H.B. 8

1

RETIREMENT OFFICE AMENDMENTS
2 2007 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: David Clark
5 Senate Sponsor: Carlene M. Walker
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Utah State Retirement and Insurance Benefit Act by amending
10 definitions, and making certain technical and administrative amendments.
11 Highlighted Provisions:
12 This bill:
13 . amends the definition of allowance by adding "or retirement allowance";
14 . amends the definition of "political subdivision" by providing that a project entity
15 created under the Interlocal Cooperation Act is not a political subdivision if it was
16 formed prior to 1987;
17 . requires that retirement contributions made by a participating employee for a retiree
18 that is subject to postemployment retirement restrictions shall be made to a
19 "qualified" defined contribution plan;
20 . adds "covered individual" to those whose benefits are not subject to alienation,
21 assignment, or attachment for legal purposes;
22 . allows the executive director to delegate certain dispute rulings to the deputy
23 director;
24 . provides that Option One retirement allowance is only payable to the member
25 during the member's lifetime for the Public Employees' Contributory and
26 Noncontributory systems;
27 . adds "mentally" able to resume firefighter service to the examiners report for a

28 determination regarding disability benefits;
29 . allows reserves in an insurance risk pool to be refunded directly to covered
30 individuals;
31 . repeals a requirement that employees not be allowed to change from the high
32 deductible health plan more frequently than every three years and replaces it with a
33 provision that the program must be administered so that the impact on the overall
34 health plan is actuarially neutral;
35 . requires the office to consult with covered employers in addition to certain state
36 agencies prior to determining the amount of annual contributions to a health savings
37 account;
38 . changes references to eligibility to receive a "retirement benefit" to eligibility to
39 receive a "retirement allowance" to clarify provisions of the Unused Sick Leave
40 Retirement Option Program I and II; and
41 . makes technical changes.
42 Monies Appropriated in this Bill:
43 None
44 Other Special Clauses:
45 None
46 Utah Code Sections Affected:
47 AMENDS:
48 49-11-102, as last amended by Chapter 116, Laws of Utah 2005
49 49-11-504, as last amended by Chapter 116, Laws of Utah 2005
50 49-11-612, as last amended by Chapter 260, Laws of Utah 2006
51 49-11-613, as last amended by Chapter 116, Laws of Utah 2005
52 49-12-402, as last amended by Chapter 116, Laws of Utah 2005
53 49-13-402, as last amended by Chapter 116, Laws of Utah 2005
54 49-16-602, as last amended by Chapter 240, Laws of Utah 2003
55 49-17-301, as renumbered and amended by Chapter 250, Laws of Utah 2002
56 49-18-301, as renumbered and amended by Chapter 250, Laws of Utah 2002
57 49-20-201, as last amended by Chapter 118, Laws of Utah 2004
58 49-20-402, as renumbered and amended by Chapter 250, Laws of Utah 2002

59 49-20-409, as last amended by Chapter 260, Laws of Utah 2006
60 49-20-410, as enacted by Chapter 276, Laws of Utah 2006
61 49-21-102, as last amended by Chapter 116, Laws of Utah 2005
62 49-21-401, as last amended by Chapter 240, Laws of Utah 2003
63 67-19-14.2, as last amended by Chapter 15, Laws of Utah 2005
64 67-19-14.4, as enacted by Chapter 15, Laws of Utah 2005
65
66 Be it enacted by the Legislature of the state of Utah:
67 Section 1. Section 49-11-102 is amended to read:
68 49-11-102. Definitions.
69 As used in this title:
70 (1) (a) "Active member" means a member who is employed or who has been employed
71 by a participating employer within the previous 120 days.
72 (b) "Active member" does not include retirees.
73 (2) "Actuarial equivalent" means a benefit of equal value when computed upon the
74 basis of mortality tables as recommended by the actuary and adopted by the executive director,
75 including regular interest.
76 (3) "Actuarial interest rate" means the interest rate as recommended by the actuary and
77 adopted by the board upon which the funding of system costs and benefits are computed.
78 (4) "Agency" means:
79 (a) a department, division, agency, office, authority, commission, board, institution, or
80 hospital of the state;
81 (b) a county, municipality, school district, or special district;
82 (c) a state college or university; or
83 (d) any other participating employer.
84 (5) "Allowance" or "retirement allowance" means the pension plus the annuity,
85 including any cost of living or other authorized adjustments to the pension and annuity.
86 (6) "Alternate payee" means a member's former spouse or family member eligible to
87 receive payments under a Domestic Relations Order in compliance with Section 49-11-612 .
88 (7) "Annuity" means monthly payments derived from member contributions.
89 (8) "Appointive officer" means an employee appointed to a position for a definite and

90 fixed term of office by official and duly recorded action of a participating employer whose
91 appointed position is designated in the participating employer's charter, creation document, or
92 similar document, and who earns during the first full month of the term of office $500 or more,
93 indexed as of January 1, 1990, as provided in Section 49-12-407 .
94 (9) "Beneficiary" means any person entitled to receive a payment under this title
95 through a relationship with or designated by a member, participant, covered individual, or
96 alternate payee of a defined contribution plan.
97 (10) "Board" means the Utah State Retirement Board established under Section
98 49-11-202 .
99 (11) "Board member" means a person serving on the Utah State Retirement Board as
100 established under Section 49-11-202 .
101 (12) "Contributions" means the total amount paid by the participating employer and the
102 member into a system or to the Utah Governors' and Legislators' Retirement Plan under
103 Chapter 19, Utah Governor's and Legislators' Retirement Act.
104 (13) "Council member" means a person serving on the Membership Council
105 established under Section 49-11-202 .
106 (14) "Covered individual" means any individual covered under Chapter 20, Public
107 Employees' Benefit and Insurance Program Act.
108 (15) "Current service" means covered service as defined in Chapters 12, 13, 14, 15, 16,
109 17, 18, and 19.
110 (16) "Defined contribution" or "defined contribution plan" means any defined
111 contribution plan authorized under the Internal Revenue Code and administered by the board.
112 (17) "Educational institution" means a political subdivision or instrumentality of the
113 state or a combination thereof primarily engaged in educational activities or the administration
114 or servicing of educational activities, including:
115 (a) the State Board of Education and its instrumentalities;
116 (b) any institution of higher education and its branches;
117 (c) any school district and its instrumentalities;
118 (d) any vocational and technical school; and
119 (e) any entity arising out of a consolidation agreement between entities described under
120 this Subsection (17).

121 (18) (a) "Employer" means any department, educational institution, or political
122 subdivision of the state eligible to participate in a government-sponsored retirement system
123 under federal law.
124 (b) "Employer” may also include an agency financed in whole or in part by public
125 funds.
126 (19) "Exempt employee" means an employee working for a participating employer:
127 (a) who is not eligible for service credit under Section 49-12-203 , 49-13-203 ,
128 49-14-203 , 49-15-203 , or 49-16-203 ; and
129 (b) for whom a participating employer is not required to pay contributions or
130 nonelective contributions.
131 (20) "Final average monthly salary" means the amount computed by dividing the
132 compensation received during the final average salary period under each system by the number
133 of months in the final average salary period.
134 (21) "Fund” means any fund created under this title for the purpose of paying benefits
135 or costs of administering a system, plan, or program.
136 (22) (a) "Inactive member" means a member who has not been employed by a
137 participating employer for a period of at least 120 days.
138 (b) "Inactive member" does not include retirees.
139 (23) (a) "Member" means a person, except a retiree, with contributions on deposit with
140 a system, the Utah Governors' and Legislators' Retirement Plan under Chapter 19, or with a
141 terminated system.
142 (b) "Member" also includes leased employees within the meaning of Section 414(n)(2)
143 of the Internal Revenue Code, if the employees have contributions on deposit with the office.
144 If leased employees constitute less than 20% of the participating employer's work force that is
145 not highly compensated within the meaning of Section 414(n)(5)(c)(ii), Internal Revenue Code,
146 "member" does not include leased employees covered by a plan described in Section 414(n)(5)
147 of the federal Internal Revenue Code.
148 (24) "Member contributions" means the sum of the contributions paid to a system or
149 the Utah Governors' and Legislators' Retirement Plan, including refund interest if allowed by a
150 system, and which are made by:
151 (a) the member; and

152 (b) the participating employer on the member's behalf under Section 414(h) of the
153 Internal Revenue Code.
154 (25) "Nonelective contribution" means an amount contributed by a participating
155 employer into a participant's defined contribution account.
156 (26) "Office" means the Utah State Retirement Office.
157 (27) "Participant" means an individual with voluntary deferrals or nonelective
158 contributions on deposit with the defined contribution plans administered under this title.
159 (28) "Participating employer" means a participating employer, as defined by Chapters
160 12, 13, 14, 15, 16, 17, and 18, or an agency financed in whole or in part by public funds which
161 is participating in a system or plan as of January 1, 2002.
162 (29) "Pension" means monthly payments derived from participating employer
163 contributions.
164 (30) "Plan" means the Utah Governors' and Legislators' Retirement Plan created by
165 Chapter 19 or the defined contribution plans created under Section 49-11-801 .
166 (31) (a) "Political subdivision" means any local government entity, including cities,
167 towns, counties, and school districts, but only if the subdivision is a juristic entity that is legally
168 separate and distinct from the state and only if its employees are not by virtue of their
169 relationship to the entity employees or the state.
170 (b) "Political subdivision" includes special districts or authorities created by the
171 Legislature or by local governments, including the office.
172 (c) "Political subdivision" does not include a project entity created under Title 11,
173 Chapter 13, Interlocal Cooperation Act, that was formed prior to July 1, 1987.
174 (32) "Program" means the Public Employees' Insurance Program created under Chapter
175 20, Public Employees' Benefit and Insurance Program Act, or the Public Employees'
176 Long-Term Disability program created under Chapter 21, Public Employees' Long-Term
177 Disability Act.
178 (33) "Public funds" means those funds derived, either directly or indirectly, from public
179 taxes or public revenue, dues or contributions paid or donated by the membership of the
180 organization, used to finance an activity whose objective is to improve, on a nonprofit basis,
181 the governmental, educational, and social programs and systems of the state or its political
182 subdivisions.

183 (34) "Qualified defined contribution plan" means a defined contribution plan that
184 meets the requirements of Section 401(k) or Section 403(b) of the Internal Revenue Code.
185 [(34)] (35) "Refund interest" means the amount accrued on member contributions at a
186 rate adopted by the board.
187 [(35)] (36) "Retiree" means an individual who has qualified for an allowance under this
188 title.
189 [(36)] (37) "Retirement" means the status of an individual who has become eligible,
190 applies for, and is entitled to receive an allowance under this title.
191 [(37)] (38) "Retirement date" means the date selected by the member on which the
192 member's retirement becomes effective with the office.
193 [(38)] (39) "Service credit" means:
194 (a) the period during which an employee is employed and compensated by a
195 participating employer and meets the eligibility requirements for membership in a system or the
196 Utah Governors' and Legislators' Retirement Plan, provided that any required contributions are
197 paid to the office; and
198 (b) periods of time otherwise purchasable under this title.
199 [(39)] (40) "System" means the individual retirement systems created by [Chapters 12,
200 13, 14, 15, 16, 17, and 18] Chapter 12, Public Employees' Contributory Retirement Act,
201 Chapter 13, Public Employees' Noncontributory Retirement Act, Chapter 14, Public Safety
202 Contributory Retirement Act, Chapter 15, Public Safety Noncontributory Retirement Act,
203 Chapter 16, Firefighters' Retirement Act, Chapter 17, Judges' Contributory Retirement Act,
204 Chapter 18, Judges' Noncontributory Retirement Act, and Utah Governors' and Legislators'
205 Retirement Act.
206 [(40)] (41) "Voluntary deferrals" means an amount contributed by a participant into
207 that participant's defined contribution account.
208 Section 2. Section 49-11-504 is amended to read:
209 49-11-504. Reemployment of a retiree -- Restrictions.
210 (1) A person who retires from a nonparticipating employer is not subject to any
211 postretirement restrictions under this title.
212 (2) A retiree of an agency who returns to work at a different agency is not subject to
213 any postretirement restrictions under this section and may not earn additional service credit.

214 (3) For the purposes of Subsections (4) and (5), "full-time" employment means
215 employment requiring 20 hours of work per week or more or at least a half-time teaching
216 contract.
217 (4) A retiree of an agency who is reemployed on a full-time basis by the same agency
218 within six months of the date of retirement is subject to the following:
219 (a) the agency shall immediately notify the office;
220 (b) the office shall cancel the retiree's allowance and reinstate the retiree to active
221 member status;
222 (c) the allowance cancellation and reinstatement to active member status is effective on
223 the first day of the month following the date of reemployment;
224 (d) the reinstated retiree may not retire again with a recalculated benefit for a two-year
225 period from the date of cancellation of the original allowance, and if the retiree retires again
226 within the two-year period, the original allowance shall be resumed; and
227 (e) a reinstated retiree retiring after the two-year period shall be credited with the
228 service credit in the retiree's account at the time of the first retirement and from that time shall
229 be treated as a member of a system, including the accrual of additional service credit, but
230 subject to recalculation of the allowance under Subsection (9).
231 (5) A retiree of an agency who is reemployed by the same agency within six months of
232 retirement on a less than full-time basis by the same agency is subject to the following:
233 (a) the retiree may earn, without penalty, compensation from that position which is not
234 in excess of the exempt earnings permitted by Social Security;
235 (b) if a retiree receives compensation in a calendar year in excess of the Social Security
236 limitation, 25% of the allowance shall be suspended for the remainder of the six-month period;
237 (c) the effective date of a suspension and reinstatement of an allowance shall be set by
238 the office; and
239 (d) any suspension of a retiree's allowance under this Subsection (5) shall be applied
240 on a calendar year basis.
241 (6) For six months immediately following retirement, the retiree and participating
242 employer shall:
243 (a) maintain an accurate record of gross earnings in employment;
244 (b) report the gross earnings at least monthly to the office;

245 (c) immediately notify the office in writing of any postretirement earnings under
246 Subsection (4); and
247 (d) immediately notify the office in writing whether postretirement earnings equal or
248 exceed the exempt earnings under Subsection (5).
249 (7) A retiree of an agency who is reemployed by the same agency after six months from
250 the retirement date is not subject to any postretirement restrictions under this title and may not
251 earn additional service credit.
252 (8) If a participating employer hires a nonexempt retiree who may not earn additional
253 service credit under this section, the participating employer shall contribute the same
254 percentage of a retiree's salary that the participating employer would have been required to
255 contribute if the retiree were an active member, up to the amount allowed by federal law, to a
256 retiree designated:
257 (a) qualified defined contribution plan administered by the board, if the participating
258 employer participates in [the] a qualified defined contribution plan administered by the board;
259 or
260 (b) qualified defined contribution plan offered by the participating employer if the
261 participating employer does not participate in a qualified defined contribution plan
262 administered by the board.
263 (9) Notwithstanding any other provision of this section, a retiree who has returned to
264 work, accrued additional service credit, and again retires shall have the retiree's allowance
265 recalculated using:
266 (a) the formula in effect at the date of the retiree's original retirement for all service
267 credit accrued prior to that date; and
268 (b) the formula in effect at the date of the subsequent retirement for all service credit
269 accrued between the first and subsequent retirement dates.
270 (10) This section does not apply to elected positions.
271 (11) The board may make rules to implement this section.
272 Section 3. Section 49-11-612 is amended to read:
273 49-11-612. Nonassignability of benefits or payments -- Exemption from legal
274 process.
275 (1) Except as provided in Subsections (2), (3), and (4), the right of any member, retiree,

276 participant, covered individual, or beneficiary to any retirement benefit, retirement payment, or
277 any other retirement right accrued or accruing under this title and the assets of the funds created
278 by this title are not subject to alienation or assignment by the member, retiree, participant, or
279 their beneficiaries and are not subject to attachment, execution, garnishment, or any other legal
280 or equitable process.
281 (2) The office may, upon the request of the retiree, deduct from the retiree's allowance
282 insurance premiums or other dues payable on behalf of the retiree, but only to those entities
283 that have received the deductions prior to February 1, 2002.
284 (3) (a) The office shall provide for the division of an allowance, defined contribution
285 account, continuing monthly death benefit, or refund of member contributions upon
286 termination to former spouses and family members under an order of a court of competent
287 jurisdiction with respect to domestic relations matters on file with the office.
288 (b) The court order shall specify the manner in which the allowance, defined
289 contribution account, continuing monthly death benefit, or refund of member contributions
290 shall be partitioned, whether as a fixed amount or as a percentage of the benefit.
291 (c) Allowances, continuing monthly death benefits, and refunds of member
292 contributions split under a domestic relations order are subject to the following:
293 (i) the amount to be paid or the period for which payments shall be made under the
294 original domestic relations order may not be altered if the alteration affects the actuarial
295 calculation of the allowance;
296 (ii) payments to an alternate payee shall begin at the time the member or beneficiary
297 begins receiving payments; and
298 (iii) the alternate payee shall receive payments in the same form as allowances received
299 by the member or beneficiary.
300 (d) A court order under this section may not be issued more than 12 months after the
301 death of the member.
302 (4) In accordance with federal law, the board may deduct the required amount from any
303 benefit, payment, or other right accrued or accruing to any member of a system, plan, or
304 program under this title to offset any amount that member owes to a system, plan, or program
305 administered by the board.
306 (5) The board shall make rules to implement this section.

307 Section 4. Section 49-11-613 is amended to read:
308 49-11-613. Appeals procedure -- Right of appeal to hearing officer -- Board
309 reconsideration -- Judicial review.
310 (1) (a) All members, retirees, participants, alternative payees, or covered individuals of
311 a system, plan, or program under this title shall acquaint themselves with their rights and
312 obligations under this title.
313 (b) Any dispute regarding a benefit, right, obligation, or employment right under this
314 title is subject to the procedures provided under this section.
315 (c) A person who disputes a benefit, right, obligation, or employment right under this
316 title shall request a ruling by the executive director who may delegate the decision to the
317 deputy director.
318 (d) A person who is dissatisfied by a ruling of the executive director or deputy director
319 with respect to any benefit, right, obligation, or employment right under this title shall request a
320 review of that claim by a hearing officer.
321 (2) The hearing officer shall:
322 (a) be hired by the executive director after consultation with the board;
323 (b) follow the procedures and requirements of Title 63, Chapter 46b, Administrative
324 Procedures Act, except as specifically modified under this title;
325 (c) hear and determine all facts pertaining to applications for benefits under any
326 system, plan, or program under this title and all matters pertaining to the administration of the
327 office; and
328 (d) make conclusions of law in determining the person's rights under any system, plan,
329 or program under this title and matters pertaining to the administration of the office.
330 (3) The board shall review and approve or deny all decisions of the hearing officer in
331 accordance with rules adopted by the board.
332 (4) The moving party in any proceeding brought under this section shall bear the
333 burden of proof.
334 (5) A party may file an application for reconsideration by the board upon any of the
335 following grounds:
336 (a) that the board acted in excess of its powers;
337 (b) that the order or award was procured by fraud;

338 (c) that the evidence does not justify the determination of the hearing officer; or
339 (d) that the party has discovered new material evidence that could not, with reasonable
340 diligence, have been discovered or procured prior to the hearing.
341 (6) The board shall affirm, reverse, or modify the decision of the hearing officer, or
342 remand the application to the hearing officer for further consideration.
343 (7) A party aggrieved by the board's decision may obtain judicial review by complying
344 with the procedures and requirements of Title 63, Chapter 46b, Administrative Procedures Act.
345 (8) The board may make rules to implement this section.
346 Section 5. Section 49-12-402 is amended to read:
347 49-12-402. Service retirement plans -- Calculation of retirement allowance --
348 Social Security limitations.
349 (1) (a) Except as provided under Section 49-12-701 , retirees of this system may choose
350 from the six retirement options described in this section.
351 (b) Options Two, Three, Four, Five, and Six are modifications of the Option One
352 calculation.
353 (2) The Option One benefit is an annual allowance calculated as follows:
354 (a) If the retiree is at least 65 years of age or has accrued at least 30 years of service
355 credit, the allowance is:
356 (i) an amount equal to 1.25% of the retiree's final average monthly salary multiplied by
357 the number of years of service credit accrued prior to July 1, 1975; plus
358 (ii) an amount equal to 2% of the retiree's final average monthly salary multiplied by
359 the number of years of service credit accrued on and after July 1, 1975.
360 (b) If the retiree is less than 65 years of age, the allowance shall be reduced 3% for
361 each year of retirement from age 60 to age 65, unless the member has 30 or more years of
362 accrued credit in which event no reduction is made to the allowance.
363 (c) (i) Years of service includes any fractions of years of service to which the retiree
364 may be entitled.
365 (ii) At the time of retirement, if a retiree's combined years of actual, not purchased,
366 service credit is within 1/10 of one year of the total years of service credit required for
367 retirement, the retiree shall be considered to have the total years of service credit required for
368 retirement.

369 (d) An Option One allowance is only payable to the member during the member's
370 lifetime.
371 (3) The allowance payable under Options Two, Three, Four, Five, and Six is calculated
372 by reducing an Option One benefit based on actuarial computations to provide the following:
373 (a) Option Two is a reduced allowance paid to and throughout the lifetime of the
374 retiree, and, if the retiree receives less in annuity payments than the amount of the retiree's
375 member contributions, the remaining balance of the retiree's member contributions shall be
376 paid in accordance with Sections 49-11-609 and 49-11-610 .
377 (b) Option Three is a reduced allowance paid to and throughout the lifetime of the
378 retiree, and, upon the death of the retiree, the same reduced allowance paid to and throughout
379 the lifetime of the retiree's lawful spouse at the time of retirement.
380 (c) Option Four is a reduced allowance paid to and throughout the lifetime of the
381 retiree, and upon the death of the retiree, an amount equal to 1/2 of the retiree's allowance paid
382 to and throughout the lifetime of the retiree's lawful spouse at the time of retirement.
383 (d) Option Five is a modification of Option Three so that if the lawful spouse at the
384 time of retirement predeceases the retiree, an allowance equivalent to the amount payable at the
385 time of initial retirement under Option One shall be paid to the retiree for the remainder of the
386 retiree's life, beginning on the last day of the month following the month in which the lawful
387 spouse dies.
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