HOUSE BILL NO. 118
INTRODUCED BY D. MOOD
BY REQUEST OF THE TEACHERS' RETIREMENT BOARD
AN ACT REVISING STATUTES GOVERNING THE TEACHERS' RETIREMENT SYSTEM TO COMPLY WITH THE REQUIREMENTS OF THE INTERNAL REVENUE CODE FOR A QUALIFIED GOVERNMENTAL RETIREMENT PLAN; CLARIFYING THE AUTHORITY OF THE TEACHERS' RETIREMENT BOARD TO COMPLY WITH THE INTERNAL REVENUE CODE; CLARIFYING THE MEMBERSHIP RIGHTS OF LEGISLATORS WHO ARE ALSO MEMBERS OF THE TEACHERS' RETIREMENT SYSTEM; GRANTING EMPLOYERS PARTICIPATING IN THE TEACHERS' RETIREMENT SYSTEM THE OPTION OF WITHHOLDING EMPLOYEE CONTRIBUTIONS UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE FOR THE PURPOSE OF PURCHASING SERVICE; PERMITTING CONTRIBUTIONS WITHHELD ON TERMINATION PAY AND REPORTED TO THE TEACHERS' RETIREMENT SYSTEM TO BE WITHHELD UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE; CLARIFYING ELIGIBILITY PROVISIONS; CLARIFYING DUTIES OF THE TEACHERS' RETIREMENT BOARD REPRESENTATIVE; AMENDING SECTIONS 5-2-304, 19-20-101, 19-20-106, 19-20-302, 19-20-404, 19-20-405, 19-20-414, 19-20-502, 19-20-602, 19-20-603, 19-20-702, 19-20-703, 19-20-710, 19-20-716, 19-20-801, 19-20-802, 19-20-804, 19-20-901, AND 19-20-902, MCA; REPEALING SECTIONS 19-20-412, 19-20-413, 19-20-704, 19-20-707, 19-20-708, AND 19-20-709, MCA; AND PROVIDING EFFECTIVE DATES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 5-2-304, MCA, is amended to read:
"5-2-304. Continued participation in public retirement systems. (1) The purpose of this section is to provide a means whereby persons serving in the Montana legislature may continue their participation in public retirement systems governed by state law. This section is not intended to provide duplicate credit for the same service in two retirement systems supported wholly or in part by public funds. This section does not affect contribution rates or benefit payments specifically provided for in the laws governing the operation of individual retirement systems.
(2) A person who is engaged in official duties as a member of the Montana legislature and who is otherwise eligible to
participate as a member or contributor of a public retirement system governed by state law may but is not required to
continue his the person's participation in such that public retirement system while engaged in his official duties as a
legislator. A legislator shall make an irrevocable election within 180 days of taking office whether to continue participation
in the public retirement system. A person who is a member of the Montana legislature on July 1, 1999, has until January 1,
2000, to file a written application with the teachers' or public employees' retirement board that is the irrevocable election
required by this section.
(3) A legislator who elects to continue participation as provided in subsection (2) shall:
(a) continue his the payments into the fund of the retirement system at the rate currently in effect in such the system
based on his the legislator's monthly salary as a member of that system; or
(b) continue his payments into the fund of the retirement system at the rate currently in effect in such system based on
his monthly salary as a legislator.
(4) The state contribution shall must be made by legislative appropriation. It shall must equal the appropriate employer
contribution at the rate currently in effect in the system."
Section 2. Section 19-20-101, MCA, is amended to read:
"19-20-101. Definitions. As used in this chapter, unless the context clearly indicates otherwise, the following definitions apply:
(1) "Accumulated contributions" means the sum of all the amounts deducted from the compensation of a member or paid by a member and credited to the member's individual account in the annuity savings fund, together with interest. Regular interest must be computed and allowed to provide a benefit at the time of retirement.
(2) "Actuarial equivalent" means a benefit of equal value when computed, with regular interest, on the basis of the 1971 Group Annuity Mortality Table, with ages set back 4 years and an interest rate of 8% compounded annually.
(3) "Average final compensation" means the average of a member's earned compensation during the 3 consecutive
years of full-time service or as provided under 19-20-805 that yield the highest average and on which contributions have
been made as required by 19-20-602 or 19-20-413. If amounts defined in subsection (6)(b) have been converted by an
employer to earned compensation for all members and have been continuously reported as earned compensation in a like
amount for at least the 5 fiscal years preceding the member's retirement, the amounts may be included in the calculation of
average final compensation. If amounts defined in subsection (6)(b) have been reported as earned compensation for less
than 5 fiscal years or if the member has been given the option to have amounts reported as earned compensation, any
amounts reported in the 3-year period that constitute average final compensation must be included in average final
compensation as provided under 19-20-716(2) 19-20-716(1)(b).
(4) "Beneficiary" means a person formally designated by a member, retiree, or benefit recipient to receive a retirement allowance or payment upon the death of the member, retiree, or benefit recipient.
(5) "Creditable service" is that service defined by 19-20-401.
(6) (a) "Earned compensation" means, except as limited by 19-20-715, remuneration, exclusive of maintenance, allowance, and expenses, paid for services by a member out of funds controlled by an employer before any pretax deductions allowed under the Internal Revenue Code are deducted from the member's compensation.
(b) Earned compensation does not mean:
(i) direct employer premium payments on behalf of members for health or dependent care expense accounts or any employer contribution for health, medical, pharmaceutical, disability, life, vision, dental, or any other insurance;
(ii) any direct employer payment or reimbursement for professional membership dues; maintenance; housing; day care;
or automobile, travel, lodging, or entertaining expenses; or any similar payment for any form of maintenance, allowance, or
expenses;
(iii) the imputed value of health, life, or disability insurance or any other fringe benefits; or
(iv) any noncash benefit provided by an employer to or on behalf of an employee.
(c) Earned Unless included pursuant to 19-20-716, earned compensation does not include lump-sum payments in respect
to unused, accumulated sick or annual leave, excess leave balance payments, or bonuses or any sort of early retirement
incentive or severance payment contingent upon the employee terminating employment termination pay.
(d) Adding a direct employer-paid or noncash benefit to an employee's contract or subtracting the same or like amount as a pretax deduction is considered a fringe benefit and not earned compensation.
(e) Earned compensation does not include compensation paid to a member from a plan for the deferral of compensation under section 457(f) of the Internal Revenue Code.
(7) "Employer" means the state of Montana, the trustees of a district, or any other agency or subdivision of the state that employs a person who is designated a member of the retirement system.
(8) "Full-time service" means service that is full-time and that extends over a normal academic year of at least 9 months. With respect to those members employed by the office of the superintendent of public instruction, any other state agency or institution, or the office of a county superintendent, full-time service means service that is full-time and that totals at least 9 months in any year.
(9) "Internal Revenue Code" means the federal Internal Revenue Code of 1954 or 1986, as applicable to a governmental plan, as the code provided on July 1, 1999.
(10) "Member" means a person who has an individual account in the annuity savings fund. An active member is a person included under the provisions of 19-20-302. An inactive member is a person included under the provisions of 19-20-303.
(10)(11) "Part-time service" means service that is less than full-time or that totals less than 9 months in a normal
academic year. Part-time service must be credited in the proportion that the actual time worked compares to full-time
service.
(11)(12) "Prior service" means employment of the same nature as service but rendered before September 1, 1937.
(12)(13) "Regular interest" means interest at 4% a year compounded annually or at a rate as may be set by the retirement
board in accordance with 19-20-501(2).
(14) "Retired member" means a person who has terminated employment that is eligible for membership under 19-20-302 and who has received at least one monthly retirement benefit paid pursuant to this chapter.
(13)(15) "Retirement allowance" means a payment due monthly to a person who has qualified for service or disability
retirement or due to a beneficiary as provided in 19-20-1001.
(14)(16) "Retirement board" or "board" means the retirement system's governing board provided for in 2-15-1010.
(15)(17) "Retirement system" or, "system", or "plan" means the teachers' retirement system of the state of Montana
provided for in 19-20-102.
(16)(18) "Service" means the performance of instructional duties or related activities that would entitle the person to
active membership in the retirement system under the provisions of 19-20-302.
(17)(19) "Termination" or "terminate" means that the member has severed the employment relationship with the
member's employer and that all, if any, payments due upon termination of employment, including but not limited to accrued
sick and annual leave balances, have been paid to the member.
(18)(20) (a) "Termination pay" means any form of termination pay made at the time of retirement or death; bona fide
vacation leave, sick leave, severance pay, amounts provided under a window or early retirement incentive plan, or other
payments contingent on the employee terminating employment; any lump-sum payment for deferred compensation, sick
leave, or accumulated vacation credit; or any other payment for time not worked other than compensation received while on
sick leave or authorized leave of absence.
(b) Termination pay does not include:
(i) amounts that are not wages under section 3121 of the Internal Revenue Code, determined without regard to the wage base limitation; and
(ii) amounts that are payable to a member from a plan for the deferral of compensation under section 457(f) of the Internal Revenue Code.
(19)(21) "Vested" means that a member has been credited with at least 5 full years of membership service upon which
contributions have been made, as required by 19-20-602 and 19-20-605, and who has a right to a future retirement benefit.
(22) "Written application" means a written instrument, specified by the board, properly executed, and filed with the board that contains all the information required by the board, including documentation as the board considers necessary."
Section 3. Section 19-20-106, MCA, is amended to read:
"19-20-106. Retaining qualified plan status -- board rulemaking authority. (1) The board shall administer the plan
in the manner required to satisfy the applicable qualification requirements for a qualified governmental plan, as specified in
the Internal Revenue Code. If a provision in this chapter conflicts with a qualification requirement in section 401 of the
Internal Revenue Code applicable to public retirement systems or with the plan's status as a qualified governmental plan
under section 414(d) of the Internal Revenue Code and consequent federal administrative regulations, the provision is either
ineffective or must be interpreted to conform to the federal qualification requirements and allow the system plan to retain
tax-deferred status. The board may adopt rules to implement this section.
(2) For the purpose of section 401(a) of the Internal Revenue Code, the plan document for the retirement plan is composed of the applicable provisions of the Montana constitution, this chapter, and applicable rules adopted by the board."
Section 4. General internal revenue service qualification rules. (1) The board shall distribute the corpus and income of the system to the members and their beneficiaries in accordance with the system's law. The corpus and income may not, at any time before the satisfaction of all liabilities with respect to members and their beneficiaries, be used for, or diverted to, purposes other than the exclusive benefit of the members and their beneficiaries.
(2) Forfeitures arising from severance of employment, from death, or for any other reason may not be applied to increase the benefits that any member would otherwise receive under the state's law. However, forfeitures may be used to reduce the costs of administration.
(3) Distributions from the system may be made only upon retirement, separation from service, disability, or death.
(4) Notwithstanding any provision of law to the contrary, contributions, benefits, and service credit with respect to qualified military service must be provided in accordance with section 414(u) of the Internal Revenue Code and the federal Uniformed Services Employment and Reemployment Rights Act of 1994, 38 U.S.C. 4301, et seq.
(5) The board may maintain a qualified governmental excess benefit arrangement under section 415(m) of the Internal Revenue Code. The board shall adopt rules for the necessary and appropriate procedures for the administration of the benefit arrangement in accordance with the Internal Revenue Code. The amount of any annual benefit that would exceed the limitations imposed by section 415 of the Internal Revenue Code must be paid from the benefit arrangement. The amount of a contribution that would exceed the limitation imposed by section 415 of the Internal Revenue Code must be credited to the benefit arrangement. The benefit arrangement must be a separate part of the system. The benefit arrangement is subject to the following requirements:
(a) The benefit arrangement must be maintained solely for the purpose of providing to members in the system that part of the member's annual benefit or contribution otherwise payable under the terms of this chapter that exceeds the limitations on benefits or contributions imposed by section 415 of the Internal Revenue Code.
(b) Members may not elect, directly or indirectly, to defer compensation to the benefit arrangement.
(6) The limitation year for purposes of section 415 of the Internal Revenue Code is the school year beginning September 1 and ending August 31.
(7) The plan year is the fiscal year beginning July 1 and ending June 30.
Section 5. Section 19-20-302, MCA, is amended to read:
"19-20-302. Active membership. (1) Unless otherwise provided by this chapter, the following persons must be active members of the retirement system, with the exception that those persons who became eligible for membership on September 1, 1937, or on September 1, 1939, and who elected not to become members under the provisions of the law at that time are not required to be members:
(a) any person who is a teacher, principal, or district superintendent as defined in 20-1-101;
(b) any person who is an administrative officer or a member of the instructional or scientific staff of a unit of the Montana university system and who has not elected or is not required to participate in the optional retirement program under Title 19, chapter 21;
(c) any person employed as a speech-language pathologist, school nurse, or school psychologist or in an instructional services capacity by the office of the superintendent of public instruction, the office of a county superintendent, a special education cooperative, a public institution of the state of Montana, the Montana state school for the deaf and blind, or a school district;
(d) any person who is an administrative officer or a member of the instructional staff of the board of public education;
(e) any person who has elected not to become a member of the retirement system and is reentering service in a capacity prescribed by subsection (1)(a), (1)(b), (1)(c), or (1)(d);
(f) any person who has elected not to become a member of the retirement system, who has been continuously employed in a capacity prescribed by subsection (1)(a), (1)(b), (1)(c), or (1)(d) since the time of the election, and who may elect to become a member of the retirement system.
(2) A person elected to the office of county superintendent of schools after July 1, 1995, is not eligible for optional membership in the public employees' retirement system under the provisions of 19-3-412 and may, within 30 days of taking office, elect to become an active member of the teachers' retirement system. The retirement system membership of an elected county superintendent of schools as of June 30, 1995, must remain unchanged for as long as the person continues to serve in the capacity of county superintendent of schools.
(3) In order to be eligible for active membership, a person described in subsection (1) or (2) must:
(a) be employed in the capacity prescribed for the person's eligibility for at least 30 days in any fiscal year; and
(b) have the compensation for the person's creditable service totally paid by an employer.
(4) (a) A substitute teacher:
(i) may elect shall make an irrevocable election whether to become an active member of the retirement system on the
first day of employment in any fiscal year; or
(ii) is required to become an active member of the retirement system on the 31st day of employment in any fiscal year if the substitute teacher has not elected membership under subsection (4)(a)(i).
(b) A person employed as a substitute teacher on July 1, 1999, who has not elected to become a member by that date shall make an irrevocable election as required by subsection (4)(a)(i) on the first day of employment as a substitute in the next school year after July 1, 1999.
(c) The employer shall give written notification to a substitute teacher on the first day of employment in any fiscal year
of the option to elect membership under subsection (4)(a)(i).
(d) If a substitute teacher declines to elect membership during the election period, the teacher shall execute a written statement waiving membership and the employer shall retain the statement.
(5) A substitute teacher who did not elect membership under subsection (4)(a)(i) and who subsequently becomes a
member must be awarded creditable service for substitute teaching service if the substitute teacher contributes:
(a) an amount equal to the combined employee and employer contributions that would have been made if the substitute
teacher had elected membership; plus
(b) interest at the rate that the contributions would have earned if they had been on deposit with the retirement system.
(6) At any time that a person's eligibility to become a member of the retirement system is in doubt, the retirement board
shall determine the person's eligibility for membership. All persons in similar circumstances must be treated alike."
Section 6. Section 19-20-404, MCA, is amended to read:
"19-20-404. Creditable service for active service in military, red cross, or merchant marine. (1) A member may
receive up to 4 years of creditable service without cost for active service in the armed forces of the United States, which
includes the army, navy, marine corps, air force, and coast guard, during the Korean conflict between June 1, 1950, and
January 31, 1955, and the Vietnam conflict between December 22, 1961, and May 7, 1975, dates inclusive, if the member
has 5 years or more of creditable service in the retirement system. To qualify this service, a member shall submit to the
board a completed written application form and proper certification of the member's military service.
(2) (a) If a member is ineligible for service credit under subsection (1), the member may apply under the provisions of
this subsection (a) for creditable service in the retirement system, except as provided in subsection (2)(b), for active service
in the armed forces of the United States, which includes the army, navy, marine corps, air force, and coast guard, or in the
American red cross or merchant marine. The person must be awarded creditable service, conditional upon the person's
completing 5 years of active membership in Montana, for the number of years, not exceeding 2, that the retirement board
determines to be creditable service, if the person contributes to the retirement system an amount equal to the combined
employer and employee contributions for the person's first full year's teaching salary earned in Montana following the active
service in the armed forces of the United States, the American red cross, or the merchant marine for each year of creditable
service plus interest at the rate the contribution would have earned had the contribution been in the person's account upon
completion of 5 years of membership service in Montana. The contribution rate is that rate in effect at the time the person is
eligible for the service.
(b) If a member elects to purchase additional service under 19-20-412, service purchased under this subsection (2) may
be used only for the purpose of calculating the member's retirement allowance and may not be considered creditable service
for the purpose of determining eligibility under 19-20-801 or 19-20-802.
(3) The contribution required under subsection (2) may be made in a lump-sum payment or in installments as agreed between the person and the retirement board."
Section 7. Section 19-20-405, MCA, is amended to read:
"19-20-405. Limit on creditable service that may be awarded. The total creditable service for service purchased
under 19-20-402 through 19-20-404, 19-20-408, and 19-20-410(1), and 19-20-412 may not exceed 5 years."
Section 8. Section 19-20-414, MCA, is amended to read:
"19-20-414. Rollover or transfer of public employee accumulated contributions. (1) A member who is eligible to
qualify service under this chapter may at any time before retirement apply to roll over or transfer the member's accumulated
contributions on deposit with any other qualified eligible retirement plan. The total amount transferred to the retirement
system may not exceed the amount due to purchase service.
(2) If, in the case of a transfer, the transferred the account includes both tax-deferred and taxed contributions amounts,
the transferring agency shall identify the member's tax-deferred and taxed contribution and interest balances amounts at the
time the transfer is made.
(3) To the extent permitted by section 401(a)(31) of the Internal Revenue Code and as limited by subsection (1), the board shall accept a direct rollover of eligible distributions from another eligible retirement plan."
Section 9. Procedure for purchase of service credit and pick up. (1) A member who wishes to redeposit pursuant to 19-20-602(2) amounts previously withdrawn or who is eligible to purchase service credit pursuant to this part shall make the following series of elections to accomplish the redeposit or purchase:
(a) The member may elect a lump-sum payment, a series of installment payments, or a combination of lump-sum payments and installment payments.
(b) If a series of installment payments are elected by the member, the member may elect to pay the installments directly to the board or to have the installments paid by payroll deduction or the member may select a combination of both.
(c) With respect to installments payable by payroll deduction, if the member's employer has adopted the resolution described in subsection (2), the member shall elect the irrevocable payroll deduction authorization provided in subsection (4). If the member's employer has not adopted the resolution, the member may elect only a revocable payroll deduction authorization.
(2) An employer may adopt a resolution to pick up and pay the member's elective contributions made pursuant to a binding, irrevocable payroll deduction authorization. The contributions picked up by the employer must be payable from the same source as is used to pay compensation to the member. The resolution must contain the following statements:
(a) that the member contributions, even though designated as member contributions for state law purposes, are being paid by the employer in lieu of the contributions by the member; and
(b) that the member may not choose to receive the contributed amounts directly instead of having them paid by the employer to the system.
(3) (a) With respect to any member's elective contributions, the effective date of the employer pick up is the later of:
(i) the adoption of the employer's resolution; or
(ii) the execution of the irrevocable payroll deduction authorization form.
(b) The pick up does not apply to a contribution made before the effective date of the employer's resolution. An irrevocable payroll deduction authorization in effect on the effective date of the employer's resolution is void and the provisions of subsection (1) apply.
(4) If the irrevocable payroll deduction authorization is elected by the member, it must be executed by the member and the member's employer. Subject to any maximum amounts or duration established by state or federal law, the irrevocable payroll deduction authorization must specify:
(a) the amount of the deduction;
(b) the number of installments;
(c) the number of years and type of service that the member is purchasing; and
(d) that the contributions being picked up, although designated as member contributions, are being paid by the employer directly to the board in lieu of contributions by the member.
(5) The minimum duration of the irrevocable payroll deduction authorization is 3 months, and the maximum duration is 5 years. The minimum number of years specified to be purchased may not be less than 1 year or the total number of years that the member is eligible to purchase. The maximum may not exceed the total number of years that the member is eligible to purchase.
(6) The irrevocable payroll deduction authorization may not give the member the option of receiving the deduction amounts directly instead of having them paid by the employer to the system. A member may make more than one binding, irrevocable payroll deduction authorization so long as a subsequent deduction authorization does not amend a previous binding, irrevocable payroll deduction authorization. A member may not prepay any amounts under a binding, irrevocable payroll deduction authorization.
(7) If a member terminates or dies prior to completion of the installment payments, the binding, irrevocable payroll deduction authorization expires and the board shall prorate the service credit purchased based upon the amount paid as of the date of termination or death. In the case of a termination, the member may make a lump-sum contribution for the balance of the service subject to the limitations of section 415 of the Internal Revenue Code. In the case of the member's death, the payment to purchase service may be made from the member's estate subject to the limitations of section 415 of the Internal Revenue Code.
Section 10. Credit for legislative service required. (1) A legislator who did not elect to continue to participate in the system, as provided under 5-2-304, and who subsequently participates as a member must be awarded creditable service for legislative service if the legislator contributes:
(a) an amount equal to the member contributions that would have been made if the legislator had elected membership; and
(b) interest at the rate that the contributions would have earned if they had been on deposit with the retirement system.
(2) The employer contribution must be made by the legislative branch in the amount that would have been contributed if the legislator had elected membership plus interest at the rate that the contributions would have earned if they had been on deposit with the retirement system.
Section 11. Credit for substitute teaching service required. A substitute teacher who did not elect membership under 19-20-302 and who subsequently becomes a member must be awarded creditable service for substitute teaching service if the substitute teacher contributes:
(1) an amount equal to the combined member and employer contributions that would have been made if the substitute teacher had elected membership; and
(2) interest at the rate that the contributions would have earned if they had been on deposit with the retirement system.
Section 12. Section 19-20-502, MCA, is amended to read:
"19-20-502. Restrictions on use of moneys money. (1) No A member of the retirement board or any of its employees
or an employee of the board may not:
(a) have an interest, direct or indirect, in the gains or profits of any investment of moneys money of the retirement
system, except as herein provided in this section;
(b) directly or indirectly, for himself the member or employee or as an agent, in any manner use the moneys money or
deposits of the retirement system except to make such current and necessary expenditures as are authorized by the
retirement board; or
(c) become an endorser or surety or in any manner an obligor for moneys money loaned by or borrowed from the
retirement system.
(2) The assets of the retirement system may not be used for or diverted to any purpose other than for the exclusive benefit of the members and their beneficiaries and for paying the reasonable expenses of administering the retirement system.
(3) The board may not engage in a transaction prohibited by section 503(b) of the Internal Revenue Code."
Section 13. Section 19-20-602, MCA, is amended to read:
"19-20-602. Annuity savings fund -- member's contribution. (1) The annuity savings fund is a fund in which the contributions for the members to provide for their retirement allowance or benefits must be accumulated in individual accounts for each member. The normal contribution of each member is 7.044% of the member's earned compensation. Contributions to and payments from the annuity savings fund must be made in the following manner:
(1) (a) 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:
(i) shall pick up and pay the contributions that would be payable by the member under this section subsection (1) for
service rendered after June 30, 1985;
(ii) shall pick up and pay the contributions that would be paid in the manner provided in 19-20-716; and
(iii) may pick up and pay the contributions that would be payable by the member pursuant to [section 9].
(b) The member's contributions picked up by the employer must be designated for all purposes of the retirement system as the member's contributions, except for the determination of a tax upon a distribution from the retirement system. These contributions must become part of the member's accumulated contributions but must be accounted for separately from those previously accumulated.
(c) The member's contributions picked up by the employer must be payable from the same source as is used to pay compensation to the member and must be included in the member's earned compensation as defined in 19-20-101. The employer shall deduct from the member's compensation an amount equal to the amount of the member's contributions picked up by the employer and remit the total of the contributions to the retirement board.
(d) The deductions must be made notwithstanding that the minimum compensation provided by law for a member may be reduced by the deductions. Each member is considered to consent to the deductions prescribed by this section, and payment of salary or compensation less the deductions is a complete discharge of all claims for the services rendered by the member during the period covered by the payment, except as to the benefits provided by the retirement system.
(2) In addition to the normal contributions, and subject to the approval of the retirement board, and to the extent
permitted by section 415(k)(3) of the Internal Revenue Code, a member may redeposit in the annuity savings fund, by a
single payment or by an increased rate of contribution, an amount equal to accumulated contributions that the member has
previously withdrawn, plus interest in the amount the contributions would have earned had the contributions not been
withdrawn. The redeposit must be made in accordance with [section 9].
(3) The accumulated contributions of a member withdrawn by the member or paid to the member's estate or to the member's designated beneficiary in event of the member's death must be paid from the annuity savings fund. Upon the retirement of a member, the member's accumulated contributions must be transferred from the annuity savings fund to the pension accumulation fund."
Section 14. Section 19-20-603, MCA, is amended to read:
"19-20-603. Withdrawal of accumulated contributions -- options. An inactive member electing to do so or a person whose membership terminates without a prospect or anticipation that the member will return to work for an employer within 60 days of termination may withdraw the member's accumulated contributions from the annuity savings fund in the retirement system in accordance with the following provisions:
(1) An inactive member under the provisions of 19-20-303(1) or (3) may elect, without right of revocation, to withdraw the member's accumulated contributions. If the member does not withdraw the accumulated contributions, the member remains an inactive member of the retirement system with the right to qualify for its benefits.
(2) Upon recovery from a disabling illness or separation from the armed forces, a person qualifying as an inactive member under the provisions of 19-20-303(2) may withdraw the member's accumulated contributions unless the member returns to active membership.
(3) A person whose membership terminates under the provisions of 19-20-304(4) may withdraw the person's
accumulated contributions.
(4) Upon written request application to the board, a terminating member may have the payment of all or any portion of
the member's accumulated contributions rolled over or transferred into another qualified plan designated by the member.
The portion not rolled over or transferred must be paid directly to the terminating member. The board shall provide forms
for making the written request application. The terminating member is responsible for correctly designating an account or
plan eligible to receive the tax-deferred amount in order to continue the tax-deferred status of the amount. To the extent
required by section 401(a)(31) of the Internal Revenue Code, the board shall allow members and qualified beneficiaries to
elect a direct rollover of eligible distributions to another eligible retirement plan.
(4) If a nonvested member terminates with accumulated contributions of less than $200, the board shall pay the accumulated contributions in a lump sum as soon as administratively feasible without a written application from the member unless there is a return to service. Upon the payment of accumulated contributions, the member is considered to have withdrawn from the system."
Section 15. Section 19-20-702, MCA, is amended to read:
"19-20-702. Optional allowances. (1) Until the first payment on account of any benefit becomes normally due, any member may elect to receive one of the optional allowances described in subsection (2) in lieu of the normal form of retirement allowance, which is provided for in 19-20-902 and part 8 of this chapter. If a member dies within 30 days after retirement, the member's election to receive an optional allowance is void and the member's death will be considered as that of an active member.
(2) An optional allowance is the actuarial equivalent of the member's service retirement or disability retirement allowance at the time of the member's retirement effective date and provides an allowance payable to the member throughout the member's lifetime and, upon the member's death, an allowance payable to the person that the member nominated by written designation, duly acknowledged and filed with the retirement board at the time of the member's retirement, in accordance with one of the following options:
(a) Option A--the optional allowance will be paid to the member throughout the member's lifetime and, upon the member's death, continue throughout the lifetime of the member's designated beneficiary.
(b) Option B--the optional allowance will be paid to the member throughout the member's lifetime, and upon the member's death, one-half of the optional allowance will be continued throughout the lifetime of the member's designated beneficiary.
(c) Option C--the optional allowance will be paid to the member throughout the member's lifetime, and upon the member's death, two-thirds of the optional allowance will be continued throughout the lifetime of the member's designated beneficiary.
(d) Period certain and life--a retirement allowance will be paid for a certain period of time or for the member's lifetime, whichever is greater.
(i) The member shall elect one of the following certain time periods:
(A) 10 years if the member is 75 years of age or younger at the time of retirement; or
(B) 20 years if the member is 65 years of age or younger at the time of retirement.
(ii) At the time of retirement, the member shall file with the board a written nomination of beneficiaries to receive payments if the member dies before the end of the certain period elected. Unless limited by a family law order, the nominated beneficiary may be changed by the member at any time by filing with the board a written notice designating different beneficiaries.
(3) (a) Upon written request application to the retirement board, a retired member whose effective date of retirement is
before October 1, 1993, and who is receiving an optional retirement allowance may designate a different beneficiary, select
a different option, or convert the member's optional retirement allowance to a regular retirement or disability allowance
normal form of retirement allowance if:
(i) the original beneficiary has died; or. The benefit must convert to the normal form of retirement allowance effective
the first of the month following the death of the designated beneficiary.
(ii) the member has been divorced from the original beneficiary and the original beneficiary has not been granted the right to receive the optional retirement allowance as part of the divorce settlement. The benefit must convert to the normal form of retirement allowance effective the first of the month following receipt of a written application and verification that the original beneficiary has not been granted the right to receive the optional retirement allowance as part of the divorce settlement.
(b) Upon receipt of the request written application, the board shall actuarially adjust the member's monthly retirement or
disability allowance to reflect the change.
(4) Effective on the first of the month following the death of a person nominated as the designated beneficiary under
subsection (2)(a), (2)(b), or (2)(c), any A retired member receiving an optional retirement allowance pursuant to subsection
(2)(a), (2)(b), or (2)(c) that is effective after October 1, 1993, will revert may file a written application to revert the optional
retirement allowance to the full normal form of retirement allowance available at the time of retirement if:
(a) the original beneficiary has died. The benefit must revert to the full normal form of retirement allowance effective the first of the month following the death of the designated beneficiary.
(b) the member has been divorced from the original beneficiary and the original beneficiary has not been granted the right to receive the optional retirement allowance as part of the divorce settlement. The benefit must revert to the full normal form of retirement allowance effective the first of the month following receipt of a written application and verification that the original beneficiary has not been granted the right to receive the optional retirement allowance as part of the divorce settlement.
(5) The normal form of retirement allowance available must be increased by the value of any postretirement adjustments received by the member since the effective date of retirement.
(6) The retired member may, within 18 months of the death of the designated beneficiary, shall file a the written
application required by subsection (3) or (4) with the board to designate a different beneficiary and or to select an actuarially
equivalent optional allowance, or both, within 18 months of the death or divorce of the designated beneficiary. The optional
allowance is effective on the first day of the month following receipt of the retiree's application."
Section 16. Section 19-20-703, MCA, is amended to read:
"19-20-703. Payments to be monthly. (1) All retirement allowances must be paid in equal monthly installments.
(2) The retirement allowance may commence:
(a) no earlier than the first day of the month following the member's termination date or on the first day of the month following the date when the member first becomes eligible, whichever date is later; or
(b) if requested by the inactive member in writing:
(i) on the first day of a later month; or
(ii) on the first day of the month following the member's 60th birthday.
(3) Distribution of a member's benefit must begin by the later of the April 1 following the calendar year in which a member attains age 70 1/2 or April 1 of the year following the calendar year in which the member terminates. If a member fails to apply for retirement benefits by the later of either of those dates, the board shall begin distribution of the monthly benefit as provided in 19-20-702(2)(d)(i)(A).
(4) The life expectancy of a member or the member's beneficiary may not be recalculated after benefits commence."
Section 17. Section 19-20-710, MCA, is amended to read:
"19-20-710. Maximum benefit limitation. No A monthly benefit paid under the retirement system provided for in this
chapter may not exceed the annual limits on benefits as specified in section 415 of the Internal Revenue Code of 1986 and
adjusted annually by the commissioner of internal revenue for calendar years 1988 and thereafter. However, benefits in
excess of those limits may be paid from an excess benefit arrangement subject to [section 19]."
Section 18. Section 19-20-716, MCA, is amended to read:
"19-20-716. Termination pay. (1) If a member terminates and receives termination pay at the time of termination and
elects to retire at that the time of retirement, the member shall select, subject to subsection (4) and by executing a binding,
irrevocable written election at least 90 days before the member's termination date, one of the following options:
(1)(a) Option 1--The member may use the total termination pay in the calculation of the member's average final
compensation. The member and the employer shall pay contributions to the retirement system as determined by the board to
adequately compensate the system for the additional retirement benefit. The contributions must be made at the time of
termination.
(2)(b) Option 2--The member may use a yearly amount of the total termination pay added to each of the 3 consecutive
years' salary used in the calculation of the member's average final compensation. To determine the amount of termination
pay used in the calculation of average final compensation, termination pay must be divided by the total number of years of
creditable service to determine a yearly amount. The member and the employer shall pay contributions on the termination
pay according to the rates provided for in 19-20-602 and 19-20-605(1). The contributions must be made at the time of
termination.
(3)(c) Option 3--The member may exclude the termination pay from the average final compensation. A contribution is
not required of either the member or the employer, and any contributions made under 19-20-602 and 19-20-605 must be
refunded.
(2) A binding, irrevocable election required by this section must be executed by both the member and the employer and must contain statements with regard to the contributions required to be made by the member under subsections (1)(a) and (1)(b) that:
(a) the contributions being picked up, although designated as member contributions, are being paid by the employer directly to the system in lieu of contributions by the member and that the picked up contributions are paid from the same source as compensation is paid;
(b) the member may not choose to directly receive the amounts deducted from the member's termination pay instead of having them paid by the employer to the system;
(c) the member may not prepay any portion of the contributions; and
(d) the effective date of the pick up is the date of execution of the binding, irrevocable election by both the member and employer. The pick up does not apply to a contribution made before the effective date of the pick up.
(3) Pursuant to subsection (2), contributions required under subsection (1)(a) or (1)(b) must be:
(a) deducted from the portion of termination pay that:
(i) constitutes wages for the purposes of section 3121 of the Internal Revenue Code, determined without regard to the wage base limitation; and
(ii) can be included in the member's gross income for federal tax purposes; and
(b) picked up by the employer.
(4) If a member fails to make the written election within the time period required in subsection (1) or if the member contribution is greater than the total amount of termination pay, the member may contribute for the purposes specified in subsections (1)(a) and (1)(b) all or any part of the termination pay received. A contribution made pursuant to this subsection cannot be picked up by the employer and is subject to the limitations of section 415 of the Internal Revenue Code."
Section 19. Maximum contribution limitation. (1) Notwithstanding any other provision of law to the contrary, the board may modify a request by a participant to make a contribution to the system if the amount of the contribution would exceed the limits in section 415(c) or 415(n) of the Internal Revenue Code by using the following methods:
(a) If the system's law requires a lump-sum payment for purchase of service credit, the board may establish a periodic payment plan in order to avoid a contribution in excess of the limits of section 415(c) or 415(n) of the Internal Revenue Code.
(b) If the board's option in subsection (1)(a) will not avoid a contribution in excess of the limits in section 415(c) of the Internal Revenue Code, the board may direct the excess contribution to the qualified excess benefit arrangement pursuant to section 415(m) of the Internal Revenue Code.
(2) If the board's options in subsections (1)(a) and (1)(b) will not avoid a contribution in excess of the limits of section 415(c) of the Internal Revenue Code, the board shall reduce or refuse the contribution.
(3) The board shall use the provisions of section 415(n) of the Internal Revenue Code, as the provisions apply to a government plan, to facilitate member's service purchases. An eligible participant in a retirement plan, as defined by section 1526 of the Taxpayer Relief Act of 1997, 26 U.S.C. 415, may purchase service credit without regard to the limitations of section 415(c)(1) of the Internal Revenue Code under the Montana statutes in effect on August 5, 1997.
(4) For the purpose of calculating the maximum contribution under section 415 of the Internal Revenue Code, the definitions of "compensation", "wages", and "salary" include the amount of any elective deferral, as defined in section 402(g) of the Internal Revenue Code, or any contribution that is contributed or deferred by the employer at the election of the member and that is not includable in the gross income of the member by reason of sections 125, 403(b), or 457 of the Internal Revenue Code.
Section 20. Section 19-20-801, MCA, is amended to read:
"19-20-801. Eligibility for service retirement. A member who has at least 5 full years of creditable service, whose last
5 years of creditable service were in this state, and who has attained the age of 60 or has been credited with full-time or
part-time creditable service in 25 or more years may retire from service if the member has terminated employment in all
positions from which the member is eligible to retire and files with the retirement board a written application setting forth
the fact of the member's retirement."
Section 21. Section 19-20-802, MCA, is amended to read:
"19-20-802. Early retirement. (1) A member who is not eligible for service retirement but who has at least 5 years of
creditable service, whose last 5 years of creditable service were in this state, and who has attained the age of 50 may retire
from service and be eligible for an early retirement allowance if he the member files with the retirement board his the
member's written application setting forth the fact of his retirement.
(2) The early retirement allowance shall must be determined as prescribed in 19-20-804(1) and section 5, Chapter 549,
Laws of 1981, with the exception that the allowance will be reduced as follows:
(a) by 1/2 of 1% multiplied by the number of months up to a maximum of 60 months by which the retirement date
precedes the date on which he the member would have retired had he the member attained 60 years of age or had he the
member completed 25 years of creditable service; and
(b) by 3/10 of 1% multiplied by the number of months in excess of the 60 months in subsection (2)(a) but not to exceed
60 additional months that the retirement date precedes the date on which he the member would have retired had he the
member attained 60 years of age or had he the member completed 25 years of creditable service."
Section 22. Section 19-20-804, MCA, is amended to read:
"19-20-804. Allowance for service retirement. (1) Upon termination, an eligible member must receive a retirement
allowance equal to one-sixtieth of the member's average final compensation, as limited by 19-20-715, multiplied by the sum
of the number of years of creditable service, and service transferred under 19-20-409, and additional service purchased
under 19-20-412.
(2) Except as provided in subsection (3) (4), a retired member may be employed as a part-time or substitute teacher in
Montana part-time in a position specified in 19-20-302 and may earn, without loss of retirement benefits, an amount not to
exceed the greater of:
(a) one-third of the sum of the member's average final compensation plus normal annual salary increases for teaching personnel employed by the school district, state agency, political subdivision, or university unit that employed the member at the time of retirement; or
(b) one-third of the median of the average final compensation for members retired during the preceding fiscal year as determined by the retirement board.
(3) (a) Except as provided in subsection (4), the retirement benefit of a retired member employed in a full-time position or earning more than allowed by subsection (2) must be canceled beginning the month in which the retired member returns to full-time employment or earns more than allowed.
(b) The retirement benefits of a retired member who was employed in a full-time position or who exceeded the amount that the retired member was eligible to earn under subsection (2) and who was reemployed for less than 1 year must, upon termination of employment, be reinstated beginning the later of either the month following termination or July 1 of the school year following the date on which the retired member was reemployed. The reinstated retirement benefit is the amount that the retired member would have been entitled to receive had the retired member not returned to employment.
(c) Upon retirement after cancellation of a retired member's benefit pursuant to subsection (3)(a), a retired member who is reemployed as an active member for a minimum of 1 year of full-time service must receive a recalculated benefit. The recalculated benefit is based on the service credit accumulated at the time of the member's previous retirement plus any service credit accumulated subsequent to reemployment.
(4) If an early-retired member under 19-20-802 is reemployed with the same employer within 30 days from the member's effective date of retirement or if the early-retired member is guaranteed reemployment with the same employer, the member must be considered to have continued in the status of an active member and not to have separated from service. Any retirement allowance payments received by the member must be repaid to the system, together with interest, at the actuarially assumed rate, and the retirement allowance must be terminated."
Section 23. Section 19-20-901, MCA, is amended to read:
"19-20-901. Eligibility for disability retirement -- determination by board. (1) Upon the application of a member or of the member's employer for a disability retirement allowance, any member who has 5 or more years of creditable service and who has become disabled while being an active member may be retired by the retirement board the month immediately following the month in which employment is terminated. In order for a member to be eligible for disability retirement, the retirement board or its representative shall certify that the member is mentally or physically incapacitated for the further performance of the member's duties, that the incapacity is likely to be permanent, and that the member should be retired. The board's representative shall report to the board the representative's findings and any action taken by the representative, and the action must be presented to the board for approval by the board.
(2) In making a determination under subsection (1), the retirement board or its representative may:
(a) order examinations by a physician, psychologist, or vocational rehabilitation counselor;
(b) conduct hearings, administer oaths and affirmations, take depositions, and certify to official acts; and
(c) issue subpoenas to compel the attendance of witnesses and the production of books, papers, correspondence, memorandums, and other records considered necessary as evidence in connection with a claim for disability retirement. The subpoenas issued under this subsection (2)(c) are enforceable as provided in 2-4-104.
(3) The retirement board may secure and pay reasonable compensation for professional services and advice that the board determines necessary to carry out the purposes of this part."
Section 24. Section 19-20-902, MCA, is amended to read:
"19-20-902. Allowance for disability retirement. (1) Upon retirement for disability, a member must receive a disability retirement allowance equal to the greater of:
(a) one-sixtieth of the member's average final compensation multiplied by the sum of the number of years of creditable
service, including service transferred under 19-20-409, and additional service purchased under 19-20-412; or
(b) one-fourth of the member's average final compensation.
(2) The earned compensation in the year of termination that is included in the calculation of average final compensation of a member who is awarded a disability retirement allowance prior to the completion of a full year is the compensation, pay, or salary that the member would have received under the member's contract had the member completed the full year. Any termination pay received by the member is limited to the amount actually paid and is not the amount that the member would have earned had the member completed the full year."
Section 25. Payment of death benefits. (1) Death benefits paid from the system are subject to the requirements of this section.
(2) Death benefits must be distributed in accordance with section 401(a)(9) of the Internal Revenue Code and the regulations adopted under that section.
(3) The amount of benefits payable to a member's beneficiary may not exceed the maximum determined under the incidental death benefit requirements of the Internal Revenue Code.
(4) If the member dies before retirement benefits commence and a benefit is payable pursuant to 19-20-1001, distributions to the member's beneficiaries must begin as soon as administratively feasible and must begin no later than December 31 of the calendar year immediately following the calendar year in which the member died. If the beneficiary has not elected the form of payment by the date on which the beneficiary is to receive the benefit and the beneficiary is eligible for a monthly benefit, the benefit must be paid as provided in 19-20-702(2)(d)(i)(A) or a lump sum must be paid if that is the only benefit due the beneficiary.
Section 26. Repealer. Sections 19-20-412, 19-20-413, 19-20-704, 19-20-707, 19-20-708, and 19-20-709, MCA, are repealed.
Section 27. Codification instruction. (1) [Section 4] is intended to be codified as an integral part of Title 19, chapter 20, part 2, and the provisions of Title 19, chapter 20, part 2, apply to [section 4].
(2) [Sections 9 through 11] are intended to be codified as an integral part of Title 19, chapter 20, part 4, and the provisions of Title 19, chapter 20, part 4, apply to [sections 9 through 11].
(3) [Section 19] is intended to be codified as an integral part of Title 19, chapter 20, part 7, and the provisions of Title 19, chapter 20, part 7, apply to [section 19].
(4) [Section 25] is intended to be codified as an integral part of Title 19, chapter 20, part 10, and the provisions of Title 19, chapter 20, part 10, apply to [section 25].
Section 28. Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before July 1, 1999.
Section 29. Effective date -- contingent effective dates. (1) Except as provided in subsections (2) and (3), [this act] is effective July 1, 1999.
(2) The provisions in [sections 4 and 19], providing for the creation and use of an excess benefit arrangement, are effective on the later of July 1, 1999, or the date that the internal revenue service determines in a private letter ruling that the creation and use of the excess benefit arrangement provided in those sections comply with the requirements of the Internal Revenue Code regarding a qualified retirement plan.
(3) The provisions in [sections 9, 13, and 18], providing for the making of contributions required to purchase service or for purposes of termination pay by employer pick up, are effective on the later of July 1, 1999, or the date that the internal revenue service determines in a private letter ruling that the creation and use of the employer pick up method of making contributions provided in those sections comply with the requirements of the Internal Revenue Code regarding a qualified retirement plan.
- END -
Latest Version of HB 118 (HB0118.ENR)
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