HOUSE BILL NO. 256

INTRODUCED BY J. COBB

A BILL FOR AN ACT ENTITLED: "AN ACT PROVIDING A STATE CONTRIBUTION TO THE DEFERRED COMPENSATION PLAN ACCOUNTS OF CERTAIN ELIGIBLE STATE EMPLOYEES; TRANSFERRING ADMINISTRATION OF THE STATE DEFERRED COMPENSATION PLAN FROM THE DEPARTMENT OF ADMINISTRATION TO THE PUBLIC EMPLOYEES' RETIREMENT BOARD; PROVIDING AN APPROPRIATION; AMENDING SECTIONS 19-2-408, 19-50-101, 19-50-102, 19-50-201, 19-50-202, 19-50-203, 19-50-204, AND 19-50-206, MCA; AND PROVIDING AN EFFECTIVE DATE."

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

NEW SECTION. Section 1. Employer contribution. (1) Except as provided in subsection (3), not later than January 15, 2001, the board shall contribute $50 to the deferred compensation account of each eligible state employee participating in the state's deferred compensation plan established pursuant to this chapter.

(2) A state employee is eligible to receive the state contribution provided under subsection (1) if the state employee, between July 1, 1999, and November 30, 2000, participated in the state deferred compensation plan for at least 12 consecutive months and deferred at least $20 each month in each of the 12 months.

(3) If the amount appropriated for the purposes of subsection (1) is insufficient to provide for the $50 state contribution to each account, the amount appropriated must be allocated to each eligible participant's account on a pro rata basis.

(4) The board shall provide an education program for state employees to inform them of the provisions of this section.

(5) For purposes of this section, the term "state employee" does not include an employee of the Montana university system.

Section 2. Section 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, except as provided in subsection (3). Before the fiscal yearend closing, the board shall compute the administrative expenses attributable to each retirement system 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 and excluding expenses for administering the state deferred compensation plan established pursuant to chapter 50, may not exceed 1.5% of the total retirement benefits paid.

(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 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 ."

Section 3. Section 19-50-101, MCA, is amended to read:

"19-50-101. Definitions. For the purposes of this chapter, unless a different meaning is plainly implied by the context, the following definitions apply:

(1) "Administrator" means the board or an appropriate officer of a political subdivision.

(2) "Advisory council" means the state employee group benefits advisory council provided for in 2-15-1016.

(3) "Board" means the public employees' retirement board created in 2-15-1009.

(4) "Deferred compensation" means that income that an employee may legally defer in a deferred compensation plan established under this chapter pursuant to the rulings of the internal revenue service and that, while invested, is exempt from state and federal income tax on the employee's contribution and on the interest, dividends, and capital gains until ultimately distributed to the employee.

(5) "Eligible deferred compensation plan" means a plan meeting the requirements of section 457 of the Internal Revenue Code.

(6) "Employee" means any person, including independent contractors and elected officials, receiving compensation from the state or a political subdivision for performing services.

(7) "Fund" means the state deferred compensation investment account.

(8) "Participant" means an employee enrolled in an eligible deferred compensation plan established pursuant to this chapter.

(9) "Political subdivision" means any city, town, county, or other political subdivision of the state of Montana."

Section 4. Section 19-50-102, MCA, is amended to read:

"19-50-102. Deferred compensation programs permitted -- rules. (1) The state or a political subdivision may establish deferred compensation plans that are eligible under section 457 of the Internal Revenue Code of 1954 (26 U.S.C. 457), as amended or superseded, and in compliance with regulations of the U.S. department of the treasury. Eligible deferred compensation plans for employees may be established in addition to any retirement, pension, or other benefit plan administered by the state or a political subdivision.

(2) An employee may enter into a written agreement with the board or a political subdivision to defer a part of the employee's compensation to one or more of the investment options provided in subsection (4) for the purpose of investment as provided by this chapter. The total amount deferred may not exceed the employee's annual salary and may not exceed the amounts permitted under applicable sections of the Internal Revenue Code.

(3) Compensation deferred pursuant to this chapter is included as compensation for the purpose of computing retirement or pension benefits.

(4) The board or an appropriate officer of a political subdivision shall from time to time select the type of investment options and the financial institutions or entities in which state or political subdivision employee deferred compensation plan funds may be invested. The board or an appropriate officer of a political subdivision shall notify affected plan members of potential changes in investment options and financial institutions before the changes are made. The investment options and entities may include:

(a) a state deferred compensation investment fund established pursuant to Title 17 for the purpose of administering a state-invested deferred compensation plan. All contributions made by participants in the state deferred compensation investment fund and all interest or increase in the fund must be credited to the fund. These state-invested funds may be commingled with other state investment funds, but separate accounting must be maintained. The assets of the fund must be maintained for the benefit of participants and may not be diverted except for paying the reasonable expenses for administering the state deferred compensation investment fund.

(b) savings accounts in federally insured financial institutions;

(c) life insurance contracts and fixed annuity and variable annuity contracts from companies that are licensed to do business in the state and subject to regulation by the insurance commissioner;

(d) investment funds managed pursuant to investment services contracts maintained by the board or an appropriate officer of a political subdivision with investment managers registered with the United States securities and exchange commission;

(e) mutual funds provided through contracts maintained by the board or an appropriate officer of a political subdivision with mutual fund companies regulated by the United States securities and exchange commission; or

(f) a combination of the items in subsections (4)(a) through (4)(e).

(5) The deferred compensation plan funds invested pursuant to this section and the income from those funds must be held in a trust, custodial account, or insurance contract for the exclusive benefit of participants and their beneficiaries.

(6) The administrator may allocate any necessary costs against the assets and interest earnings accumulated in funds, accounts, or contracts established under this chapter.

(7) The board or appropriate officer of a political subdivision shall promulgate rules not inconsistent with this chapter for the proper administration of deferred compensation plans established under this chapter."

Section 5. Section 19-50-201, MCA, is amended to read:

"19-50-201. Board authorized to make contracts with political subdivisions. (1) A political subdivision may become a contracting employer and make all or specified groups of its employees eligible to participate in the board-administered deferred compensation program by a contract entered into and between the board and the legislative body of the political subdivision. The contract may include any provisions that are consistent with this chapter and necessary for the administration of the deferred compensation program.

(2) The approval and termination of the contract must be subject to the following provisions:

(a) The legislative body of the political subdivision shall adopt a resolution to enter into a contract with the board authorizing the political subdivision's employees to participate in the board-administered deferred compensation program. The resolution must contain a summary of the major provisions of the board-administered deferred compensation program.

(b) The contract must specify that the political subdivision agrees that the board is the administrator of the deferred compensation program and agrees to the rules and conditions established by the board for the proper administration of the plan.

(c) The contract may be revoked or amended in the manner prescribed in the original approval of contracts."

Section 6. Section 19-50-202, MCA, is amended to read:

"19-50-202. Administration of program. The deferred compensation program must be administered by the board or the appropriate officer designated by a political subdivision. Payroll deductions must be made, in each instance, by the appropriate payroll officer. The administrator shall protect the interests of program participants and safeguard the assets of the deferred compensation plan and shall contract with private corporations, institutions, or individuals for administrative and marketing services. The administrator may solicit bids for options under 19-50-102. All contracts with marketing representatives must provide that all options in 19-50-102 be presented in an unbiased manner and in a manner so as to conform to applicable rules promulgated by the administrator, be reported on a periodic basis to all employees participating in eligible deferred compensation plans, and not be the subject of unreasonable solicitation of employees to participate in the program. All costs or fees in relation to the marketing of options provided under 19-50-102 must be paid by the underwriting companies selected by the administrator or by the interest earnings accruing to the assets of the state deferred compensation investment fund."

Section 7. Section 19-50-203, MCA, is amended to read:

"19-50-203. Payments authorized. Notwithstanding any other provision of law to the contrary, the board or a political subdivision is authorized to make payments to eligible deferred compensation plans designated by this chapter. The payments may not be construed to be a prohibited use of the general assets of the state or a political subdivision."

Section 8. Section 19-50-204, MCA, is amended to read:

"19-50-204. Public entity not to be liable. There is no financial liability of the state, the board, or a political subdivision for any investment losses incurred by any eligible deferred compensation plan established under this chapter."

Section 9. Section 19-50-206, MCA, is amended to read:

"19-50-206. Functions of advisory council. (1) The board shall meet and consult with the advisory council before negotiating, contracting, or modifying deferred compensation plans.

(2) The advisory council shall meet at least quarterly to review existing deferred compensation plans and to advise the board on the administration of the program."

NEW SECTION. Section 10. Appropriation. (1) For the biennium ending June 30, 2001, there is appropriated from the state general fund to the public employees' retirement board the following:

(a) $430,000 for the state contribution to the accounts of eligible state deferred compensation plan participants under [section 1]; and

(b) $20,000 for the education program provided in [section 1].

(2) Amounts unspent pursuant to this section revert to the general fund.

NEW SECTION. Section 11. Codification instruction. [Section 1] is intended to be codified as an integral part of Title 19, chapter 50, and the provisions of Title 19, chapter 50, apply to [section 1].

NEW SECTION. Section 12. Contingent voidness. If there are no social security contribution account reversions to the state general fund under 19-1-602(4), then [this act] is void.

NEW SECTION. Section 13. 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. Section 14. Effective date. [This act] is effective July 1, 1999.

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