WPC
2 Z B
- 0 7 HP LJ 5/5M RM 32 LPT2 x x P 7 P HB0079 CL2252 LC0282 1 Ы x x P 7P. i A Z U n i v e r s 2 3| x c N XX 56th Legislature` T$E HB0079.02 c y N STATE INTERNET/BBS COPY * `l"T$I HB 79 y m% HOUSE BILL NO. 79
INTRODUCED BY M. BRAINARD
BY REQUEST OF THE COMMITTEE ON PUBLIC EMPLOYEE RETIREMENT SYSTEMS
A BILL FOR AN ACT ENTITLED: "AN ACT RELATING TO THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM;
ESTABLISHING A DEFINED CONTRIBUTION PLAN WITHIN THE PUBLIC EMPLOYEES' RETIREMENT
SYSTEM AND SPECIFYING THE PLAN'S PROVISION OF RIGHTS, BENEFITS, AND FEATURES;
ELIMINATING CERTAIN INVESTMENT RESTRICTIONS IN THE UNIFIED INVESTMENT PROGRAM;
PROVIDING FOR THE POWERS AND DUTIES OF THE PUBLIC EMPLOYEES' RETIREMENT BOARD IN
IMPLEMENTING AND ADMINISTERING THE NEW PLAN; ALLOWING CURRENT AND NEW SYSTEM
MEMBERS TO CHOOSE WHETHER TO JOIN THE NEW DEFINED CONTRIBUTION PLAN OR STAY IN THE
DEFINED BENEFIT PLAN; SPECIFYING PLAN CHOICE, MEMBERSHIP, AND VESTING CRITERIA; ALLOWING
RETIREMENT SYSTEM MEMBERS EMPLOYED BY THE UNIVERSITY SYSTEM TO CHOOSE THE OPTIONAL
RETIREMENT PLAN; PROVIDING FOR ACTUARIAL FUNDING OF DEFINED BENEFIT PLAN UNFUNDED
LIABILITIES AND PLAN CHOICE COSTS; ESTABLISHING CRITERIA FOR THE INVESTMENT ALTERNATIVES
THAT MAY BE OFFERED IN THE NEW PLAN; SPECIFYING THE PAYOUT AND BENEFIT OPTIONS
AVAILABLE WITHIN THE DEFINED CONTRIBUTION PLAN; PROVIDING FOR DEATH BENEFITS AND A
MEMBER LOAN FEATURE IN THE NEW PLAN; REQUIRING AND SPECIFYING THE COMPONENTS OF
MEMBER EDUCATIONAL PROGRAMS; ESTABLISHING AN IMPLEMENTATION SCHEDULE; PROVIDING FOR
AN IMPLEMENTATION TEAM, ADVISORY COUNCIL, AND OVERSIGHT COMMITTEE; PROVIDING FOR
PAYMENT OF CERTAIN LOCAL GOVERNMENT ADMINISTRATIVE EXPENSES; REQUIRING THAT THE
PUBLIC EMPLOYEES' RETIREMENT BOARD FILE FOR AN INTERNAL REVENUE SERVICE DETERMINATION;
PROVIDING AN APPROPRIATION; AMENDING SECTIONS 2-15-1009, 2-18-704, 17-6-201, 19-2-302,
19-2-303, 19-2-401, 19-2-403, 19-2-405, 19-2-406, 19-2-407, 19-2-408, 19-2-409, 19-2-501,
19-2-503, 19-2-504, 19-2-505, 19-2-603, 19-2-902, 19-2-906, 19-2-907, 19-2-908, 19-2-909,
19-2-1001, 19-2-1002, 19-2-1003, 19-2-1005, 19-2-1006, 19-2-1007, 19-3-103, 19-3-108, 19-3-201,
19-3-203, 19-3-315, 19-3-316, 19-3-401, 19-21-102, 19-21-201, 19-21-202, AND 19-21-203, MCA;
AND PROVIDING EFFECTIVE DATES, AN APPLICABILITY PROVISION, AND TERMINATION DATES."
WHEREAS, House Bill No. 90 of the 55th Legislature required the Committee on Public Employee
Retirement Systems (CPERS) to design a new or modified public employees' retirement plan containingcertain specified features; and
WHEREAS, House Bill No. 90 required that the new or modified plan increase portability of member
contributions, increase flexibility to allow members to choose among investment options, and retain a plan
component that offers a specified benefit in retirement; and
WHEREAS, House Bill No. 90 required that the CPERS establish an implementation schedule for the
new or modified plan, provide for an educational program, and present any implementing legislation; and
WHEREAS, the CPERS contracted with a benefits consulting firm and conducted a thorough and
broad-based study during the 1997-98 interim to determine the design of the new or modified retirement
plan; and
WHEREAS, the study involved numerous focus groups from across Montana, including members
of retirement systems, employers, plan administrators, and public officials; and
WHEREAS, the CPERS commissioned and considered reports and analyses by the contracted
consulting firm; and
WHEREAS, the CPERS has concluded the study required by House Bill No. 90 and recommends that
the current public employees' retirement system (PERS) consist of two retirement plans, the current defined
retirement benefit plan and a new defined contribution retirement plan; and
WHEREAS, current and new members of the PERS may choose between either the defined benefit
plan or the defined contribution plan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1.ĠSection 2-15-1009 , MCA, is amended to read:
"2-15-1009.Public employees' retirement board -- terms -- allocation. (1) There is a public
employees' retirement board.
(2)The board consists of
six
seven members appointed by the governor. The members are:
(a)three public employees who are active members of a public retirement system (not more than
one of these members may be an employee of the same department and at least one of these members
must, no later than July 1, 2003, be a member of the defined contribution plan created pursuant to
[sections 42 through 64]);
(b)one retired public employee who is an inactive member of the public employees' retirement
system;
and
Č (c)two members at large; and
(d) one member who has experience in investment management, counseling, or financial planning
or who has other similar experience.
(3)The term of office for each member is 5 years.
(4)The board is allocated to the department for administrative purposes only as prescribed in
2-15-121. The board shall hire necessary employees as provided in 19-2-404.
(5)Members of the board must be compensated and receive travel expenses as provided for in
2-15-124."
Section 2.ĠSection 2-18-704 , MCA, is amended to read:
"2-18-704.Mandatory provisions. (1) An insurance contract or plan issued under this part must
contain provisions that permit:
(a)the member of a group who retires from active service under the appropriate retirement
provisions of a defined benefit plan provided by law or, in the case of the defined contribution plan
provided in [sections 42 through 64], a member with at least 5 years of service and who is at least age
50 while in covered employment to remain a member of the group until the member becomes eligible for
medicare under the federal Health Insurance for the Aged Act, 42 U.S.C. 1395, as amended, unless the
member is a participant in another group plan with substantially the same or greater benefits at an
equivalent cost or unless the member is employed and, by virtue of that employment, is eligible to
participate in another group plan with substantially the same or greater benefits at an equivalent cost;
(b)the surviving spouse of a member to remain a member of the group as long as the spouse is
eligible for retirement benefits accrued by the deceased member as provided by law unless the spouse is
eligible for medicare under the federal Health Insurance for the Aged Act or unless the spouse has or is
eligible for equivalent insurance coverage as provided in subsection (1)(a);
(c)the surviving children of a member to remain members of the group as long as they are eligible
for retirement benefits accrued by the deceased member as provided by law unless they have equivalent
coverage as provided in subsection (1)(a) or are eligible for insurance coverage by virtue of the employment
of a surviving parent or legal guardian.
(2)An insurance contract or plan issued under this part must contain the provisions of subsection
(1) for remaining a member of the group and also must permit:
(a)the spouse of a retired member the same rights as a surviving spouse under subsection (1)(b); (b)the spouse of a retiring member to convert a group policy as provided in 33-22-508; and
(c)continued membership in the group by anyone eligible under the provisions of this section,
notwithstanding the person's eligibility for medicare under the federal Health Insurance for the Aged Act.
(3)(a)A state insurance contract or plan must contain provisions that permit a legislator to remain
a member of the state's group plan until the legislator becomes eligible for medicare under the federal
Health Insurance for the Aged Act, 42 U.S.C. 1395, as amended, if the legislator:
(i)terminates service in the legislature and is a vested member of a state retirement system
provided by law; and
(ii)notifies the department of administration in writing within 90 days of the end of the legislator's
legislative term.
(b)A former legislator may not remain a member of the group plan under the provisions of
subsection (3)(a) if the person:
(i)is a member of a plan with substantially the same or greater benefits at an equivalent cost; or
(ii)is employed and, by virtue of that employment, is eligible to participate in another group plan
with substantially the same or greater benefits at an equivalent cost.
(c)A legislator who remains a member of the group under the provisions of subsection (3)(a) and
subsequently terminates membership may not rejoin the group plan unless the person again serves as a
legislator.
(4)(a) A state insurance contract or plan must contain provisions that permit continued
membership in the state's group plan by a member of the judges' retirement system who leaves judicial
office but continues to be an inactive vested member of the judges' retirement system as provided by
19-5-301. The judge shall notify the department of administration in writing within 90 days of the end of
the judge's judicial service of the judge's choice to continue membership in the group plan.
(b)A former judge may not remain a member of the group plan under the provisions of this
subsection (4) if the person:
(i)is a member of a plan with substantially the same or greater benefits at an equivalent cost;
(ii)is employed and, by virtue of that employment, is eligible to participate in another group plan
with substantially the same or greater benefits at an equivalent cost; or
(iii)becomes eligible for medicare under the federal Health Insurance for the Aged Act, 42 U.S.C.
1395, as amended.
(c)A judge who remains a member of the group under the provisions of this subsection (4) andsubsequently terminates membership may not rejoin the group plan unless the person again serves in a
position covered by the state's group plan.
(5)A person electing to remain a member of the group under subsection (1), (2), (3), or (4) shall
pay the full premium for coverage and for that of the person's covered dependents.
(6)An insurance contract or plan issued under this part that provides for the dispensing of
prescription drugs by an out-of-state mail service pharmacy, as defined in 37-7-702:
(a)must permit any member of a group to obtain prescription drugs from a pharmacy located in
Montana that is willing to match the price charged to the group or plan and to meet all terms and
conditions, including the same professional requirements that are met by the mail service pharmacy for a
drug, without financial penalty to the member; and
(b)may only be with an out-of-state mail service pharmacy that is registered with the board under
Title 37, chapter 7, part 7, and that is registered in this state as a foreign corporation."
Section 3.ĠSection 17-6-201 , MCA, is amended to read:
"17-6-201.
٠(Temporary)
Unified investment program -- general provisions. (1) The unified
investment program directed by Article VIII, section 13, of the Montana constitution to be provided for
public funds must be administered by the board of investments in accordance with the prudent expert
principle, which requires an investment manager to:
(a)discharge the duties with the care, skill, prudence, and diligence, under the circumstances then
prevailing, that a prudent person acting in a like capacity with the same resources and familiar with like
matters exercises in the conduct of an enterprise of a like character with like aims;
(b)diversify the holdings of each fund within the unified investment program to minimize the risk
of loss and to maximize the rate of return unless, under the circumstances, it is clearly prudent not to do
so; and
(c)discharge the duties solely in the interest of and for the benefit of the funds forming the unified
investment program.
(2)(a)Retirement funds may be invested in common stocks of any corporation
, except that an
investment may not be made at any time that would cause the book value of the investments in a
retirement fund to exceed 50% of the book value of the fund or that would cause the stock of one
corporation to exceed 2% of the book value of the retirement fund
.
(b)Other public funds may not be invested in private corporate capital stock. "Private corporatecapital stock" means only the common stock of a corporation.
(3)(a)This section does not prevent investment in any business activity in Montana, including
activities that continue existing jobs or create new jobs in Montana.
(b)The board is urged under the prudent expert principle to invest up to 3% of retirement funds
in venture capital companies. Whenever possible, preference should be given to investments in those
venture capital companies that demonstrate an interest in making investments in Montana.
(c)In discharging its duties, the board shall consider the preservation of purchasing power of
capital during periods of high monetary inflation.
(d)The board may not make a direct loan to an individual borrower. The purchase of a loan or a
portion of a loan originated by a financial institution is not considered a direct loan.
(4)The board has the primary authority to invest state funds. Another agency may not invest state
funds unless otherwise provided by law. The board shall direct the investment of state funds in accordance
with the laws and constitution of this state. The board has the power to veto investments made under its
general supervision.
(5)The board shall:
(a)assist agencies with public money to determine if, when, and how much surplus cash is
available for investment;
(b)determine the amount of surplus treasury cash to be invested;
(c)determine the type of investment to be made;
(d)prepare the claim to pay for the investment; and
(e)keep an account of the total of each investment fund and of all the investments belonging to
the fund and a record of the participation of each treasury fund account in each investment fund.
(6)The board may:
(a)execute deeds of conveyance transferring real property obtained through investments. Prior to
the transfer of real property directly purchased and held as an investment, the board shall obtain an
appraisal by a qualified appraiser.
(b)direct the withdrawal of funds deposited by or for the state treasurer pursuant to 17-6-101 and
17-6-105;
(c)direct the sale of securities in the program at their full and true value when found necessary
to raise money for payments due from the treasury funds for which the securities have been purchased;
(d)expend funds needed to cover costs of necessary repairs to property owned by the board asan investment. Repairs that cost in excess of $2,500 must be bid, and the bid must be awarded in
compliance with existing state law and regulations. Emergency repairs may be made by the board without
bid if approved by the state architect.
(7)The cost of administering and accounting for each investment fund must be deducted from the
income from each fund.
(8)At the beginning of each fiscal year, the board shall, from the appropriate fund, reimburse the
department of commerce for the costs of administering programs established under Title 90, chapter 3,
that are not covered by payback funds available from the account established in 90-3-305.
17-6-201.
٠(Effective July 1, 1999)
Unified investment program -- general provisions. (1) The
unified investment program directed by Article VIII, section 13, of the Montana constitution to be provided
for public funds must be administered by the board of investments in accordance with the prudent expert
principle, which requires an investment manager to:
(a)discharge the duties with the care, skill, prudence, and diligence, under the circumstances then
prevailing, that a prudent person acting in a like capacity with the same resources and familiar with like
matters exercises in the conduct of an enterprise of a like character with like aims;
(b)diversify the holdings of each fund within the unified investment program to minimize the risk
of loss and to maximize the rate of return unless, under the circumstances, it is clearly prudent not to do
so; and
(c)discharge the duties solely in the interest of and for the benefit of the funds forming the unified
investment program.
(2)(a)Retirement funds may be invested in common stocks of any corporation
, except that an
investment may not be made at any time that would cause the book value of the investments in a
retirement fund to exceed 50% of the book value of the fund or that would cause the stock of one
corporation to exceed 2% of the book value of the retirement fund
.
(b)Other public funds may not be invested in private corporate capital stock. "Private corporate
capital stock" means only the common stock of a corporation.
(3)(a)This section does not prevent investment in any business activity in Montana, including
activities that continue existing jobs or create new jobs in Montana.
(b)The board is urged under the prudent expert principle to invest up to 3% of retirement funds
in venture capital companies. Whenever possible, preference should be given to investments in those
venture capital companies that demonstrate an interest in making investments in Montana. (c)In discharging its duties, the board shall consider the preservation of purchasing power of
capital during periods of high monetary inflation.
(d)The board may not make a direct loan to an individual borrower. The purchase of a loan or a
portion of a loan originated by a financial institution is not considered a direct loan.
(4)The board has the primary authority to invest state funds. Another agency may not invest state
funds unless otherwise provided by law. The board shall direct the investment of state funds in accordance
with the laws and constitution of this state. The board has the power to veto investments made under its
general supervision.
(5)The board shall:
(a)assist agencies with public money to determine if, when, and how much surplus cash is
available for investment;
(b)determine the amount of surplus treasury cash to be invested;
(c)determine the type of investment to be made;
(d)prepare the claim to pay for the investment; and
(e)keep an account of the total of each investment fund and of all the investments belonging to
the fund and a record of the participation of each treasury fund account in each investment fund.
(6)The board may:
(a)execute deeds of conveyance transferring real property obtained through investments. Prior to
the transfer of real property directly purchased and held as an investment, the board shall obtain an
appraisal by a qualified appraiser.
(b)direct the withdrawal of funds deposited by or for the state treasurer pursuant to 17-6-101 and
17-6-105;
(c)direct the sale of securities in the program at their full and true value when found necessary
to raise money for payments due from the treasury funds for which the securities have been purchased;
(d)expend funds needed to cover costs of necessary repairs to property owned by the board as
an investment. Repairs that cost in excess of $2,500 must be bid, and the bid must be awarded in
compliance with existing state law and regulations. Emergency repairs may be made by the board without
bid if approved by the state architect.
(7)The cost of administering and accounting for each investment fund must be deducted from the
income from each fund."
Section 4.ĠSection 19-2-302 , MCA, is amended to read:
"19-2-302.Applicability.
This
Except as otherwise provided in this title, this chapter applies to the
provisions and administration of the retirement systems and plans within the systems under chapters 3,
5 through 9, and 13 of this title."
Section 5.ĠSection 19-2-303 , MCA, is amended to read:
"19-2-303.Definitions. Unless the context requires otherwise, for each of the retirement systems
subject to this chapter, the following definitions apply:
(1) "Account balance" means all contributions, income, and other assets in a retirement account
that have, pursuant to [section 52], vested to a member of the defined contribution plan.
(1)
(2)Ġ"Accumulated contributions" means the sum of all the regular and any additional
contributions made by a member in a
system
defined benefit plan, together with the regular interest on the
contributions.
(2)
(3)Ġ"Active member" means a member who is a paid employee of an employer, is making the
required contributions, and is properly reported to the division for the most current reporting period.
(3)
(4)Ġ"Actuarial cost" means the amount determined by the board in a uniform and
nondiscriminatory manner to represent the present value of the benefits to be derived from the additional
service to be credited based on the most recent actuarial valuation for the system and the age, years until
retirement, and current salary of the member.
(4)
(5)Ġ"Actuarial equivalent" means a benefit of equal value when computed upon the basis of the
1971 Group Annuity Mortality Table, with ages set back 4 years and an interest rate of 8% compounded
annually.
(5)
(6)Ġ"Actuarial liabilities" means the excess of the present value of all benefits payable under a
defined benefit retirement
system
plan over the present value of future normal costs in that retirement
system
plan.
(6)
(7)Ġ"Actuary" means the actuary retained by the board in accordance with 19-2-405.
(7)
(8)Ġ"Additional contributions" means contributions made by a member of a defined benefit plan
to purchase various types of optional service credit as allowed by the applicable retirement
system
plan.
(8)
(9)Ġ"Annuity" means:
(a) in the case of a defined benefit plan, equal and fixed payments for life that are the actuarial
equivalent of a lump-sum payment under a retirement
system
plan and as such are not benefits paid by aretirement
system
plan and are not subject to periodic or one-time increases; or
(b) in the case of the defined contribution plan, a payment of a fixed sum of money at regular
intervals.
(9)
(10)Ġ"Benefit" means:
(a) the service or disability retirement or survivorship benefit payment provided by a defined benefit
retirement
system
plan; or
(b) a payment or distribution under the defined contribution retirement plan for the exclusive benefit
of a plan member or the member's beneficiary or
a benefit
an annuity purchased under [section 57].
(10)
(11)Ġ"Board" means the public employees' retirement board provided for in 2-15-1009.
(11)
(12)Ġ"Contingent annuitant" means a person designated to receive a continuing monthly benefit
after the death of a retired member.
(13) "Covered employment" means employment in a covered position.
(14) "Covered position" means a position in which the employee must be a member of the
retirement system except as otherwise provided by law.
(12)
(15)Ġ"Credited service" or "service credit" means the periods of time for which the required
contributions have been made to a retirement
system
plan and that are used to calculate service or
disability retirement or survivorship benefits under a defined benefit retirement
system
plan.
(16) "Defined benefit retirement plan" or "defined benefit plan" means a plan within the retirement
systems provided for pursuant to 19-2-302 that is not the defined contribution retirement plan.
(17) "Defined contribution retirement plan" or "defined contribution plan" means the plan within
the public employees' retirement system established in 19-3-103 that is provided for in [sections 42
through 64] and that is not a defined benefit plan.
(13)
(18)Ġ"Department" means the department of administration.
(14)
(19)Ġ"Designated beneficiary" means the person designated by a member or payment recipient
to receive any survivorship benefits
or
, lump-sum payments, or benefit from a retirement account upon the
death of the member or payment recipient, including annuities derived from the benefits or payments.
(15)
(20)Ġ"Disability" means a total inability of the member to perform the member's duties by
reason of physical or mental incapacity. The disability must be incurred while the member is an active
member and must be one of permanent duration or of extended and uncertain duration, as determined by
the board on the basis of competent medical opinion.
(16)
(21)Ġ"Division" means the public employees' retirement division of the department
ofadministration
.
(17)
(22)Ġ"Employee" means a person who is employed by an employer in any capacity and whose
salary is paid by the employer.
(18)
(23)Ġ"Employer" means a governmental entity participating in a retirement system enumerated
in 19-2-302 on behalf of its eligible employees.
(19)
(24)Ġ"Essential elements of the position" means fundamental job duties. An element may be
considered essential because of but not limited to the following factors:
(a)the position exists to perform the element;
(b)there are a limited number of employees to perform the element; or
(c)the element is highly specialized.
(20)
(25)Ġ"Fiscal year" means any year commencing with July 1 and ending the following June 30.
(21)
(26)Ġ"Inactive member" means a member who is not an active or retired member.
(22)
(27)Ġ"Member" means
any
either:
(a) a person with accumulated contributions and service credited with a defined benefit retirement
system
plan or receiving a retirement benefit on account of the person's previous service credited in a
retirement system; or
(b) a person with a retirement account in the defined contribution plan.
(23)
(28)Ġ"Membership service" or "years of service" means the periods of service that are used to
determine eligibility for retirement or other benefits.
(24)
(29)Ġ"Normal cost" or "future normal cost" means an amount calculated under an actuarial cost
method required to fund accruing benefits for members of a defined benefit retirement
system
plan during
any year in the future. Normal cost does not include any portion of the supplemental costs of a retirement
system
plan.
(25)
(30)Ġ"Pension" means benefit payments for life derived from contributions to a
system
retirement plan made from state- or employer-controlled funds.
(26)
(31)Ġ"Pension trust fund" means a fund established to hold the contributions, income, and
assets of a retirement system or plan in public trust.
(27)
(32) "Plan choice rate" means the amount of the employer contribution as a percentage of
payroll covered by the defined contribution plan members that is allocated to the public employees'
retirement system's defined benefit plan pursuant to [section 53] and that is adjusted by the board
pursuant to [section 54] to actuarially fund the unfunded liabilities and the normal cost rate changes in adefined benefit plan resulting from member selection of the defined contribution plan.
(33)Ġ"Regular contributions" means contributions required from members under a retirement
system
plan.
(28)
(34)Ġ"Regular interest" means interest at the rate set from time to time by the board.
(29)
(35)Ġ"Retirement" or "retired" means the status of a member who has terminated from service
and has received and accepted a retirement benefit from a retirement
system
plan.
(36) "Retirement account" means an individual account within the defined contribution retirement
plan for the deposit of employer and employee contributions and other assets for the exclusive benefit of
a member of the defined contribution plan or the member's beneficiary.
(30)
(37)Ġ"Retirement benefit" means:
(a) in the case of a defined benefit plan, the periodic benefit payable as a result of service, early,
or disability retirement under a defined benefit plan of a retirement system.
An
With respect to a defined
benefit plan, the term does not mean an annuity
is not a retirement benefit
.
(b) in the case of the defined contribution plan, a benefit as defined in subsection (10)(b).
(31)
(38)Ġ"Retirement system" or "system" means one of the public employee retirement systems
enumerated in 19-2-302.
(32)
(39)Ġ"Service" means employment of an employee in a position covered by a retirement system.
(33)
(40)Ġ"Statutory beneficiary" means the surviving spouse or dependent child or children of a
member of the highway patrol officers', municipal police officers', or firefighters' unified retirement system
who are statutorily designated to receive benefits upon the death of the member.
(34)
(41)Ġ"Supplemental cost" means an element of the total actuarial cost of a defined benefit
retirement
system
plan arising from benefits payable for service performed prior to the inception of the
retirement
system
plan or prior to the date of contribution rate increases, changes in actuarial assumptions,
actuarial losses, or failure to fund or otherwise recognize normal cost accruals or interest on supplemental
costs. These costs are included in the unfunded actuarial liabilities of the retirement
system
plan.
(35)
(42)Ġ"Survivorship benefit" means payments for life to the statutory or designated beneficiary
of a deceased member who died while in service under a defined benefit retirement
system
plan.
(36)
(43) "Termination of employment" or "termination of service" means that the member has
severed the employment relationship with the employer and has been paid all compensation due upon
termination of employment, including but not limited to payment of accrued annual leave credits, as
provided in 2-18-617, and payment of accrued sick leave credits, as provided in 2-18-618. For purposesof this subsection, compensation as a result of legal action, court order, appeal, or settlement to which the
board was not party is not a payment due upon termination.
(37)
(44)Ġ"Unfunded actuarial liabilities" or "unfunded liabilities" means the excess of a defined
benefit retirement
system's
plan's actuarial liabilities at any given point in time over the value of its cash
and investments on that same date.
(38)
(45)Ġ"Vested member" or "vested" means:
(a) with respect to a defined benefit plan, a member or the status of a member who has attained
the minimum membership service requirements to be eligible for retirement benefits under
a
the retirement
system
plan; or
.
(b) with respect to the defined contribution plan, a member or the status of a member who,
pursuant to [section 52], is entitled to employer contributions and income on those contributions in the
member's retirement account.
(39)
(46)Ġ"Written application" means a written instrument duly executed and filed with the board
and containing all information required by the board, including
such
proofs of age
as
that the board
considers necessary."
Section 6.ĠSection 19-2-401 , MCA, is amended to read:
"19-2-401.Location of board -- jurisdiction and venue for judicial review -- quorum -- officers and
employees. (1) The board shall maintain its office in the city of Helena. Jurisdiction and venue for judicial
review of final administrative decisions of the board are in the first judicial district, Lewis and Clark County,
unless otherwise stipulated by the parties.
(2)A quorum of the board is
three
four members.
(3)The board shall elect one of its members presiding officer. The board may appoint a committee
of one or more of its members to perform routine acts, such as retirement of members and fixing of
retirement benefits, approval of death claims, and correction of records necessary in the administration of
the systems in accordance with the provisions of chapters 3, 5 through 9,
12,
13, and
15
17 of this title
and in accordance with the rules of the board. The attorney general is the legal counsel for the board."
Section 7.ĠSection 19-2-403 , MCA, is amended to read:
"19-2-403.Powers and duties of board. (1) The board shall administer the provisions of the
chapters enumerated in 19-2-302. (2)The board may establish rules that it considers proper for the administration and operation of
the retirement systems and enforcement of the chapters under which each retirement system is
established.
(3)The board shall establish uniform rules that are necessary to determine service credit for
fractional years of service.
(4)The board shall determine who are employees within the meaning of each retirement system.
The board is the sole authority for determining the conditions under which persons may become members
of and receive benefits under the retirement systems.
(5)The board shall determine and may modify retirement benefits under the retirement systems.
(6)In matters of board discretion under the systems, the board shall treat all persons in similar
circumstances in a uniform and nondiscriminatory manner.
(7)The board shall maintain records and accounts it determines necessary for the administration
of the retirement systems.
(8)Upon the basis of the findings of the actuary pursuant to 19-2-405, the board shall adopt
actuarial tables and rates of regular interest it determines appropriate for the administration of the
retirement systems.
(9)The board shall review the sufficiency of benefits paid by the retirement system or plan and
recommend to the legislature those changes in benefits in a defined benefit plan or in contributions under
the defined contribution plan that may be necessary for
retired
members and their beneficiaries to maintain
a stable standard of living.
(10)The board may implement third-party mailings under the provisions of 2-6-109. If third-party
mailings are implemented, the board shall adopt rules governing means of implementation, including the
specification of eligible third parties, appropriate materials, and applicable fees and procedures. Fees
generated by third-party mailings must be deposited in an account in the state special revenue fund and
must be appropriated to the board for the benefit of participants of retirement systems or plans
administered by the board.
(11) The board shall perform other duties and may exercise the powers concerning the defined
contribution plan for plan members as provided in [sections 42 through 64]."
Section 8.ĠSection 19-2-405 , MCA, is amended to read:
"19-2-405.Employment of actuary -- biennial investigation and valuation. (1) The board shall retaina competent actuary who is an enrolled member of the American academy of actuaries and who is familiar
with public systems of pensions. The actuary is the technical advisor of the board on matters regarding
the operation of the retirement systems.
(2)The board shall require the actuary to make a biennial actuarial investigation into the suitability
of the actuarial tables used by the retirement systems and an actuarial valuation of the assets and liabilities
of
the
each defined benefit plan that is a part of the retirement systems.
(3)The normal cost contribution rate, which is funded by required employee contributions and a
portion of the required employer contributions to
the
each defined benefit retirement
system
plan, must
be calculated as
that
the level percentage of members' salaries that will actuarially fund benefits payable
under a retirement
system
plan as those benefits accrue in the future.
(4)(a)ĠThe unfunded liability contribution rate, which is entirely funded by a portion of the required
employer contributions to the retirement
system
plan, must be calculated as
that
the level percentage of
current and future defined benefit plan members' salaries that will amortize the unfunded actuarial liabilities
of the retirement
system
plan over a reasonable period of time, not to exceed 30 years, as determined by
the board.
(b) In determining the amortization period under subsection (4)(a) for the public employees'
retirement system's defined benefit plan, the actuary shall take into account the plan choice rate
contributions to be made to the defined benefit plan pursuant to [section 53] and 19-21-203(5)(b).
(5)The board shall require the actuary to conduct a periodic actuarial investigation into the
actuarial experience of the retirement systems and plans.
(6) The board may require the actuary to conduct any valuation necessary to administer the
retirement systems and the plans subject to this chapter."
Section 9.ĠSection 19-2-406 , MCA, is amended to read:
"19-2-406.Determination of disability by board -- compliance with federal law -- conversion to
service retirement benefit -- rules. (1) The board shall determine whether a member has become disabled.
In the discharge of its duty regarding determinations, the board, any member of the board, or any
authorized representative of the board may order medical examinations, conduct hearings, administer oaths
and affirmations, take depositions, certify to official acts, and issue subpoenas to compel the attendance
of witnesses and the production of books, papers, correspondence, memoranda, and other records
considered necessary as evidence in connection with a claim for disability retirement. (2)The board shall adopt rules requiring employers to identify and explain the essential elements
of a member's position, any accommodations that were or can be made in compliance with the Americans
With Disabilities Act of 1990 (42 U.S.C. 12101, et seq.), and the effectiveness of the accommodations.
(3)The board shall retain medical personnel to advise it in assessing the nature and extent of
disabling conditions while reviewing claims for disability retirement.
(4)The disability retirement benefit paid to a member must be converted to a service retirement
benefit, without recalculation of the monthly benefit amount, when the member has attained the minimum
age required for normal service retirement. The board shall notify the member in writing as to the change
in status.
(5) This section does not apply to members of the defined contribution plan."
Section 10.ĠSection 19-2-407 , MCA, is amended to read:
"19-2-407.Report by division to governor. As soon as practical after the close of each fiscal year,
the division shall file with the governor a report of its work for that fiscal year. The report must include a
statement as to the accumulated cash and securities in the pension trust funds as certified by the state
treasurer and the board of investments. The report must
also
include the most recent unpublished report
of the actuary of the actuarial valuation of the assets and liabilities of each system or plan. The report must
also provide information concerning the defined contribution plan, including a description of the plan, the
number of members in the plan, plan contribution rates, the total amount of money invested by members,
investment performance, administrative costs and fees, determinations on the plan choice rate made
pursuant to [section 54], and other information required under applicable governmental accounting
standards and as determined by the board."
Section 11.ĠSection 19-2-408 , MCA, is amended to read:
"19-2-408.Administrative expenses. (1) The legislature finds that proper administration of the
pension trust funds benefits both employers and members and continues to benefit members after
retirement.
(2)The administrative expenses of the retirement systems administered by the board must be paid
from the investment earnings on the pension trust fund of the public employees' retirement
system
system's defined benefit plan, except as otherwise provided in
subsection (3)
this section. Before the fiscal
yearend closing, the board shall compute the administrative expenses attributable to each retirementsystem or plan administered by the board for the immediately preceding fiscal year and transfer that
amount from each retirement system's pension trust fund to the pension trust fund of the public
employees' retirement system. The total administrative expenses of the board, including the administration
of the volunteer firefighters' pension plan, may not exceed 1.5% of the total defined benefit plan
retirement benefits paid. For purposes of this section, an administrative expense does not include an
expenditure of funds allocated under [section 41(1)(b) or (1)(c)] to the education fund established in
[section 41(1)(a)] or an expenditure of funds appropriated specifically for the purposes of [section 41].
(3)On January 1 of each year, each employer under the public employees' retirement system shall
contribute on behalf of each member then in its service a membership fee of $1 in addition to other
required contributions. The fees must be used for the purpose of defraying the administrative expense of
chapters
2,
3, 5 through 9, and 13 and this chapter.
(4)The board may assess and the division may collect a fee from the department of fish, wildlife,
and parks for the purpose of defraying the expenses of administering chapter 8 of this title.
(5)The administrative expenses of the defined contribution plan must be paid, as provided in
[section 46], from assets of the defined contribution plan."
Section 12.ĠSection 19-2-409 , MCA, is amended to read:
"19-2-409.
Systems
Plans to be funded on actuarially sound basis -- definition. As required by
Article VIII, section 15, of the Montana constitution, each system must be funded on an actuarially sound
basis. For purposes of this section, "actuarially sound basis" means that contributions to each
system
retirement plan must be sufficient to pay the full actuarial cost of the
system
plan.
The
For a defined
benefit plan, the full actuarial cost includes both the normal cost of providing benefits as they accrue in
the future and the cost of amortizing unfunded liabilities over a scheduled period of no more than 30 years.
For the defined contribution plan, the full actuarial cost is the contribution defined by law that is payable
to an account on behalf of the member."
Section 13.ĠSection 19-2-501 , MCA, is amended to read:
"19-2-501.Pension trust funds established. A pension trust fund is established and maintained
for each retirement plan within a system subject to this chapter as enumerated in 19-2-302."
Section 14.ĠSection 19-2-503 , MCA, is amended to read: "19-2-503.Management of pension trust funds. The pension trust funds must be managed as
follows:
(1)The board is the trustee of all money collected for the retirement systems and has exclusive
control of the administration of the pension trust funds except as otherwise provided by law.
(2)The department shall deposit in the state treasury all amounts received by it as provided in this
chapter.
(3)
The
Except as provided in [sections 42 through 64], the state treasurer is custodian of the
pension trust funds, subject to the exclusive control of the board for administration and the board of
investments for the investment of the funds."
Section 15.ĠSection 19-2-504 , MCA, is amended to read:
"19-2-504.Investment of pension trust funds. (1)
The
Except as provided in [sections 42 through
64], the pension trust funds of the retirement systems must be invested by the state board of investments
as part of the unified investment program described in Title 17, chapter 6, part 2.
(2)All income earned on any assets constituting a part of the pension trust funds must be paid
into the appropriate pension trust funds as received.
(3)The pension trust funds may be commingled for investment purposes, but separate accounts
must be maintained for each system."
Section 16.ĠSection 19-2-505 , MCA, is amended to read:
"19-2-505.Restrictions on use of funds. (1) Except as provided in this section, a member or an
employee of the board, the department, or the board of investments may not:
(a)have any interest, direct or indirect, in the making of any investment or in the gains or profits
accruing from the pension trust funds;
(b)directly or indirectly, for the member or employee or as an agent or partner of others, borrow
from the pension trust funds or deposits;
(c)in any manner use the pension trust funds except to make current and necessary payments that
are authorized by the division; or
(d)become an endorser or surety as to or in any manner an obligor for investments for the pension
trust funds.
(2)The assets of the retirement systems, including the assets of retirement accounts, may not beused for or diverted to any purpose other than for the exclusive benefit of the members and their
beneficiaries and for paying the reasonable administrative expenses of the retirement systems administered
by the board.
(3) This section does not prevent:
(a) the administration of an investment alternative within the defined contribution plan to the same
extent that all other investment alternatives within the defined contribution plan are managed; or
(b) the facilitation of a member loan pursuant to [section 59] for members of the defined
contribution plan in the same manner and to the same extent that all other member loans made pursuant
to [section 59] are facilitated."
Section 17.ĠSection 19-2-603 , MCA, is amended to read:
"19-2-603.Reinstatement after withdrawal of contributions. (1) Except as otherwise provided in
[sections 42 through 64] and this section,
any
a person who again becomes a member of a defined benefit
plan subsequent to the refund of the person's accumulated contributions after a termination of previous
membership is considered a new member without credit for any previous membership service. The person
may reinstate that membership service by redepositing the sum of the accumulated contributions that were
refunded to the person at the last termination of the person's membership plus the interest that would have
been credited to the person's accumulated contributions had the refund not taken place. If the person
makes this redeposit, the service credits previously canceled must be reinstated.
(2)Regardless of whether this redeposit is made, the documents held by the retirement system
as executed by the member prior to termination of membership must be held by the system for the same
purposes as prior to termination, and beneficiaries nominated in the documents continue unchanged until
changed as provided in this section."
Section 18.ĠSection 19-2-902 , MCA, is amended to read:
"19-2-902.Frequency of benefit payments. A retirement benefit or survivorship benefit granted
under a retirement system subject to this chapter, other than a benefit under the defined contribution plan,
must be payable in monthly installments, except that the board may elect to convert payments of at least
$20
per
a year to a single sum of actuarial equivalent value. A smaller pro rata amount may be paid for part
of a month when the retirement benefit ends before the last day of the month."
Section 19.ĠSection 19-2-906 , MCA, is amended to read:
"19-2-906.Limitations on disability or survivorship benefits. If the board determines that
a
member's
the disability or death of a member of a defined benefit plan is proximately caused by the gross
negligence, willful misconduct, or violation of the law by the member, the board may revoke, suspend, or
refuse to grant benefits except an annuity that is the actuarial equivalent of the member's accumulated
contributions with regular interest to the day the benefit commences."
Section 20.ĠSection 19-2-907 , MCA, is amended to read:
"19-2-907.Alternate payees -- family law orders -- rulemaking. (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)"family law order" means a judgment, decree, or order of a court of 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; and
(b)"participant" means a member or an actual or potential beneficiary, survivor, or contingent
annuitant of a retirement system designated pursuant to Title 19, chapter 3, 5, 6, 7, 8, 9, 13, or 17.
(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 plan; or
(b)an amount or duration of payment greater than that available to a participant under the
appropriate retirement system.
(5)
A
In a defined benefit plan, 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 amountof 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. Conversion of a disability retirement to a service
retirement pursuant to 19-2-406(4), 19-3-1015(2), 19-6-612(2), or 19-8-712(2) does not increase the
maximum monthly amount that may be apportioned to an alternate payee.
(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
each 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 or plan 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)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.
(8) The board shall adopt rules to provide for the application of a family law order within the
defined contribution plan."
Section 21.ĠSection 19-2-908 , MCA, is amended to read:
"19-2-908.Time of commencement of benefit -- rulemaking. (1) (a) The board shall grant a benefit
to any member, or the member's statutory or designated beneficiary, who has fulfilled all eligibility
requirements, terminated covered service, and filed the appropriate written application.
(b)A member may apply for retirement benefits before terminating covered service, but
commencement of the benefits must be as provided in this section.
(2)(a)Except as provided in subsection (2)(b), the service retirement benefit may commence onthe first day of the month following the eligible member's last day of membership service or, if requested
by the inactive member in writing, on the first day of a later month following receipt of the written
application.
(b)If an elected official's term of office expires before the 15th day of the month, the official may
elect that service retirement benefits from a defined benefit plan commence on the first day of the month
following the official's last full month in office. An official electing this option may not earn membership
service, service credit, or compensation for purposes of calculating final average salary under the retirement
system in the partial month ending the official's term, and compensation earned in that partial month is
not subject to employer or employee contributions.
(3)The disability retirement benefit payable to a member must commence on the day following
the member's termination from service.
(4)Monthly survivorship benefits from a defined benefit plan must commence on the day following
the death of the member.
(5)Estimated and finalized benefit payments must be issued as provided in rules adopted by the
board.
(6) With respect to the defined contribution plan, the board shall adopt rules regarding the
commencement of benefits that are consistent with applicable provisions of the Internal Revenue Code and
its implementing regulations."
Section 22.ĠSection 19-2-909 , MCA, is amended to read:
"19-2-909.Execution or withholding for support obligation -- rulemaking. (1) Benefits in the
retirement systems or plans provided for in chapters 3, 5 through 9, 13, and 17 are subject to execution
and income withholding for the payment of a participant's support obligation.
(2)For purposes of this section, the following definitions apply:
(a)"Execution" means a warrant for distraint issued or a writ of execution obtained by the
department of public health and human services when providing support enforcement services under Title
IV-D of the Social Security Act.
(b)"Income withholding" means an income-withholding order issued under the provisions of Title
40, chapter 5, part 3 or 4, or an income-withholding order issued in another state as provided in 40-5-157.
(c)"Participant" means a member or an actual or potential beneficiary, survivor, or contingent
annuitant of a retirement system or plan designated pursuant to Title 19, chapter 3, 5, 6, 7, 8, 9, 13, or17.
(d)"Support obligation" has the meaning provided in 40-5-403 for a support order.
(3)The execution or income-withholding 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 plan; or
(b)an amount or duration of payment greater than that available to a participant under the
appropriate retirement system or plan.
(4)
The
An execution or income-withholding order applied to a defined benefit retirement plan may
only
provide for payment only 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 and paid
under this section 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
under this section may be further limited only to a specified maximum time or the life of a specified
participant. Payments may also be limited to a specific amount
per
each month if the number of payments
is specified.
(5) The board shall adopt rules to provide for the application of an execution or income-withholding
order within the defined contribution plan."
Section 23.ĠSection 19-2-1001 , MCA, is amended to read:
"19-2-1001.Maximum benefit and contribution limitation. A monthly benefit paid under a defined
benefit plan of the retirement systems and the annual additions to a retirement account within the defined
contribution plan may not exceed the annual limits on benefits and contributions as specified in section 415
of the Internal Revenue Code of 1986 and adjusted annually by the commissioner of internal revenue."
Section 24.ĠSection 19-2-1002 , MCA, is amended to read:
"19-2-1002.Vesting of retirement benefits upon termination of
system
plan. Upon termination of
a retirement
system
plan, termination of employment of a substantial number of members that would
constitute a partial termination of the retirement
system
plan, or complete discontinuance of contributions
to that retirement
system
plan, the retirement benefit accrued to each member directly affected by the
occurrence becomes fully vested and nonforfeitable to the extent funded."
Section 25.ĠSection 19-2-1003 , MCA, is amended to read:
"19-2-1003.Transfer of dormant, nonvested member-accumulated contributions. The board may,
in its discretion, transfer the accumulated contributions of a nonvested member of a defined benefit plan
to the pension trust fund of the
system
plan in which the member is participating if the member has not
participated in the plan as an employee for a period of 10 years. Rights of the member may not be
jeopardized by the transfer, and the accumulated contributions must be transferred to the member's name
upon subsequent return to service or subsequent application for refund."
Section 26.ĠSection 19-2-1005 , MCA, is amended to read:
"19-2-1005.Compensation limit. A retirement
system
plan subject to this chapter may not take
into account compensation of a member in excess of the amount permitted in Internal Revenue Code
section 401(a)(17)."
Section 27.ĠSection 19-2-1006 , MCA, is amended to read:
"19-2-1006.Use of forfeitures. A retirement
system
plan subject to this chapter may not apply
forfeitures of benefits to increase the benefits of any member in a manner not permitted in Internal Revenue
Code section 401(a)(8)."
Section 28.ĠSection 19-2-1007 , MCA, is amended to read:
"19-2-1007.Required distributions. The benefits payable by the retirement
systems
plans subject
to this chapter are subject to the requirements of section 401(a)(9) of the Internal Revenue Code as
follows:
(1)Benefits must begin by April 1 of the calendar year following the plan year in which the
member reaches 70 1/2 years of age or retires, whichever is later. (2)The member's entire interest in
the
a retirement
system
plan must be distributed over the life
of the member or the lives of the member and a designated beneficiary
,
or over a period not extending
beyond the life expectancy of the member or the life expectancy of the member and a designated
beneficiary.
(3)When a member dies after distribution of benefits has begun, the remaining portion of the
member's interest must be distributed at least as rapidly as under the method of distribution prior to the
member's death.
(4)When a member dies before distribution of benefits has begun, the entire interest of the
member must be distributed within 5 years of the member's death. The 5-year payment rule does not apply
to any portion of the member's interest that is payable to a designated beneficiary over the life or life
expectancy of the beneficiary and that begins within 1 year after the date of the member's death. The
5-year payment rule does not apply to any portion of the member's interest that is payable to a surviving
spouse, that is payable over the life or life expectancy of the spouse, and that begins no later than the date
the member would have reached 70 1/2 years of age.
(5)The benefits payable must meet the minimum distribution incidental benefit requirements of
section 401(a)(9)(G) of the Internal Revenue Code."
Section 29.ĠSection 19-3-103 , MCA, is amended to read:
"19-3-103.Retirement system created -- system to consist of two plans. (1) A defined benefit
retirement
system
plan is created and established to become effective July 1, 1945
, and to be known as
the public employees' retirement system
.
(2) A defined contribution plan is established as provided in [sections 42 through 64].
(3)ĠThe public employees' retirement system consists of the defined benefit plan and the defined
contribution plan. Each plan within the system is governed by the applicable provisions of chapter 2 and
this chapter."
Section 30.ĠSection 19-3-108 , MCA, is amended to read:
"19-3-108.Definitions. Unless the context requires otherwise, as used in this chapter, the
following definitions apply:
(1)"Compensation" means remuneration paid out of funds controlled by an employer.
Compensation does not include the payments or contributions made in lieu of wages for an individualsubject to 19-3-403(4)(a).
(2)"Contracting employer" means any political subdivision or governmental entity that has
contracted to come into the system under this chapter.
(3)"Defined benefit plan" means the plan within the public employees' retirement system
established in 19-3-103 that is not the defined contribution plan.
(4)Ġ"Employer" means the state of Montana, its university system or any of the colleges, schools,
components, or units of the university system for the purposes of this chapter, or any contracting
employer.
(4)
(5)Ġ"Employer contributions" means payments to
the
a pension trust fund pursuant to 19-3-316
from appropriations of the state of Montana and from contracting employers.
(5)
(6)Ġ"Final average salary", except as provided in 19-3-520, means a member's highest average
monthly compensation during any 36 consecutive months of membership service. Lump-sum payments for
severance pay, sick leave, and annual leave paid to the member upon termination of employment may be
used in the calculation of a retirement benefit only to the extent that they are used to replace, on a
month-for-month basis, the regular compensation for a month or months included in the calculation of the
final average salary. A lump-sum payment may not be added to a single month's compensation.
(7) "System" or "retirement system" means the public employees' retirement system established
in 19-3-103."
Section 31.ĠSection 19-3-201 , MCA, is amended to read:
"19-3-201.Contracts with political subdivisions. (1) Any municipal corporation, county, or public
agency in the state may become a contracting employer and make all or specified groups of its employees
members of the retirement system by a contract entered into between the board and the legislative body
of the contracting employer. The contract may include any provisions that are consistent with chapter 2
and this chapter and necessary in the administration of the retirement system as it affects the contracting
employer and its employees.
(2)The approval of the contract is subject to the following provisions, in addition to the other
provisions of this chapter:
(a)The legislative body of the contracting employer shall adopt a resolution giving notice of
intention to approve the contract and containing a summary of the major provisions of the retirement
system. The contract may not be approved unless the employees proposed to be included in the retirementsystem adopt the proposal by a majority affirmative vote in a secret ballot. The ballot at the election must
include the summary of the retirement system as set forth in the resolution. The election must be
conducted as prescribed by the legislative body of the contracting employer. Approval of the contract must
be by ordinance adopted by the affirmative vote of two-thirds of the members of the legislative body, not
less than 20 days after the adoption of the resolution or by an ordinance adopted by a majority vote of the
electorate of the contracting employer voting on the contract.
(b)The contract must specify that all employees of the contracting employer or groups of
employees as agreed to between the board and the contracting employer
must
shall become members. The
groups of employees to be included must be by departments, duties, or other similar classifications and
not by individual employees. The board may disapprove any classification into groups if, in its opinion, the
classification affects adversely the interest of the retirement system. Membership in the retirement system
is compulsory for all employees included under the contract and who are hired after the effective date of
the contract. An employee's membership in either the defined benefit plan or the defined contribution plan
is determined on an individual basis as provided in this chapter.
(c)The contract may be amended in the manner prescribed in this section for the original approval
of contracts. Groups of excluded employees may be subsequently included by amendment.
(3)The termination of the contract is subject to the following provisions, in addition to the other
provisions of this chapter:
(a)The legislative body of a contracting employer shall adopt a resolution giving notice to its
employees that it intends to terminate retirement system coverage.
(b)All employees covered under the retirement system
shall
must receive notice of the termination
resolution and be permitted to vote for or against the resolution by secret ballot.
(c)If a majority of covered employees votes for termination, the legislative body, not less than 20
days after the approval of the resolution by the employees, may adopt by a
2/3
two-thirds majority a
resolution terminating coverage under the system effective the last day of that month and forward the
resolution and a certified copy of the election results to the board.
(d)Upon receipt of the termination resolution, the board may request an actuarial valuation of the
liabilities of the terminating agency to the retirement system, and the board may withhold approval of the
termination of contract until satisfactory arrangements are made to provide funding for any excess accrued
liabilities not previously funded by the terminating agency."
Section 32.ĠSection 19-3-203 , MCA, is amended to read:
"19-3-203.Conversion of local or state retirement plan. (1) If the legislative body of any city,
county, or public agency having an existing retirement, pension, or annuity fund or system, referred to as
the local system, desires to make the members of the local system members of the public employees'
retirement system, it may enter into a contract for that purpose with the board in the manner provided in
19-3-201. However, the employees voting, as provided in 19-3-201(2)(a),
shall
must be limited to active
members of the local system, and approval
shall require
requires an affirmative vote of two-thirds of the
employees.
(2)
All
Subject to the applicable provisions of this chapter, active members of the local system shall
become members of either the defined benefit plan or the defined contribution plan of the retirement
system and
shall
are no longer
be
members of the local system. The pensions being paid to pensioners or
annuitants of the local system on the effective date of the contract must be continued and paid at their
existing rates by the public employees' retirement system. The liability for the pensions must be computed
by the actuary and charged to the contracting employer. All cash and securities held by the local system
must be transferred to the retirement system as of the effective date of the contract and credited to the
employer. The value of the securities must be determined by the board.
(3)The trustees or other administrative head of the local system as of the effective date of the
contract shall certify the proportion, if any, of the funds of the system that represents the accumulated
contributions of the active members and the relative shares of the members as of that date. The shares
must be charged to the employer and credited as accumulated contributions of the members in the public
employees' retirement system and administered as if the contributions had been made during membership
in the retirement system. Any excess of employer credits over charges under this section must be offset,
with regular interest, against future required employer contributions. Any excess of employer charges over
credits under this section must be payable by the contracting employer, with regular interest, on a monthly
basis as specified in the contract."
Section 33.ĠSection 19-3-315 , MCA, is amended to read:
"19-3-315.Member's contribution to be deducted. (1)
On and after July 1, 1997, the regular
contribution of each member is 6.8% of the member's compensation.
Each member's contribution
increases to
is 6.9%
beginning July 1, 1999
of the member's compensation.
(2)Payment of salaries or wages less the contribution is full and complete discharge andacquittance of all claims and demands for the service rendered by members during the period covered by
the payment, except their claims to the benefits to which they may be entitled under the provisions of this
chapter.
(3)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 subsection (1) for service rendered after June 30, 1985.
(4)(a)ĠThe 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
(b) In the case of a member of the defined benefit plan, these contributions must become part of
the member's accumulated contributions but must be accounted for separately from those previously
accumulated.
(c) In the case of a member of the defined contribution plan, these contributions must be allocated
as provided in [section 53].
(5)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 wages, as defined
in 19-1-102, and compensation. 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 board."
Section 34.ĠSection 19-3-316 , MCA, is amended to read:
"19-3-316.Employer contribution rates. (1) Each employer shall contribute to
the cost of benefits
under
the system. Except as provided in subsection (2), the amount of the employer contribution as a
percentage of the employer's covered payroll is
6.8% beginning July 1, 1997, and increases to
6.9%
beginning July 1, 1999
. Of employer contributions made under this subsection for both defined benefit plan
and defined contribution plan members, a portion must be allocated for educational programs as provided
in [section 41]. Employer contributions for members under the defined contribution plan must be allocated
as provided in [section 53].
(2)Local government and school district employer contributions must be the total employer
contribution rate provided in subsection (1) minus the state contribution rate applied to their monthly
covered payrolls under 19-3-319. The payment is statutorily appropriated as provided in 17-7-502." Section 35.ĠSection 19-3-401 , MCA, is amended to read:
"19-3-401.Membership -- inactive vested members -- inactive nonvested members. (1) Except as
otherwise provided in this chapter, all employees shall become members of the defined benefit plan on the
first day of service. Each employer shall file with the board information affecting their employees' status
as members
of the retirement system
as the board may require. An employee may become a member of
the defined contribution plan only as provided in [sections 42 through 64].
(2)A member of the defined benefit plan with at least 5 years of membership service who
terminates service and does not take a refund of the member's accumulated contributions is an inactive
vested member and retains the right to purchase service and to receive a service retirement benefit subject
to the provisions of this chapter.
(3)A member of the defined benefit plan with less than 5 years of membership service who
terminates service and leaves the member's accumulated contributions in the pension trust fund is an
inactive nonvested member and is not eligible for any benefits from the retirement
system
plan. An inactive
nonvested member is eligible only for a refund of the member's accumulated contributions.
(4)Every employee who reenters service shall become a member of either the defined benefit plan
or the defined contribution plan subject to the provisions of this chapter unless the employee has had an
original election of exemption from membership and the employee's service was not interrupted by a break
of more than 1 month. A seasonal employee who has had an original election of exemption from
membership is not subject to the requirement regarding the break in service while continuing in the
employee's original employment and employed on a seasonal basis, but upon termination of employment
to accept new employment or absence of more than 1 month in returning to original employment in any
ensuing season, the seasonal employee shall become a member of the retirement system upon reentry.
(5)Time during which an employee of a school district is absent from service during official
vacation is counted as service in determining eligibility for membership under this chapter."
Section 36.ĠSection 19-21-102 , MCA, is amended to read:
"19-21-102.
Definition of teachers' retirement system
Definitions.
In this chapter, "teachers'
Unless the context requires otherwise, as used in this chapter, the following definitions apply:
(1) "Program" means the optional retirement program established pursuant to this chapter.
(2) "Public employees' retirement system" means the retirement system established in 19-3-103.
(3) "Teachers' retirement system" or "system" means the teachers' retirement system providedfor in Title 19, chapter 20."
Section 37.ĠSection 19-21-201 , MCA, is amended to read:
"19-21-201.Participation in program. (1) Except as provided in subsection (2), 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)before January 1, 1988, for an eligible person hired before July 1, 1987;
(b)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)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.
(2)(a)An eligible person hired on or after July 1, 1993, shall become a member of the
optional
retirement plan
program 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
An eligible 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
program.
(c)A person eligible to make an election under this subsection (2) shall exercise the election within
30 days of being hired.
(d) A person is ineligible to make an election under subsection (1) or (2) if the person previously
elected to remain in the teachers' retirement system pursuant to subsection (1) or to remain in the public
employees' retirement system pursuant to this subsection (2).
(3)The election must be exercised by filing a written
notice
irrevocable election with the teachers'
retirement system and the disbursing officer of the employer. The election is effective as of the date the
notice is filed or January 1, 1988, whichever is later.
(4)If an eligible officer 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.
(5)An election under this section is not effective unless the notice filed with the disbursing officerof the employer is accompanied by an appropriate application, if one is required, for the issuance of a
contract or contracts under the program.
(6) Subject to and as provided in [section 48], a university system employee in a position covered
under the public employees' retirement system may elect to participate in the program."
Section 38.ĠSection 19-21-202 , MCA, is amended to read:
"19-21-202.Effect on rights under teachers' retirement system. (1) An election under
19-21-201(1) through (3) and (5) to participate in the
optional retirement
program is a waiver of all rights
and benefits under the teachers' retirement system except as provided in this section.
(2)A member of the teachers' 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, the member is considered an inactive member of the
retirement
system if qualified under 19-20-303, with the rights and privileges provided under 19-20-603(1). A member
who elects to participate in the
optional retirement
program who does not qualify as an inactive member
under 19-20-303 is considered a terminated member of the
retirement
system under 19-20-304(4).
(3)A person who elects to participate in the
optional retirement
program is ineligible to be an
active member of the teachers' retirement system while continuously employed in a position eligible to
participate in the
optional retirement
program."
Section 39.ĠSection 19-21-203 , MCA, is amended to read:
"19-21-203.Contributions -- supplemental and plan choice rate contributions. (1) Each
optional
retirement
program participant shall contribute an amount equal to the member's contribution required
under 19-20-602. 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) mustremain 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
pickup
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 board of regents' contribution
to the designated company or companies for the benefit of the participant.
(5)(a)ĠThe board of regents shall make the supplemental contributions to the teachers' retirement
system, as provided in 19-20-621, to discharge the obligation incurred by the Montana university system
for the past service liability incurred by active, inactive, and retired members of the teachers' retirement
system.
(b) For employees electing to become program members pursuant to [section 48], the board of
regents shall, in addition to other contributions required under this section, contribute to the public
employees' retirement system the plan choice rate provided in [section 53(2)(b)] and adjusted pursuant to
[section 54]."
NEW SECTION.ĠSection 40.Nonapplication of part to defined contribution plan. Except as
otherwise provided in [sections 42 through 64], none of the provisions of this part apply under the defined
contribution plan.
NEW SECTION.ĠSection 41.Education fund established -- allocation of employer contributions --
educational program requirements. (1)(a) The board shall establish an education fund and provide for
educational programs for system members in a manner consistent with the provisions of this section.
(b) For the initial transfer educational program established for system members, the following
amounts must be allocated to the education fund established in subsection (1)(a):
(i) from the employee contributions made pursuant to 19-3-315 for fiscal year 2000, $10 from
each member's contributions; and
(ii) from the employer contributions made pursuant to 19-3-316 for fiscal year 2000, 0.075% of
covered payroll.
(c) For the ongoing educational and communication programs established pursuant to this section,
from the employer contributions made pursuant to 19-3-316, 0.04% of covered payroll must be allocatedto the education fund established in subsection (1)(a). The board shall from time to time review the
sufficiency of this amount and recommend to the legislature the adjustments that it considers appropriate.
(2)(a) The educational programs must provide system members with impartial and balanced
information about plan choices. The programs must involve multimedia formats. Plan comparisons must,
to the greatest extent possible, be based upon real rates of return on investments available in each
retirement plan.
(b) If an educational program is conducted by a contractor, the board shall monitor the
performance of the contract to ensure that the program is conducted in accordance with the contract,
applicable law, and the rules of the board. A contractor hired to provide educational services pursuant to
this section may not be the same entity contracted to provide other services for the defined contribution
plan.
(3) The board shall provide for an initial and an ongoing transfer educational program to provide
system members with information necessary to make informed plan choice decisions. The transfer
educational program must include but is not limited to information on:
(a) the amount of money available to a member to transfer to the defined contribution plan;
(b) the features of and differences between the defined benefit plan and the defined contribution
plan, both generally and specifically, as those differences may affect the member;
(c) the expected benefit available if the member were to retire under each of the retirement plans,
based on appropriate alternative sets of assumptions;
(d) the aggregate rate of return from investments in the defined contribution plan and the period
of time over which the aggregate rate of return must be achieved to equal or exceed the expected monthly
benefit payable to the member under the defined benefit plan;
(e) the historical rates of return for the investment alternatives available in the defined contribution
plan;
(f) the benefits and historical rates of return on investments available in deferred compensation
plans or a plan under section 403(b) of the Internal Revenue Code for which the employee may be eligible;
(g) the plan choices available to employees of the university system pursuant to [section 48] and
the comparative benefits of each available plan; and
(h) payout options available in each of the retirement plans.
(4) An ongoing educational and communication program must provide members of either plan with
information necessary to make informed decisions about choices within their plan of membership and inpreparation for retirement. The program must include but not be limited to information concerning:
(a) rights and conditions of membership;
(b) benefit features within the plan, options, and the effects of certain decisions;
(c) coordination of contributions and benefits with a deferred compensation plan under section 457
of the Internal Revenue Code or a plan under section 403(b) of the Internal Revenue Code;
(d) significant plan changes;
(e) contribution rates and plan funding status; and
(f) planning for retirement.
(5) The board shall also establish a communication program to provide plan information to
participating employers and the employer's personnel and payroll officers and to explain their respective
responsibilities in conjunction with the retirement plans.
(6) This section does not prohibit a plan vendor or vendors from providing system members with
information necessary to make informed decisions about the defined contribution plan and investment
alternatives within the plan.
NEW SECTION.ĠSection 42.Definitions. Unless the context requires otherwise, as used in
[sections 42 through 64], the following definitions apply:
(1) "Member" means an employee with a retirement account in the defined contribution plan.
(2) "Optional retirement program" means the retirement plan established by the board of regents
under chapter 21 of this title.
(3) "Plan" or "defined contribution plan" means the defined contribution retirement plan.
NEW SECTION.ĠSection 43. Defined contribution plan established -- assets to be held in trust --
contracted services. (1) The board shall establish within the public employees' retirement system a defined
contribution plan in accordance with the provisions of [sections 42 through 64]. The plan must be
established as a pension plan for the exclusive benefit of members and their beneficiaries and as a
"qualified plan" pursuant to section 401(a) of the Internal Revenue Code and its implementing regulations.
Retirement accounts must be established for each member of the defined contribution plan. Assets of the
plan must be held in trust. The plan is established in addition to any retirement, pension, deferred
compensation, or other benefit plan administered by the state or a political subdivision.
(2) The board shall contract for plan administration and use a competitive bidding process whencontracting for consulting, educational, investment, recordkeeping, or other services for the plan.
(3) The board shall contract for a qualified consultant to assist in preparation of the request for
bid or request for proposal for plan services.
NEW SECTION.ĠSection 44.Legislative intent. It is the intent of the legislature that, in
implementing and administering the defined contribution plan:
(1) changes to current administrative processes and the impact of those changes on employers
be minimized to the extent possible;
(2) the administrative structure for the plan be configured in an economical and efficient manner;
(3) administration and services for the plan be contracted out to the extent possible, but that the
board provide for the diligent oversight of the contracts;
(4) reasonable participant services be provided for and that fees be commensurate with the
services;
(5) lines of communication and responsibilities be clearly established so that employers or their
personnel and payroll officers do not advise members about plan choices or investment alternatives; and
(6) employers be encouraged to provide paid time for employees to attend educational programs
sponsored by the board pursuant to [section 41].
NEW SECTION.ĠSection 45.Board powers and duties -- rulemaking. (1) The board has the powers
and shall perform the duties regarding the defined contribution plan as provided in 19-2-403, as applicable.
The board may also exercise the powers and shall perform the duties provided in this chapter.
(2) The board shall, in accordance with the Montana Administrative Procedure Act, adopt rules
necessary for the implementation of [sections 42 through 64] and other applicable sections in chapters 2
and 3 of this title, including rules concerning the following:
(a) matters necessary for the treatment of the plan as a qualified plan under applicable sections
of the Internal Revenue Code;
(b) the treatment of dormant or inactive accounts;
(c) the security and privacy of information maintained by the board concerning a member's
investments, as required by applicable law;
(d) minimum asset, reserve, insurance, or other security requirements intended to ensure the
solvency of a contractor used by the board for investment services; and (e) the commencement of benefits in the plan pursuant to [sections 42 through 64] and as
provided in 19-2-908.
NEW SECTION.ĠSection 46.Administrative expenses and fees. (1) The board may establish a fund
within the defined contribution plan for paying the plan's administrative expenses.
(2) The board may:
(a) assess fees to pay the reasonable administrative costs of the plan; and
(b) negotiate with a vendor or vendors for vendor reimbursement of board administrative expenses
from fees collected by the vendor.
(3) All fees assessed must be fully disclosed to plan members and treated as public information.
NEW SECTION.ĠSection 47.Plan membership -- written election required -- failure to elect -- effect
of election. (1) Except as otherwise provided in [sections 42 through 64]:
(a) (i) a member who is an active member of the defined benefit plan on the date that the defined
contribution plan becomes effective may, within 12 months after that date, elect to transfer to and become
a member of the plan;
(ii) a member who was an inactive member of the defined benefit plan on the date that the defined
contribution plan becomes effective and who is rehired into covered employment after the plan effective
date may, within 12 months after the member's rehire date, elect to transfer to and become a member of
the plan;
(b) a member who is initially hired into covered employment on or after the date that the defined
contribution plan becomes effective may, within 12 months of the member's hire date, elect to become
a member of the plan.
(2)(a) Elections made pursuant to this section must be made on a form prescribed by the board.
(b) A member failing to make an election prescribed by this section remains a member of the
defined benefit plan.
(c) An election under this section, including the default election pursuant to subsection (2)(b), is
a one-time irrevocable election. Subject to [section 49], this subsection (2)(c) does not prohibit a new
election after an employee has terminated membership in either plan and returned to covered employment.
(3) A member in either the defined benefit plan or the defined contribution plan who becomes
inactive after an election under this section and who returns to active membership remains in the planpreviously elected.
(4) A system member may not simultaneously be a member of the defined benefit plan and the
defined contribution plan and must be a member of either the defined benefit plan or the defined
contribution plan. A period of service may not be credited in more than one retirement plan within the
system.
(5) The provisions of [sections 42 through 64] do not prohibit the board from adopting rules to
allow an employee to elect the defined contribution plan on the first day of covered employment.
(6) A member of the defined benefit plan who is subject to a family law order pursuant to
19-2-907 or an execution or income-withholding order pursuant to 19-2-909 may not transfer to the
defined contribution plan unless the order is modified to apply under the defined contribution plan or, for
university employees making an election pursuant to [section 48], the optional retirement program.
NEW SECTION.ĠSection 48.Plan choices for members employed by university system -- amount
available to transfer -- effect on rights. (1) If an employee of the university system, as defined in 5-20-201,
is eligible to make an election under [sections 42 through 64] to transfer to the defined contribution plan,
the employee may, instead of electing the plan, make a one-time irrevocable election on a form prescribed
by the board to transfer membership to the university system's optional retirement program provided for
under chapter 21 of this title.
(2) For an employee electing to transfer to the optional retirement program, the board shall transfer
to the optional retirement program the amount that the employee would have been able to transfer to the
defined contribution plan under [section 50].
(3) An election to become a member of the optional retirement program pursuant to this section
is a waiver of all rights and benefits under the public employees' retirement system.
NEW SECTION.ĠSection 49.Reinstatement of plan membership -- purchase of prior service in
defined benefit plan. (1)(a) An employee who terminated membership in the defined benefit plan, the
defined contribution plan, or the optional retirement program after making an election pursuant to [section
47] or [section 48] and who returns to covered employment after a break in service of less than 24
consecutive months shall become a member of the plan that the member last selected and is not eligible
for a new plan choice election.
(b) Except as provided in subsection (2), an employee who terminated membership in either thedefined benefit plan, the defined contribution plan, or the optional retirement program after making an
election pursuant to [section 47] or [section 48] and who returns to covered employment after a break in
service of 24 consecutive months or more is eligible to make a plan choice election as if the employee were
initially hired as provided for in [section 47(1)(b)].
(2) (a) An employee who returns to covered employment after terminating plan membership in the
defined contribution plan or the optional retirement program shall return to the plan previously selected if
the employee has accessed money derived from the employee's former retirement account by:
(i) receiving a lump-sum distribution of the member's former retirement account, unless the
distribution was forced pursuant to [section 60(1)(b)];
(ii) receiving a lump-sum distribution from an account outside the defined contribution plan that
has at any time received a transfer of funds from the member's former retirement account or any account
to which the member has transferred funds from a former retirement account; or
(iii) receiving a regular benefit, payment, or distribution from an account outside the defined
contribution plan in which there is money from the member's former retirement account.
(b) For the purposes of this subsection (2), "retirement account" also includes an employee's
account under the optional retirement program.
(3)(a) An employee who returns to covered employment after terminating membership in the
defined benefit plan, who is eligible to make a plan choice, and who elects to join the defined benefit plan
may reinstate prior membership service as provided in 19-2-603.
(b) An employee who returns to covered employment after terminating membership in the defined
contribution plan or the optional retirement program, who is eligible to make a plan choice, and who elects
to join the defined benefit plan may purchase prior membership service by paying to the board the full
actuarial cost of the service as of the latest actuarial valuation of the defined benefit plan. The employee
may not purchase membership service under this section in excess of the employee's length of service as
a member of the defined contribution plan or the optional retirement program.
NEW SECTION.ĠSection 50.Amount available to transfer. (1)(a) For an employee who was a
system member on the day before the effective date of the defined contribution plan and who elects to
transfer to the plan, the board shall transfer from the defined benefit plan to the member's retirement
account the employee's contributions and the percentage of the employer's contributions specified in
subsection (1)(b), plus 8% compounded annual interest on the total of the employee and employercontributions.
(b) Based on the contribution amount historically available to pay unfunded liabilities in the defined
benefit plan and the transferring member's years of service, the percentage of the employer contributions
that may be transferred are as follows:
Years of service`(T$> Percentage of employer
`T$7 contributions available to transfer
Less than 5 years`!T$H 65.53%
5 to 9 years`!T$H 58.59%
10 to 14 years`!T$H 55.26%
15 to 19 years`!T$H 55.42%
20 or more years`!T$H 57.53%
(2) For an employee hired on or after the effective date of the defined contribution plan who elects
to become a member of the plan, the board shall transfer from the defined benefit plan to the member's
retirement account an amount equal to the amount that would have been credited to the member's account
pursuant to [section 53] had the employee become a plan member on the employee's hire date, plus
interest credited at the actuarially assumed rate of return on the defined benefit plan assets as of the plan's
latest actuarial valuation.
NEW SECTION.ĠSection 51.Transfers or rollovers into plan -- membership credit for purposes of
vesting. (1) Except as provided in subsection (2), the board shall accept the transfer or rollover of assets
from another qualified plan to the member's retirement account. If a member is transferring assets from
another plan provided for in this title, the member must, for the purposes of becoming vested pursuant to
[section 52], receive credit for the employee's prior membership service under that plan.
(2) (a) After-tax money may not be transferred or rolled over to a retirement account unless the
money was contributed to the system's defined benefit plan on an after-tax basis.
(b) To the extent that the transfer or rollover is disallowed under the Internal Revenue Code
provisions in effect as of the calendar year immediately preceding the date of the transfer or rollover, a
member may not transfer or rollover to a retirement account contributions made under sections 403(b) and
457 of the Internal Revenue Code.
NEW SECTION.ĠSection 52.Vesting -- mandatory termination of membership -- forfeitures. (1)A member is fully vested with the member's contributions and the income on those contributions from the
date that the employee becomes a member of the plan, but is not considered a vested member, as defined
in 19-2-303, unless the member meets the criteria under subsection (2).
(2) A member is not vested with the employer's contributions and the income on those
contributions and does not attain the status of a vested member until the member has a total of
5
3 years
of membership service under the system.
(3) A member who terminates covered employment before becoming a vested member shall
terminate plan membership by removing from the plan the member's entire account balance as provided
in [section 56]. The employer contributions and income on the employer's contributions in the member's
retirement account are forfeited and must be allocated as provided in [section 53].
NEW SECTION.ĠSection 53.Allocation of contributions and forfeitures. (1) Each plan member's
retirement account must be credited with the employee contributions made under 19-3-315.
(2) Subject to adjustment by the board as provided in [section 54], beginning on the plan's
effective date, of the employer contributions under 19-3-316:
(a) 4.49% of compensation must be allocated to the member's retirement account; and
(b) 2.37% of compensation must be allocated to the defined benefit plan as the plan choice rate.
(3) Forfeitures of employer contributions and investment income on the employer contributions
may not be used to increase a member's retirement account. The board shall allocate the forfeitures under
[section 52] to meet the employer contributions obligation provided under subsection (2)(a) of this section
in lieu of direct contributions by the employer and shall increase the contribution amount under subsection
(2)(b) of this section by the amount of the forfeitures used in lieu of the employer contributions.
NEW SECTION.ĠSection 54.Determination and adjustment of plan choice rate and contribution
allocations -- rulemaking. (1) The board shall provide for the periodic review of the sufficiency of the plan
choice rate and shall adjust the allocation of contributions under [section 53] as specified in this section.
The board shall provide that the data necessary to comply with this section is collected and maintained for
all system members.
(2) The plan choice rate set in [section 53(2)(b)] must be adjusted as provided in this section,
taking into account:
(a) as determined under subsection (3), the change in the normal cost contribution rate in thedefined benefit plan that is the result of member selection of the defined contribution plan;
(b) as determined under subsection (4), the anticipated reduction in defined contribution plan costs
because of forfeitures; and
(c) as determined under subsection (5), the sufficiency of the plan choice rate to actuarially fund
the defined contribution plan's share of the defined benefit plan's unfunded liabilities.
(3) The change in the normal cost contribution rate must be an amount equal to the difference
between the normal cost contribution rate in the defined benefit plan that would have resulted if all system
members remained in the defined benefit plan and the normal cost contribution rate in the defined benefit
plan for the actual members of the defined benefit plan, multiplied by the covered payroll of members in
the defined benefit plan, divided by the covered payroll of members in the defined contribution plan. The
measurements under this subsection must be based on the defined benefit plan in effect on the effective
date of the defined contribution plan until the board determines that the defined benefit plan has been
amended in a manner that significantly affects plan choices available to system members. After a board
determination that the defined benefit plan has been significantly changed, the measurements in this
subsection with respect to members entering the system after the significant change must be made on the
basis of the defined benefit plan, as amended.
(4) The anticipated reduction in defined contribution plan costs as a result of forfeitures under
[section 52] must be determined as the amount of forfeitures expected during the next biennium based on
actual forfeitures in the preceding biennium, adjusted by taking into account the gains or losses during the
preceding biennium resulting from forfeitures of greater or lesser amounts than expected, divided by twice
the covered payroll of members of the defined contribution plan.
(5) The sufficiency of the plan choice rate to actuarially fund the appropriate share of the defined
benefit plan's unfunded liabilities must be determined as follows:
(a) The board shall determine the number of years required to actuarially fund the defined benefit
plan's unfunded liabilities as of the June 30, 1998, actuarial valuation, which must be the initial schedule
for the defined contribution plan to actuarially fund the plan's share of the unfunded liabilities. The board
shall reduce the schedule by 1 year each biennium.
(b) During each subsequent actuarial valuation of the defined benefit plan conducted pursuant to
19-2-405, the board shall determine whether the plan choice rate minus the sum of the amounts provided
in subsections (2)(a) and (2)(b) of this section is sufficient to pay the unfunded liability obligations within
the schedule determined under subsection (5)(a) of this section. If the amount is insufficient to fund theliability over a period of 10 years longer than the scheduled period or is more than sufficient to fund the
liability over a period of 10 years earlier than the scheduled period, the board shall determine to the nearest
0.1% the amount of the increase or decrease in the plan choice rate that is required to actuarially fund the
liabilities according to the established schedule.
(6) If the board determines that the plan choice rate should be increased or decreased, the plan
choice rate under [section 53(2)(b)] must be increased or decreased accordingly. If the plan choice rate is
increased, the allocation of employer contributions to member accounts under [section 53(2)(a)] must be
decreased by that amount. If the plan choice rate is decreased, the allocation of employer contributions
to member accounts under [section 53(2)(b)] must be increased by that amount.
(7) By November 1 of the year of a determination pursuant to this section that the allocation of
employer contributions under [section 53(2)] must be changed, the board shall notify system members,
participating employers, employee and employer organizations, the governor, and the legislature of its
determination and of the changes required.
(8) Effective January 1 of the year after the regular legislative session that immediately follows
a determination under this section, the plan choice rate and the allocation of contributions under [section
53(2)] must be adjusted according to the board's determination.
NEW SECTION.ĠSection 55.Investment alternatives -- notice of changes -- default fund. (1) The
board shall contract with a vendor or vendors to provide for at least eight investment alternatives within
the defined contribution plan. In providing for the plan's investment alternatives, only a vendor or vendors
offering suitable and well-managed investments, licensed to conduct business in Montana, and regulated
by the United States securities and exchange commission may be used.
(2) The investment alternatives must include at least three that offer plan members the following:
(a) the ability to materially affect the potential return on amounts in the member's retirement
account and the degree of risk to which those amounts are subject;
(b) a range of investment alternatives that:
(i) provides sound and diversified funds;
(ii) offers, under each alternative, a materially different risk and return characteristic than found in
the other alternatives;
(iii) allows the member or beneficiary to choose among them to achieve a portfolio with an
aggregate risk and return characteristic to achieve a point within the risk and return range normallyappropriate for the member or beneficiary based on age, income, and individual retirement goals; and
(iv) tends to minimize through diversification the overall risk of large losses.
(3) Subject to a competitive bidding process, the investment alternatives may include the
investment alternatives offered to members of the state deferred compensation plan pursuant to chapter
50 of this title.
(4) The board shall from time to time review the suitability and management of investment
alternatives and may change the alternatives to be offered. The board shall notify affected members of
potential changes before any changes become effective.
(5) Assets within each member's retirement account must be invested as directed by the member.
(6) The board shall provide for a balanced fund to be established as a default investment fund. In
the case of a member failing to direct how the member's retirement account is to be invested, the
member's entire account balance must be invested in the default fund.
(7) This section does not prohibit the board from contracting with the board of investments
established in 2-15-1808 to provide one or more investment alternatives within the plan.
NEW SECTION.ĠSection 56.Payout of account balances when terminating plan membership.
Subject to [section 59(3)], any time after termination of covered employment, a member or the member's
beneficiary may terminate plan membership by making a written application to the board and removing the
member's account balance from the plan through any combination of the following payout options, each
of which is subject to applicable regulations of the internal revenue service:
(1) a direct rollover to an eligible retirement plan or to an individual retirement account or annuity
pursuant to section 401(a)(31) of the Internal Revenue Code;
(2) a regular rollover to an eligible retirement plan pursuant to section 402(c) of the Internal
Revenue Code; or
(3) a lump-sum distribution of the member's account balance.
NEW SECTION.ĠSection 57.Distribution options for plan members -- rulemaking -- minimum
distribution requirements -- restrictions. (1) Subject to [sections 52 and 60], a member may, after
termination of covered employment, leave the member's account balance in the plan, and the member is
eligible for a distribution as provided in this section.
(2) After termination of covered employment, upon written application to the board, a membermay:
(a) if the member is at least 60 years of age,
directly transfer the member's account balance to
the defined benefit plan and
purchase for the full actuarial cost, as determined by the board,
a benefit
equivalent to an optional retirement
an annuity similar to a benefit provided under 19-3-1501 and subject
to the guaranteed annual benefit adjustment as provided in 19-3-1605; or
(b) if provided for by the board, select a distribution option offered pursuant to a contract
negotiated by the board with a plan vendor or vendors.
(3) A member who is less than 70 1/2 years of age who returns to covered employment may not
continue to receive a distribution under this section while actively employed in a covered position.
(4) The board shall adopt rules to administer this section and to provide that distributions comply
with the minimum distribution requirements established in the Internal Revenue Code and applicable under
19-2-1007.
NEW SECTION.ĠSection 58.Death benefits. A plan member's beneficiary must be determined
as provided in chapter 2, part 8, of this title. Upon written application filed with the board after the death
of a plan member, the member's beneficiary is entitled to the member's account balance and all rights
established in and subject to [sections 42 through 64].
NEW SECTION.ĠSection 59.Member loans -- rulemaking. (1)(a) Except as provided in subsection
(1)(b), a vested member may take a loan from the member's account balance of up to one-half of the
member's account balance or $50,000, whichever is less. A loan may be made for no longer than 5 years
and must be paid back with interest at a rate equal to the average prime interest rate of major New York
banks in effect at the time that the loan was made. The loan provided for in this section is intended to
qualify as a right or feature of the plan for the exclusive benefit of a plan member or the member's
beneficiary.
(b) A member is ineligible for a loan if the member's account is subject to a family support order
pursuant to 19-2-907 or an execution or income-withholding order pursuant to 19-2-909.
(2) Repayment by an active member must be by automatic payroll deduction from the
compensation of the member paid by the member's employer.
(3) A member who takes a loan may not terminate plan membership and is not eligible for a payout
under [section 56] or a distribution under [section 57] until the loan is fully repaid. (4) The board may contract for loan administration and shall adopt rules to implement this section.
NEW SECTION.ĠSection 60.Minimum account balance required for membership after termination
-- adjustment by rule. (1)(a) If a member's account balance is less than $5,000 at the time that the
member terminates covered employment, the member shall, subject to [section 59], terminate plan
membership by removing the member's account balance from the plan in a manner provided pursuant to
[section 56].
(b) If the member fails to remove the member's account balance, the board may close the account
by paying to the member a lump-sum distribution of the member's entire account balance.
(2) The board may by rule adjust the minimum account balance provided in this section as
necessary to maintain reasonable administrative costs and to account for inflation.
NEW SECTION.ĠSection 61.Implementation schedule -- plan effective date. (1) In exercising its
authority pursuant to [sections 42 through 64] to implement the defined contribution plan, the board shall:
(a) by September 1, 1999, retain a qualified consultant to assist the board in developing
appropriate requests for proposals for contracted services;
(b) by January 1, 2000, issue a request for proposal for all required contracted services;
(c) by August 1, 2000, award the contracts for all required contracted services; and
(d) by September 1, 2000, begin the development and modification of data systems and reporting
processes required to administer the plan.
(2) The defined contribution plan must become operational by no later than July 1, 2002.
NEW SECTION.ĠSection 62.Implementation team -- state agency assistance. The board shall
create an implementation team to assist in establishing the defined contribution plan. Upon request of the
board, other state agencies may provide technical and professional assistance to support the
implementation of the plan. The board may also request the assistance of other contracting employers and
may provide compensation for personal services and other costs incurred by an agency or contracting
employer to support the board pursuant to this section.
NEW SECTION.ĠSection 63.Creation of advisory council required. Pursuant to the powers
authorized under 2-15-122, the director of the department shall, by August 1, 1999, appoint a definedcontribution plan advisory council, which must be approved by the governor for an initial term of 2 years.
The advisory council shall meet at least quarterly and shall advise the board concerning the establishment
and operation of the defined contribution plan, including the selection of the initial investment alternatives
to be provided pursuant to [section 55]. On the second anniversary of the creation of the advisory council,
the governor shall determine whether to continue the existence of the council as provided in 2-15-122.
NEW SECTION.ĠSection 64.Legislative oversight committee -- reports and recommendations by
board -- study of health care costs. (1) The legislative council shall provide for an appropriate interim
legislative committee to oversee the implementation of the defined contribution plan established pursuant
to [sections 42 through 64] and to act as a steering committee on matters of policy.
(2) The board shall consult with and provide regular progress reports to the committee and shall
make recommendations regarding the design and implementation of the defined contribution plan.
(3) The committee shall also examine options for addressing the cost of postretirement health
insurance and other medical care for public retirees.
NEW SECTION.ĠSection 65.Board to seek commissioner's ruling or opinion. The public employees'
retirement board shall, as soon as possible, request in writing a ruling or opinion from the commissioner
of the internal revenue service as to whether the defined contribution retirement plan established pursuant
to [this act] constitutes a "qualified plan" pursuant to section 401(a) of the Internal Revenue Code.
NEW SECTION.ĠSection 66.Rulemaking -- implementation -- certification that plan is effective.
(1) The public employees' retirement board may adopt rules necessary to implement the provisions of
[sections 42 through 64].
(2) The board shall certify to the governor and the secretary of state the date on which the defined
contribution retirement plan established pursuant to [sections 42 through 64] is ready to become
operational and shall provide a copy of the certification to the code commissioner.
(3) Rights under [sections 42 through 64] do not vest until the defined contribution retirement plan
becomes operational and is certified as provided in this section.
NEW SECTION.ĠSection 67.Payment of local government administration expenses. To the extent
that a local government unit is required to incur administrative expenses to start the defined contributionretirement plan that exceed the amount provided in 1-2-112(4)(a), the expenses must be paid by the public
employees' retirement board as defined contribution plan administrative expenses.
NEW SECTION.ĠSection 68.Appropriation -- repayment. (1)(a) To pay the startup costs of the
defined contribution retirement plan, there is appropriated from the general fund to the public employees'
retirement board for the biennium ending June 30, 2001, $2.93 million to be deposited to the account for
paying administrative expenses for the defined contribution plan established pursuant to [this act].
(b) Of the amount appropriated under subsection (1)(a):
(i) up to $250,000 must be used for the initial transfer educational program provided in [section
41];
(ii) up to $200,000, plus any amount not spent pursuant to subsection (1)(b)(i), must be used for
consulting services and vendor searches; and
(iii) up to $2.48 million, plus any amount not spent pursuant to subsection (1)(b)(ii), may be used
for other startup costs of the defined contribution retirement plan.
(2) Of the appropriation under subsection (1), $2.48 million must be repaid over a reasonable
amount of time to the general fund from defined contribution retirement plan assets as provided in [section
46].
NEW SECTION.ĠSection 69.Codification instruction. (1) [Section 40] is intended to be codified
as an integral part of Title 19, chapter 2, parts 7 and 11; and Title 19, chapter 3, parts 5, 9 through 12,
and 15, and the provisions of Title 19, chapter 2, parts 7 and 11; and Title 19, chapter 3, parts 5, 9
through 12, and 15, apply to [section 40].
(2) [Section 41] is intended to be codified as an integral part of Title 19, chapter 3, part 1, and
the provisions of Title 19, chapter 3, part 1, apply to [section 41].
(3) [Sections 42 through 64] are intended to be codified as an integral part of Title19, chapter 3,
and the provisions of Title 19, chapter 3, apply to [sections 42 through 64].
NEW SECTION.ĠSection 70.Coordination instruction. If __ Bill No. __ [LC0567] is passed and
approved and if it provides for the continuation of the committee on public employee retirement systems
provided for in Title 5, chapter 21, then the phrase "legislative council shall provide for an appropriate
interim legislative committee" as it appears in [section 64] of [this act] is replaced with the phrase"committee on public employee retirement systems provided for in Title 5, chapter 21".
NEW SECTION.ĠSection 71.Saving clause. [This act] does not affect rights and duties that
matured, penalties that were incurred, or proceedings that were begun before [the effective date of this
act].
NEW SECTION.ĠSection 72.Severability. If a part of [this act] is invalid, all valid parts that are
severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its
applications, the part remains in effect in all valid applications that are severable from the invalid
applications.
NEW SECTION.ĠSection 73.Effective dates. (1) Except as provided in subsections (2) through
(4), [this act] is effective October 1, 1999.
(2) [Sections 3, 11, 20 through 22, 43(2) and (3), 44, 45, 55(1) through (3) and (7), 61, 62, 65,
66, 69 through 72,
and
74, and 75 and this section] are effective on passage and approval.
(3) [Sections 34, 41(1)(a), (1)(b), and (2) through (6), 46, 63, 64, 67, and 68] are effective July
1, 1999.
(4) [Sections 2, 4 through 10, 12 through 19, 23 through 40, 41(1)(c), 43(1), 47 through 54,
55(4) through (6), and 56 through 60] are effective contingent upon certification, as provided in [section
66], that the defined contribution retirement plan is ready to become operational or on July 1, 2002,
whichever is earlier.
NEW SECTION.Section 74.Contract of employment --applicability. Contract rights of
employment are not applicable with regard to the right to choose the defined contribution plan until the
plan choice period begins. Contract rights of employment are not applicable with regard to rights in the
defined contribution plan or the optional retirement program until the defined contribution plan or the
optional retirement program is chosen.
NEW SECTION.ĠSection 75.Termination. (1) [Sections 62 and 64] terminate July 1, 2001.
(2) [Section 61] terminates July 1, 2002.
j) END