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First Substitute H.B. 24

Representative Don L. Ipson proposes the following substitute bill:


             1     
UTAH RETIREMENT SYSTEM AMENDMENTS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Don L. Ipson

             5     
Senate Sponsor: Todd Weiler

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Utah State Retirement and Insurance Benefit Act by amending its
             10      provisions.
             11      Highlighted Provisions:
             12          This bill:
             13          .    amends definitions;
             14          .    amends retiree reemployment provisions by prohibiting a participating employer
             15      from making a retirement related contribution that exceeds the normal cost rate for
             16      all reemployeed retirees, not just full-time employees;
             17          .    increases the amount that is required to be corrected in payments made by the office
             18      if an error is discovered that results in a modification of the benefit amount;
             19          .    amends provisions related to benefit information forms that must be signed by each
             20      employee;
             21          .    allows the retirement office to communicate with members, beneficiaries,
             22      participating employers, and others through electronic means;
             23          .    clarifies that an employee of an institution of higher education who participates in
             24      other retirement systems is excluded from membership in the Utah Retirement
             25      Systems until the participating employer ceases employer contributions;


             26          .    repeals provisions that require death benefits to be provided through purchase of a
             27      group insurance policy for Tier I public employees and for Tier II employees;
             28          .    expands the offsets used in determining long-term disability benefits to include any
             29      benefit earned for the same period of disability as the benefit was based;
             30          .    clarifies the date of termination of long-term disability benefits for exempted
             31      employees and volunteer firefighters;
             32          .    establishes investment requirements for employer contributions made on behalf of
             33      certain employees who are exempt from the four-year vesting requirements in the
             34      Tier II systems;
             35          .    provides that employees who are exempt from the four-year vesting requirement in
             36      the Tier II systems and who terminate before the one-year election period are
             37      entitled to all employer contributions and associated investment gains and losses;
             38      and
             39          .    makes technical changes.
             40      Money Appropriated in this Bill:
             41          None
             42      Other Special Clauses:
             43          None
             44      Utah Code Sections Affected:
             45      AMENDS:
             46          49-11-102, as last amended by Laws of Utah 2012, Chapter 298
             47          49-11-504, as last amended by Laws of Utah 2011, Chapter 439
             48          49-11-607, as last amended by Laws of Utah 2003, Chapter 240
             49          49-11-612, as last amended by Laws of Utah 2012, Chapter 298
             50          49-11-616, as last amended by Laws of Utah 2012, Chapter 298
             51          49-11-617, as renumbered and amended by Laws of Utah 2002, Chapter 250
             52          49-12-203, as last amended by Laws of Utah 2009, Chapter 51
             53          49-12-204, as last amended by Laws of Utah 2010, Chapter 158
             54          49-12-501, as renumbered and amended by Laws of Utah 2002, Chapter 250
             55          49-13-203, as last amended by Laws of Utah 2010, Chapter 280
             56          49-13-204, as last amended by Laws of Utah 2010, Chapter 158


             57          49-13-501, as renumbered and amended by Laws of Utah 2002, Chapter 250
             58          49-21-102, as last amended by Laws of Utah 2012, Chapter 55
             59          49-21-402, as last amended by Laws of Utah 2012, Chapter 298
             60          49-21-403, as last amended by Laws of Utah 2011, Chapters 366 and 439
             61          49-22-203, as enacted by Laws of Utah 2010, Chapter 266
             62          49-22-401, as last amended by Laws of Utah 2012, Chapter 298
             63          49-22-501, as last amended by Laws of Utah 2011, Chapter 439
             64          49-23-401, as last amended by Laws of Utah 2012, Chapter 298
             65          49-23-501, as last amended by Laws of Utah 2011, Chapter 439
             66     
             67      Be it enacted by the Legislature of the state of Utah:
             68          Section 1. Section 49-11-102 is amended to read:
             69           49-11-102. Definitions.
             70          As used in this title:
             71          (1) (a) "Active member" means a member who is employed or who has been employed
             72      by a participating employer within the previous 120 days.
             73          (b) "Active member" does not include retirees.
             74          (2) "Actuarial equivalent" means a benefit of equal value when computed upon the
             75      basis of mortality tables as recommended by the actuary and adopted by the executive director,
             76      including regular interest.
             77          (3) "Actuarial interest rate" means the interest rate as recommended by the actuary and
             78      adopted by the board upon which the funding of system costs and benefits are computed.
             79          (4) (a) "Agency" means:
             80          (i) a department, division, agency, office, authority, commission, board, institution, or
             81      hospital of the state;
             82          (ii) a county, municipality, school district, local district, or special service district;
             83          (iii) a state college or university; or
             84          (iv) any other participating employer.
             85          (b) "Agency" does not include an entity listed under Subsection (4)(a)(i) that is a
             86      subdivision of another entity listed under Subsection (4)(a).
             87          (5) "Allowance" or "retirement allowance" means the pension plus the annuity,


             88      including any cost of living or other authorized adjustments to the pension and annuity.
             89          (6) "Alternate payee" means a member's former spouse or family member eligible to
             90      receive payments under a Domestic Relations Order in compliance with Section 49-11-612 .
             91          (7) "Amortization rate" means the board certified percent of salary required to amortize
             92      the unfunded actuarial accrued liability in accordance with policies established by the board
             93      upon the advice of the actuary.
             94          (8) "Annuity" means monthly payments derived from member contributions.
             95          (9) "Appointive officer" means an employee appointed to a position for a definite and
             96      fixed term of office by official and duly recorded action of a participating employer whose
             97      appointed position is designated in the participating employer's charter, creation document, or
             98      similar document, and:
             99          (a) who earns $500 or more per month, indexed as of January 1, 1990, as provided in
             100      Section 49-12-407 for a Tier I appointive officer; and
             101          (b) whose appointive position is full-time as certified by the participating employer for
             102      a Tier II appointive officer.
             103          (10) (a) "At-will employee" means a person who is employed by a participating
             104      employer and:
             105          (i) who is not entitled to merit or civil service protection and is generally considered
             106      exempt from a participating employer's merit or career service personnel systems;
             107          (ii) whose on-going employment status is entirely at the discretion of the person's
             108      employer; or
             109          (iii) who may be terminated without cause by a designated supervisor, manager, or
             110      director.
             111          (b) "At-will employee" does not include a career employee who has obtained a
             112      reasonable expectation of continued employment based on inclusion in a participating
             113      employer's merit system, civil service protection system, or career service personnel systems,
             114      policies, or plans.
             115          (11) "Beneficiary" means any person entitled to receive a payment under this title
             116      through a relationship with or designated by a member, participant, covered individual, or
             117      alternate payee of a defined contribution plan.
             118          (12) "Board" means the Utah State Retirement Board established under Section


             119      49-11-202 .
             120          (13) "Board member" means a person serving on the Utah State Retirement Board as
             121      established under Section 49-11-202 .
             122          (14) "Certified contribution rate" means the board certified percent of salary paid on
             123      behalf of an active member to the office to maintain the system on a financially and actuarially
             124      sound basis.
             125          (15) "Contributions" means the total amount paid by the participating employer and the
             126      member into a system or to the Utah Governors' and Legislators' Retirement Plan under
             127      Chapter 19, Utah Governors' and Legislators' Retirement Act.
             128          (16) "Council member" means a person serving on the Membership Council
             129      established under Section 49-11-202 .
             130          (17) "Covered individual" means any individual covered under Chapter 20, Public
             131      Employees' Benefit and Insurance Program Act.
             132          (18) "Current service" means covered service [as defined in Chapters 12, 13, 14, 15,
             133      16, 17, 18, and 19.] under:
             134          (a) Chapter 12, Public Employees' Contributory Retirement Act;
             135          (b) Chapter 13, Public Employees' Noncontributory Retirement Act;
             136          (c) Chapter 14, Public Safety Contributory Retirement Act;
             137          (d) Chapter 15, Public Safety Noncontributory Retirement Act;
             138          (e) Chapter 16, Firefighters' Retirement Act;
             139          (f) Chapter 17, Judges' Contributory Retirement Act;
             140          (g) Chapter 18, Judges' Noncontributory Retirement Act;
             141          (h) Chapter 19, Governors' and Legislators' Retirement Act;
             142          (i) Chapter 22, New Public Employees' Tier II Contributory Retirement Act; or
             143          (j) Chapter 23, New Public Safety and Firefighter Tier II Contributory Retirement Act.
             144          (19) "Defined benefit" or "defined benefit plan" or "defined benefit system" means a
             145      system or plan offered under this title to provide a specified allowance to a retiree or a retiree's
             146      spouse after retirement that is based on a set formula involving one or more of the following
             147      factors:
             148          (a) years of service;
             149          (b) final average monthly salary; or


             150          (c) a retirement multiplier.
             151          (20) "Defined contribution" or "defined contribution plan" means any defined
             152      contribution plan or deferred compensation plan authorized under the Internal Revenue Code
             153      and administered by the board.
             154          (21) "Educational institution" means a political subdivision or instrumentality of the
             155      state or a combination thereof primarily engaged in educational activities or the administration
             156      or servicing of educational activities, including:
             157          (a) the State Board of Education and its instrumentalities;
             158          (b) any institution of higher education and its branches;
             159          (c) any school district and its instrumentalities;
             160          (d) any vocational and technical school; and
             161          (e) any entity arising out of a consolidation agreement between entities described under
             162      this Subsection (21).
             163          (22) "Elected official":
             164          (a) means a person elected to a state office, county office, municipal office, school
             165      board or school district office, local district office, or special service district office;
             166          (b) includes a person who is appointed to serve an unexpired term of office described
             167      under Subsection (22)(a); and
             168          (c) does not include a judge or justice who is subject to a retention election under
             169      Section 20A-12-201 .
             170          (23) (a) "Employer" means any department, educational institution, or political
             171      subdivision of the state eligible to participate in a government-sponsored retirement system
             172      under federal law.
             173          (b) "Employer" may also include an agency financed in whole or in part by public
             174      funds.
             175          (24) "Exempt employee" means an employee working for a participating employer:
             176          (a) who is not eligible for service credit under Section 49-12-203 , 49-13-203 ,
             177      49-14-203 , 49-15-203 , or 49-16-203 ; and
             178          (b) for whom a participating employer is not required to pay contributions or
             179      nonelective contributions.
             180          (25) "Final average monthly salary" means the amount computed by dividing the


             181      compensation received during the final average salary period under each system by the number
             182      of months in the final average salary period.
             183          (26) "Fund" means any fund created under this title for the purpose of paying benefits
             184      or costs of administering a system, plan, or program.
             185          (27) (a) "Inactive member" means a member who has not been employed by a
             186      participating employer for a period of at least 120 days.
             187          (b) "Inactive member" does not include retirees.
             188          (28) (a) "Initially entering" means hired, appointed, or elected for the first time, in
             189      current service as a member with any participating employer.
             190          (b) "Initially entering" does not include a person who has any prior service credit on
             191      file with the office.
             192          (c) "Initially entering" includes an employee of a participating employer, except for an
             193      employee that is not eligible under a system or plan under this title, who:
             194          (i) does not have any prior service credit on file with the office;
             195          (ii) is covered by a retirement plan other than a retirement plan created under this title;
             196      and
             197          (iii) moves to a position with a participating employer that is covered by this title.
             198          (29) "Institution of higher education" means an institution described in Section
             199      53B-1-102 .
             200          [(29)] (30) (a) "Member" means a person, except a retiree, with contributions on
             201      deposit with a system, the Utah Governors' and Legislators' Retirement Plan under Chapter 19,
             202      Utah Governors' and Legislators' Retirement Act, or with a terminated system.
             203          (b) "Member" also includes leased employees within the meaning of Section 414(n)(2)
             204      of the Internal Revenue Code, if the employees have contributions on deposit with the office.
             205      If leased employees constitute less than 20% of the participating employer's work force that is
             206      not highly compensated within the meaning of Section 414(n)(5)(c)(ii), Internal Revenue Code,
             207      "member" does not include leased employees covered by a plan described in Section 414(n)(5)
             208      of the federal Internal Revenue Code.
             209          [(30)] (31) "Member contributions" means the sum of the contributions paid to a
             210      system or the Utah Governors' and Legislators' Retirement Plan, including refund interest if
             211      allowed by a system, and which are made by:


             212          (a) the member; and
             213          (b) the participating employer on the member's behalf under Section 414(h) of the
             214      Internal Revenue Code.
             215          [(31)] (32) "Nonelective contribution" means an amount contributed by a participating
             216      employer into a participant's defined contribution account.
             217          [(32)] (33) "Normal cost rate":
             218          (a) means the percent of salary that is necessary for a retirement system that is fully
             219      funded to maintain its fully funded status; and
             220          (b) is determined by the actuary based on the assumed rate of return established by the
             221      board.
             222          [(33)] (34) "Office" means the Utah State Retirement Office.
             223          [(34)] (35) "Participant" means an individual with voluntary deferrals or nonelective
             224      contributions on deposit with the defined contribution plans administered under this title.
             225          [(35)] (36) "Participating employer" means a participating employer, as defined by
             226      Chapter 12, Public Employees' Contributory Retirement Act, Chapter 13, Public Employees'
             227      Noncontributory Retirement Act, Chapter 14, Public Safety Contributory Retirement Act,
             228      Chapter 15, Public Safety Noncontributory Retirement Act, Chapter 16, Firefighters'
             229      Retirement Act, Chapter 17, Judges' Contributory Retirement Act, and Chapter 18, Judges'
             230      Noncontributory Retirement Act, or an agency financed in whole or in part by public funds
             231      which is participating in a system or plan as of January 1, 2002.
             232          [(36)] (37) "Pension" means monthly payments derived from participating employer
             233      contributions.
             234          [(37)] (38) "Plan" means the Utah Governors' and Legislators' Retirement Plan created
             235      by Chapter 19, Utah Governors' and Legislators' Retirement Act, the New Public Employees'
             236      Tier II Defined Contribution Plan created by Chapter 22, Part 4, Tier II Defined Contribution
             237      Plan, the New Public Safety and Firefighter Tier II Defined Contribution Plan created by
             238      Chapter 23, Part 4, Tier II Defined Contribution Plan, or the defined contribution plans created
             239      under Section 49-11-801 .
             240          [(38)] (39) (a) "Political subdivision" means any local government entity, including
             241      cities, towns, counties, and school districts, but only if the subdivision is a juristic entity that is
             242      legally separate and distinct from the state and only if its employees are not by virtue of their


             243      relationship to the entity employees of the state.
             244          (b) "Political subdivision" includes local districts, special service districts, or
             245      authorities created by the Legislature or by local governments, including the office.
             246          (c) "Political subdivision" does not include a project entity created under Title 11,
             247      Chapter 13, Interlocal Cooperation Act, that was formed prior to July 1, 1987.
             248          [(39)] (40) "Program" means the Public Employees' Insurance Program created under
             249      Chapter 20, Public Employees' Benefit and Insurance Program Act, or the Public Employees'
             250      Long-Term Disability program created under Chapter 21, Public Employees' Long-Term
             251      Disability Act.
             252          [(40)] (41) "Public funds" means those funds derived, either directly or indirectly, from
             253      public taxes or public revenue, dues or contributions paid or donated by the membership of the
             254      organization, used to finance an activity whose objective is to improve, on a nonprofit basis,
             255      the governmental, educational, and social programs and systems of the state or its political
             256      subdivisions.
             257          [(41)] (42) "Qualified defined contribution plan" means a defined contribution plan
             258      that meets the requirements of Section 401(k) or Section 403(b) of the Internal Revenue Code.
             259          [(42)] (43) (a) "Reemployed," "reemploy," or "reemployment" means work or service
             260      performed after retirement, in exchange for compensation.
             261          (b) Reemployment includes work or service performed on a contract if the retiree is:
             262          (i) listed as the contractor; or
             263          (ii) an owner, partner, or principle of the contractor.
             264          [(43)] (44) "Refund interest" means the amount accrued on member contributions at a
             265      rate adopted by the board.
             266          [(44)] (45) "Retiree" means an individual who has qualified for an allowance under this
             267      title.
             268          [(45)] (46) "Retirement" means the status of an individual who has become eligible,
             269      applies for, and is entitled to receive an allowance under this title.
             270          [(46)] (47) "Retirement date" means the date selected by the member on which the
             271      member's retirement becomes effective with the office.
             272          [(47)] (48) "Retirement related contribution":
             273          (a) means any employer payment to any type of retirement plan or program made on


             274      behalf of an employee; and
             275          (b) does not include Social Security payments or Social Security substitute payments
             276      made on behalf of an employee.
             277          [(48)] (49) "Service credit" means:
             278          (a) the period during which an employee is employed and compensated by a
             279      participating employer and meets the eligibility requirements for membership in a system or the
             280      Utah Governors' and Legislators' Retirement Plan, provided that any required contributions are
             281      paid to the office; and
             282          (b) periods of time otherwise purchasable under this title.
             283          [(49)] (50) "System" means the individual retirement systems created by Chapter 12,
             284      Public Employees' Contributory Retirement Act, Chapter 13, Public Employees'
             285      Noncontributory Retirement Act, Chapter 14, Public Safety Contributory Retirement Act,
             286      Chapter 15, Public Safety Noncontributory Retirement Act, Chapter 16, Firefighters'
             287      Retirement Act, Chapter 17, Judges' Contributory Retirement Act, Chapter 18, Judges'
             288      Noncontributory Retirement Act, and Chapter 19, Utah Governors' and Legislators' Retirement
             289      Act, the defined benefit portion of the Tier II Hybrid Retirement System under Chapter 22, Part
             290      3, Tier II Hybrid Retirement System, and the defined benefit portion of the Tier II Hybrid
             291      Retirement System under Chapter 23, Part 3, Tier II Hybrid Retirement System.
             292          [(50)] (51) "Tier I" means a system or plan under this title for which an employee is
             293      eligible to participate if the employee initially enters regular full-time employment before July
             294      1, 2011.
             295          [(51)] (52) (a) "Tier II" means a system or plan under this title provided in lieu of a
             296      Tier I system or plan for which an employee is eligible to participate, if the employee initially
             297      enters regular full-time employment on or after July 1, 2011.
             298          (b) "Tier II" includes:
             299          (i) the Tier II hybrid system established under:
             300          (A) Chapter 22, Part 3, Tier II Hybrid Retirement System; or
             301          (B) Chapter 23, Part 3, Tier II Hybrid Retirement System; and
             302          (ii) the Tier II Defined Contribution Plan (Tier II DC Plan) established under:
             303          (A) Chapter 22, Part 4, Tier II Defined Contribution Plan; or
             304          (B) Chapter 23, Part 4, Tier II Defined Contribution Plan.


             305          [(52)] (53) "Unfunded actuarial accrued liability" or "UAAL":
             306          (a) is determined by the system's actuary; and
             307          (b) means the excess, if any, of the accrued liability of a retirement system over the
             308      actuarial value of its assets.
             309          [(53)] (54) "Voluntary deferrals" means an amount contributed by a participant into
             310      that participant's defined contribution account.
             311          Section 2. Section 49-11-504 is amended to read:
             312           49-11-504. Reemployment of a retiree -- Restrictions.
             313          (1) As used in this section, "full-time" means:
             314          (a) employment requiring 20 or more hours of work per week; or
             315          (b) at least a half-time teaching contract.
             316          (2) (a) Except for the provisions of Subsection (3), the provisions of this section do not
             317      apply to a person who is subject to the provisions of Section 49-11-505 .
             318          (b) This section does not apply to employment as an elected official.
             319          (3) A person who is not a retiree under this title is not subject to any postretirement
             320      restrictions under this title.
             321          (4) A retiree of an agency who is reemployed may not earn additional service credit, if
             322      the retiree is reemployed by:
             323          (a) a different agency; or
             324          (b) the same agency after six months from the retirement date.
             325          (5) A retiree of an agency who is reemployed on a full-time basis by the same agency
             326      within six months of the date of retirement is subject to the following:
             327          (a) the agency shall immediately notify the office;
             328          (b) the office shall cancel the retiree's allowance and reinstate the retiree to active
             329      member status;
             330          (c) the allowance cancellation and reinstatement to active member status is effective on
             331      the first day of the month following the date of reemployment;
             332          (d) the reinstated retiree may not retire again with a recalculated benefit for a two-year
             333      period from the date of cancellation of the original allowance, and if the retiree retires again
             334      within the two-year period, the original allowance shall be resumed; and
             335          (e) a reinstated retiree retiring after the two-year period shall be credited with the


             336      service credit in the retiree's account at the time of the first retirement and from that time shall
             337      be treated as a member of a system, including the accrual of additional service credit, but
             338      subject to recalculation of the allowance under Subsection (9).
             339          (6) A retiree of an agency who is reemployed by the same agency within six months of
             340      retirement on a less than full-time basis by the same agency is subject to the following:
             341          (a) the retiree may earn, without penalty, compensation from that position which is not
             342      in excess of the exempt earnings permitted by Social Security;
             343          (b) if a retiree receives compensation in a calendar year in excess of the Social Security
             344      limitation, 25% of the allowance shall be suspended for the remainder of the six-month period;
             345          (c) the effective date of a suspension and reinstatement of an allowance shall be set by
             346      the office; and
             347          (d) any suspension of a retiree's allowance under this Subsection (6) shall be applied
             348      on a calendar year basis.
             349          (7) For six months immediately following retirement, the retiree and participating
             350      employer who are subject to Subsection (6) shall:
             351          (a) maintain an accurate record of gross earnings in employment;
             352          (b) report the gross earnings at least monthly to the office;
             353          (c) immediately notify the office in writing of any postretirement earnings under
             354      Subsection (6); and
             355          (d) immediately notify the office in writing whether postretirement earnings equal or
             356      exceed the exempt earnings under Subsection (6).
             357          (8) (a) If a participating employer hires a retiree, [on a full-time basis, who may not
             358      earn additional service credit under Subsection (4),] the participating employer may not make a
             359      retirement related contribution in an amount that exceeds the normal cost rate as defined under
             360      Section 49-11-102 on behalf of the retiree under Subsections (8)(b) and (c).
             361          (b) The contributions under Subsection (8)(a) are not required, but if paid, shall be paid
             362      to a retiree-designated:
             363          (i) qualified defined contribution plan administered by the board, if the participating
             364      employer participates in a qualified defined contribution plan administered by the board; or
             365          (ii) qualified defined contribution plan offered by the participating employer if the
             366      participating employer does not participate in a qualified defined contribution plan


             367      administered by the board.
             368          (c) Notwithstanding the provisions of Subsection (8)(b), if an employer is not
             369      participating in a qualified defined contribution plan administered by the board, the employer
             370      may elect to pay the contributions under Subsection (8)(a) to a deferred compensation plan
             371      administered by the board.
             372          (9) A retiree who has returned to work, accrued additional service credit, and again
             373      retires shall have the retiree's allowance recalculated using:
             374          (a) the formula in effect at the date of the retiree's original retirement for all service
             375      credit accrued prior to that date; and
             376          (b) the formula in effect at the date of the subsequent retirement for all service credit
             377      accrued between the first and subsequent retirement dates.
             378          (10) The board may make rules to implement this section.
             379          Section 3. Section 49-11-607 is amended to read:
             380           49-11-607. Determination of benefits -- Errors in records or calculations --
             381      Correction of errors by the office.
             382          (1) After the retirement date, which shall be set by a member in the member's
             383      application for retirement, no alteration, addition, or cancellation of a benefit may be made
             384      except as provided in Subsections (2), (3), and (4) or other law.
             385          (2) (a) Errors in the records or in the calculations of the office which result in an
             386      incorrect benefit to any member, retiree, participant, covered individual, alternate payee, or
             387      beneficiary shall be corrected by the office if the correction results in a modification of the
             388      benefit amount of [$1] $5 or more.
             389          (b) Future payments shall be made to any member, retiree, participant, covered
             390      individual, alternate payee, or beneficiary to:
             391          (i) pay the benefit to which the member or beneficiary was entitled; or
             392          (ii) recover any overpayment.
             393          (3) (a) Errors in the records or calculation of a participating employer which result in
             394      an incorrect benefit to a member, retiree, participant, covered individual, alternate payee, or
             395      beneficiary shall be corrected by the participating employer.
             396          (b) If insufficient employer contributions have been received by the office, the
             397      participating employer shall pay any delinquent employer contributions, plus interest under


             398      Section 49-11-503 , required by the office to maintain the system, plan, or program affected on
             399      an actuarially sound basis.
             400          (c) If excess contributions have been received by the office, the contributions shall be
             401      refunded to the participating employer or member which paid the contributions.
             402          (4) If a dispute exists between a participating employer and a member at the time of the
             403      member's retirement which will affect the member's benefit calculation, and notice of the
             404      dispute is given to the office prior to the calculation of a member's benefit, the benefit may be
             405      paid based on the member's retirement date and the records available and then recalculated
             406      upon settlement of the dispute.
             407          Section 4. Section 49-11-612 is amended to read:
             408           49-11-612. Domestic relations order benefits -- Nonassignability of benefits or
             409      payments -- Exemption from legal process.
             410          (1) As used in this section, "domestic relations order benefits" means:
             411          (a) an allowance;
             412          (b) a defined contribution account established under:
             413          (i) Part 8, Defined Contribution Plans;
             414          (ii) Chapter 22, New Public Employees' Tier II Contributory Retirement Act; or
             415          (iii) Chapter 23, New Public Safety and Firefighter Tier II Contributory Retirement
             416      Act;
             417          (c) a continuing monthly death benefit established under:
             418          (i) Chapter 14, Part 5, Death Benefit;
             419          (ii) Chapter 15, Part 5, Death Benefit;
             420          (iii) Chapter 16, Part 5, Death Benefit;
             421          (iv) Chapter 17, Part 5, Death Benefit;
             422          (v) Chapter 18, Part 5, Death Benefit; or
             423          (vi) Chapter 19, Part 5, Death Benefit;
             424          (d) a lump sum death benefit provided [under a group insurance policy] under:
             425          (i) Chapter 12, Part 5, Death Benefit;
             426          (ii) Chapter 13, Part 5, Death Benefit;
             427          (iii) Chapter 22, Part 5, Death Benefit; or
             428          (iv) Chapter 23, Part 5, Death Benefit; or


             429          (e) a refund of member contributions upon termination.
             430          (2) Except as provided in Subsections (3), (4), and (5), the right of any member, retiree,
             431      participant, covered individual, or beneficiary to any retirement benefit, retirement payment, or
             432      any other retirement right accrued or accruing under this title and the assets of the funds created
             433      by this title are not subject to alienation or assignment by the member, retiree, participant, or
             434      their beneficiaries and are not subject to attachment, execution, garnishment, or any other legal
             435      or equitable process.
             436          (3) The office may, upon the request of the retiree, deduct from the retiree's allowance
             437      insurance premiums or other dues payable on behalf of the retiree, but only to those entities
             438      that have received the deductions prior to February 1, 2002.
             439          (4) (a) The office shall provide for the division of domestic relations order benefits
             440      with former spouses and family members under an order of a court of competent jurisdiction
             441      with respect to domestic relations matters on file with the office.
             442          (b) The court order shall specify the manner in which the domestic relations order
             443      benefits shall be partitioned, whether as a fixed amount or as a percentage of the benefit.
             444          (c) Domestic relations order benefits split under a domestic relations order are subject
             445      to the following:
             446          (i) the amount to be paid or the period for which payments shall be made under the
             447      original domestic relations order may not be altered if the alteration affects the actuarial
             448      calculation of the allowance;
             449          (ii) payments to an alternate payee shall begin at the time the member or beneficiary
             450      begins receiving payments; and
             451          (iii) the alternate payee shall receive payments in the same form as allowances received
             452      by the member or beneficiary.
             453          (d) To be valid, a court order under this section must be received by the office within
             454      12 months of the death of the member.
             455          (5) In accordance with federal law, the board may deduct the required amount from any
             456      benefit, payment, or other right accrued or accruing to any member or beneficiary of a system,
             457      plan, or program under this title to offset any amount that member or beneficiary owes to a
             458      system, plan, or program administered by the board.
             459          (6) The board shall make rules to implement this section.


             460          Section 5. Section 49-11-616 is amended to read:
             461           49-11-616. Benefits information.
             462          (1) (a) The office shall provide [written general information] a form to each
             463      participating employer [concerning] providing:
             464          (i) general information on the benefits available under this title[.]; and
             465          (ii) a place for each employee to sign verifying that the employee has received the
             466      form.
             467          (2) (a) A participating employer shall provide the [information] form under Subsection
             468      (1) to each eligible employee immediately upon:
             469          (i) termination of service;
             470          (ii) leave of absence;
             471          (iii) commencement of long-term disability benefits; or
             472          (iv) retirement.
             473          (b) When received from a participating employer under this section, an employee shall
             474      sign the form under Subsection (1) verifying that the employee has received it.
             475          [(b)] (c) (i) Each participating employer shall maintain the records necessary to
             476      demonstrate that each employee has received the [information outlined in] form under
             477      Subsection (1).
             478          (ii) The records shall be made available to the office upon request.
             479          [(3) (a) The office shall provide each participating employer with a form to be signed
             480      by each employee which verifies that the employee has been given the information required by
             481      this section.]
             482          [(b) A copy of the signed form shall be immediately forwarded to the office by the
             483      participating employer or the employee.]
             484          Section 6. Section 49-11-617 is amended to read:
             485           49-11-617. Original documents.
             486          (1) At the reasonable discretion of the office, any document relating to this title may be
             487      treated as an original, whether created by photocopy, facsimile, e-mail, electronic transmission,
             488      imaging, or other technology.
             489          (2) The office may communicate with participating employers, members, beneficiaries,
             490      and others through electronic means as determined appropriate by the office.


             491          Section 7. Section 49-12-203 is amended to read:
             492           49-12-203. Exclusions from membership in system.
             493          (1) The following employees are not eligible for service credit in this system:
             494          (a) subject to the requirements of Subsection (2), an employee whose employment
             495      status is temporary in nature due to the nature or the type of work to be performed[, provided
             496      that:];
             497          [(i) if the term of employment exceeds six months and the employee otherwise
             498      qualifies for service credit in this system, the participating employer shall report and certify to
             499      the office that the employee is a regular full-time employee effective the beginning of the
             500      seventh month of employment; or]
             501          [(ii) if an employee, previously terminated prior to being eligible for service credit in
             502      this system is reemployed within three months of termination by the same participating
             503      employer, the participating employer shall report and certify that the member is a regular
             504      full-time employee when the total of the periods of employment equals six months and the
             505      employee otherwise qualifies for service credit in this system.]
             506          (b) [(i) A current or future employee of a two-year or four-year college or university
             507      who holds, or is entitled to hold, under Section 49-12-204 , a retirement annuity contract]
             508      except as provided under Subsection (3)(a), an employee of an institution of higher education
             509      who participates in a retirement system with the Teachers' Insurance and Annuity Association
             510      of America or with any other public or private retirement system, organization, or company
             511      during any period in which required contributions based on compensation have been paid on
             512      behalf of the employee by the employer[.];
             513          [(ii) The employee, upon cessation of the participating employer contributions, shall
             514      immediately become eligible for service credit in this system.]
             515          (c) an employee serving as an exchange employee from outside the state[.];
             516          (d) an executive department head of the state, a member of the State Tax Commission,
             517      the Public Service Commission, and a member of a full-time or part-time board or commission
             518      who files a formal request for exemption[.];
             519          (e) an employee of the Department of Workforce Services who is covered under
             520      another retirement system allowed under Title 35A, Chapter 4, Employment Security Act[.]; or
             521          (f) [(i)] an employee who is employed on or after July 1, 2009 with an employer that


             522      has elected, prior to July 1, 2009, to be excluded from participation in this system under
             523      Subsection 49-12-202 (2)(c).
             524          (2) If an employee whose status is temporary in nature due to the nature of type of
             525      work to be performed:
             526          (a) is employed for a term that exceeds six months and the employee otherwise
             527      qualifies for service credit in this system, the participating employer shall report and certify to
             528      the office that the employee is a regular full-time employee effective the beginning of the
             529      seventh month of employment; or
             530          (b) was previously terminated prior to being eligible for service credit in this system
             531      and is reemployed within three months of termination by the same participating employer, the
             532      participating employer shall report and certify that the member is a regular full-time employee
             533      when the total of the periods of employment equals six months and the employee otherwise
             534      qualifies for service credits in this system.
             535          (3) (a) Upon cessation of the participating employer contributions, an employee under
             536      Subsection (1)(b) is eligible for service credit in this system.
             537          [(ii)] (b) Notwithstanding the provisions of [this] Subsection (1)(f), any eligibility for
             538      service credit earned by an employee under this chapter before July 1, 2009 is not affected
             539      under [this] Subsection (1)(f).
             540          [(2)] (4) Upon filing a written request for exemption with the office, the following
             541      employees shall be exempt from coverage under this system:
             542          (a) a full-time student or the spouse of a full-time student and individuals employed in
             543      a trainee relationship;
             544          (b) an elected official;
             545          (c) an executive department head of the state, a member of the State Tax Commission,
             546      a member of the Public Service Commission, and a member of a full-time or part-time board or
             547      commission;
             548          (d) an employee of the Governor's Office of Planning and Budget;
             549          (e) an employee of the Governor's Office of Economic Development;
             550          (f) an employee of the Commission on Criminal and Juvenile Justice;
             551          (g) an employee of the Governor's Office;
             552          (h) an employee of the State Auditor's Office;


             553          (i) an employee of the State Treasurer's Office;
             554          (j) any other member who is permitted to make an election under Section 49-11-406 ;
             555          (k) a person appointed as a city manager or chief city administrator or another person
             556      employed by a municipality, county, or other political subdivision, who is an at-will employee;
             557      and
             558          (l) an employee of an interlocal cooperative agency created under Title 11, Chapter 13,
             559      Interlocal Cooperation Act, who is engaged in a specialized trade customarily provided through
             560      membership in a labor organization that provides retirement benefits to its members.
             561          [(3)] (5) (a) Each participating employer shall prepare a list designating those positions
             562      eligible for exemption under Subsection [(2)] (4).
             563          (b) An employee may not be exempted unless the employee is employed in a position
             564      designated by the participating employer.
             565          [(4)] (6) (a) In accordance with this section, a municipality, county, or political
             566      subdivision may not exempt more than 50 positions or a number equal to 10% of the
             567      employees of the municipality, county, or political subdivision whichever is lesser.
             568          (b) A municipality, county, or political subdivision may exempt at least one regular
             569      full-time employee.
             570          [(5)] (7) Each participating employer shall:
             571          (a) file employee exemptions annually with the office; and
             572          (b) update the employee exemptions in the event of any change.
             573          [(6)] (8) The office may make rules to implement this section.
             574          Section 8. Section 49-12-204 is amended to read:
             575           49-12-204. Higher education employees' eligibility requirements -- Election
             576      between different retirement plans -- Classification requirements -- Transfer between
             577      systems -- One-time election window -- Rulemaking.
             578          (1) (a) A regular full-time employee of an institution of higher education who is
             579      eligible to participate in either this system or [in a retirement annuity contract] with the
             580      Teachers' Insurance and Annuity Association of America or with any other public or private
             581      retirement system, organization, or company, designated by the Board of Regents, shall, not
             582      later than January 1, 1979, elect to participate exclusively in this system or in an annuity
             583      contract allowed under this Subsection (1).


             584          (b) The election is final, and no right exists to make any further election.
             585          (2) (a) Except as provided under Subsection (2)(c), a regular full-time employee hired
             586      by an institution of higher education after January 1, 1979, may participate only in the
             587      retirement plan which attaches to the person's employment classification.
             588          (b) Each institution of higher education shall prepare or amend existing employment
             589      classifications, under the direction of the Board of Regents, so that each classification is
             590      assigned with either:
             591          (i) this system;
             592          (ii) the Teachers' Insurance and Annuity Association of America; or
             593          (iii) another public or private system, organization, or company designated by the
             594      Board of Regents.
             595          (c) Notwithstanding a person's employment classification assignment under Subsection
             596      (2)(b), a regular full-time employee who begins employment with an institution of higher
             597      education on or after May 11, 2010, has a one-time irrevocable election to continue
             598      participation in this system, if the employee has service credit in this system before the date of
             599      employment.
             600          (3) Notwithstanding an employment classification assignment change made under
             601      Subsection (2)(b), a regular full-time employee hired by an institution of higher education after
             602      January 1, 1979, whose employment classification requires participation in this system may
             603      elect to continue participation in this system.
             604          (4) A regular full-time employee hired by an institution of higher education after
             605      January 1, 1979, whose employment classification requires participation in this system shall
             606      participate in this system.
             607          (5) (a) Notwithstanding any other provision of this section, a regular full-time
             608      employee of an institution of higher education shall have a one-time irrevocable election to
             609      participate in this system if the employee:
             610          (i) was hired after January 1, 1979;
             611          (ii) whose employment classification assignment under Subsection (2)(b) required
             612      participation in a retirement program other than this system; and
             613          (iii) has service credit in a system under this title.
             614          (b) The election under Subsection (5)(a) shall be made before June 30, 2010.


             615          (c) All forms required by the office must be completed and received by the office no
             616      later than June 30, 2010, for the election to participate in this system to be effective.
             617          (d) Beginning July 1, 2010, a regular full-time employee of an institution of higher
             618      education who elects to be covered by this system under Subsection (5)(a) may begin to accrue
             619      service credit in this system.
             620          (6) A regular full-time employee of an institution of higher education who elects to be
             621      covered by this system under Subsection (2)(c) or (5)(a), may purchase periods of employment
             622      while covered under another retirement program sponsored by the institution of higher
             623      education by complying with the requirements of Section 49-11-403 .
             624          (7) The board shall make rules to implement this section.
             625          Section 9. Section 49-12-501 is amended to read:
             626           49-12-501. Death benefit -- Eligibility for death benefit -- Benefit calculation --
             627      Payment of claim -- Exclusion.
             628          (1) The office shall provide a death benefit [through the purchase of a group insurance
             629      policy] for members of this system.
             630          (2) The board shall make rules to administer the death benefit provided by this section
             631      and may, in accordance with federal law, establish:
             632          (a) benefit levels;
             633          (b) classes of members; and
             634          (c) a living benefit option.
             635          (3) This death benefit is payable when:
             636          (a) the member dies prior to the member's retirement date or dies under circumstances
             637      which Section 49-12-402 requires to be treated as the death of a member before retirement;
             638          (b) the office receives acceptable proof of death; and
             639          (c) benefits are not payable under Section 49-12-404 .
             640          (4) The death benefit payable to the beneficiary under this section is a lump-sum
             641      payment consisting of:
             642          (a) the return of any member contributions under this chapter; plus
             643          (b) a percentage of the final average salary of the member to be determined by the
             644      board.
             645          (5) Any amount of a living benefit option paid to the member prior to death shall be


             646      deducted from the benefit payable to the beneficiary.
             647          (6) The cost of the death benefit shall be paid by the participating employer as a
             648      portion of the contribution rate established under Section 49-12-301 .
             649          (7) The portion of the death benefit provided under Subsection (4)(b) may not be paid
             650      to the beneficiary of an inactive member unless:
             651          (a) that member has 10 or more years of accrued service credit prior to July 1, 1987; or
             652          (b) the death of the member occurs either:
             653          (i) within a period of 120 days after the last day of work for which the person received
             654      compensation; or
             655          (ii) while the member is still physically or mentally incapacitated from performance of
             656      duties, if the incapacity has been continuous since the last day of work for which compensation
             657      was received.
             658          (8) The death benefit provided under Subsection (4)(b) shall be paid in accordance
             659      with Sections 49-11-609 and 49-11-610 .
             660          (9) The death benefit paid to the beneficiary of an inactive member, except as
             661      otherwise provided under Subsection (7), is a lump-sum return of the member's member
             662      contributions.
             663          (10) Payment of the death benefit by the office constitutes a full settlement of any
             664      beneficiary's claim against the office, and the office is not liable for any further or additional
             665      claims or assessments on behalf of the member.
             666          (11) Unless otherwise specified in a written document filed with the office, death
             667      benefits payable to beneficiaries shall be in accordance with the order of precedence
             668      established under Title 75, Chapter 2, Intestate Succession and Wills.
             669          (12) A death benefit under this section may not be paid to a beneficiary of a retiree
             670      under this system.
             671          Section 10. Section 49-13-203 is amended to read:
             672           49-13-203. Exclusions from membership in system.
             673          (1) The following employees are not eligible for service credit in this system:
             674          (a) subject to the requirements of Subsection (2), an employee whose employment
             675      status is temporary in nature due to the nature or the type of work to be performed[, provided
             676      that:];


             677          [(i) if the term of employment exceeds six months and the employee otherwise
             678      qualifies for service credit in this system, the participating employer shall report and certify to
             679      the office that the employee is a regular full-time employee effective the beginning of the
             680      seventh month of employment; and]
             681          [(ii) if an employee, previously terminated prior to becoming eligible for service credit
             682      in this system, is reemployed within three months of termination by the same participating
             683      employer, the participating employer shall report and certify to the office that the member is a
             684      regular full-time employee when the total of the periods of employment equals six months and
             685      the employee otherwise qualifies for service credit in this system.]
             686          (b) (i) [A current or future employee of a two-year or four-year college or university
             687      who holds, or is entitled to hold, under Section 49-13-204 , a retirement annuity contract]
             688      except as provided under Subsection (3)(a), an employee of an institution of higher education
             689      who participates in a retirement system with the Teachers' Insurance and Annuity Association
             690      of America or with any other public or private retirement system, organization, or company
             691      during any period in which required contributions based on compensation have been paid on
             692      behalf of the employee by the employer[.];
             693          [(ii) The employee, upon cessation of the participating employer contributions, shall
             694      immediately become eligible for service credit in this system.]
             695          (c) an employee serving as an exchange employee from outside the state[.];
             696          (d) an executive department head of the state or a legislative director, senior executive
             697      employed by the governor's office, a member of the State Tax Commission, a member of the
             698      Public Service Commission, and a member of a full-time or part-time board or commission
             699      who files a formal request for exemption[.];
             700          (e) an employee of the Department of Workforce Services who is covered under
             701      another retirement system allowed under Title 35A, Chapter 4, Employment Security Act[.]; or
             702          (f) [(i)] an employee who is employed with an employer that has elected to be excluded
             703      from participation in this system under Subsection 49-13-202 (5), effective on or after the date
             704      of the employer's election under Subsection 49-13-202 (5).
             705          (2) If an employee whose status is temporary in nature due to the nature of type of
             706      work to be performed:
             707          (a) is employed for a term that exceeds six months and the employee otherwise


             708      qualifies for service credit in this system, the participating employer shall report and certify to
             709      the office that the employee is a regular full-time employee effective the beginning of the
             710      seventh month of employment; or
             711          (b) was previously terminated prior to being eligible for service credit in this system
             712      and is reemployed within three months of termination by the same participating employer, the
             713      participating employer shall report and certify that the member is a regular full-time employee
             714      when the total of the periods of employment equals six months and the employee otherwise
             715      qualifies for service credits in this system.
             716          (3) (a) Upon cessation of the participating employer contributions, an employee under
             717      Subsection (1)(b) is eligible for service credit in this system.
             718          [(ii)] (b) Notwithstanding the provisions of [this] Subsection (1)(f), any eligibility for
             719      service credit earned by an employee under this chapter before the date of the election under
             720      Subsection 49-13-202 (5) is not affected under [this] Subsection (1)(f).
             721          [(2)] (4) Upon filing a written request for exemption with the office, the following
             722      employees shall be exempt from coverage under this system:
             723          (a) a full-time student or the spouse of a full-time student and individuals employed in
             724      a trainee relationship;
             725          (b) an elected official;
             726          (c) an executive department head of the state, a member of the State Tax Commission,
             727      a member of the Public Service Commission, and a member of a full-time or part-time board or
             728      commission;
             729          (d) an employee of the Governor's Office of Planning and Budget;
             730          (e) an employee of the Governor's Office of Economic Development;
             731          (f) an employee of the Commission on Criminal and Juvenile Justice;
             732          (g) an employee of the Governor's Office;
             733          (h) an employee of the State Auditor's Office;
             734          (i) an employee of the State Treasurer's Office;
             735          (j) any other member who is permitted to make an election under Section 49-11-406 ;
             736          (k) a person appointed as a city manager or chief city administrator or another person
             737      employed by a municipality, county, or other political subdivision, who is an at-will employee;
             738          (l) an employee of an interlocal cooperative agency created under Title 11, Chapter 13,


             739      Interlocal Cooperation Act, who is engaged in a specialized trade customarily provided through
             740      membership in a labor organization that provides retirement benefits to its members; and
             741          (m) an employee of the Utah Science Technology and Research Initiative created under
             742      Title 63M, Chapter 2, Utah Science Technology and Research [and] Governing Authority Act.
             743          [(3)] (5) (a) Each participating employer shall prepare a list designating those positions
             744      eligible for exemption under Subsection [(2)] (4).
             745          (b) An employee may not be exempted unless the employee is employed in a position
             746      designated by the participating employer.
             747          [(4)] (6) (a) In accordance with this section, a municipality, county, or political
             748      subdivision may not exempt more than 50 positions or a number equal to 10% of the
             749      employees of the municipality, county, or political subdivision, whichever is lesser.
             750          (b) A municipality, county, or political subdivision may exempt at least one regular
             751      full-time employee.
             752          [(5)] (7) Each participating employer shall:
             753          (a) file employee exemptions annually with the office; and
             754          (b) update the employee exemptions in the event of any change.
             755          [(6)] (8) The office may make rules to implement this section.
             756          Section 11. Section 49-13-204 is amended to read:
             757           49-13-204. Higher education employees' eligibility requirements -- Election
             758      between different retirement plans -- Classification requirements -- Transfer between
             759      systems -- One-time election window -- Rulemaking.
             760          (1) (a) A regular full-time employee of an institution of higher education who is
             761      eligible to participate in either this system or in a retirement [annuity contract] system with the
             762      Teachers' Insurance and Annuity Association of America or with any other public or private
             763      retirement system, organization, or company, designated by the Board of Regents, shall, not
             764      later than January 1, 1979, elect to participate exclusively in this system or in an annuity
             765      contract allowed under this Subsection (1)(a).
             766          (b) The election is final, and no right exists to make any further election.
             767          (2) (a) Except as provided under Subsection (2)(c), a regular full-time employee hired
             768      by an institution of higher education after January 1, 1979, may participate only in the
             769      retirement plan which attaches to the person's employment classification.


             770          (b) Each institution of higher education shall prepare or amend existing employment
             771      classifications, under the direction of the Board of Regents, so that each classification is
             772      assigned with either:
             773          (i) this system;
             774          (ii) the Teachers' Insurance and Annuity Association of America; or
             775          (iii) another public or private system, organization, or company designated by the
             776      Board of Regents.
             777          (c) Notwithstanding a person's employment classification assignment under Subsection
             778      (2)(b), a regular full-time employee who begins employment with an institution of higher
             779      education on or after May 11, 2010, has a one-time irrevocable election to continue
             780      participation in this system, if the employee has service credit in this system before the date of
             781      employment.
             782          (3) Notwithstanding an employment classification assignment change made under
             783      Subsection (2)(b), a regular full-time employee hired by an institution of higher education after
             784      January 1, 1979, whose employment classification requires participation in this system may
             785      elect to continue participation in this system.
             786          (4) A regular full-time employee hired by an institution of higher education after
             787      January 1, 1979, whose employment classification requires participation in this system shall
             788      participate in this system.
             789          (5) (a) Notwithstanding any other provision of this section, a regular full-time
             790      employee of an institution of higher education whose employment classification assignment
             791      under Subsection (2)(b) required participation in a retirement program other than this system
             792      shall have a one-time irrevocable election to participate in this system.
             793          (b) The election under Subsection (5)(a) shall be made before June 30, 2010.
             794          (c) All forms required by the office must be completed and received by the office no
             795      later than June 30, 2010, for the election to participate in this system to be effective.
             796          (d) Beginning July 1, 2010, a regular full-time employee of an institution of higher
             797      education who elects to be covered by this system under Subsection (5)(a) may begin to accrue
             798      service credit in this system.
             799          (6) A regular full-time employee of an institution of higher education who elects to be
             800      covered by this system under Subsection (2)(c) or (5)(a) may purchase periods of employment


             801      while covered under another retirement program by complying with the requirements of
             802      Section 49-11-403 .
             803          (7) The board shall make rules to implement this section.
             804          Section 12. Section 49-13-501 is amended to read:
             805           49-13-501. Death benefit -- Eligibility for death benefit -- Benefit calculation --
             806      Payment of claim.
             807          (1) The office shall provide a death benefit [through the purchase of a group insurance
             808      policy] for members of this system.
             809          (2) The board shall make rules to administer the death benefit provided by this section
             810      and may, in accordance with federal law, establish:
             811          (a) benefit levels;
             812          (b) classes of members; and
             813          (c) a living benefit option.
             814          (3) This death benefit is payable when:
             815          (a) the member dies prior to the member's retirement date or dies under circumstances
             816      which Section 49-13-402 requires to be treated as the death of a member before retirement;
             817          (b) the office receives acceptable proof of death; and
             818          (c) benefits are not payable under Section 49-13-404 .
             819          (4) The death benefit payable to the beneficiary under this section is a lump-sum
             820      payment consisting of:
             821          (a) the return of any member contributions under this chapter; plus
             822          (b) a percentage of the final average salary of the member to be determined by the
             823      board.
             824          (5) Any amount of a living benefit option paid to the member prior to death shall be
             825      deducted from the benefit payable to the beneficiary.
             826          (6) The cost of the death benefit shall be paid by the participating employer as a
             827      portion of the contribution rate established under Section 49-13-301 .
             828          (7) The portion of the death benefit provided under Subsection (4)(b), may not be paid
             829      to the beneficiary of an inactive member unless:
             830          (a) that member has 10 or more years of service credit prior to July 1, 1987; or
             831          (b) the death of the member occurs either:


             832          (i) within a period of 120 days after the last day of work for which the person received
             833      compensation; or
             834          (ii) while the member is still physically or mentally incapacitated from performance of
             835      duties, if the incapacity has been continuous since the last day of work for which compensation
             836      was received.
             837          (8) The death benefit provided under Subsection (4)(b) shall be paid in accordance
             838      with Sections 49-11-609 and 49-11-610 .
             839          (9) The death benefit paid to the beneficiary of an inactive member, except as
             840      otherwise provided under Subsection (7), is a lump-sum return of the member's member
             841      contributions.
             842          (10) Payment of the death benefit by the office constitutes a full settlement of any
             843      beneficiary's claim against the office and the office is not liable for any further or additional
             844      claims or assessments on behalf of the member.
             845          (11) Unless otherwise specified in a written document filed with the office, death
             846      benefits payable to beneficiaries shall be in accordance with the order of precedence
             847      established under Title 75, Chapter 2, Intestate Succession and Wills.
             848          (12) A death benefit under this section may not be paid on behalf of a retiree under this
             849      system.
             850          Section 13. Section 49-21-102 is amended to read:
             851           49-21-102. Definitions.
             852          As used in this chapter:
             853          (1) "Date of disability" means the date on which a period of continuous disability
             854      commences, and may not commence on or before the last day of actual work.
             855          (2) (a) "Eligible employee" means the following employee whose employer provides
             856      coverage under this chapter:
             857          (i) (A) any regular full-time employee as defined under Section 49-12-102 , 49-13-102 ,
             858      or 49-22-102 ;
             859          (B) any public safety service employee as defined under Section 49-14-102 , 49-15-102 ,
             860      or 49-23-102 ;
             861          (C) any firefighter service employee or volunteer firefighter as defined under Section
             862      49-23-102 who began firefighter service on or after July 1, 2011;


             863          (D) any judge as defined under Section 49-17-102 or 49-18-102 ; or
             864          (E) the governor of the state;
             865          (ii) an employee who is exempt from participating in a retirement system under
             866      Subsection 49-12-203 [(2)](4), 49-13-203 [(2)](4), 49-14-203 (1), or 49-15-203 (1); and
             867          (iii) an employee who is covered by a retirement program offered by the Teachers'
             868      Insurance and Annuity Association of America.
             869          (b) "Eligible employee" does not include:
             870          (i) any employee that is exempt from coverage under Section 49-21-201 ; or
             871          (ii) a retiree.
             872          (3) "Elimination period" means the three months at the beginning of each continuous
             873      period of total disability for which no benefit will be paid. The elimination period begins on
             874      the nearest first day of the month from the date of disability. The elimination period may
             875      include a one-time trial return to work period of less than 15 consecutive calendar days.
             876          (4) "Maximum benefit period" means the maximum period of time the monthly
             877      disability income benefit will be paid under Section 49-21-403 for any continuous period of
             878      total disability.
             879          (5) "Monthly disability benefit" means the monthly payments and accrual of service
             880      credit under Section 49-21-401 .
             881          (6) "Objective medical impairment" means an impairment resulting from an injury or
             882      illness which is diagnosed by a physician and which is based on accepted objective medical
             883      tests or findings rather than subjective complaints.
             884          (7) "Physician" means a licensed physician.
             885          (8) "Regular monthly salary" means the amount certified by the participating employer
             886      as the monthly salary of the eligible employee, unless there is a discrepancy between the
             887      certified amount and the amount actually paid, in which case the office shall determine the
             888      regular monthly salary.
             889          (9) "Regular occupation" means either the primary duties performed by the eligible
             890      employee for the 12 months preceding the date of disability, or a permanent assignment of duty
             891      to the eligible employee.
             892          (10) "Rehabilitative employment" means any occupation or employment for wage or
             893      profit, for which the eligible employee is reasonably qualified to perform based on education,


             894      training, or experience.
             895          (11) (a) "Total disability" means the complete inability, due to objective medical
             896      impairment, whether physical or mental, to engage in the eligible employee's regular
             897      occupation during the elimination period and the first 24 months of disability benefits.
             898          (b) (i) "Total disability" means, after the elimination period and the first 24 months of
             899      disability benefits, the complete inability, as determined under Subsection (11)(b)(ii), to engage
             900      in any gainful occupation which is reasonable, considering the eligible employee's education,
             901      training, and experience.
             902          (ii) For purposes of Subsection (11)(b)(i), inability is determined:
             903          (A) based solely on physical objective medical impairment; and
             904          (B) regardless of the existence or absence of any mental impairment.
             905          Section 14. Section 49-21-402 is amended to read:
             906           49-21-402. Reduction or reimbursement of benefit -- Circumstances --
             907      Application for other benefits required.
             908          (1) A monthly disability benefit may be terminated unless:
             909          (a) the eligible employee is under the ongoing care and treatment of a physician other
             910      than the eligible employee; and
             911          (b) the eligible employee provides the information and documentation requested by the
             912      office.
             913          (2) The monthly disability benefit shall be reduced or reimbursed by any amount
             914      received by, or payable to, the eligible employee from the following sources for the same
             915      period of time during which the eligible employee is entitled to receive a monthly disability
             916      benefit:
             917          (a) Social Security disability benefits, including all benefits received by the eligible
             918      employee, the eligible employee's spouse, and the eligible employee's children as determined
             919      by the Social Security Administration;
             920          (b) workers' compensation indemnity benefits;
             921          (c) any money received by judgment, legal action, or settlement from a third party
             922      liable to the employee for the disability;
             923          (d) unemployment compensation benefits;
             924          (e) automobile no-fault, medical payments, or similar insurance payments;


             925          (f) any money received by a judgment, settlement, or other payment as a result of a
             926      claim against an employer; and
             927          (g) any payments made for sick leave, annual leave, or similar payments.
             928          (3) The monthly disability benefit shall be reduced by any amount in excess of
             929      one-third of the eligible employee's regular monthly salary received by, or payable to, the
             930      eligible employee from the following sources for the same period of time during which the
             931      eligible employee is entitled to receive a monthly disability benefit:
             932          (a) any [employer-sponsored retirement programs] retirement payment earned through
             933      or provided by public or private employment; and
             934          (b) any disability benefit resulting from the disability for which benefits are being
             935      received under this chapter.
             936          (4) After the date of disability, cost-of-living increases to any of the benefits listed in
             937      Subsection (2) or (3) may not be considered in calculating a reduction to the monthly disability
             938      benefit.
             939          (5) Any amounts payable to the eligible employee from one or more of the sources
             940      under Subsection (2) are considered as amounts received whether or not the amounts were
             941      actually received by the eligible employee.
             942          (6) (a) An eligible employee shall first apply for all disability benefits from
             943      governmental entities under Subsection (2) to which the eligible employee is or may be
             944      entitled, and provide to the office evidence of the applications.
             945          (b) If the eligible employee fails to make application under this Subsection (6), the
             946      monthly disability benefit shall be suspended.
             947          Section 15. Section 49-21-403 is amended to read:
             948           49-21-403. Termination of disability benefits -- Calculation of retirement benefit.
             949          (1) An eligible employee covered by this chapter and eligible for service credit under a
             950      system or plan, including an eligible employee who relinquishes rights to retirement benefits
             951      under Section 49-11-619 , who applies and is qualified for a monthly disability benefit shall
             952      receive a monthly disability benefit until the earlier of:
             953          (a) the date of the eligible employee's death;
             954          (b) the date the eligible employee no longer has a disability;
             955          (c) the date the eligible employee has accumulated or would have accumulated, if the


             956      employee had not chosen the Title 49, Chapter 22, Part 4, Tier II Defined Contribution Plan,
             957      Title 49, Chapter 23, Part 4, Tier II Defined Contribution Plan, been a volunteer firefighter, or
             958      exempted from a retirement system or plan:
             959          (i) 20 years of service credit if the eligible employee is covered by Chapter 14, Public
             960      Safety Contributory Retirement Act, or Chapter 15, Public Safety Noncontributory Retirement
             961      Act;
             962          (ii) 25 years of service credit if the eligible employee is covered by Chapter 17, Judges'
             963      Contributory Retirement Act, or Chapter 18, Judges' Noncontributory Retirement Act;
             964          (iii) 30 years of service credit if the eligible employee is covered by Chapter 12, Public
             965      Employees' Contributory Retirement Act, or Chapter 13, Public Employees' Noncontributory
             966      Retirement Act;
             967          (iv) 35 years of service credit if the eligible employee is covered by the defined benefit
             968      portion under Chapter 22, Part 3, Tier II Hybrid Retirement System, or is covered by the
             969      defined contribution plan under Chapter 22, Part 4, Tier II Defined Contribution Plan; or
             970          (v) 25 years of service credit if the eligible employee is covered by the defined benefit
             971      portion under Chapter 23, Part 3, Tier II Hybrid Retirement System, or is covered by the
             972      defined contribution plan under Chapter 23, Part 4, Tier II Defined Contribution Plan; or
             973          (d) the date the eligible employee has received a monthly disability benefit for the
             974      following applicable time periods:
             975          (i) if the eligible employee is under age 60, the monthly disability benefit is payable
             976      until age 65;
             977          (ii) if the eligible employee is 60 or 61 years of age on the date of disability, the
             978      monthly disability benefit is payable for five years;
             979          (iii) if the eligible employee is 62 or 63 years of age on the date of disability, the
             980      monthly disability benefit is payable for four years;
             981          (iv) if the eligible employee is 64 or 65 years of age on the date of disability, the
             982      monthly disability benefit is payable for three years;
             983          (v) if the eligible employee is 66, 67, or 68 years of age on the date of disability, the
             984      monthly disability benefit is payable for two years; and
             985          (vi) if the eligible employee is 69 years of age or older on the date of disability, the
             986      monthly disability benefit is payable for one year.


             987          (2) (a) Upon termination of a monthly disability benefit, an eligible employee eligible
             988      for service credit under a system may retire under the requirements of the system which
             989      covered the eligible employee on the date of disability.
             990          (b) The final average salary used in the calculation of the allowance shall be based on
             991      the annual rate of pay on the date of disability, improved by the annual cost-of-living increase
             992      factor applied to retirees of the system which covered the eligible employee on the date of
             993      disability.
             994          (3) An eligible employee who is eligible for service credit in a system, but has
             995      relinquished rights to an allowance under Section 49-11-619 , may receive the benefits the
             996      eligible employee would have received by being eligible for service credit in the system
             997      covering the eligible employee on the date of disability, except for the accrual of service credit,
             998      in accordance with this title.
             999          (4) An eligible employee receiving a monthly disability benefit who has service credit
             1000      from two or more systems may not combine service credits under Section 49-11-405 in
             1001      qualifying for retirement, unless the eligible employee would receive a greater allowance by
             1002      combining the service credits.
             1003          (5) An eligible employee covered by this chapter who is a participant in the Tier II
             1004      Defined Contribution Plan, created in Chapter 22, Part 4, Tier II Defined Contribution Plan, or
             1005      Chapter 23, Part 4, Tier II Defined Contribution Plan, who applies and is qualified for a
             1006      monthly disability benefit, shall receive a monthly disability benefit until the earlier of:
             1007          (a) the date of the eligible employee's death;
             1008          (b) the date the eligible employee no longer has a disability;
             1009          (c) (i) 35 years from the date the eligible employee began participation in the Tier II
             1010      Defined Contribution Plan, created in Chapter 22, Part 4, Tier II Defined Contribution Plan; or
             1011          (ii) 25 years from the date the eligible employee began participation in the Tier II
             1012      Defined Contribution Plan created in Chapter 23, Part 4, Tier II Defined Contribution Plan; or
             1013          (d) the date the eligible employee has received a monthly disability benefit for the
             1014      following applicable time periods:
             1015          (i) if the eligible employee is under age 60, the monthly disability benefit is payable
             1016      until age 65;
             1017          (ii) if the eligible employee is 60 or 61 years of age on the date of disability, the


             1018      monthly disability benefit is payable for five years;
             1019          (iii) if the eligible employee is 62 or 63 years of age on the date of disability, the
             1020      monthly disability benefit is payable for four years;
             1021          (iv) if the eligible employee is 64 or 65 years of age on the date of disability, the
             1022      monthly disability benefit is payable for three years;
             1023          (v) if the eligible employee is 66, 67, or 68 years of age on the date of disability, the
             1024      monthly disability benefit is payable for two years; and
             1025          (vi) if the eligible employee is 69 years of age or older on the date of disability, the
             1026      monthly disability benefit is payable for one year.
             1027          Section 16. Section 49-22-203 is amended to read:
             1028           49-22-203. Exclusions from membership in system.
             1029          (1) The following employees are not eligible for service credit in this system:
             1030          [(1) An] (a) subject to the requirements of Subsection (2), an employee whose
             1031      employment status is temporary in nature due to the nature or the type of work to be
             1032      performed[, provided that:];
             1033          [(a) if the term of employment exceeds six months and the employee otherwise
             1034      qualifies for service credit in this system, the participating employer shall report and certify to
             1035      the office that the employee is a regular full-time employee effective the beginning of the
             1036      seventh month of employment; and]
             1037          [(b) if an employee, previously terminated prior to becoming eligible for service credit
             1038      in this system, is reemployed within three months of termination by the same participating
             1039      employer, the participating employer shall report and certify to the office that the member is a
             1040      regular full-time employee when the total of the periods of employment equals six months and
             1041      the employee otherwise qualifies for service credit in this system.]
             1042          [(2) (a) A current or future]
             1043          (b) except as provided under Subsection (3), an employee of an institution of higher
             1044      education who [holds, or is entitled to hold, under Section 49-22-204 , a retirement annuity
             1045      contract] participates in a retirement system with the Teachers' Insurance and Annuity
             1046      Association of America or with any other public or private retirement system, organization, or
             1047      company during any period in which required contributions based on compensation have been
             1048      paid on behalf of the employee by the employer[.];


             1049          [(b) The employee, upon cessation of the participating employer contributions, shall
             1050      immediately become eligible for service credit in this system.]
             1051          [(3) An] (c) an employee serving as an exchange employee from outside the state[.]; or
             1052          [(4) An] (d) an employee of the Department of Workforce Services who is covered
             1053      under another retirement system allowed under Title 35A, Chapter 4, Employment Security
             1054      Act.
             1055          (2) If an employee whose status is temporary in nature due to the nature of type of
             1056      work to be performed:
             1057          (a) is employed for a term that exceeds six months and the employee otherwise
             1058      qualifies for service credit in this system, the participating employer shall report and certify to
             1059      the office that the employee is a regular full-time employee effective the beginning of the
             1060      seventh month of employment; or
             1061          (b) was previously terminated prior to being eligible for service credit in this system
             1062      and is reemployed within three months of termination by the same participating employer, the
             1063      participating employer shall report and certify that the member is a regular full-time employee
             1064      when the total of the periods of employment equals six months and the employee otherwise
             1065      qualifies for service credits in this system.
             1066          (3) Upon cessation of the participating employer contributions, an employee under
             1067      Subsection (1)(b) is eligible for service credit in this system.
             1068          Section 17. Section 49-22-401 is amended to read:
             1069           49-22-401. Contributions -- Rates.
             1070          (1) Up to the amount allowed by federal law, the participating employer shall make a
             1071      nonelective contribution of 10% of the participant's compensation to a defined contribution
             1072      plan.
             1073          (2) (a) The participating employer shall contribute the 10% nonelective contribution
             1074      described in Subsection (1) to a defined contribution plan qualified under Section 401(k) of the
             1075      Internal Revenue Code which:
             1076          (i) is sponsored by the board; and
             1077          (ii) has been grandfathered under Section 1116 of the Federal Tax Reform Act of 1986.
             1078          (b) The member may make voluntary deferrals to:
             1079          (i) the qualified 401(k) plan which receives the employer contribution described in this


             1080      Subsection (2); or
             1081          (ii) at the member's option, another defined contribution plan established by the
             1082      participating employer.
             1083          (c) In addition to the percent specified under Subsection (2)(a), the participating
             1084      employer shall pay the corresponding Tier I system amortization rate of the employee's
             1085      compensation to the office to be applied to the employer's corresponding Tier I system liability.
             1086          (3) (a) Except as provided under Subsection (3)(c), the total amount contributed by the
             1087      participating employer under Subsection (2)(a) vests to the member upon accruing four years
             1088      employment as a regular full-time employee under this title.
             1089          (b) The total amount contributed by the member under Subsection (2)(b) vests to the
             1090      member's benefit immediately and is nonforfeitable.
             1091          (c) Upon filing a written request for exemption with the office, the following
             1092      employees are exempt from the vesting requirements of Subsection (3)(a):
             1093          (i) an executive department head of the state;
             1094          (ii) a member of the State Tax Commission;
             1095          (iii) a member of the Public Service Commission;
             1096          (iv) an employee of the Governor's Office of Planning and Budget;
             1097          (v) an employee of the Governor's Office of Economic Development;
             1098          (vi) an employee of the Commission on Criminal and Juvenile Justice;
             1099          (vii) an employee of the Governor's Office;
             1100          (viii) an employee of the State Auditor's Office;
             1101          (ix) an employee of the State Treasurer's Office;
             1102          (x) a person appointed as a city manager or appointed as a city administrator or another
             1103      at-will employee of a municipality, county, or other political subdivision;
             1104          (xi) an employee of an interlocal cooperative agency created under Title 11, Chapter
             1105      13, Interlocal Cooperation Act, who is engaged in a specialized trade customarily provided
             1106      through membership in a labor organization that provides retirement benefits to its members;
             1107      and
             1108          (xii) an employee of the Utah Science Technology and Research Initiative created
             1109      under Title 63M, Chapter 2, Utah Science Technology and Research Governing Authority Act.
             1110          (d) (i) A participating employer shall prepare a list designating those positions eligible


             1111      for exemption under Subsection (3)(c).
             1112          (ii) An employee may not be exempted unless the employee is employed in a position
             1113      designated by the participating employer under Subsection (3)(c).
             1114          (e) (i) All employer contributions made on behalf of an employee shall be invested in
             1115      accordance with Subsection 49-22-303 (3)(a) until the one-year election period under
             1116      Subsection 49-22-201 (2)(c) is expired if the employee:
             1117          (A) elects to be exempt in accordance with Subsection (3)(c); and
             1118          (B) continues employment with the participating employer through the one-year
             1119      election period under Subsection 49-22-201 (2)(c).
             1120          (ii) An employee is entitled to receive a distribution of the employer contributions
             1121      made on behalf of the employee and all associated investment gains and losses if the employee:
             1122          (A) elects to be exempt in accordance with Subsection (3)(c); and
             1123          (B) terminates employment prior to the one-year election period under Subsection
             1124      49-22-201 (2)(c).
             1125          [(e)] (f) (i) In accordance with this section, a municipality, county, or political
             1126      subdivision may not exempt more than 50 positions or a number equal to 10% of the
             1127      employees of the municipality, county, or political subdivision, whichever is less.
             1128          (ii) A municipality, county, or political subdivision may exempt at least one regular
             1129      full-time employee.
             1130          [(f)] (g) Each participating employer shall:
             1131          (i) file each employee exemption annually with the office; and
             1132          (ii) update an employee exemption in the event of any change.
             1133          [(g)] (h) (i) The office shall make rules to implement this Subsection (3).
             1134          (ii) The rules made under Subsection [(3)(g)(i)] (3)(h)(i) shall include provisions to
             1135      allow the exemption provided under Subsection (3)(c) to apply to all contributions made
             1136      beginning on or after July 1, 2011, on behalf of an exempted employee who began the
             1137      employment before May 8, 2012.
             1138          (4) (a) Contributions made by a participating employer under Subsection (2)(a) shall be
             1139      invested in a default option selected by the board until the member is vested in accordance with
             1140      Subsection (3)(a).
             1141          (b) A member may direct the investment of contributions including associated


             1142      investment gains and losses made by a participating employer under Subsection (2)(a) only
             1143      after the contributions have vested in accordance with Subsection (3)(a).
             1144          (c) A member may direct the investment of contributions made by the member under
             1145      Subsection (3)(b).
             1146          (5) No loans shall be available from contributions made by a participating employer
             1147      under Subsection (2)(a).
             1148          (6) No hardship distributions shall be available from contributions made by a
             1149      participating employer under Subsection (2)(a).
             1150          (7) (a) Except as provided in Subsection (7)(b), if a member terminates employment
             1151      with a participating employer prior to the vesting period described in Subsection (3)(a), all
             1152      contributions made by a participating employer on behalf of the member including associated
             1153      investment gains and losses under Subsection (2)(a) are subject to forfeiture.
             1154          (b) If a member who terminates employment with a participating employer prior to the
             1155      vesting period described in Subsection (3)(a) subsequently enters employment with the same or
             1156      another participating employer within 10 years of the termination date of the previous
             1157      employment:
             1158          (i) all contributions made by the previous participating employer on behalf of the
             1159      member including associated investment gains and losses shall be reinstated upon the member's
             1160      employment as a regular full-time employee; and
             1161          (ii) the length of time that the member worked with the previous employer shall be
             1162      included in determining whether the member has completed the vesting period under
             1163      Subsection (3)(a).
             1164          (c) The office shall establish a forfeiture account and shall specify the uses of the
             1165      forfeiture account, which may include an offset against administrative costs or employer
             1166      contributions made under this section.
             1167          (8) The office may request from any other qualified 401(k) plan under Subsection (2)
             1168      any relevant information pertaining to the maintenance of its tax qualification under the
             1169      Internal Revenue Code.
             1170          (9) The office may take any action which in its judgment is necessary to maintain the
             1171      tax-qualified status of its 401(k) defined contribution plan under federal law.
             1172          Section 18. Section 49-22-501 is amended to read:


             1173           49-22-501. Death benefit -- Eligibility for death benefit -- Benefit calculation --
             1174      Payment of claim.
             1175          (1) The office shall provide a death benefit [through the purchase of a group insurance
             1176      policy] for members of this system.
             1177          (2) The board shall make rules to administer the death benefit provided by this section
             1178      and may, in accordance with federal law, establish:
             1179          (a) benefit levels;
             1180          (b) classes of members; and
             1181          (c) a living benefit option.
             1182          (3) This death benefit is payable when:
             1183          (a) the member dies prior to the member's retirement date or dies under circumstances
             1184      which Subsection 49-22-305 (4) requires to be treated as the death of a member before
             1185      retirement;
             1186          (b) the office receives acceptable proof of death; and
             1187          (c) benefits are not payable under Section 49-22-307 .
             1188          (4) The death benefit payable to the beneficiary under this section is a lump-sum
             1189      payment consisting of:
             1190          (a) the return of any member contributions under this chapter; plus
             1191          (b) a percentage of the final average salary of the member to be determined by the
             1192      board.
             1193          (5) Any amount of a living benefit option paid to the member prior to death shall be
             1194      deducted from the benefit payable to the beneficiary.
             1195          (6) The cost of the death benefit shall be paid by the participating employer in addition
             1196      to the contribution rate established under Section 49-22-301 or 49-22-401 .
             1197          (7) The portion of the death benefit provided under Subsection (4)(b) may not be paid
             1198      to the beneficiary of an inactive member unless the death of the member occurs either:
             1199          (a) within a period of 120 days after the last day of work for which the person received
             1200      compensation; or
             1201          (b) while the member is still physically or mentally incapacitated from performance of
             1202      duties, if the incapacity has been continuous since the last day of work for which compensation
             1203      was received.


             1204          (8) The death benefit provided under Subsection (4)(b) shall be paid in accordance
             1205      with Sections 49-11-609 and 49-11-610 .
             1206          (9) The death benefit paid to the beneficiary of an inactive member, except as
             1207      otherwise provided under Subsection (7), is a lump-sum return of the member's member
             1208      contributions.
             1209          (10) Payment of the death benefit by the office constitutes a full settlement of any
             1210      beneficiary's claim against the office and the office is not liable for any further or additional
             1211      claims or assessments on behalf of the member.
             1212          (11) Unless otherwise specified in a written document filed with the office, death
             1213      benefits payable to beneficiaries shall be in accordance with the order of precedence
             1214      established under Title 75, Chapter 2, Intestate Succession and Wills.
             1215          (12) A death benefit under this section may not be paid on behalf of a retiree under this
             1216      system.
             1217          Section 19. Section 49-23-401 is amended to read:
             1218           49-23-401. Contributions -- Rates.
             1219          (1) Up to the amount allowed by federal law, the participating employer shall make a
             1220      nonelective contribution of 12% of the participant's compensation to a defined contribution
             1221      plan.
             1222          (2) (a) The participating employer shall contribute the 12% nonelective contribution
             1223      described in Subsection (1) to a defined contribution plan qualified under Section 401(k) of the
             1224      Internal Revenue Code which:
             1225          (i) is sponsored by the board; and
             1226          (ii) has been grandfathered under Section 1116 of the Federal Tax Reform Act of 1986.
             1227          (b) The member may make voluntary deferrals to:
             1228          (i) the qualified 401(k) plan which receives the employer contribution described in this
             1229      Subsection (2); or
             1230          (ii) at the member's option, another defined contribution plan established by the
             1231      participating employer.
             1232          (c) In addition to the percent specified under Subsection (2)(a), the participating
             1233      employer shall pay the corresponding Tier I system amortization rate of the employee's
             1234      compensation to the office to be applied to the employer's corresponding Tier I system liability.


             1235          (3) (a) Except as provided under Subsection (3)(c), the total amount contributed by the
             1236      participating employer under Subsection (2)(a) vests to the member upon accruing four years of
             1237      service credit under this title.
             1238          (b) The total amount contributed by the member under Subsection (2)(b) vests to the
             1239      member's benefit immediately and is nonforfeitable.
             1240          (c) Upon filing a written request for exemption with the office, the following
             1241      employees are exempt from the vesting requirements of Subsection (3)(a) if the employee is a
             1242      public safety service employee and is:
             1243          (i) an executive department head of the state;
             1244          (ii) an elected or appointed sheriff of a county; or
             1245          (iii) an elected or appointed chief of police of a municipality.
             1246          (d) (i) A participating employer shall prepare a list designating those positions eligible
             1247      for exemption under Subsection (3)(c).
             1248          (ii) An employee may not be exempted unless the employee is employed in a position
             1249      designated by the participating employer under Subsection (3)(c).
             1250          (e) (i) All employer contributions made on behalf of an employee shall be invested in
             1251      accordance with Subsection 49-23-302 (3)(a) until the one-year election period under
             1252      Subsection 49-23-201 (2)(c) is expired if the employee:
             1253          (A) elects to be exempt in accordance with Subsection (3)(c); and
             1254          (B) continues employment with the participating employer through the one-year
             1255      election period under Subsection 49-23-201 (2)(c).
             1256          (ii) An employee is entitled to receive a distribution of the employer contributions
             1257      made on behalf of the employee and all associated investment gains and losses if the employee:
             1258          (A) elects to be exempt in accordance with Subsection (3)(c); and
             1259          (B) terminates employment prior to the one-year election period under Subsection
             1260      49-23-201 (2)(c).
             1261          [(e)] (f) Each participating employer shall:
             1262          (i) file each employee exemption annually with the office; and
             1263          (ii) update an employee exemption in the event of any change.
             1264          [(f)] (g) (i) The office shall make rules to implement this Subsection (3).
             1265          (ii) The rules made under Subsection [(3)(f)(i)] (3)(g)(i) shall include provisions to


             1266      allow the exemption provided under Subsection (3)(c) to apply to all contributions made
             1267      beginning on or after July 1, 2011, on behalf of an exempted employee who began the
             1268      employment before May 8, 2012.
             1269          (4) (a) Contributions made by a participating employer under Subsection (2)(a) shall be
             1270      invested in a default option selected by the board until the member is vested in accordance with
             1271      Subsection (3)(a).
             1272          (b) A member may direct the investment of contributions, including associated
             1273      investment gains and losses, made by a participating employer under Subsection (2)(a) only
             1274      after the contributions have vested in accordance with Subsection (3)(a).
             1275          (c) A member may direct the investment of contributions made by the member under
             1276      Subsection (3)(b).
             1277          (5) No loans shall be available from contributions made by a participating employer
             1278      under Subsection (2)(a).
             1279          (6) No hardship distributions shall be available from contributions made by a
             1280      participating employer under Subsection (2)(a).
             1281          (7) (a) Except as provided in Subsection (7)(b), if a member terminates employment
             1282      with a participating employer prior to the vesting period described in Subsection (3)(a), all
             1283      contributions made by a participating employer on behalf of the member under Subsection
             1284      (2)(a), including associated investment gains and losses are subject to forfeiture.
             1285          (b) If a member who terminates employment with a participating employer prior to the
             1286      vesting period described in Subsection (3)(a) subsequently enters employment with the same or
             1287      another participating employer within 10 years of the termination date of the previous
             1288      employment:
             1289          (i) all contributions made by the previous participating employer on behalf of the
             1290      member, including associated investment gains and losses, shall be reinstated upon the
             1291      member's employment as a regular full-time employee; and
             1292          (ii) the length of time that the member worked with the previous employer shall be
             1293      included in determining whether the member has completed the vesting period under
             1294      Subsection (3)(a).
             1295          (c) The office shall establish a forfeiture account and shall specify the uses of the
             1296      forfeiture account, which may include an offset against administrative costs of employer


             1297      contributions made under this section.
             1298          (8) The office may request from any other qualified 401(k) plan under Subsection (2)
             1299      any relevant information pertaining to the maintenance of its tax qualification under the
             1300      Internal Revenue Code.
             1301          (9) The office may take any action which in its judgment is necessary to maintain the
             1302      tax-qualified status of its 401(k) defined contribution plan under federal law.
             1303          Section 20. Section 49-23-501 is amended to read:
             1304           49-23-501. Death benefit -- Eligibility for death benefit -- Benefit calculation --
             1305      Payment of claim.
             1306          (1) The office shall provide a death benefit [through the purchase of a group insurance
             1307      policy] for members of this system.
             1308          (2) The board shall make rules to administer the death benefit provided by this section
             1309      and may, in accordance with federal law, establish:
             1310          (a) benefit levels;
             1311          (b) classes of members; and
             1312          (c) a living benefit option.
             1313          (3) This death benefit is payable when:
             1314          (a) the member dies prior to the member's retirement date or dies under circumstances
             1315      which Subsection 49-23-304 (4) requires to be treated as the death of a member before
             1316      retirement;
             1317          (b) the office receives acceptable proof of death; and
             1318          (c) benefits are not payable under Section 49-23-306 .
             1319          (4) The death benefit payable to the beneficiary under this section is a lump-sum
             1320      payment consisting of:
             1321          (a) the return of any member contributions under this chapter; plus
             1322          (b) a percentage of the final average salary of the member to be determined by the
             1323      board.
             1324          (5) Any amount of a living benefit option paid to the member prior to death shall be
             1325      deducted from the benefit payable to the beneficiary.
             1326          (6) The cost of the death benefit shall be paid by the participating employer in addition
             1327      to the contribution rate established under Section 49-23-301 or 49-23-401 .


             1328          (7) The portion of the death benefit provided under Subsection (4)(b) may not be paid
             1329      to the beneficiary of an inactive member unless the death of the member occurs either:
             1330          (a) within a period of 120 days after the last day of work for which the person received
             1331      compensation; or
             1332          (b) while the member is still physically or mentally incapacitated from performance of
             1333      duties, if the incapacity has been continuous since the last day of work for which compensation
             1334      was received.
             1335          (8) The death benefit provided under Subsection (4)(b) shall be paid in accordance
             1336      with Sections 49-11-609 and 49-11-610 .
             1337          (9) The death benefit paid to the beneficiary of an inactive member, except as
             1338      otherwise provided under Subsection (7), is a lump-sum return of the member's member
             1339      contributions.
             1340          (10) Payment of the death benefit by the office constitutes a full settlement of any
             1341      beneficiary's claim against the office and the office is not liable for any further or additional
             1342      claims or assessments on behalf of the member.
             1343          (11) Unless otherwise specified in a written document filed with the office, death
             1344      benefits payable to beneficiaries shall be in accordance with the order of precedence
             1345      established under Title 75, Chapter 2, Intestate Succession and Wills.
             1346          (12) A death benefit under this section may not be paid on behalf of a retiree under this
             1347      system.


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