are the trustees of all money collected for the retirement system, and as trustees, they shall provide for the financial administration of the money as provided in Article VIII, section 15, of the Montana constitution in the following manner:

     (1)  The money must be invested and reinvested by the state board of investments.

     (2)  The retirement board shall annually establish the rate of regular interest. The rate established by the board may not be less than 4%.

     (3)  The retirement board shall annually divide among the several reserves of the retirement system an amount equal to the average balance of the reserves during the preceding fiscal year multiplied by the rate of regular interest. In accordance with the provisions of 19-20-605(5), the amount to be credited to each reserve must be allocated from the interest and other earnings on the money of the retirement system actually realized during the preceding fiscal year, less the amount allocated to administrative expenses. The administrative expenses of the retirement system, less amortization of intangible assets, may not exceed 1.5% of retirement benefits paid.

     (4)  The state treasurer is the custodian of the collected retirement system money and of the securities in which the money is invested.

     (5)  For purposes of Article VIII, section 12, of the Montana constitution, all the reserves established by part 6 of this chapter must be accounts in the pension trust fund type of the treasury fund structure of the state.

     (6)  Benefits and refunds to eligible recipients are payable pursuant to a contract as contained in statute. Unless specifically provided for by statute, the contract does not contain revisions to statutes after the time of retirement or termination."

 

     Section 9.  Section 19-20-503, MCA, is amended to read:

     "19-20-503.  Transfer of dormant 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 account if the annuity savings account has been dormant for a period of 7 years. A right of the member may not be jeopardized by the transfer, and the amount, including the interest the amount would have earned had the amount remained in the annuity savings account, must be transferred back to the member's annuity savings account upon 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 10.  Section 19-20-602, MCA, is amended to read:

     "19-20-602.  Annuity savings fund account -- member's contribution. (1) The annuity savings fund account is a fund an account in which the contributions for the members to provide for their retirement allowance or benefits must be accumulated in individual accounts for each member. The normal contribution of each member is 7.15% of the member's earned compensation.

     (2)  Contributions to and payments from the annuity savings fund account must be made in the following manner:

     (a)  Each employer, pursuant to section 414(h)(2) of the Internal Revenue Code:

     (i)  shall pick up and pay the contributions that would be payable by the member under this subsection (2) for service rendered after June 30, 1985;

     (ii) shall pick up and pay the contributions that would be paid in the manner provided in 19-20-716; and

     (iii) may pick up and pay the contributions that would be payable by the member pursuant to 19-20-415.

     (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.

     (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 account. Upon the retirement of a member, the member's accumulated contributions must be transferred from the annuity savings fund account to the pension accumulation fund account."

 

     Section 11.  Section 19-20-603, MCA, is amended to read:

     "19-20-603.  Withdrawal of accumulated contributions -- options. An inactive member electing to do so or 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 accumulated contributions from the annuity savings fund account in the retirement system in accordance with the following provisions:

     (1)  An inactive member under the provisions 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, 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)  Upon written application to the board, a terminating member may have the payment of all or any portion of the member's accumulated contributions rolled over or transferred into another qualified plan designated by the member. The portion not rolled over or transferred must be paid directly to the terminating member. The board shall provide forms for filing the written application. 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. To the extent required by section 401(a)(31) of the Internal Revenue Code, the board shall allow members and qualified beneficiaries to elect a direct rollover of eligible distributions to another eligible retirement plan.

     (4)  If a nonvested member terminates with accumulated contributions of less than $200, the board shall pay the accumulated contributions in a lump sum as soon as administratively feasible without a written application from the member unless there is a return to service. Upon the payment of accumulated contributions, the member is considered to have withdrawn from the system."

 

     Section 12.  Section 19-20-605, MCA, is amended to read:

     "19-20-605.  Pension accumulation fund account -- employer's contribution. The pension accumulation fund account is the fund account in which the reserves for payment of retirement allowances and benefits must be accumulated and from which retirement allowances and benefits must be paid to retirees or their beneficiaries. Contributions to and payments from the pension accumulation fund account must be made as follows:

     (1)  Each employer shall pay into the pension accumulation fund account 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 must be credited to the pension accumulation fund account, and the amount required to allow regular interest on the annuity savings fund account must be transferred to that fund account from the pension accumulation fund account.

     (6)  The retirement board may transfer from the pension accumulation fund account to the expense fund account an amount necessary to cover expenses of administration."

 

     Section 13.  Section 19-20-705, MCA, is amended to read:

     "19-20-705.  Correction of errors. (1) If a change or error in the records results in a member or beneficiary receiving from the retirement system more or less than the member or beneficiary would have been entitled to receive had the records been correct, then, on discovery of the error, the retirement board shall correct the error and, as far as practicable, shall adjust the payments so that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled will be paid.

     (2)  If the amount of a contribution payment is incorrect, the board may reject the payment or accept the payment and approve an arrangement to collect the correct amount, including any or all of the following arrangements:

     (a)  adjustment of subsequent payments to the board from a member or an employer;

     (b)  collection of installment payments or a lump-sum payment from an employer; or

     (c)  collection of installment payments, a lump-sum payment, or a rollover payment from a member.

     (3)  Upon discovery of a forged signature on a retirement benefit application, the benefit must be corrected as provided in subsection (1).

     (4) Interest accrues on contributions not reported or amounts overpaid to members at the actuarially assumed rate. Interest accrues from the date the contributions were due or the date the benefits were paid in error. If the board finds that the error was caused by the teachers' retirement system, interest must be waived."

 

     Section 14.  Section 19-20-716, MCA, is amended to read:

     "19-20-716.  Termination pay. (1) If a member terminates and receives termination pay at the time of retirement, the member shall select, subject to subsections (4) (5) and (5) (6), by signing a binding, irrevocable written election at least 90 days before the member's termination date, one of the following options:

     (a)  Option 1--The member may use the total 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.

     (b)  Option 2--The member may use a yearly amount of the total 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). The contributions must be made at the time of termination.

     (c)  Option 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.

     (2)  A binding, irrevocable written election required by this section must be signed by both the member and the employer at least 90 days prior to the member's termination date and must contain statements with regard to the contributions required to be made by the member under subsections (1)(a) and (1)(b) that:

     (a)  the contributions being picked up, although designated as member contributions, are being paid by the employer directly to the system in lieu of contributions by the member and that the picked up contributions are paid from the same source as compensation is paid;

     (b)  the member may not choose to directly receive the amounts deducted from the member's termination pay instead of having them paid by the employer to the system;

     (c)  the member may not prepay any portion of the contributions; and

     (d)  the effective date of the pickup is the date that the irrevocable written election is signed by both the member and employer. The effective date must be at least 90 days prior to the date of the member's termination. The pickup does not apply to a contribution made before the effective date of the pickup.

     (3) For the purpose of this section, the date of termination is the last day the member is performing any services covered under this chapter.

     (3)(4)  Pursuant to subsection (2), contributions required under subsection (1)(a) or (1)(b) must be:

     (a)  deducted from the portion of termination pay that:

     (i)  constitutes wages for the purposes of section 3121 of the Internal Revenue Code, determined without regard to the wage base limitation; and

     (ii) can be included in the member's gross income for federal tax purposes; and

     (b)  picked up by the employer, except as provided in subsections (4) (5) and (5) (6).

     (4)(5)  A member's contributions greater than the total amount of the member's termination pay may not be picked up by the employer and are subject to the limitations of section 415 of the Internal Revenue Code.

     (5)(6)  If a member and the member's employer fail to sign the written election within the time period required in subsection (1), the member may contribute for the purposes specified in subsections (1)(a) and (1)(b) on all or any part of the termination pay received. A contribution made pursuant to this subsection may not be picked up by the employer and is subject to the limitations of section 415 of the Internal Revenue Code."

 

     Section 15.  Section 19-20-717, MCA, is amended to read:

     "19-20-717.  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 personal representative or executor 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 16.  Section 19-20-731, MCA, is amended to read:

     "19-20-731.  Postretirement employment limitations -- cancellation and recalculation of benefits. (1) Except as otherwise provided in this section, a retired member may be employed part-time by a school district, state agency, or unit of the university system in a position eligible to participate in the retirement system and may earn, without an adjustment of retirement benefits, an amount not to exceed the greater of:

     (a)  one-third of the sum of the member's average final compensation; 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.

     (2)  On July 1 of each year following the member's retirement effective date, the maximum that a retired member may earn under subsection (1)(a) is increased by an amount equal to the consumer price index increase for urban wage earners compiled by the bureau of labor statistics of the United States department of labor or its successor agency in the preceding calendar year.

     (3)  Except as provided in subsection (5), the retirement benefit of a retired member:

     (a)  employed in a part-time position or earning more than allowed by subsections (1) and (2) must be temporarily reduced by $1 for each dollar earned over the maximum allowed. Monthly benefits must be reduced beginning as soon as practical after the excess earnings have been reported to the retirement system by the employer. The retirement benefit must be canceled if the retired member's earnings over the maximum allowed exceed the gross monthly benefit amount.

     (b)  employed in a full-time position must be canceled beginning in the month in which the retired member returns to full-time employment.

     (4)  Upon termination and retirement subsequent to a cancellation of benefits pursuant to subsection (3), the retirement benefit of a member:

     (a)  who was reemployed and earned less than 1 year of creditable service must be reinstated beginning either the first of the month following termination or on July 1 following the date on which the retired member was reemployed, whichever is later. The reinstated retirement benefit is the amount and option that the retired member would have been entitled to receive had the retired member not returned to employment.

     (b)  who was reemployed and earned at least 1 year of creditable service must be recalculated under 19-20-804 if the member has attained normal retirement age or under 19-20-802 if the member has not attained normal retirement age but is eligible for early retirement. The recalculated benefit is based on must include the service credit accumulated at the time of the member's previous retirement, plus any service credit accumulated subsequent to reemployment. The recalculated normal form benefit amount must be increased by the amount of any benefit enhancement received pursuant to 19-20-719 that the retired member was receiving when the member's benefits were canceled.

     (5)  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 canceled.

     (6) For purposes of this section, "position eligible to participate in the retirement system" includes work performed by a retiree through a professional employer arrangement, an employee leasing arrangement, or a temporary service contractor, as those terms are defined in 39-8-102.

     (7) The retirement allowance of any retired member who is employed in a position and who elects to participate in the optional retirement program under Title 19, chapter 21, must be suspended until the member is no longer employed in the position and is no longer participating in the optional retirement program."

 

     Section 17.  Section 19-20-805, MCA, is amended to read:

     "19-20-805.  Earned compensation -- part-time service. (1) 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 immediately preceding the member's termination is the compensation that the member would have earned in the 3 years used to calculate average final compensation 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.

     (2)  (a) Subject to subsection (2)(b), if a member has transferred service from the public employees' retirement system as provided under 19-20-409 and does not have 3 consecutive years of full-time service reported to the teachers' retirement system, the member's average final compensation may be calculated as follows:

     (i)  if the member's part-time service credit in the public employees' retirement system plus the member's part-time service credit in the teachers' retirement system equals 1 year in any of the fiscal years used in determining average final compensation, then the member's annual salary for that fiscal year must be the member's salary as a member of the public employees' retirement system plus the member's salary as a member of the teachers' retirement system; or

     (ii) if the member's part-time service credit in the public employees' retirement system plus the member's part-time service credit in the teachers' retirement system equals less than 1 year in any of the fiscal years used to determine average final compensation, then the member's part-time salary as a member of the public employees' retirement system plus the member's part-time salary as a member of the teachers' retirement system must be divided by the sum of the member's part-time teachers' retirement system service credit and the member's part-time public employees' retirement system service credit, divided by the member's part-time teachers' retirement system service credit.

     (b)  Compensation reported to the public employees' retirement system used to calculate average final compensation must be adjusted to exclude any compensation that would be considered termination pay under this chapter."

 

     Section 18.  Section 19-20-1101, MCA, is amended to read:

     "19-20-1101.  Withholding of group insurance premium from retirement allowance. (1) A retired member who is a participant in an approved employer-sponsored group insurance plan may elect to have the monthly premium for the group insurance withheld from the member's retirement allowance by the retirement system. and Premiums withheld may be paid paid directly to the insurance carrier or employer of record at the time of retirement.

     (2)  Upon the death of a retired member, the beneficiary, if eligible, may elect to continue to have the monthly insurance premium withheld from a monthly retirement benefit and paid directly to the employer or the employer's insurance carrier.

     (3) Each month, using the retirement system's online employer reporting system, the employer shall verify that all authorized insurance deductions are correct and notify the retired member of any changes."

 

     Section 19.  Effective date. [This act] is effective on passage and approval.

- END -

 


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