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H.B. 202 Enrolled

             1     

EMPLOYEE BENEFIT AMENDMENTS

             2     
2008 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: John Dougall

             5     
Senate Sponsor: Curtis S. Bramble

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah State Retirement and Insurance Benefit Act by allowing the
             10      transfer of certain members' defined benefit balance to a defined contribution plan, by
             11      adding certain employees who may elect to be excluded from membership in the public
             12      employees retirement systems.
             13      Highlighted Provisions:
             14          This bill:
             15          .    defines certain terms;
             16          .    allows certain elected state officials and certain appointed executives and senior staff
             17      to elect to have the members' defined benefit balance transferred from the defined
             18      benefit system or plan to a defined contribution plan;
             19          .    allows certain employees to be excluded, upon written request, from future coverage
             20      under the Public Employees' Contributory Retirement System and the Public
             21      Employees' Noncontributory Retirement System, including employees of the
             22      Commission on Criminal and Juvenile Justice, employees of the governor's offices,
             23      and employees of the state treasurer and state auditor; and
             24          .    makes technical changes.
             25      Monies Appropriated in this Bill:
             26          None
             27      Other Special Clauses:
             28          This bill provides an immediate effective date.
             29      Utah Code Sections Affected:


             30      AMENDS:
             31          49-11-102, as last amended by Laws of Utah 2007, Chapters 130, 252, and 329
             32          49-11-801, as renumbered and amended by Laws of Utah 2002, Chapter 250
             33          49-12-203, as last amended by Laws of Utah 2007, Chapters 192 and 306
             34          49-13-203, as last amended by Laws of Utah 2007, Chapters 192 and 306
             35      ENACTS:
             36          49-11-406, Utah Code Annotated 1953
             37     
             38      Be it enacted by the Legislature of the state of Utah:
             39          Section 1. Section 49-11-102 is amended to read:
             40           49-11-102. Definitions.
             41          As used in this title:
             42          (1) (a) "Active member" means a member who is employed or who has been employed
             43      by a participating employer within the previous 120 days.
             44          (b) "Active member" does not include retirees.
             45          (2) "Actuarial equivalent" means a benefit of equal value when computed upon the basis
             46      of mortality tables as recommended by the actuary and adopted by the executive director,
             47      including regular interest.
             48          (3) "Actuarial interest rate" means the interest rate as recommended by the actuary and
             49      adopted by the board upon which the funding of system costs and benefits are computed.
             50          (4) (a) "Agency" means:
             51          (i) a department, division, agency, office, authority, commission, board, institution, or
             52      hospital of the state;
             53          (ii) a county, municipality, school district, local district, or special service district;
             54          (iii) a state college or university; or
             55          (iv) any other participating employer.
             56          (b) "Agency" does not include an entity listed under Subsection (4)(a)(i) that is a
             57      subdivision of another entity listed under Subsection (4)(a).


             58          (5) "Allowance" or "retirement allowance" means the pension plus the annuity,
             59      including any cost of living or other authorized adjustments to the pension and annuity.
             60          (6) "Alternate payee" means a member's former spouse or family member eligible to
             61      receive payments under a Domestic Relations Order in compliance with Section 49-11-612 .
             62          (7) "Annuity" means monthly payments derived from member contributions.
             63          (8) "Appointive officer" means an employee appointed to a position for a definite and
             64      fixed term of office by official and duly recorded action of a participating employer whose
             65      appointed position is designated in the participating employer's charter, creation document, or
             66      similar document, and who earns during the first full month of the term of office $500 or more,
             67      indexed as of January 1, 1990, as provided in Section 49-12-407 .
             68          (9) (a) "At-will employee" means a person who is employed by a participating employer
             69      and:
             70          (i) who is not entitled to merit or civil service protection and is generally considered
             71      exempt from a participating employer's merit or career service personnel systems;
             72          (ii) whose on-going employment status is entirely at the discretion of the person's
             73      employer; or
             74          (iii) who may be terminated without cause by a designated supervisor, manager, or
             75      director.
             76          (b) "At-will employee" does not include a career employee who has obtained a
             77      reasonable expectation of continued employment based on inclusion in a participating
             78      employer's merit system, civil service protection system, or career service personnel systems,
             79      policies, or plans.
             80          [(9)] (10) "Beneficiary" means any person entitled to receive a payment under this title
             81      through a relationship with or designated by a member, participant, covered individual, or
             82      alternate payee of a defined contribution plan.
             83          [(10)] (11) "Board" means the Utah State Retirement Board established under Section
             84      49-11-202 .
             85          [(11)] (12) "Board member" means a person serving on the Utah State Retirement


             86      Board as established under Section 49-11-202 .
             87          [(12)] (13) "Contributions" means the total amount paid by the participating employer
             88      and the member into a system or to the Utah Governors' and Legislators' Retirement Plan under
             89      Chapter 19, Utah [Governor's] Governors' and Legislators' Retirement Act.
             90          [(13)] (14) "Council member" means a person serving on the Membership Council
             91      established under Section 49-11-202 .
             92          [(14)] (15) "Covered individual" means any individual covered under Chapter 20, Public
             93      Employees' Benefit and Insurance Program Act.
             94          [(15)] (16) "Current service" means covered service as defined in Chapters 12, 13, 14,
             95      15, 16, 17, 18, and 19.
             96          (17) "Defined benefit" or "defined benefit plan" or "defined benefit system" means a
             97      system or plan offered under this title to provide a specified allowance to a retiree or a retiree's
             98      spouse after retirement that is based on a set formula involving one or more of the following
             99      factors:
             100          (a) years of service;
             101          (b) final average monthly salary; or
             102          (c) a retirement multiplier.
             103          [(16)] (18) "Defined contribution" or "defined contribution plan" means any defined
             104      contribution plan authorized under the Internal Revenue Code and administered by the board.
             105          [(17)] (19) "Educational institution" means a political subdivision or instrumentality of
             106      the state or a combination thereof primarily engaged in educational activities or the
             107      administration or servicing of educational activities, including:
             108          (a) the State Board of Education and its instrumentalities;
             109          (b) any institution of higher education and its branches;
             110          (c) any school district and its instrumentalities;
             111          (d) any vocational and technical school; and
             112          (e) any entity arising out of a consolidation agreement between entities described under
             113      this Subsection [(17)] (19).


             114          [(18)] (20) (a) "Employer" means any department, educational institution, or political
             115      subdivision of the state eligible to participate in a government-sponsored retirement system
             116      under federal law.
             117          (b) "Employer” may also include an agency financed in whole or in part by public funds.
             118          [(19)] (21) "Exempt employee" means an employee working for a participating
             119      employer:
             120          (a) who is not eligible for service credit under Section 49-12-203 , 49-13-203 ,
             121      49-14-203 , 49-15-203 , or 49-16-203 ; and
             122          (b) for whom a participating employer is not required to pay contributions or
             123      nonelective contributions.
             124          [(20)] (22) "Final average monthly salary" means the amount computed by dividing the
             125      compensation received during the final average salary period under each system by the number
             126      of months in the final average salary period.
             127          [(21)] (23) "Fund” means any fund created under this title for the purpose of paying
             128      benefits or costs of administering a system, plan, or program.
             129          [(22)] (24) (a) "Inactive member" means a member who has not been employed by a
             130      participating employer for a period of at least 120 days.
             131          (b) "Inactive member" does not include retirees.
             132          [(23)] (25) (a) "Member" means a person, except a retiree, with contributions on
             133      deposit with a system, the Utah Governors' and Legislators' Retirement Plan under Chapter 19,
             134      Utah Governors' and Legislators' Retirement Act, or with a terminated system.
             135          (b) "Member" also includes leased employees within the meaning of Section 414(n)(2)
             136      of the Internal Revenue Code, if the employees have contributions on deposit with the office. If
             137      leased employees constitute less than 20% of the participating employer's work force that is not
             138      highly compensated within the meaning of Section 414(n)(5)(c)(ii), Internal Revenue Code,
             139      "member" does not include leased employees covered by a plan described in Section 414(n)(5)
             140      of the federal Internal Revenue Code.
             141          [(24)] (26) "Member contributions" means the sum of the contributions paid to a


             142      system or the Utah Governors' and Legislators' Retirement Plan, including refund interest if
             143      allowed by a system, and which are made by:
             144          (a) the member; and
             145          (b) the participating employer on the member's behalf under Section 414(h) of the
             146      Internal Revenue Code.
             147          [(25)] (27) "Nonelective contribution" means an amount contributed by a participating
             148      employer into a participant's defined contribution account.
             149          [(26)] (28) "Office" means the Utah State Retirement Office.
             150          [(27)] (29) "Participant" means an individual with voluntary deferrals or nonelective
             151      contributions on deposit with the defined contribution plans administered under this title.
             152          [(28)] (30) "Participating employer" means a participating employer, as defined by
             153      Chapters 12, 13, 14, 15, 16, 17, and 18, or an agency financed in whole or in part by public
             154      funds which is participating in a system or plan as of January 1, 2002.
             155          [(29)] (31) "Pension" means monthly payments derived from participating employer
             156      contributions.
             157          [(30)] (32) "Plan" means the Utah Governors' and Legislators' Retirement Plan created
             158      by Chapter 19, Utah Governors' and Legislators' Retirement Act, or the defined contribution
             159      plans created under Section 49-11-801 .
             160          [(31)] (33) (a) "Political subdivision" means any local government entity, including
             161      cities, towns, counties, and school districts, but only if the subdivision is a juristic entity that is
             162      legally separate and distinct from the state and only if its employees are not by virtue of their
             163      relationship to the entity employees [or] of the state.
             164          (b) "Political subdivision" includes local districts, special service districts, or authorities
             165      created by the Legislature or by local governments, including the office.
             166          (c) "Political subdivision" does not include a project entity created under Title 11,
             167      Chapter 13, Interlocal Cooperation Act, that was formed prior to July 1, 1987.
             168          [(32)] (34) "Program" means the Public Employees' Insurance Program created under
             169      Chapter 20, Public Employees' Benefit and Insurance Program Act, or the Public Employees'


             170      Long-Term Disability program created under Chapter 21, Public Employees' Long-Term
             171      Disability Act.
             172          [(33)] (35) "Public funds" means those funds derived, either directly or indirectly, from
             173      public taxes or public revenue, dues or contributions paid or donated by the membership of the
             174      organization, used to finance an activity whose objective is to improve, on a nonprofit basis, the
             175      governmental, educational, and social programs and systems of the state or its political
             176      subdivisions.
             177          [(34)] (36) "Qualified defined contribution plan" means a defined contribution plan that
             178      meets the requirements of Section 401(k) or Section 403(b) of the Internal Revenue Code.
             179          [(35)] (37) "Refund interest" means the amount accrued on member contributions at a
             180      rate adopted by the board.
             181          [(36)] (38) "Retiree" means an individual who has qualified for an allowance under this
             182      title.
             183          [(37)] (39) "Retirement" means the status of an individual who has become eligible,
             184      applies for, and is entitled to receive an allowance under this title.
             185          [(38)] (40) "Retirement date" means the date selected by the member on which the
             186      member's retirement becomes effective with the office.
             187          [(39)] (41) "Service credit" means:
             188          (a) the period during which an employee is employed and compensated by a
             189      participating employer and meets the eligibility requirements for membership in a system or the
             190      Utah Governors' and Legislators' Retirement Plan, provided that any required contributions are
             191      paid to the office; and
             192          (b) periods of time otherwise purchasable under this title.
             193          [(40)] (42) "System" means the individual retirement systems created by Chapter 12,
             194      Public Employees' Contributory Retirement Act, Chapter 13, Public Employees'
             195      Noncontributory Retirement Act, Chapter 14, Public Safety Contributory Retirement Act,
             196      Chapter 15, Public Safety Noncontributory Retirement Act, Chapter 16, Firefighters' Retirement
             197      Act, Chapter 17, Judges' Contributory Retirement Act, Chapter 18, Judges' Noncontributory


             198      Retirement Act, and Chapter 19, Utah Governors' and Legislators' Retirement Act.
             199          [(41)] (43) "Voluntary deferrals" means an amount contributed by a participant into that
             200      participant's defined contribution account.
             201          Section 2. Section 49-11-406 is enacted to read:
             202          49-11-406. Governor's appointed executives and senior staff -- Appointed
             203      legislative employees -- Transfer of value of accrued defined benefit -- Procedures.
             204          (1) As used in this section:
             205          (a) "Defined benefit balance" means the total amount of the contributions made on
             206      behalf of a member to a defined benefit system plus refund interest.
             207          (b) "Senior staff" means an at-will employee who reports directly to an elected official,
             208      executive director, or director and includes a deputy director and other similar, at-will employee
             209      positions designated by the governor, the speaker of the House, or the president of the Senate
             210      and filed with the Department of Human Resource Management and the Utah State Retirement
             211      Office.
             212          (2) In accordance with this section and subject to federal law, a member who has
             213      service credit from a system may elect to be exempt from coverage under a defined benefit
             214      system and to have the member's defined benefit balance transferred from the defined benefit
             215      system or plan to a defined contribution plan in the member's own name if the member is:
             216          (a) the state auditor;
             217          (b) the state treasurer;
             218          (c) an appointed executive under Subsection 67-22-2 (1)(a);
             219          (d) an employee in the Governor's Office;
             220          (e) senior staff in the Governor's Office of Planning and Budget;
             221          (f) senior staff in the Governor's Office of Economic Development;
             222          (g) senior staff in the Commission on Criminal and Juvenile Justice;
             223          (h) a legislative employee appointed under Subsection 36-12-7 (3)(a); or
             224          (i) a legislative employee appointed by the speaker of the House of Representatives, the
             225      House of Representatives minority leader, the president of the Senate, or the Senate minority


             226      leader.
             227          (3) An election made under Subsection (2):
             228          (a) is final, and no right exists to make any further election;
             229          (b) is considered a request to be exempt from coverage under a defined benefits system;
             230      and
             231          (c) shall be made on forms provided by the office.
             232          (4) The board shall adopt rules to implement and administer this section.
             233          Section 3. Section 49-11-801 is amended to read:
             234           49-11-801. Defined contribution plans authorized -- Subject to federal and state
             235      laws -- Rules to implement this provision -- Costs of administration -- Limitations on
             236      eligibility -- Protection of tax status.
             237          (1) (a) The board [may] shall establish and administer defined contribution plans
             238      established under the Internal Revenue Code.
             239          (b) Voluntary deferrals and nonelective contributions shall be permitted according to
             240      the provisions of these plans as established by the board.
             241          (c) The defined contribution account balance is vested in the participant.
             242          (2) (a) Voluntary deferrals and nonelective contributions shall be posted to the
             243      participant's account.
             244          (b) Participants may direct the investment of their account in the investment options
             245      established by the board and in accordance with federal and state law.
             246          (3) (a) The board may make rules and create plan documents to implement and
             247      administer this section.
             248          (b) The board may adopt rules under which a participant may put money into a defined
             249      contribution plan as permitted by federal law.
             250          (c) The office may reject any payments if the office determines the tax status of the
             251      systems, plans, or programs would be jeopardized by allowing the payment.
             252          (d) Costs of administration shall be paid as established by the board.
             253          (4) Voluntary deferrals and nonelective contributions may be invested separately or in


             254      conjunction with the Utah State Retirement Investment Fund.
             255          (5) The board or office may take actions necessary to protect the tax qualified status of
             256      the systems, plans, and programs under its control, including the movement of individuals from
             257      defined contribution plans to defined benefit systems or the creation of excess benefit plans
             258      authorized by federal law.
             259          (6) The office may, at its sole discretion, correct errors made in the administration of its
             260      defined contribution plans.
             261          Section 4. Section 49-12-203 is amended to read:
             262           49-12-203. Exclusions from membership in system.
             263          (1) The following employees are not eligible for service credit in this system:
             264          (a) An employee whose employment status is temporary in nature due to the nature or
             265      the type of work to be performed, provided that:
             266          (i) if the term of employment exceeds six months and the employee otherwise qualifies
             267      for service credit in this system, the participating employer shall report and certify to the office
             268      that the employee is a regular full-time employee effective the beginning of the seventh month of
             269      employment; or
             270          (ii) if an employee, previously terminated prior to being eligible for service credit in this
             271      system is reemployed within three months of termination by the same participating employer,
             272      the participating employer shall report and certify that the member is a regular full-time
             273      employee when the total of the periods of employment equals six months and the employee
             274      otherwise qualifies for service credit in this system.
             275          (b) (i) A current or future employee of a two-year or four-year college or university
             276      who holds, or is entitled to hold, under Section 49-12-204 , a retirement annuity contract with
             277      the Teachers' Insurance and Annuity Association of America or with any other public or private
             278      system, organization, or company during any period in which required contributions based on
             279      compensation have been paid on behalf of the employee by the employer.
             280          (ii) The employee, upon cessation of the participating employer contributions, shall
             281      immediately become eligible for service credit in this system.


             282          (c) An employee serving as an exchange employee from outside the state.
             283          (d) An executive department head of the state, a member of the State Tax Commission,
             284      the Public Service Commission, and a member of a full-time or part-time board or commission
             285      who files a formal request for exemption.
             286          (e) An employee of the Department of Workforce Services who is covered under
             287      another retirement system allowed under Title 35A, Chapter 4, Employment Security Act.
             288          (2) Upon filing a written request for exemption with the office, the following employees
             289      shall be exempt from coverage under this system:
             290          (a) a full-time student or the spouse of a full-time student and individuals employed in a
             291      trainee relationship;
             292          (b) an elected official;
             293          (c) an executive department head of the state [or a legislative director, senior executive
             294      employed by the governor's office], a member of the State Tax Commission, a member of the
             295      Public Service Commission, and a member of a full-time or part-time board or commission;
             296          [(d) an at-will employee who:]
             297          [(i) is a person appointed by the speaker of the House of Representatives, the House of
             298      Representatives minority leader, the president of the Senate, or the Senate minority leader; or]
             299          [(ii) is an employee of the Governor's Office of Economic Development who has been
             300      hired directly from a position not covered by a system;]
             301          (d) an employee of the Governor's Office of Planning and Budget;
             302          (e) an employee of the Governor's Office of Economic Development;
             303          (f) an employee of the Commission on Criminal and Juvenile Justice;
             304          (g) an employee of the Governor's Office;
             305          (h) an employee of the State Auditor's Office;
             306          (i) an employee of the State Treasurer's Office;
             307          (j) any other member who is permitted to make an election under Section 49-11-406 ;
             308          [(e)] (k) a person appointed as a city manager or chief city administrator or another
             309      person employed by a municipality, county, or other political subdivision, who is [not entitled to


             310      merit or civil service protection] an at-will employee; and
             311          [(f)] (l) an employee of an interlocal cooperative agency created under Title 11, Chapter
             312      13, Interlocal Cooperation Act, who is engaged in a specialized trade customarily provided
             313      through membership in a labor organization that provides retirement benefits to its members.
             314          (3) (a) Each participating employer shall prepare a list designating those positions
             315      eligible for exemption under Subsection (2).
             316          (b) An employee may not be exempted unless the employee is employed in a position
             317      designated by the participating employer.
             318          (4) (a) In accordance with this section, a municipality, county, or political subdivision
             319      may not exempt more than 50 positions or a number equal to 10% of the employees of the
             320      municipality, county, or political subdivision whichever is lesser.
             321          (b) A municipality, county, or political subdivision may exempt at least one regular
             322      full-time employee.
             323          (5) Each participating employer shall:
             324          (a) file employee exemptions annually with the office; and
             325          (b) update the employee exemptions in the event of any change.
             326          (6) The office may make rules to implement this section.
             327          Section 5. Section 49-13-203 is amended to read:
             328           49-13-203. Exclusions from membership in system.
             329          (1) The following employees are not eligible for service credit in this system:
             330          (a) An employee whose employment status is temporary in nature due to the nature or
             331      the type of work to be performed, provided that:
             332          (i) if the term of employment exceeds six months and the employee otherwise qualifies
             333      for service credit in this system, the participating employer shall report and certify to the office
             334      that the employee is a regular full-time employee effective the beginning of the seventh month of
             335      employment; and
             336          (ii) if an employee, previously terminated prior to becoming eligible for service credit in
             337      this system, is reemployed within three months of termination by the same participating


             338      employer, the participating employer shall report and certify to the office that the member is a
             339      regular full-time employee when the total of the periods of employment equals six months and
             340      the employee otherwise qualifies for service credit in this system.
             341          (b) (i) A current or future employee of a two-year or four-year college or university
             342      who holds, or is entitled to hold, under Section 49-13-204 , a retirement annuity contract with
             343      the Teachers' Insurance and Annuity Association of America or with any other public or private
             344      system, organization, or company during any period in which required contributions based on
             345      compensation have been paid on behalf of the employee by the employer.
             346          (ii) The employee, upon cessation of the participating employer contributions, shall
             347      immediately become eligible for service credit in this system.
             348          (c) An employee serving as an exchange employee from outside the state.
             349          (d) An executive department head of the state or a legislative director, senior executive
             350      employed by the governor's office, a member of the State Tax Commission, a member of the
             351      Public Service Commission, and a member of a full-time or part-time board or commission who
             352      files a formal request for exemption.
             353          (e) An employee of the Department of Workforce Services who is covered under
             354      another retirement system allowed under Title 35A, Chapter 4, Employment Security Act.
             355          (2) Upon filing a written request for exemption with the office, the following employees
             356      shall be exempt from coverage under this system:
             357          (a) a full-time student or the spouse of a full-time student and individuals employed in a
             358      trainee relationship;
             359          (b) an elected official;
             360          (c) an executive department head of the state [or a legislative director, senior executive
             361      employed by the governor's office], a member of the State Tax Commission, a member of the
             362      Public Service Commission, and a member of a full-time or part-time board or commission;
             363          [(d) an at-will employee who:]
             364          [(i) is a person appointed by the speaker of the House of Representatives, the House of
             365      Representatives minority leader, the president of the Senate, or the Senate minority leader; or]


             366          [(ii) is an employee of the Governor's Office of Economic Development who has been
             367      hired directly from a position not covered by a system;]
             368          (d) an employee of the Governor's Office of Planning and Budget;
             369          (e) an employee of the Governor's Office of Economic Development;
             370          (f) an employee of the Commission on Criminal and Juvenile Justice;
             371          (g) an employee of the Governor's Office;
             372          (h) an employee of the State Auditor's Office;
             373          (i) an employee of the State Treasurer's Office;
             374          (j) any other member who is permitted to make an election under Section 49-11-406 ;
             375          [(e)] (k) a person appointed as a city manager or chief city administrator or another
             376      person employed by a municipality, county, or other political subdivision, who is [not entitled to
             377      merit or civil service protection] an at-will employee; and
             378          [(f)] (l) an employee of an interlocal cooperative agency created under Title 11, Chapter
             379      13, Interlocal Cooperation Act, who is engaged in a specialized trade customarily provided
             380      through membership in a labor organization that provides retirement benefits to its members.
             381          (3) (a) Each participating employer shall prepare a list designating those positions
             382      eligible for exemption under Subsection (2).
             383          (b) An employee may not be exempted unless the employee is employed in a position
             384      designated by the participating employer.
             385          (4) (a) In accordance with this section, a municipality, county, or political subdivision
             386      may not exempt more than 50 positions or a number equal to 10% of the employees of the
             387      municipality, county, or political subdivision, whichever is lesser.
             388          (b) A municipality, county, or political subdivision may exempt at least one regular
             389      full-time employee.
             390          (5) Each participating employer shall:
             391          (a) file employee exemptions annually with the office; and
             392          (b) update the employee exemptions in the event of any change.
             393          (6) The office may make rules to implement this section.


             394          Section 6. Effective date.
             395          If approved by two-thirds of all the members elected to each house, this bill takes effect
             396      upon approval by the governor, or the day following the constitutional time limit of Utah
             397      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             398      the date of veto override.


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