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First Substitute H.B. 202

Senator Curtis S. Bramble proposes the following substitute bill:


             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 member's 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
             17      staff to elect to have the members' defined benefit balance transferred from the
             18      defined 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
             46      basis 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
             69      employer 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,
             93      Public 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
             118      funds.


             119          [(19)] (21) "Exempt employee" means an employee working for a participating
             120      employer:
             121          (a) who is not eligible for service credit under Section 49-12-203 , 49-13-203 ,
             122      49-14-203 , 49-15-203 , or 49-16-203 ; and
             123          (b) for whom a participating employer is not required to pay contributions or
             124      nonelective contributions.
             125          [(20)] (22) "Final average monthly salary" means the amount computed by dividing the
             126      compensation received during the final average salary period under each system by the number
             127      of months in the final average salary period.
             128          [(21)] (23) "Fund” means any fund created under this title for the purpose of paying
             129      benefits or costs of administering a system, plan, or program.
             130          [(22)] (24) (a) "Inactive member" means a member who has not been employed by a
             131      participating employer for a period of at least 120 days.
             132          (b) "Inactive member" does not include retirees.
             133          [(23)] (25) (a) "Member" means a person, except a retiree, with contributions on
             134      deposit with a system, the Utah Governors' and Legislators' Retirement Plan under Chapter 19,
             135      Utah Governors' and Legislators' Retirement Act, or with a terminated system.
             136          (b) "Member" also includes leased employees within the meaning of Section 414(n)(2)
             137      of the Internal Revenue Code, if the employees have contributions on deposit with the office.
             138      If leased employees constitute less than 20% of the participating employer's work force that is
             139      not highly compensated within the meaning of Section 414(n)(5)(c)(ii), Internal Revenue Code,
             140      "member" does not include leased employees covered by a plan described in Section 414(n)(5)
             141      of the federal Internal Revenue Code.
             142          [(24)] (26) "Member contributions" means the sum of the contributions paid to a
             143      system or the Utah Governors' and Legislators' Retirement Plan, including refund interest if
             144      allowed by a system, and which are made by:
             145          (a) the member; and
             146          (b) the participating employer on the member's behalf under Section 414(h) of the
             147      Internal Revenue Code.
             148          [(25)] (27) "Nonelective contribution" means an amount contributed by a participating
             149      employer into a participant's defined contribution account.


             150          [(26)] (28) "Office" means the Utah State Retirement Office.
             151          [(27)] (29) "Participant" means an individual with voluntary deferrals or nonelective
             152      contributions on deposit with the defined contribution plans administered under this title.
             153          [(28)] (30) "Participating employer" means a participating employer, as defined by
             154      Chapters 12, 13, 14, 15, 16, 17, and 18, or an agency financed in whole or in part by public
             155      funds which is participating in a system or plan as of January 1, 2002.
             156          [(29)] (31) "Pension" means monthly payments derived from participating employer
             157      contributions.
             158          [(30)] (32) "Plan" means the Utah Governors' and Legislators' Retirement Plan created
             159      by Chapter 19, Utah Governors' and Legislators' Retirement Act, or the defined contribution
             160      plans created under Section 49-11-801 .
             161          [(31)] (33) (a) "Political subdivision" means any local government entity, including
             162      cities, towns, counties, and school districts, but only if the subdivision is a juristic entity that is
             163      legally separate and distinct from the state and only if its employees are not by virtue of their
             164      relationship to the entity employees [or] of the state.
             165          (b) "Political subdivision" includes local districts, special service districts, or
             166      authorities created by the Legislature or by local governments, including the office.
             167          (c) "Political subdivision" does not include a project entity created under Title 11,
             168      Chapter 13, Interlocal Cooperation Act, that was formed prior to July 1, 1987.
             169          [(32)] (34) "Program" means the Public Employees' Insurance Program created under
             170      Chapter 20, Public Employees' Benefit and Insurance Program Act, or the Public Employees'
             171      Long-Term Disability program created under Chapter 21, Public Employees' Long-Term
             172      Disability Act.
             173          [(33)] (35) "Public funds" means those funds derived, either directly or indirectly, from
             174      public taxes or public revenue, dues or contributions paid or donated by the membership of the
             175      organization, used to finance an activity whose objective is to improve, on a nonprofit basis,
             176      the governmental, educational, and social programs and systems of the state or its political
             177      subdivisions.
             178          [(34)] (36) "Qualified defined contribution plan" means a defined contribution plan
             179      that meets the requirements of Section 401(k) or Section 403(b) of the Internal Revenue Code.
             180          [(35)] (37) "Refund interest" means the amount accrued on member contributions at a


             181      rate adopted by the board.
             182          [(36)] (38) "Retiree" means an individual who has qualified for an allowance under this
             183      title.
             184          [(37)] (39) "Retirement" means the status of an individual who has become eligible,
             185      applies for, and is entitled to receive an allowance under this title.
             186          [(38)] (40) "Retirement date" means the date selected by the member on which the
             187      member's retirement becomes effective with the office.
             188          [(39)] (41) "Service credit" means:
             189          (a) the period during which an employee is employed and compensated by a
             190      participating employer and meets the eligibility requirements for membership in a system or the
             191      Utah Governors' and Legislators' Retirement Plan, provided that any required contributions are
             192      paid to the office; and
             193          (b) periods of time otherwise purchasable under this title.
             194          [(40)] (42) "System" means the individual retirement systems created by Chapter 12,
             195      Public Employees' Contributory Retirement Act, Chapter 13, Public Employees'
             196      Noncontributory Retirement Act, Chapter 14, Public Safety Contributory Retirement Act,
             197      Chapter 15, Public Safety Noncontributory Retirement Act, Chapter 16, Firefighters'
             198      Retirement Act, Chapter 17, Judges' Contributory Retirement Act, Chapter 18, Judges'
             199      Noncontributory Retirement Act, and Chapter 19, Utah Governors' and Legislators' Retirement
             200      Act.
             201          [(41)] (43) "Voluntary deferrals" means an amount contributed by a participant into
             202      that participant's defined contribution account.
             203          Section 2. Section 49-11-406 is enacted to read:
             204          49-11-406. Governor's appointed executives and senior staff -- Appointed
             205      legislative employees -- Transfer of value of accrued defined benefit -- Procedures.
             206          (1) As used in this section:
             207          (a) "Defined benefit balance" means the total amount of the contributions made on
             208      behalf of a member to a defined benefit system plus refund interest.
             209          (b) "Senior staff" means an at-will employee who reports directly to an elected official,
             210      executive director, or director and includes a deputy director and other similar, at-will
             211      employee positions designated by the governor, the speaker of the House, or the president of


             212      the Senate and filed with the Department of Human Resource Management and the Utah State
             213      Retirement Office.
             214          (2) In accordance with this section and subject to federal law, a member who has
             215      service credit from a system may elect to be exempt from coverage under a defined benefit
             216      system and to have the member's defined benefit balance transferred from the defined benefit
             217      system or plan to a defined contribution plan in the member's own name if the member is:
             218          (a) the state auditor;
             219          (b) the state treasurer;
             220          (c) an appointed executive under Subsection 67-22-2 (1)(a);
             221          (d) an employee in the Governor's Office;
             222          (e) senior staff in the Governor's Office of Planning and Budget;
             223          (f) senior staff in the Governor's Office of Economic Development;
             224          (g) senior staff in the Commission on Criminal and Juvenile Justice;
             225          (h) a legislative employee appointed under Subsection 36-12-7 (3)(a); or
             226          (i) a legislative employee appointed by the speaker of the House of Representatives, the
             227      House of Representatives minority leader, the president of the Senate, or the Senate minority
             228      leader.
             229          (3) An election made under Subsection (2):
             230          (a) is final, and no right exists to make any further election;
             231          (b) is considered a request to be exempt from coverage under a defined benefits
             232      system; and
             233          (c) shall be made on forms provided by the office.
             234          (4) The board shall adopt rules to implement and administer this section.
             235          Section 3. Section 49-11-801 is amended to read:
             236           49-11-801. Defined contribution plans authorized -- Subject to federal and state
             237      laws -- Rules to implement this provision -- Costs of administration -- Limitations on
             238      eligibility -- Protection of tax status.
             239          (1) (a) The board [may] shall establish and administer defined contribution plans
             240      established under the Internal Revenue Code.
             241          (b) Voluntary deferrals and nonelective contributions shall be permitted according to
             242      the provisions of these plans as established by the board.


             243          (c) The defined contribution account balance is vested in the participant.
             244          (2) (a) Voluntary deferrals and nonelective contributions shall be posted to the
             245      participant's account.
             246          (b) Participants may direct the investment of their account in the investment options
             247      established by the board and in accordance with federal and state law.
             248          (3) (a) The board may make rules and create plan documents to implement and
             249      administer this section.
             250          (b) The board may adopt rules under which a participant may put money into a defined
             251      contribution plan as permitted by federal law.
             252          (c) The office may reject any payments if the office determines the tax status of the
             253      systems, plans, or programs would be jeopardized by allowing the payment.
             254          (d) Costs of administration shall be paid as established by the board.
             255          (4) Voluntary deferrals and nonelective contributions may be invested separately or in
             256      conjunction with the Utah State Retirement Investment Fund.
             257          (5) The board or office may take actions necessary to protect the tax qualified status of
             258      the systems, plans, and programs under its control, including the movement of individuals from
             259      defined contribution plans to defined benefit systems or the creation of excess benefit plans
             260      authorized by federal law.
             261          (6) The office may, at its sole discretion, correct errors made in the administration of
             262      its defined contribution plans.
             263          Section 4. Section 49-12-203 is amended to read:
             264           49-12-203. Exclusions from membership in system.
             265          (1) The following employees are not eligible for service credit in this system:
             266          (a) An employee whose employment status is temporary in nature due to the nature or
             267      the type of work to be performed, provided that:
             268          (i) if the term of employment exceeds six months and the employee otherwise qualifies
             269      for service credit in this system, the participating employer shall report and certify to the office
             270      that the employee is a regular full-time employee effective the beginning of the seventh month
             271      of employment; or
             272          (ii) if an employee, previously terminated prior to being eligible for service credit in
             273      this system is reemployed within three months of termination by the same participating


             274      employer, the participating employer shall report and certify that the member is a regular
             275      full-time employee when the total of the periods of employment equals six months and the
             276      employee otherwise qualifies for service credit in this system.
             277          (b) (i) A current or future employee of a two-year or four-year college or university
             278      who holds, or is entitled to hold, under Section 49-12-204 , a retirement annuity contract with
             279      the Teachers' Insurance and Annuity Association of America or with any other public or private
             280      system, organization, or company during any period in which required contributions based on
             281      compensation have been paid on behalf of the employee by the employer.
             282          (ii) The employee, upon cessation of the participating employer contributions, shall
             283      immediately become eligible for service credit in this system.
             284          (c) An employee serving as an exchange employee from outside the state.
             285          (d) An executive department head of the state, a member of the State Tax Commission,
             286      the Public Service Commission, and a member of a full-time or part-time board or commission
             287      who files a formal request for exemption.
             288          (e) An employee of the Department of Workforce Services who is covered under
             289      another retirement system allowed under Title 35A, Chapter 4, Employment Security Act.
             290          (2) Upon filing a written request for exemption with the office, the following
             291      employees shall be exempt from coverage under this system:
             292          (a) a full-time student or the spouse of a full-time student and individuals employed in
             293      a trainee relationship;
             294          (b) an elected official;
             295          (c) an executive department head of the state [or a legislative director, senior executive
             296      employed by the governor's office], a member of the State Tax Commission, a member of the
             297      Public Service Commission, and a member of a full-time or part-time board or commission;
             298          [(d) an at-will employee who:]
             299          [(i) is a person appointed by the speaker of the House of Representatives, the House of
             300      Representatives minority leader, the president of the Senate, or the Senate minority leader; or]
             301          [(ii) is an employee of the Governor's Office of Economic Development who has been
             302      hired directly from a position not covered by a system;]
             303          (d) an employee of the Governor's Office of Planning and Budget;
             304          (e) an employee of the Governor's Office of Economic Development;


             305          (f) an employee of the Commission on Criminal and Juvenile Justice;
             306          (g) an employee of the Governor's Office;
             307          (h) an employee of the State Auditor's Office;
             308          (i) an employee of the State Treasurer's Office;
             309          (j) any other member who is permitted to make an election under Section 49-11-406 ;
             310          [(e)] (k) a person appointed as a city manager or chief city administrator or another
             311      person employed by a municipality, county, or other political subdivision, who is [not entitled
             312      to merit or civil service protection] an at-will employee; and
             313          [(f)] (l) an employee of an interlocal cooperative agency created under Title 11,
             314      Chapter 13, Interlocal Cooperation Act, who is engaged in a specialized trade customarily
             315      provided through membership in a labor organization that provides retirement benefits to its
             316      members.
             317          (3) (a) Each participating employer shall prepare a list designating those positions
             318      eligible for exemption under Subsection (2).
             319          (b) An employee may not be exempted unless the employee is employed in a position
             320      designated by the participating employer.
             321          (4) (a) In accordance with this section, a municipality, county, or political subdivision
             322      may not exempt more than 50 positions or a number equal to 10% of the employees of the
             323      municipality, county, or political subdivision whichever is lesser.
             324          (b) A municipality, county, or political subdivision may exempt at least one regular
             325      full-time employee.
             326          (5) Each participating employer shall:
             327          (a) file employee exemptions annually with the office; and
             328          (b) update the employee exemptions in the event of any change.
             329          (6) The office may make rules to implement this section.
             330          Section 5. Section 49-13-203 is amended to read:
             331           49-13-203. Exclusions from membership in system.
             332          (1) The following employees are not eligible for service credit in this system:
             333          (a) An employee whose employment status is temporary in nature due to the nature or
             334      the type of work to be performed, provided that:
             335          (i) if the term of employment exceeds six months and the employee otherwise qualifies


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


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


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


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