Bill Summary – FastDemocracy

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68th Legislature 2023                                                                                             LC 0238
                                      _____________ BILL NO. _____________
                   INTRODUCED BY _________________________________________________
                                           (Primary Sponsor)
                       BY REQUEST OF THE PUBLIC EMPLOYEES' RETIREMENT BOARD
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  A BILL FOR AN ACT ENTITLED: “AN ACT REVISING FUNDING PROVISIONS FOR THE PUBLIC
  EMPLOYEES' RETIREMENT SYSTEM; REMOVING THE PLAN CHOICE RATE; INCREASING EMPLOYER
  CONTRIBUTIONS TO THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM; AMENDING SECTIONS 19-2-
  303, 19-2-405, 19-3-315, 19-3-316, 19-3-319, 19-3-2117, AND 19-21-214, MCA; AND PROVIDING AN
  EFFECTIVE DATE.”
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  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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          Section 1. Section 19-2-303, MCA, is amended to read:
          "19-2-303.    Definitions. Unless the context requires otherwise, for each of the retirement systems
  subject to this chapter, the following definitions apply:
          (1)      "Accumulated contributions" means the sum of all the regular and any additional contributions
  made by a member in a defined benefit plan, together with the regular interest on the contributions.
          (2)      "Active member" means a member who is a paid employee of an employer, is making the
  required contributions, and is properly reported to the board for the most current reporting period.
          (3)      "Actuarial cost" means the amount determined by the board in a uniform and nondiscriminatory
  manner to represent the present value of the benefits to be derived from the additional service to be credited
  based on the most recent actuarial valuation for the system and the age, years until retirement, and current
  salary of the member.
          (4)      "Actuarial equivalent" means a benefit of equal value when computed upon the basis of the
  mortality table and interest rate assumptions adopted by the board.
          (5)      "Actuarial liabilities" means the excess of the present value of all benefits payable under a
  defined benefit retirement plan over the present value of future normal costs in that retirement plan.
          (6)      "Actuary" means the actuary retained by the board in accordance with 19-2-405.
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68th Legislature 2023                                                                                               LC 0238
            (7)    "Additional contributions" means contributions made by a member of a defined benefit plan to
  purchase various types of optional service credit as allowed by the applicable retirement plan.
            (8)    "Annuity" means:
            (a)    in the case of a defined benefit plan, equal and fixed payments for life that are the actuarial
  equivalent of a lump-sum payment under a retirement plan and as such are not benefits paid by a retirement
  plan and are not subject to periodic or one-time increases; or
            (b)    in the case of the defined contribution plan, a payment of a fixed sum of money at regular
  intervals.
            (9)    "Banked holiday time" means the hours reported for work performed on a holiday that the
  employee may use for equivalent time off or that may be paid to the employee as specified by the employer's
  policy.
            (10)   "Benefit" means:
            (a)    the service retirement benefit, early retirement benefit, or disability retirement or survivorship
  benefit payment provided by a defined benefit retirement plan; or
            (b)    a payment or distribution under the defined contribution retirement plan, including a disability
  payment under 19-3-2141, for the exclusive benefit of a plan member or the member's beneficiary or an annuity
  purchased under 19-3-2124.
            (11)   "Board" means the public employees' retirement board provided for in 2-15-1009.
            (12)   "Contingent annuitant" means:
            (a)    under option 2 or 3 provided for in 19-3-1501, one natural person designated to receive a
  continuing monthly benefit after the death of a retired member; or
            (b)    under option 4 provided for in 19-3-1501, a natural person, charitable organization, estate, or
  trust that may receive a continuing monthly benefit after the death of a retired member.
            (13)   "Covered employment" means employment in a covered position.
            (14)   "Covered position" means a position in which the employee must be a member of the
  retirement system except as otherwise provided by law.
            (15)   "Defined benefit retirement plan" or "defined benefit plan" means a plan within the retirement
  systems provided for pursuant to 19-2-302 that is not the defined contribution retirement plan.
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68th Legislature 2023                                                                                               LC 0238
           (16)     "Defined contribution retirement plan" or "defined contribution plan" means the plan within the
  public employees' retirement system established in 19-3-103 that is provided for in chapter 3, part 21, of this
  title and that is not a defined benefit plan.
           (17)     "Department" means the department of administration.
           (18)     "Designated beneficiary" means the person, charitable organization, estate, or trust for the
  benefit of a natural person designated by a member or payment recipient to receive any survivorship benefits,
  lump-sum payments, or benefit from a retirement account upon the death of the member or payment recipient,
  including annuities derived from the benefits or payments.
           (19)     "Direct rollover" means a payment by the retirement plan to the eligible retirement plan
  specified by the distributee or a payment from an eligible retirement plan to the retirement plan specified by the
  distributee.
           (20)     "Disability" or "disabled" means a total inability of the member to perform the member's duties
  by reason of physical or mental incapacity. The disability must be incurred while the member is an active
  member and must be one of permanent duration or of extended and uncertain duration, as determined by the
  board on the basis of competent medical opinion.
           (21)     "Distributee" means:
           (a)      a member;
           (b)      a member's surviving spouse;
           (c)      a member's spouse or former spouse who is the alternate payee under a family law order as
  defined in 19-2-907; or
           (d)      effective January 1, 2007, a member's nonspouse beneficiary who is a designated beneficiary
  as defined by section 401(a)(9)(E) of the Internal Revenue Code, 26 U.S.C. 401(a)(9)(E).
           (22)     "Early retirement benefit" means the retirement benefit payable to a member following early
  retirement and is the actuarial equivalent of the accrued portion of the member's service retirement benefit.
           (23)     "Eligible retirement plan" means any of the following that accepts the distributee's eligible
  rollover distribution:
           (a)      an individual retirement account described in section 408(a) of the Internal Revenue Code, 26
  U.S.C. 408(a);
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68th Legislature 2023                                                                                             LC 0238
          (b)      an individual retirement annuity described in section 408(b) of the Internal Revenue Code, 26
  U.S.C. 408(b);
          (c)      an annuity plan described in section 403(a) of the Internal Revenue Code, 26 U.S.C. 403(a);
          (d)      a qualified trust described in section 401(a) of the Internal Revenue Code, 26 U.S.C. 401(a);
          (e)      effective January 1, 2002, an annuity contract described in section 403(b) of the Internal
  Revenue Code, 26 U.S.C. 403(b);
          (f)      effective January 1, 2002, a plan eligible under section 457(b) of the Internal Revenue Code,
  26 U.S.C. 457(b), that is maintained by a state, a political subdivision of a state, or any agency or
  instrumentality of a state or a political subdivision of a state that agrees to separately account for amounts
  transferred into that plan from a plan under this title; or
          (g)      effective January 1, 2008, a Roth IRA described in section 408A of the Internal Revenue Code,
  26 U.S.C. 408A.
          (24)     "Eligible rollover distribution":
          (a)      means any distribution of all or any portion of the balance from a retirement plan to the credit of
  the distributee, as provided in 19-2-1011;
          (b)      effective January 1, 2002, includes a distribution to a surviving spouse or to a spouse or former
  spouse who is an alternate payee under a domestic relations order, as defined in section 414(p) of the Internal
  Revenue Code, 26 U.S.C. 414(p).
          (25)     "Employee" means a person who is employed by an employer in any capacity and whose
  salary is being paid by the employer or a person for whom an interlocal governmental entity is responsible for
  paying retirement contributions pursuant to 7-11-105.
          (26)     "Employer" means a governmental agency participating in a retirement system enumerated in
  19-2-302 on behalf of its eligible employees. The term includes an interlocal governmental entity identified as
  responsible for paying retirement contributions pursuant to 7-11-105.
          (27)     "Essential elements of the position" means fundamental job duties. An element may be
  considered essential because of but not limited to the following factors:
          (a)      the position exists to perform the element;
          (b)      there are a limited number of employees to perform the element; or
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68th Legislature 2023                                                                                            LC 0238
          (c)      the element is highly specialized.
          (28)     "Excess earnings" means the difference, if any, between reported compensation and the limits
  provided in 19-2-1005(2) used to calculate a member's highest average compensation or final average
  compensation.
          (29)     "Fiscal year" means a plan year, which is any year commencing with July 1 and ending the
  following June 30.
          (30)     "Inactive member" means a member who terminates service and does not retire or take a
  refund of the member's accumulated contributions.
          (31)     "Internal Revenue Code" has the meaning provided in 15-30-2101.
          (32)     "Member" means either:
          (a)      a person with accumulated contributions and service credited with a defined benefit retirement
  plan or receiving a retirement benefit on account of the person's previous service credited in a retirement
  system; or
          (b)      a person with a retirement account in the defined contribution plan.
          (33)     "Membership service" means the periods of service that are used to determine eligibility for
  retirement or other benefits.
          (34)     (a) "Normal cost" or "future normal cost" means an amount calculated under an actuarial cost
  method required to fund accruing benefits for members of a defined benefit retirement plan during any year in
  the future.
          (b)      Normal cost does not include any portion of the supplemental costs of a retirement plan.
          (35)     "Normal retirement age" means the age at which a member is eligible to immediately receive a
  retirement benefit based on the member's age or both age and length of service, as specified under the
  member's retirement system, without disability and without an actuarial or similar reduction in the benefit.
          (36)     "Pension" means benefit payments for life derived from contributions to a retirement plan made
  from state- or employer-controlled funds.
          (37)     "Pension trust fund" means a fund established to hold the contributions, income, and assets of
  a retirement system or plan in public trust.
          (38) "Plan choice rate" means the amount of the employer contribution as a percentage of payroll
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68th Legislature 2023                                                                                                LC 0238
  covered by the defined contribution plan members that is allocated to the public employees' retirement system's
  defined benefit plan pursuant to 19-3-2117 to actuarially fund the unfunded liabilities and the normal cost rate
  changes in a defined benefit plan resulting from member selection of the defined contribution plan.
          (39)(38) "Regular contributions" means contributions required from members under a retirement plan.
          (40)(39) "Regular interest" means interest at rates set from time to time by the board.
          (41)(40) "Retirement" or "retired" means the status of a member who has:
          (a)      terminated from service; and
          (b)      received and accepted a retirement benefit from a retirement plan.
          (42)(41) "Retirement account" means an individual account within the defined contribution retirement
  plan for the deposit of employer and member contributions and other assets for the exclusive benefit of a
  member of the defined contribution plan or the member's beneficiary.
          (43)(42) "Retirement benefit" means:
          (a)      in the case of a defined benefit plan, the periodic benefit payable as a result of service
  retirement, early retirement, or disability retirement under a defined benefit plan of a retirement system. With
  respect to a defined benefit plan, the term does not mean an annuity.
          (b)      in the case of the defined contribution plan, a benefit as defined in subsection (10)(b).
          (44)(43) "Retirement plan" or "plan" means either a defined benefit plan or a defined contribution plan
  under one of the public employee retirement systems enumerated in 19-2-302.
          (45)(44) "Retirement system" or "system" means one of the public employee retirement systems
  enumerated in 19-2-302.
          (46)(45) "Service" means employment of an employee in a position covered by a retirement system.
          (47)(46) "Service credit" means the periods of time for which the required contributions have been
  made to a retirement plan and that are used to calculate retirement benefits or survivorship benefits under a
  defined benefit retirement plan.
          (48)(47) "Service retirement benefit" means the retirement benefit that the member may receive at
  normal retirement age.
          (49)(48) "Statutory beneficiary" means the surviving spouse or dependent child or children of a
  member of the highway patrol officers', municipal police officers', or firefighters' unified retirement system who
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68th Legislature 2023                                                                                              LC 0238
  are statutorily designated to receive benefits upon the death of the member.
          (50)(49) "Supplemental cost" means an element of the total actuarial cost of a defined benefit
  retirement plan arising from benefits payable for service performed prior to the inception of the retirement plan
  or prior to the date of contribution rate increases, changes in actuarial assumptions, actuarial losses, or failure
  to fund or otherwise recognize normal cost accruals or interest on supplemental costs. These costs are
  included in the unfunded actuarial liabilities of the retirement plan.
          (51)(50) "Survivorship benefit" means payments for life to the statutory or designated beneficiary of a
  deceased member who died while in service under a defined benefit retirement plan.
          (52)(51) "Termination of employment", "termination from employment", "terminated employment",
  "terminated from employment", "terminate employment", or "terminates employment" means that:
          (a)   there has been a complete severance of a covered employment relationship by the positive act of
  either the employee, the employer, or both; and
          (b)   the member is no longer receiving compensation for covered employment, other than any
  outstanding lump-sum payment for compensatory leave, sick leave, or annual leave.
          (53)(52) "Termination of service", "termination from service", "terminated from service", "terminated
  service", "terminating service", or "terminates service" means that:
          (a)      there has been a complete severance of a covered employment relationship by the positive act
  of either the employee, the employer, or both for at least 30 days;
          (b)      no written or verbal agreement exists between employee and employer that the employee will
  return to covered employment in the future;
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