67th Legislature
HB 81.1
1 HOUSE BILL NO. 81
2 INTRODUCED BY J. HAMILTON
3 BY REQUEST OF THE PUBLIC EMPLOYEES' RETIREMENT BOARD
4
5 A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING LAWS RELATED TO THE
6 ADMINISTRATION OF THE PUBLIC EMPLOYEE RETIREMENT SYSTEMS ADMINISTERED BY THE
7 PUBLIC EMPLOYEES' RETIREMENT BOARD; REVISING PROVISIONS RELATED TO ALTERNATE PAYEE
8 RIGHTS UNDER FAMILY LAW ORDERS, REQUIRED BENEFIT DISTRIBUTIONS UNDER FEDERAL LAW,
9 AND MILITARY SERVICE PURCHASE ELIGIBILITY; CLARIFYING WHEN GUARANTEED ANNUAL BENEFIT
10 ADJUSTMENTS MAY COMMENCE; CLARIFYING THE AMOUNT OF THE GUARANTEED ANNUAL
11 BENEFIT ADJUSTMENT PAYABLE UNDER THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM DEFINED
12 BENEFIT PLAN; CLARIFYING PROVISIONS GOVERNING LONG-TERM DISABILITY BENEFIT PAYMENTS
13 UNDER THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM DEFINED CONTRIBUTION PLAN; AMENDING
14 SECTIONS 19-2-907, 19-2-908, 19-2-1007, 19-3-503, 19-3-1605, 19-3-2114, 19-3-2124, 19-3-2141, 19-5-410,
15 19-6-801, 19-7-803, 19-8-901, 19-9-403, AND 19-13-403, MCA; AND PROVIDING AN EFFECTIVE DATE.”
16
17 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
18
19 Section 1. Section 19-2-907, MCA, is amended to read:
20 "19-2-907. Alternate payees -- family law orders -- rulemaking. (1) A participant in a retirement
21 system may have the participant's rights modified or recognized by a family law order.
22 (2) For purposes of this section:
23 (a) "family law order" means a judgment, decree, or order of a court of competent jurisdiction under
24 Title 40 concerning child support, parental support, spousal maintenance, or marital property rights that
25 includes a transfer of all or a portion of a participant's payment rights in a retirement system to an alternate
26 payee in compliance with this section and with section 414(p) of the Internal Revenue Code, 26 U.S.C. 414(p);
27 and
28 (b) "participant" means an identified person who is a member or an actual or potential beneficiary,
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1 survivor, or contingent annuitant of a retirement system or plan designated pursuant to Title 19, chapter 3, 5, 6,
2 7, 8, 9, 13, or 17.
3 (3) A family law order must identify a participant and an alternate payee by full name, current address,
4 date of birth, and social security number. An alternate payee's rights and interests granted in compliance with
5 this section are not subject to assignment, execution, garnishment, attachment, or other process. An alternate
6 payee's rights or interests may be modified only by a family law order amending the family law order that
7 established the right or interest.
8 (4) Except as provided in subsection (6)(a), a family law order may not require:
9 (a) a type or form of benefit, option, or payment not available to the affected participant under the
10 appropriate retirement system or plan; or
11 (b) an amount or duration of payment greater than that available to a participant under the appropriate
12 retirement system or plan.
13 (5) With respect to a defined benefit plan, a family law order may provide for payment to an alternate
14 payee only as follows:
15 (a) Retirement benefit payments or refunds may be apportioned by directing payment of either a
16 percentage of the amount payable or a fixed amount of no more than the amount payable to the participant.
17 Payments to an alternate payee may be limited to a specific amount each month if the number of payments is
18 specified.
19 (b) The maximum amount of disability or survivorship benefits that may be paid to alternate payees is
20 the monthly benefit amount that would have been payable on the date of termination of service if the member
21 had retired without disability or death. The maximum amount paid may be zero, depending on the member's
22 age and service credit at the time of disability or death. Conversion of a disability retirement to a service
23 retirement pursuant to 19-2-406(5), 19-3-1015(2), 19-6-612(2), or 19-8-712(2) does not increase the maximum
24 monthly amount that may be paid to an alternate payee.
25 (c) Retirement benefit adjustments for which a participant is eligible after retirement may be paid as a
26 percentage only if existing benefit payments are paid as a percentage. The adjustments must be paid as a
27 percentage in the same ratio as existing benefit payments unless the family law order specifies that the
28 alternate payee is not entitled to benefit adjustments.
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1 (d) The participant may be required to choose a specified form of benefit payment or designate a
2 beneficiary or contingent annuitant if the retirement system or plan allows for that option.
3 (6) With respect to a defined contribution plan, a family law order may provide for payment to an
4 alternate payee only as follows:
5 (a) The vested account of the participant may be apportioned by directing payment of either a
6 percentage or a fixed amount. The total amount paid may not exceed the amount in the participant's vested
7 account. The alternate payee may receive the payment only as a direct payment, rollover, or transfer. The
8 alternate payee's portion must be totally disbursed to the alternate payee as soon as administratively feasible
9 upon the board's approval of the family law order.
10 (b) If the participant is receiving periodic payments or an annuity provided under the plan, those
11 payments may be apportioned as a percentage of the amount payable to the participant. Payments to the
12 alternate payee may be limited to a specific amount each month if the number of payments is specified.
13 Payments may not total more than the amount payable to the payee.
14 (7) The duration of monthly payments paid from a defined benefit or defined contribution plan
15 participant to an alternate payee may not exceed the lifetime of the appropriate participant. The duration of the
16 monthly payments may be further limited only to a specified maximum time, the life of the alternate payee, or
17 the life of another specified participant. The Unless a family law order specifies the alternate payee's rights and
18 interests revert to the participant upon the alternate payee's death, the alternate payee's rights and interests
19 survive the alternate payee's death and may be transferred by inheritance or by designation of a beneficiary.
20 (8) The board may assess a participant or an alternate payee for all costs of reviewing and
21 administering a family law order, including reasonable attorney fees. The board may adopt rules to implement
22 this section.
23 (9) Each family law order establishing a final obligation concerning payments by the retirement
24 system must contain a statement that the order is subject to review and approval by the board.
25 (10) The board shall adopt rules to provide for the administration of family law orders."
26
27 Section 2. Section 19-2-908, MCA, is amended to read:
28 "19-2-908. Time of commencement of benefit -- rulemaking. (1) (a) The board shall grant a
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1 benefit to any active or inactive member who is vested, or the member's statutory or designated beneficiary,
2 who has fulfilled all eligibility requirements, terminated service, and filed the appropriate written application with
3 the board. However, the board may, on its own accord and without a written application, begin benefit
4 payments to a member or beneficiary in order to comply with section 401(a)(9) of the Internal Revenue Code.
5 (b) A member may apply for retirement benefits before termination from employment, but
6 commencement of the benefits must be as provided in this section.
7 (2) (a) Except as provided in subsection (2)(b), the service retirement benefit may commence on the
8 first day of the month following the eligible member's last day of employment or, if requested by the member in
9 writing, on the first day of a later month.
10 (b) If an elected official's term of office expires before the 15th day of the month, the official may elect
11 that service retirement benefits from a defined benefit plan commence on the first day of the month following
12 the official's last full month in office. An official electing this option shall file a written application with the board.
13 An official electing this option may not earn membership service, service credit, or compensation for purposes
14 of calculating highest average compensation or final average compensation, as defined under the provisions of
15 the appropriate retirement system, in the partial month ending the official's term, and compensation earned in
16 that partial month is not subject to employer or employee contributions.
17 (3) (a) Subject to the provisions of subsection (3)(b), the disability retirement benefit payable to a
18 member must commence on the day following the member's termination from employment.
19 (b) If a disabled member continues with a purchase of service or chooses to purchase service
20 following termination of employment, the member's disability benefit may not commence until the service
21 purchase is completed.
22 (4) If a member begins receiving retirement benefits payments later than when the member is initially
23 eligible, the guaranteed annual benefit adjustment payable pursuant to 19-3-1605, 19-5-901, 19-6-710, 19-6-
24 711, 19-7-711, 19-8-1105, 19-9-1009, 19-9-1010, 19-9-1013, 19-13-1010, and 19-13-1011 does not commence
25 until January 1 of the year after the year in which the member begins to receive the member's retirement benefit
26 payment has received a monthly retirement benefit payment in each of the year's 12 months. The guaranteed
27 annual benefit adjustment may not be paid retroactively.
28 (5) A designated beneficiary eligible to receive a death payment may instead elect a survivorship
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1 benefit if the designated beneficiary is a natural person and notifies the board of the designated beneficiary's
2 election in writing within 90 days after the designated beneficiary receives notice that the designated beneficiary
3 is eligible to receive a death payment. Monthly survivorship benefits from a defined benefit plan must
4 commence on the day following the death of the member.
5 (6) Estimated and finalized benefit payments must be issued as provided in rules adopted by the
6 board.
7 (7) With respect to the defined contribution plan, the board shall adopt rules regarding the
8 commencement of benefits that are consistent with applicable provisions of the Internal Revenue Code and its
9 implementing regulations."
10
11 Section 3. Section 19-2-1007, MCA, is amended to read:
12 "19-2-1007. Required distributions. The benefits payable by a retirement system or plan subject to
13 this chapter are subject to the requirements of section 401(a)(9) of the Internal Revenue Code as follows:
14 (1) (a) Benefits must begin by the later of April 1 of the calendar year following the later of:
15 (i) the calendar year in which the member reaches 70 1/2 years of age if the member was born before
16 July 1, 1949, or 72 years of age if the member was born after June 30, 1949; or April 1 of
17 (ii) the calendar year following the calendar year in which the member terminates employment.
18 (b) If a member fails to apply for retirement benefits by April 1 of the year following the calendar year
19 in which the member attains age 70 1/2 or April 1st of the year following the calendar year in which the member
20 terminates employment, whichever is later benefits must begin under subsection (1)(a), the board shall begin
21 distribution of the benefit benefits as required by the retirement system or plan to which the member belongs or,
22 subject to subsection (2), as an option 4 benefit in chapters 3, 5, 7, and 8 of this title.
23 (2) The member's entire interest in a retirement system or plan must be distributed over the life of the
24 member or the lives of the member and a designated beneficiary or over a period not extending beyond the life
25 expectancy of the member or the life expectancy of the member and a designated beneficiary. Death benefits
26 must be distributed in accordance with section 401(a)(9) of the Internal Revenue Code and the regulations
27 implementing that section.
28 (3) The life expectancy of a member or the member's beneficiary may not be recalculated after
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1 payment of the benefits has begun.
2 (4) When a member dies after distribution of benefits has begun, the remaining portion of the
3 member's interest must be distributed beginning within 3 months of notification to the board of the death of the
4 member and, if necessary, the identification of the beneficiary pursuant to 19-2-802 and must be distributed at
5 least as rapidly as under the method of distribution prior to the member's death.
6 (5) When a member dies before distribution of benefits has begun, the entire interest of the member
7 must be distributed within 5 years of the member's death. The 5-year payment rule does not apply to any
8 portion of the member's interest that is payable to a designated beneficiary over the life or life expectancy of the
9 beneficiary and that begins within 1 year after the date of the member's death. The 5-year payment rule does
10 not apply to any portion of the member's interest that is payable to a surviving spouse, that is payable over the
11 life or life expectancy of the spouse, and that begins no later than the date the member would have reached
12 70 1/2 years of age if the member was born before July 1, 1949, or 72 years of age if the member was born
13 after June 30, 1949. Distributions to a member's beneficiary must begin as soon as administratively feasible,
14 but must begin no later than December 31 of the calendar year immediately following the calendar year in
15 which the member died. If the beneficiary has not elected the form of payment by that date, payment to the
16 beneficiary must be made in the form of a lifetime monthly benefit payment if the beneficiary is eligible for a
17 monthly benefit or in a lump sum if that is the only benefit payable to the beneficiary.
18 (6) The benefits payable must meet the minimum distribution incidental benefit requirements of
19 section 401(a)(9)(G) of the Internal Revenue Code."
20
21 Section 4. Section 19-3-503, MCA, is amended to read:
22 "19-3-503. Application to purchase military service. (1) (a) Except as provided in subsection (1)(b)
23 and subject to 19-3-514, a member with at least 5 years of membership service may, at any time prior to
24 retirement, file a written application with the board to purchase service credit and membership service for up to
25 5 years of the member's active service in the armed forces of the United States, including the first special
26 service force or the American merchant marine in oceangoing service during the period of armed conflict,
27 December 7, 1941, to August 15, 1945.
28 (b) A member is not eligible to purchase active military service credit and membership service under
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1 subsection (1)(a) if the member:
2 (i) has retired from active duty in the armed forces of the United States, including the first special
3 service force or the American merchant marine in oceangoing service during the period of armed conflict,
4 December 7, 1941, to August 15, 1945, with a military service retirement benefit based on that military service;
5 (ii) is eligible, pursuant to 19-2-707, to receive credit in the system for that service under 19-2-707; or
6 (iii) is eligible to receive credit for that service in any other retirement system or plan.
7 (2) (a) Except as provided in subsection (2)(b) and subject to 19-3-514, a member with at least 5
8 years of membership service may, at any time prior to retirement, file a written application with the board to
9 purchase service credit