Bill Text: AZ HB2562 | 2013 | Fifty-first Legislature 1st Regular | Chaptered


Bill Title: Public retirement systems; ineligible employees

Spectrum: Partisan Bill (Republican 1-0)

Status: (Passed) 2013-06-19 - Governor Signed [HB2562 Detail]

Download: Arizona-2013-HB2562-Chaptered.html

 

 

 

Conference Engrossed

 

 

 

State of Arizona

House of Representatives

Fifty-first Legislature

First Regular Session

2013

 

 

 

CHAPTER 216

 

HOUSE BILL 2562

 

 

AN ACT

 

amending title 38, chapter 5, article 2, Arizona Revised Statutes, by adding sections 38-716 and 38-728; Amending sections 38‑797, 38-797.07 and 38‑847, Arizona Revised Statutes; amending title 38, chapter 5, article 4, Arizona Revised Statutes, by adding section 38-847.01; changing the designation of title 38, chapter 5, article 8, Arizona Revised Statutes, to "DEFINED CONTRIBUTION PLANS"; amending section 38-951, Arizona Revised Statutes; Amending title 38, chapter 5, article 8, Arizona Revised Statutes, by adding sections 38‑955 and 38-956; making an appropriation; relating to public retirement systems.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 



Be it enacted by the Legislature of the State of Arizona:

Section 1.  Title 38, chapter 5, article 2, Arizona Revised Statutes, is amended by adding section 38-716, to read:

START_STATUTE38-716.  Employers' responsibilities under the system

In addition to any other requirements of this article or article 2.1, 7 or 8 of this chapter, an employer of a member shall:

1.  Cooperate and collaborate with ASRS and follow all ASRS procedures to ensure the proper enrollment of members in the system.

2.  Submit any reports, data, paperwork or materials that are requested by ASRS and that are necessary to make eligibility determinations and for the proper administration of the plan.

3.  Attend the ASRS annual training conference. END_STATUTE

Sec. 2.  Title 38, chapter 5, article 2, Arizona Revised Statutes, is amended by adding section 38-728, to read:

START_STATUTE38-728.  Eligibility determinations; employee enrollment

A.  For an employee hired on or after the effective date of this section, if an employer disagrees with a written determination made by the state social security section 218 administrator of the employee's inclusion under agreements providing for the employee's coverage under the federal old age and survivors insurance system or the application or use of that written determination by ASRS for ASRS membership, the employer shall enroll the employee pursuant to section 38‑956 in the plan established by ASRS pursuant to section 38‑955 during the social security administration or ASRS administrative appeals process.  If there is a determination of the employee's eligibility that is final and is not appealable and the employee is determined:

1.  To be eligible for ASRS, the employer shall enroll the employee in ASRS and section 38‑738 applies, and the employer shall discontinue the employee's participation in the plan established by ASRS pursuant to section 38‑955.

2.  To be not eligible for ASRS, the employee shall continue participation in the plan established by ASRS pursuant to section 38‑955, unless the employee has entered into an agreement with the employer that requires participation in an alternative retirement plan or for other compensation provided in lieu of retirement benefits and that agreement is executed within two years of the date that the employee first commenced participation in the plan and is irrevocable for the remainder of the employee's employment with the employer.

3.  To be not eligible for ASRS and the employer elects not to provide coverage under section 38-956, subsection B, the retired employee's participation in the plan established by ASRS pursuant to section 38‑955 shall be discontinued.

B.  For an employee who is hired on or after the effective date of this section, if an employer disagrees with a written determination made by the state social security section 218 administrator of the employee's inclusion under agreements providing for the employee's coverage under the federal old age and survivors insurance system or the application or use of that written determination by ASRS for ASRS membership and the employee is enrolled in ASRS, the following shall occur:

1.  The employee's participation in asrs shall be suspended, additional contributions shall not be collected or permitted and service credit shall not be applied during the social security administration or ASRS administrative appeals process.

2.  The employee shall be enrolled pursuant to section 38‑956 in the plan established by ASRS pursuant to section 38‑955.

3.  If there is a determination of the employee's eligibility that is final and is not appealable and the employee is determined eligible for ASRS, the employee's suspension from participation in ASRS shall cease and section 38‑738 applies, and the employer shall discontinue the employee's participation in the plan established by ASRS pursuant to section 38‑955.

4.  If there is a determination of the employee's eligibility that is final and is not appealable and the employee is determined ineligible for ASRS, the employee shall continue participation pursuant to section 38‑956 in the plan established by ASRS pursuant to section 38‑955, except:

(a)  If the employer elects not to provide coverage under section 38‑956, subsection B, a retired employee's participation in the plan established by ASRS pursuant to section 38‑955 shall be discontinued.

(b)  If the employee has entered into an agreement with the employer that requires participation in an alternative retirement plan or for other compensation provided in lieu of retirement benefits and that agreement was executed within two years of the date that the employee first commenced participation in the plan and is irrevocable for the remainder of the employee's employment with the employer, the employee's participation in the plan established by ASRS pursuant to section 38‑955 shall be discontinued.

C.  If an employee's participation in the plan established by ASRS pursuant to section 38‑955 is discontinued pursuant to this section, no additional employee or employer contributions shall be made to the plan and the employee is entitled to the employee's retirement savings account and earnings on the account as permitted under the terms of the plan.

D.  An employer is not required to formally adopt the plan established by ASRS pursuant to section 38‑955.

E.  This section only applies to an employer that has entered into an agreement approved by the board under section 38‑729. END_STATUTE

Sec. 3.  Section 38-797, Arizona Revised Statutes, is amended to read:

START_STATUTE38-797.  Definitions

In this article, unless the context otherwise requires:

1.  "ASRS" means the Arizona state retirement system established by article 2 of this chapter.

2.  "Assets" means the accumulated resources of the LTD program.

3.  "Board" means the ASRS board established pursuant to section 38‑713.

4.  "Compensation" has the same meaning prescribed in section 38‑711.

5.  "Depository" means a bank in which the monies of the LTD program are deposited and collateralized as provided by law.

6.  "Employer" has the same meaning prescribed in section 38‑711.

7.  "Employer contributions" means all amounts paid into the LTD program by an employer.

8.  "Fiscal year" has the same meaning prescribed in section 38‑711.

9.  "LTD program" means the long‑term disability program established by this article.

10.  "Member":

(a)  Has the same meaning prescribed in section 38‑711.

(b)  Includes an employee described in section 38‑956.

11.  "Monthly compensation" means one‑twelfth of a member's annual compensation paid and payable in the fiscal year during which a member becomes disabled.

12.  "Normal retirement date":

(a)  Has the same meaning prescribed in section 38‑711 for members eligible pursuant to article 2 of this chapter.

(b)  Means sixty-five years of age for members eligible pursuant to section 38-956.

13.  "Political subdivision" has the same meaning prescribed in section 38‑711.

14.  "State" has the same meaning prescribed in section 38‑711.END_STATUTE

Sec. 4.  Section 38-797.07, Arizona Revised Statutes, is amended to read:

START_STATUTE38-797.07.  LTD program benefits; limitations; definitions

A.  The LTD program is subject to the following limitations:

1.  Except as provided in paragraph  9 of this subsection, monthly LTD program benefits shall not exceed two‑thirds of a member's monthly compensation at the time disability commences, reduced by:

(a)  For a member whose disability commences before July 1, 2008, sixty‑four per cent of social security disability benefits that the member and the member's dependents are eligible to receive.

(b)  For a member whose disability commences on or after July 1, 2008, eighty‑five per cent of social security disability benefits that the member and the member's dependents are eligible to receive, but not including:

(i)  The amount of attorney fees approved pursuant to social security administration rules and reasonable documented costs paid to an attorney to secure that disability benefit.

(ii)  Any cost‑of‑living adjustments that are granted after the member commences benefits under this section.

(c)  For a member whose disability commences before July 1, 2008, eighty‑three per cent of social security retirement benefits that the member is eligible to receive.

(d)  For a member whose disability commences on or after July 1, 2008, eighty‑five per cent of social security retirement benefits that the member is eligible to receive, but not including any cost‑of‑living adjustments that are granted after the member commences benefits under this section.

(e)  All of any workers' compensation benefits.

(f)  All of any payments for a veteran's disability if both of the following apply:

(i)  The veteran's disability payment is for the same condition or a condition related to the condition currently causing the member's total disability.

(ii)  The veteran's disability is due to, or a result of, service in the armed forces of the United States.

(g)  All of any other benefits by reason of employment that are financed partly or wholly by an employer, including payments for sick leave. This subdivision does not include any retirement benefit that is received by the member pursuant to a state retirement system or plan other than ASRS.

(h)  Fifty per cent of any salary, wages, commissions or other employment related pay that the member receives or is entitled to receive from any gainful employment in which the member actually engages.

2.  For a member whose disability commences on or after the effective date of this amendment to this section August 2, 2012, a member's monthly income from the monthly LTD program benefits and sources listed in paragraph 1 of this subsection shall not exceed one hundred per cent of the member's monthly compensation at the time disability commences.  ASRS shall offset the member's monthly LTD program benefits by the amount necessary to reduce the member's total monthly income to meet the limit prescribed in this paragraph.

3.  Monthly LTD program benefits are not payable until a member has been totally disabled for a period of six consecutive months.

4.  Monthly LTD program benefits are not payable to a member who files an initial claim for disability more than twelve months after the date of the member's date of disability unless the member demonstrates to ASRS good cause for not filing the initial claim within twelve months after the date of disability.

5.  Monthly LTD program benefits are not payable to a member who is receiving retirement benefits from ASRS.

6.  Monthly LTD program benefits are not payable to a member whose disability is due to, or a result of, any of the following:

(a)  An intentionally self‑inflicted injury.

(b)  War, whether declared or not.

(c)  An injury incurred while engaged in a felonious criminal act or enterprise.

(d)  For a member whose most recent membership in the LTD program commences before July 1, 2008, an injury or sickness for which the member received medical treatment within three months before the date of the member's coverage under the LTD program.  This subdivision does not apply to a member who either:

(i)  Has been an active member of an employer for twelve continuous months.

(ii)  Is employed by an employer before July 1, 1988.

(e)  For a member whose most recent membership in the LTD program commences on or after July 1, 2008, an injury or sickness for which the member received medical treatment within six months before the date of the member's coverage under the LTD program.  This subdivision does not apply to a member who has been an active member of an employer for twelve continuous months.

7.  Monthly LTD program benefits cease to be payable to a member at the earliest of the following:

(a)  The date the member ceases to be totally disabled.

(b)  The date the member:

(i)  Ceases to be under the direct care of a doctor.

(ii)  Refuses to undergo any medical examination or refuses to participate in any work rehabilitation program for which the member is reasonably qualified by education, training or experience and that is requested by the insurance company or claims administrator that is selected by the board to administer the LTD program.

(c)  The date the member withdraws employee contributions with interest and ceases to be a member.

(d)  The later of the following:

(i)  The member's normal retirement date.

(ii)  The month following sixty months of payments if disability occurs before sixty‑five years of age.

(iii)  The month following attainment of seventy years of age if disability occurs at sixty‑five years of age or after but before sixty‑nine years of age.

(iv)  The month following twelve months of payments if disability occurs at or after sixty‑nine years of age.

(e)  If the member is convicted of a criminal offense and sentenced to more than six months in a jail, prison or other penal institution, the first day of the month following the first thirty continuous days of the member's confinement for the remainder of the confinement.

8.  Monthly LTD program benefits are payable only for disabilities that commence on or after July 1, 1988.

9.  The minimum benefit for a member who is entitled to receive monthly LTD program benefits is fifty dollars per month.

10.  Members are eligible to receive the LTD program benefits and payments described in paragraph 1 of this subsection, and the reductions provided by paragraph 1 of this subsection apply even though the social security benefits are not actually paid as follows:

(a)  For primary and dependent social security benefits, the members are eligible for the social security benefits until the social security benefits are actually awarded, or if the social security benefits are denied, until the member pursues the social security appeal process through a hearing before a social security administrative law judge or until the insurance company or claims administrator determines that the member is not eligible for social security benefits.

(b)  For benefits and payments from any other source provided in paragraph 1 of this subsection, the members are eligible for the benefits if it is reasonable to believe that those benefits will be paid on proper completion of the claim or would have been paid except for the failure of the member to pursue the claim in time.

11.  A member shall be considered totally disabled if based on objective medical evidence:

(a)  During the first thirty months of a period of disability, the member is unable to perform all duties of the position held by the member when the member became totally disabled.

(b)  For a member who has received monthly LTD program benefits for twenty‑four months within a five‑year period, the member is unable to perform any work for compensation or gain for which the member is reasonably qualified by education, training or experience in an amount at least equal to the scheduled LTD program benefits prescribed in paragraph 1 of this subsection.

B.  A member who is eligible pursuant to article 2 of this chapter and who receives monthly LTD program benefits is entitled to receive service credit pursuant to article 2 of this chapter from the time disability commences until LTD program benefits cease to be payable, except that for a member who receives monthly LTD program benefits on or after June 30, 1999 the number of years of service credited to the member's retirement account during the period the member receives LTD program benefit payments shall not cause the member's total credited service for retirement benefits to exceed the greater of thirty years or the total years of service credited to the member's retirement account on the commencement of disability.

C.  This section does not prohibit a member whose disability has been established to the satisfaction of the board from relying on treatment by prayer through spiritual means in accordance with the tenets and practice of a recognized church, religious denomination or Native American traditional medicine by a duly accredited practitioner of the church, denomination or Native American traditional medicine without suffering reduction or suspension of the member's monthly LTD program benefits.

D.  ASRS may suspend or terminate benefits under this article if a member fails to provide information, data, paperwork or other materials that are requested by ASRS or the insurance company or claims administrator that is selected by the board to administer the LTD program.  If the member provides the information requested, ASRS shall retroactively reinstate the benefits or claim for which the member qualifies under this article.

E.  For the purposes of this section:

1.  "Objective medical evidence" means evidence that established facts and conditions, as perceived without distortion by personal feelings, prejudices or interpretations, and includes x-rays, quantitative tests, laboratory findings, data, records, reports from the attending physician and reports from a consulting physician, as applicable.

2.  "Received medical treatment" means that the member consulted with or received the advice of a licensed medical or dental practitioner, including advice given during a routine examination, and it includes situations in which the member received medical or dental care, treatment or services, including the taking of drugs, medication, insulin or similar substances.

3.  "Social security" and "social security disability" includes the railroad retirement act of 1974 (P.L. 93‑445; 88 Stat. 1305; 45 United States Code sections 231 through 231u).END_STATUTE

Sec. 5.  Section 38-847, Arizona Revised Statutes, is amended to read:

START_STATUTE38-847.  Local boards

A.  The administration of the system and responsibility for making the provisions of the system effective for each employer are vested in a local board.  The department of public safety, the Arizona game and fish department, the department of emergency and military affairs, the university of Arizona, Arizona state university, northern Arizona university, each county sheriff's office, each county attorney's office, each county parks department, each municipal fire department, each eligible fire district, each community college district, each municipal police department, the department of law, the department of liquor licenses and control, the Arizona department of agriculture, the Arizona state parks board, each Indian reservation police agency and each Indian reservation fire fighting agency shall have a local board.  A nonprofit corporation operating pursuant to sections 28‑8423 and 28‑8424 shall have one local board for all of its members.  Each local board shall be constituted as follows:

1.  For political subdivisions or Indian tribes, the mayor or chief elected official or a designee of the mayor or chief elected official approved by the respective governing body as chairman, two members elected by secret ballot by members employed by the appropriate employer and two citizens, one of whom shall be the head of the merit system, or the head's designee from among the other members of the merit system, if it exists for the group of members, appointed by the mayor or chief elected official and with the approval of the governing body of the city or the governing body of the employer.  The appointed two citizens shall serve on both local boards in a city or Indian tribes where both fire and police department employees are members.

2.  For state agencies and nonprofit corporations operating pursuant to sections 28‑8423 and 28‑8424, two members elected by secret ballot by the members employed by the appropriate employer and three citizens appointed by the governor.  Each state agency local board shall elect a chairman.

3.  For fire districts organized pursuant to section 48‑804, the secretary‑treasurer as chairman, two members elected by secret ballot by members employed by the fire district and two citizens appointed by the secretary‑treasurer, one of whom is a resident of the fire district and one of whom has experience in personnel administration but who is not required to be a resident of the fire district.

B.  On the taking effect of this system for an employer, the appointments and elections of local board members shall take place with one elective and appointive local board member serving a term ending two years after the effective date of participation for the employer and other local board members serving a term ending four years after the effective date. Thereafter, every second year, and as a vacancy occurs, an office shall be filled for a term of four years in the same manner as previously provided.

C.  Each local board shall be fully constituted pursuant to subsection A of this section within sixty days after the employer's effective date of participation in the system.  If the deadline is not met, on the written request of any member who is covered by the local board or the employer to the board of trustees, the board of trustees may appoint all vacancies of the local board pursuant to subsection A of this section and designate whether each appointive position is for a twoyear or fouryear term.  If the board of trustees cannot find individuals to serve on the local board who meet the requirements of subsection A of this section, the board of trustees may appoint individuals to serve as interim local board members until qualified individuals are appointed or elected.  Each local board shall meet at least twice a year.  Each member of a local board, within ten days after the member's appointment or election, shall take an oath of office that, so far as it devolves on the member, the member shall diligently and honestly administer the affairs of the local board and that the member shall not knowingly violate or willingly permit to be violated any of the provisions of law applicable to the system.

D.  Except as limited by subsection E of this section, a local board shall have such powers as may be necessary to discharge the following duties:

1.  To decide all questions of eligibility and for membership, service credits and benefits and determine the amount, manner and time of payment of any benefits under the system.

2.  To prescribe procedures to be followed by claimants in filing applications for benefits.

3.  To make a determination as to the right of any claimant to a benefit and to afford any claimant or the board of trustees, or both, a right to a rehearing on the original determination.  Except as otherwise required by law, unless all parties involved in a matter presented to the local board for determination otherwise agree, the local board shall commence a hearing on the matter within ninety days after the date the matter is presented to the local board for determination.  If a local board fails to commence a hearing as provided in this paragraph, on a matter presented to the local board for determination, the relief demanded by the party petitioning the local board is deemed granted and approved by the local board.  The granting and approval of this relief is considered final and binding unless a timely request for rehearing or appeal is made as provided in this article, unless the board of trustees determines that granting the relief requested would violate the internal revenue code or threaten to impair the system's status as a qualified plan under the internal revenue code.  If the board of trustees determines that granting the requested relief would violate the internal revenue code or threaten to impair the system's status as a qualified plan, the board of trustees may refuse to grant the relief by issuing a written determination to the local board and the party petitioning the local board for relief.  The decision by the board of trustees is subject to judicial review pursuant to title 12, chapter 7, article 6.

4.  To request and receive from the employers and from members such information as is necessary for the proper administration of the system and action on claims for eligibility for membership and benefits, and to forward such information to the board of trustees.

5.  To distribute, in such manner as the local board determines to be appropriate, information explaining the system received from the board of trustees.

6.  To furnish the employer, the board of trustees and the legislature, on request, with such annual reports with respect to the administration of the system as are reasonable and appropriate.

7.  To receive and review the actuarial valuation of the system for its group of members.

8.  To receive and review reports of the financial condition and of the receipts and disbursements of the fund from the board of trustees.

9.  To appoint medical boards as provided in section 38‑859.

10.  To sue and be sued to effectuate the duties and responsibilities set forth in this article.

E.  A local board shall have no power to add to, subtract from, modify or waive any of the terms of the system, change or add to any benefits provided by the system or waive or fail to apply any requirement of eligibility for membership or benefits under the system.  Notwithstanding any limitations periods imposed in this article, including subsection D, paragraph 3 and subsections G and H of this section, if the board of trustees determines a local board decision violates the internal revenue code or threatens to impair the system's status as a qualified plan under the internal revenue code, the local board's decision is not final and binding and the board of trustees may refrain from implementing or complying with the local board decision.

F.  A local board, from time to time, shall establish and adopt such rules as it deems necessary or desirable for its administration.  All rules and decisions of a local board shall be uniformly and consistently applied to all members in similar circumstances.  If a claim or dispute is presented to a local board for determination but the local board has not yet adopted uniform rules of procedure for adjudication of the claim or dispute, the local board shall adopt and use the model uniform rules of local board procedure that are issued by the board of trustees' fiduciary counsel to adjudicate the claim or dispute.

G.  Except as otherwise provided in this article, any action by a majority vote of the members of a local board that is not inconsistent with the provisions of the system and the internal revenue code shall be final, conclusive and binding on all persons affected by it unless a timely application for a rehearing or appeal is filed as provided in this article.  No later than twenty days after taking action, the local board shall submit to the board of trustees the minutes from the local board meeting that include the name of the member affected by its decision, a description of the action taken and an explanation of the reasons and all documents submitted to the local board for the action taken, including the reports of a medical board.  The board of trustees may not implement and comply with any local board action that does not comply with the internal revenue code or that threatens to jeopardize the system's status as a qualified plan under the internal revenue code.

H.  A claimant or the board of trustees may apply for a rehearing before the local board within the time periods prescribed in this subsection, except that if a decision of a local board violates the internal revenue code or threatens to jeopardize the system's status as a qualified plan under the internal revenue code, no limitation period for the board of trustees to seek a rehearing of a local board decision applies.  An application for a rehearing shall be filed in writing with a member of the local board or its secretary within sixty days after:

1.  The applicant‑claimant receives notification of the local board's original action by certified mail, by attending the meeting at which the action is taken or by receiving benefits from the system pursuant to the local board's original action, whichever occurs first.

2.  The applicant-board of trustees receives notification of the local board's original action as prescribed by subsection G of this section by certified mail.

I.  A hearing before a local board on a matter remanded from the superior court is not subject to a rehearing before the local board.

J.  Decisions of local boards are subject to judicial review pursuant to title 12, chapter 7, article 6.

K.  When making a ruling, determination or calculation, the local board shall be entitled to rely on information furnished by the employer, a medical board, the board of trustees, independent legal counsel or the actuary for the system.

L.  Each member of a local board is entitled to one vote.  A majority is necessary for a decision by the members of a local board at any meeting of the local board.

M.  The local board shall adopt such bylaws as it deems desirable.  The local board shall elect a secretary who may, but need not, be a member of the local board.  The secretary of the local board shall keep a record and prepare minutes of all meetings in compliance with chapter 3, article 3.1 of this title and forward the minutes and all necessary communications to the board of trustees as prescribed by subsection G of this section.

N.  The fees of the medical board and of the local board's independent legal counsel and all other expenses of the local board necessary for the administration of the system shall be paid by the employer and not the board of trustees or system at such rates and in such amounts as the local board shall approve.  Legal counsel that is employed by the local board is independent of the employer and any employee organization or member and owes its duty of loyalty only to the local board in connection with its representation of the local board.

O.  The local board shall issue directions to the board of trustees concerning all benefits that are to be paid from the employer's account pursuant to the provisions of the fund.  The local board shall keep on file, in such manner as it may deem convenient or proper, all reports from the board of trustees and the actuary.

P.  The local board and the individual members of the local board shall be indemnified from the assets of the employer for any judgment against the local board or its members, including attorney fees and costs, arising from any act, or failure to act, made in good faith pursuant to the provisions of the system, including expenses reasonably incurred in the defense of any claim relating to the act or failure to act. END_STATUTE

Sec. 6.  Title 38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding section 38-847.01, to read:

START_STATUTE38-847.01.  Membership in retirement plan; eligibility

A.  Each employee of an eligible group shall participate in the plan on proper determination of eligibility for membership by the local board pursuant to section 38‑847, subsection D.

B.  The employer shall provide to the local board all necessary information to render a decision on the employee's eligibility for membership.  The information shall include:

1.  The date the employee was hired or appointed to the position.

2.  The employee's position title.

3.  A description of the essential functions for the position.

C.  An employee receiving a pension from the plan is not subject to this section, but is subject to section 38‑849. END_STATUTE

Sec. 7.  Heading change

The article heading of title 38, chapter 5, article 8, Arizona Revised Statutes, is changed from "SUPPLEMENTAL DEFINED CONTRIBUTION PLANS" to "DEFINED CONTRIBUTION PLANS".

Sec. 8.  Section 38-951, Arizona Revised Statutes, is amended to read:

START_STATUTE38-951.  Definitions

In this article, unless the context otherwise requires:

1.  "Board" means the Arizona state retirement system board established by section 38‑713 or the board of trustees established by section 38‑848.

2.  "Eligible group" means any of the following:

(a)  The Arizona state retirement system established by article 2 of this chapter.

(b)  The elected officials' retirement plan established by article 3 of this chapter.

(c)  The public safety personnel retirement system established by article 4 of this chapter.

(d)  The corrections officer retirement plan established by article 6 of this chapter.

(e)  An optional retirement program established pursuant to section 15‑1451 or 15‑1628.

3.  "Employer" means an agency or department of this state or an agency or department of a political subdivision of this state that has employees in an eligible group.

4.  "Plan" means a supplemental defined contribution plan authorized by this article. END_STATUTE

Sec. 9.  Title 38, chapter 5, article 8, Arizona Revised Statutes, is amended by adding sections 38-955 and 38-956, to read:

START_STATUTE38-955.  Defined contribution plan; establishment; administration

A.  The Arizona state retirement system board shall establish, administer, manage and operate a defined contribution plan for employees enrolled pursuant to sections 38‑728 and 38‑956.

B.  The Arizona state retirement system board may:

1.  Delegate authority to implement the plan to its director appointed pursuant to section 38-715.

2.  Employ services it deems necessary, including legal services, for the operation and administration of the plan.

3.  Administer the plan through contracts with multiple vendors.

4.  Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the plan.

5.  For the purposes of this article, enter into intergovernmental agreements pursuant to title 11, chapter 7, article 3.

C.  Notwithstanding title 41, chapter 23, the Arizona state retirement system board may employ the services of the third‑party administrator that is contracted on the effective date of this section to administer the supplemental defined contribution plan pursuant to this article to also administer the defined contribution plan established pursuant to this section until the end of the current contract.  On expiration of that contract, the Arizona state retirement system board shall participate in a competitive bid process at least once every five years to contract with a private person or any qualified company or companies to administer the defined contribution plan established pursuant to this section.

D.  The defined contribution plan shall be designed to be a qualified governmental plan under section 401(a) of the internal revenue code.  The legislature intends that the defined contribution plan is a qualified plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the plan is exempt from taxation under section 501 of the internal revenue code.  The board may adopt any additional provisions to the plan that are necessary to fulfill this intent.

E.  Although designated as employee contributions, all employee contributions made to the plan shall be picked up and paid by the employer in lieu of contributions by the employee.  The contributions picked up by an employer may be made through a reduction in the employee's compensation or an offset against future compensation increases, or a combination of both.  An employee participating in the plan does not have the option of choosing to receive the contributed amounts directly instead of the employer paying the amounts to the plan.  It is intended that all employee contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from employees' gross income for federal and state income tax purposes and are includable in the gross income of the employees or their beneficiaries only in the taxable year in which they are distributed. END_STATUTE

START_STATUTE38-956.  Defined contribution plan; eligibility; contribution; vesting

A.  Except as provided in subsection B of this section, an employee of this state or a political subdivision of this state shall be enrolled in the plan established by ASRS pursuant to section 38‑955 if all of the following apply:

1.  The employee is hired on or after the effective date of this section.

2.  The employee is not eligible for the Arizona state retirement system pursuant to article 2 of this chapter because the employee is not included in agreements providing for the employee's coverage under the federal old age and survivors insurance system.

3.  The employee is not eligible for a statewide retirement system or plan pursuant to article 3, 4 or 6 of this chapter because the employee does not meet the definition of a member in those systems or plans.

4.  the employee is engaged to work at least twenty weeks in each fiscal year and at least twenty hours each week.

B.  A retired member of a statewide retirement system or plan pursuant to article 3, 4, or 6 of this chapter who meets the requirements of subsection A of this section may be enrolled in the plan established by ASRS pursuant to section 38‑955 at the employer's option.

C.  Each employee shall contribute one‑half of the total ASRS normal cost plus one and one‑half per cent of the employee's compensation, as defined in section 38‑711, by salary reduction that shall be deposited in the employee's retirement savings account.  Each employer shall contribute one‑half of the total ASRS normal cost plus one and one‑half per cent of the employee's compensation, as defined in section 38‑711, that shall be deposited in the employee's retirement savings  account.  Employee and employer contributions and earnings on those contributions are immediately vested.

D.  Each employee and employer shall also contribute to the long-term disability program pursuant to article 2.1 of this chapter.  An employee may receive benefits pursuant to article 2.1 of this chapter if the employee becomes totally disabled.

E.  Notwithstanding the requirements of subsection A of this section, an employee shall not be enrolled under this section if the employee has entered into an agreement with the employer that requires participation in an alternative retirement plan or for other compensation provided in lieu of retirement benefits.  the agreement shall specify that it is irrevocable for the remainder of the employee's employment with the employer and shall be executed within two years of initial eligibility under this section. END_STATUTE

Sec. 10.  Appropriation; ASRS; exemption

A.  The following sums are appropriated from the Arizona state retirement system administration account fund in fiscal year 2013‑2014 to the Arizona state retirement system:

1.  One FTE position and $72,400 for personal services.

2.  $430,000 for professional services.

B.  The appropriation made in subsection A, paragraph 2 of this section is exempt from the provisions of section 35‑190, Arizona Revised Statutes, relating to lapsing of appropriations.


 

 

 

 

APPROVED BY THE GOVERNOR JUNE 19, 2013.

 

FILED IN THE OFFICE OF THE SECRETARY OF STATE JUNE 19, 2013.

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