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H.B. 59

             1     

RETIREMENT ALLOWANCE AMENDMENTS

             2     
2006 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Ann W. Hardy

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah State Retirement and Insurance Benefit Act related to
             10      changes in retirement allowance options after retirement.
             11      Highlighted Provisions:
             12          This bill:
             13          .    repeals a provision allowing a retiree who divorces to change the retiree's retirement
             14      allowance option under the contributory and noncontributory systems if there is no
             15      court order filed on the matter.
             16      Monies Appropriated in this Bill:
             17          None
             18      Other Special Clauses:
             19          None
             20      Utah Code Sections Affected:
             21      AMENDS:
             22          49-12-402, as last amended by Chapter 116, Laws of Utah 2005
             23          49-13-402, as last amended by Chapter 116, Laws of Utah 2005
             24     
             25      Be it enacted by the Legislature of the state of Utah:
             26          Section 1. Section 49-12-402 is amended to read:
             27           49-12-402. Service retirement plans -- Calculation of retirement allowance --


             28      Social Security limitations.
             29          (1) (a) Except as provided under Section 49-12-701 , retirees of this system may choose
             30      from the six retirement options described in this section.
             31          (b) Options Two, Three, Four, Five, and Six are modifications of the Option One
             32      calculation.
             33          (2) The Option One benefit is an annual allowance calculated as follows:
             34          (a) If the retiree is at least 65 years of age or has accrued at least 30 years of service
             35      credit, the allowance is:
             36          (i) an amount equal to 1.25% of the retiree's final average monthly salary multiplied by
             37      the number of years of service credit accrued prior to July 1, 1975; plus
             38          (ii) an amount equal to 2% of the retiree's final average monthly salary multiplied by
             39      the number of years of service credit accrued on and after July 1, 1975.
             40          (b) If the retiree is less than 65 years of age, the allowance shall be reduced 3% for
             41      each year of retirement from age 60 to age 65, unless the member has 30 or more years of
             42      accrued credit in which event no reduction is made to the allowance.
             43          (c) (i) Years of service includes any fractions of years of service to which the retiree
             44      may be entitled.
             45          (ii) At the time of retirement, if a retiree's combined years of actual, not purchased,
             46      service credit is within 1/10 of one year of the total years of service credit required for
             47      retirement, the retiree shall be considered to have the total years of service credit required for
             48      retirement.
             49          (3) The allowance payable under Options Two, Three, Four, Five, and Six is calculated
             50      by reducing an Option One benefit based on actuarial computations to provide the following:
             51          (a) Option Two is a reduced allowance paid to and throughout the lifetime of the
             52      retiree, and, if the retiree receives less in annuity payments than the amount of the retiree's
             53      member contributions, the remaining balance of the retiree's member contributions shall be
             54      paid in accordance with Sections 49-11-609 and 49-11-610 .
             55          (b) Option Three is a reduced allowance paid to and throughout the lifetime of the
             56      retiree, and, upon the death of the retiree, the same reduced allowance paid to and throughout
             57      the lifetime of the retiree's lawful spouse at the time of retirement.
             58          (c) Option Four is a reduced allowance paid to and throughout the lifetime of the


             59      retiree, and upon the death of the retiree, an amount equal to 1/2 of the retiree's allowance paid
             60      to and throughout the lifetime of the retiree's lawful spouse at the time of retirement.
             61          (d) Option Five is a modification of Option Three so that if the lawful spouse at the
             62      time of retirement predeceases the retiree, an allowance equivalent to the amount payable at the
             63      time of initial retirement under Option One shall be paid to the retiree for the remainder of the
             64      retiree's life, beginning on the last day of the month following the month in which the lawful
             65      spouse dies.
             66          (e) Option Six is a modification of Option Four so that if the lawful spouse at the time
             67      of retirement predeceases the retiree, an allowance equivalent to the amount payable at the time
             68      of initial retirement under Option One shall be paid to the retiree for the remainder of the
             69      retiree's life, beginning on the last day of the month following the month in which the lawful
             70      spouse dies.
             71          (4) (a) (i) The final average salary is limited in the computation of that part of an
             72      allowance based on service rendered prior to July 1, 1967, during a period when the retiree
             73      received employer contributions on a portion of compensation from an educational institution
             74      toward the payment of the premium required on a retirement annuity contract with the
             75      Teachers' Insurance and Annuity Association of America or with any other public or private
             76      system, organization, or company to $4,800.
             77          (ii) This limitation is not applicable to retirees who elected to continue in the this
             78      system by July 1, 1967.
             79          (b) Periods of employment which are exempt from this system under Subsection
             80      49-12-203 (1)(b), may be purchased by the member for the purpose of retirement only if all
             81      benefits from the Teachers' Insurance and Annuity Association of America or any other public
             82      or private system or organization based on this period of employment are forfeited.
             83          (5) (a) If a retiree under Option One dies within 90 days after the retiree's retirement
             84      date, the retirement is canceled and the death shall be considered as that of a member before
             85      retirement.
             86          (b) Any payments made to the retiree shall be deducted from the amounts due to the
             87      beneficiary.
             88          [(6) If a retiree retires under either Option Five or Six and subsequently divorces, the
             89      retiree may elect to convert the benefit to a Option One benefit at the time of divorce, if there is


             90      no court order filed in the matter.]
             91          Section 2. Section 49-13-402 is amended to read:
             92           49-13-402. Service retirement plans -- Calculation of retirement allowance --
             93      Social Security limitations.
             94          (1) (a) Except as provided under Section 49-13-701 , retirees of this system may choose
             95      from the six retirement options described in this section.
             96          (b) Options Two, Three, Four, Five, and Six are modifications of the Option One
             97      calculation.
             98          (2) The Option One benefit is an allowance calculated as follows:
             99          (a) If the retiree is at least 65 years of age or has accrued at least 30 years of service
             100      credit, the allowance is an amount equal to 2% of the retiree's final average monthly salary
             101      multiplied by the number of years of service credit accrued.
             102          (b) If the retiree is less than 65 years of age, the allowance shall be reduced 3% for
             103      each year of retirement from age 60 to age 65, plus a full actuarial reduction for each year of
             104      retirement prior to age 60, unless the member has 30 or more years of accrued credit, in which
             105      event no reduction is made to the allowance.
             106          (c) (i) Years of service include any fractions of years of service to which the retiree
             107      may be entitled.
             108          (ii) At the time of retirement, if a retiree's combined years of actual, not purchased,
             109      service credit is within 1/10 of one year of the total years of service credit required for
             110      retirement, the retiree shall be considered to have the total years of service credit required for
             111      retirement.
             112          (3) The allowance payable under Options Two, Three, Four, Five, and Six is calculated
             113      by reducing an Option One benefit based on actuarial computations to provide the following:
             114          (a) Option Two is a reduced allowance paid to and throughout the lifetime of the
             115      retiree, and, if the retiree receives less in annuity payments than the amount of the retiree's
             116      member contributions, the remaining balance of the retiree's member contributions shall be
             117      paid in accordance with Sections 49-11-609 and 49-11-610 .
             118          (b) Option Three is a reduced allowance paid to and throughout the lifetime of the
             119      retiree, and, upon the death of the retiree, the same reduced allowance paid to and throughout
             120      the lifetime of the retiree's lawful spouse at the time of retirement.


             121          (c) Option Four is a reduced allowance paid to and throughout the lifetime of the
             122      retiree, and upon the death of the retiree, an amount equal to 1/2 of the retiree's allowance paid
             123      to and throughout the lifetime of the retiree's lawful spouse at the time of retirement.
             124          (d) Option Five is a modification of Option Three so that if the lawful spouse at the
             125      time of retirement predeceases the retiree, an allowance equivalent to the amount payable at the
             126      time of initial retirement under Option One shall be paid to the retiree for the remainder of the
             127      retiree's life, beginning on the last day of the month following the month in which the lawful
             128      spouse dies.
             129          (e) Option Six is a modification of Option Four so that if the lawful spouse at the time
             130      of retirement predeceases the retiree, an allowance equivalent to the amount payable at the time
             131      of initial retirement under Option One shall be paid to the retiree for the remainder of the
             132      retiree's life, beginning on the last day of the month following the month in which the lawful
             133      spouse dies.
             134          (4) (a) (i) The final average salary is limited in the computation of that part of an
             135      allowance based on service rendered prior to July 1, 1967, during a period when the retiree
             136      received employer contributions on a portion of compensation from an educational institution
             137      toward the payment of the premium required on a retirement annuity contract with the
             138      Teachers' Insurance and Annuity Association of America or with any other public or private
             139      system, organization, or company to $4,800.
             140          (ii) This limitation is not applicable to retirees who elected to continue in the Public
             141      Employees' Contributory Retirement System by July 1, 1967.
             142          (b) Periods of employment which are exempt from this system as permitted under
             143      Subsection 49-13-203 (1)(b) may be purchased by the member for the purpose of retirement
             144      only if all benefits from the Teachers' Insurance and Annuity Association of America or any
             145      other public or private system or organization based on this period of employment are forfeited.
             146          (5) (a) If a retiree under Option One dies within 90 days after the retiree's retirement
             147      date, the retirement is canceled and the death shall be considered as that of a member before
             148      retirement.
             149          (b) Any payments made to the retiree shall be deducted from the amounts due to the
             150      beneficiary.
             151          [(6) If a retiree retires under either Option Five or Six and subsequently divorces, the


             152      retiree may elect to convert the benefit to an Option One benefit at the time of divorce, if there
             153      is no court order filed in the matter.]




Legislative Review Note
    as of 10-7-05 10:02 AM


Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel


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