RBS No. 387
1 STATE OF OKLAHOMA
1
2 1st Session of the 59th Legislature (2023)
2
3 SENATE BILL 882 By: Montgomery
3
4
4
5 AS INTRODUCED
5
6 An Act relating to the Teachers’ Retirement System of
6 Oklahoma; directing creation of defined contribution
7 system for members entering after certain date;
7 establishing provisions for new members entering
8 system; requiring Teachers’ Retirement System of
8 Oklahoma to gain federal distinction and
9 authorization; directing System to offer Roth
9 individual retirement account option; providing for
10 members to borrow against certain plans subject to
10 federal requirements; directing promulgation of rules
11 by System; establishing employee and employer
11 contributions subject to certain limitations;
12 directing distribution of funds in defined
12 contribution system; allowing the Legislature to
13 modify certain rates at any time with certain
13 employee rights reserved; providing for certain funds
14 to be paid by certain date to System; establishing
14 process for certain fund distribution through the
15 Office of Management and Enterprise Services;
15 requiring employee contributions to be fully vested;
16 providing vesting schedule for employer
16 contributions; providing for investment options to be
17 determined by employee or System; providing for
17 System to contract with certain entities for certain
18 plan options; providing for payment of certain
18 revenues to System; providing for deposit of funds
19 with existing defined benefit plan; providing for
19 effect of enactment on certain rights; prohibiting
20 certain collection activity with respect to funds;
20 authorizing offsets; providing for enforcement of
21 qualified domestic orders; defining term; prescribing
21 procedures with respect to alternate payees;
22 prescribing content; imposing restrictions;
22 authorizing promulgation of rules; providing for
23 codification; and providing an effective date.
23
24
24
Req. No. 387 Page 1
 RBS No. 387
1
1
2 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
2
3 SECTION 1. NEW LAW A new section of law to be codified
3
4 in the Oklahoma Statutes as Section 17-211 of Title 70, unless there
4
5 is created a duplication in numbering, reads as follows:
5
6 A. Effective July 1, 2024, the Teachers’ Retirement System of
6
7 Oklahoma shall establish a defined contribution system for newly
7
8 employed persons of any participating employer of the System.
8
9 B. A person employed on or after July 1, 2024 shall become a
9
10 participant in the defined contribution system and the member shall
10
11 not accrue any service credit in the defined benefit system
11
12 previously established by the System.
12
13 C. The Board of Trustees of the Teachers’ Retirement System of
13
14 Oklahoma shall take any action that is reasonable and necessary to
14
15 have the defined contribution system authorized by this act to be
15
16 recognized as a tax-qualified plan as defined by 26 U.S.C. Section
16
17 457. The Board shall take whatever action is reasonable and
17
18 necessary to obtain confirmation from the Internal Revenue Service
18
19 that the 457 plan is consistent with the requirements of 26 U.S.C.
19
20 Section 457.
20
21 D. 1. In addition to the plans offered by the defined
21
22 contribution system, the System shall also offer a Roth individual
22
23 retirement account subject to any limitations under Section 408A(c)
23
24 of the Internal Revenue Code of 1986, as amended.
24
Req. No. 387 Page 2
 RBS No. 387
1 2. Members of the System may borrow against any account under
1
2 their defined contribution plan, provided such borrowing is in
2
3 compliance with the Internal Revenue Code of 1986, as amended.
3
4 E. The System shall promulgate rules to effectuate the
4
5 provisions of this act.
5
6 SECTION 2. NEW LAW A new section of law to be codified
6
7 in the Oklahoma Statutes as Section 17-212 of Title 70, unless there
7
8 is created a duplication in numbering, reads as follows:
8
9 A. Employee contributions to the defined contribution system
9
10 established under Section 1 of this act shall be a default of six
10
11 percent (6%) and shall allow for a minimum contribution of four
11
12 percent (4%) of compensation. Employee contributions to the defined
12
13 contribution system that are eligible for an employer match shall
13
14 not exceed a percentage, based on the employee’s compensation, which
14
15 would exceed the maximum amount allowed pursuant to Section 415 of
15
16 the Internal Revenue Code of 1986, as amended.
16
17 B. Except as otherwise provided by subsection C of this
17
18 section, employers of employees who become participants in the
18
19 defined contribution retirement system shall match the employee
19
20 contribution paid on a monthly or more frequent basis at the rate of
20
21 six percent (6%) based on the same compensation amount used to
21
22 compute the employee contribution amount.
22
23 C. If an employee selects a contribution rate of seven percent
23
24 (7%) or more, but not higher than allowed pursuant to the maximum
24
Req. No. 387 Page 3
 RBS No. 387
1 annual contribution limit prescribed by Section 415 of the Internal
1
2 Revenue Code of 1986, as amended, the employer matching amount shall
2
3 be seven percent (7%).
3
4 D. The initial four percent (4%) employee contribution shall be
4
5 the only mandatory contribution of an employee participating in the
5
6 defined contribution retirement system created by this act. These
6
7 funds shall be placed by the Teachers’ Retirement System of Oklahoma
7
8 in either a 401(a) plan or a 457(b) plan, to be determined by the
8
9 Board of Trustees of the Teachers’ Retirement System of Oklahoma to
9
10 maintain the plan consistent with the Internal Revenue Code. Any
10
11 employee contributions eligible to be matched under this section
11
12 over the four percent (4%) initial contribution shall be considered
12
13 voluntary deferrals of compensation and placed in a 457(b) plan.
13
14 All employer matching funds shall be placed in a 401(a) plan.
14
15 Any contribution rate that is more than the four percent (4%)
15
16 rate can be chosen by the participating employee upon the employee’s
16
17 initial participation and can be changed once per month. The
17
18 employee contribution rate chosen shall continue until the employee
18
19 elects to change the contribution rate, terminates service, or
19
20 retires.
20
21 E. The employer match as set forth in subsection B of this
21
22 section may be increased at any time by the Legislature without
22
23 affecting the then-existing rights of participating employees and
23
24 beneficiaries to encourage participating employees to accumulate
24
Req. No. 387 Page 4
 RBS No. 387
1 deferred income reserves for themselves and their dependents. The
1
2 employer match may be decreased at any time by the Legislature
2
3 without affecting the then-existing rights of participating
3
4 employees and beneficiaries in order to provide funding as may be
4
5 needed to reduce the unfunded liabilities of the defined benefit
5
6 plan as set forth in Section 17-101 et seq. of Title 70 of the
6
7 Oklahoma Statutes, but shall not be less than six percent (6%) for
7
8 any year during which the defined contribution plan is maintained.
8
9 SECTION 3. NEW LAW A new section of law to be codified
9
10 in the Oklahoma Statutes as Section 17-213 of Title 70, unless there
10
11 is created a duplication in numbering, reads as follows:
11
12 A. Except as otherwise provided by this section, employers
12
13 shall make payment to the required matching amount as provided by
13
14 Section 5 of this act within five (5) business days of the member’s
14
15 payroll pay date. The Teachers’ Retirement System of Oklahoma shall
15
16 ensure the payment is credited to the defined contribution system
16
17 account of the member as soon as possible.
17
18 B. All employee contributions to the defined contribution
18
19 system shall be affected by salary deductions from the salary of the
19
20 employee and shall be remitted by the participating employer to the
20
21 System for deposit into the defined contribution system account
21
22 maintained on behalf of the employee.
22
23 C. Participating employers whose salary deductions and employer
23
24 contributions are not remitted to the System through the Office of
24
Req. No. 387 Page 5
 RBS No. 387
1 Management and Enterprise Services shall either send all remittances
1
2 by electronic funds transfer, or place all remittances in a bank
2
3 account from which the System can debit the amount due, both within
3
4 five (5) business days of the payroll pay date of the member.
4
5 Payroll data shall be remitted by the same deadline.
5
6 D. The Office of Management and Enterprise Services shall
6
7 cooperate with the Board of Trustees of the Teachers’ Retirement
7
8 System of Oklahoma to ensure compliance with this act.
8
9 E. Each employer which has employees participating in the
9
10 defined contribution system shall pay to the System in the same
10
11 manner and at the same time required for contributions under this
11
12 section an amount to reimburse the cost of administration of the
12
13 defined contribution system, as determined by the Board of Trustees
13
14 of the Teachers’ Retirement System of Oklahoma.
14
15 1. The Board shall certify each year to the Office of
15
16 Management and Enterprise Services and to participating employers
16
17 whose salary deductions and employer contributions are not remitted
17
18 to the System through the Office, the determined amount for the
18
19 administrative cost of the defined contribution system which will be
19
20 required to be paid for each participant.
20
21 2. Each employer shall pay at least monthly to the System the
21
22 sum sufficient to satisfy the obligation under this section as
22
23 certified by the Board.
23
24
24
Req. No. 387 Page 6
 RBS No. 387
1 F. The account of each employee participating in the defined
1
2 contribution system shall consist of the amount in the account plus
2
3 credits representing employer and employee contributions and minus
3
4 debits representing any losses, other decrements, or expenses under
4
5 the system and any distributions made to the employee under the
5
6 system.
6
7 SECTION 4. NEW LAW A new section of law to be codified
7
8 in the Oklahoma Statutes as Section 17-214 of Title 70, unless there
8
9 is created a duplication in numbering, reads as follows:
9
10 A. Members shall at all times be vested at one hundred percent
10
11 (100%) of the amount of their employee contributions. Members shall
11
12 have retirement discretion over these contributions within the
12
13 available options offered by the Board of Trustees of the Teachers’
13
14 Retirement System of Oklahoma.
14
15 B. Members shall be vested with respect to the employer
15
16 matching amounts deposited into their defined contribution system
16
17 account according to the following schedule based on years of
17
18 participating service:
18
19 Year 1 20%
19
20 Year 2 40%
20
21 Year 3 60%
21
22 Year 4 80%
22
23 Year 5 and thereafter 100%
23
24
24
Req. No. 387 Page 7
 RBS No. 387
1 C. Members shall have investment discretion over all employer
1
2 contributions.
2
3 D. For the purposes of determining a member’s right to withdraw
3
4 employer matching contributions and any investment gains upon such
4
5 employer contribution matching amounts, the vesting percentages
5
6 apply at the end of each full year of service as described in
6
7 subsection B of this section.
7
8 E. For members who do not select any investment options, the
8
9 Board shall establish default investment options for the
9
10 contributions received form members and default investment options
10
11 for matching employer contributions.
11
12 F. To the extent that participants leave employment and have
12
13 not vested in all the employer contributions, the nonvested
13
14 contributions may be used to offset costs of administering the plan.
14
15 G. The Board shall contract with one or more business entities
15
16 to create a range of choices regarding investment of funds deposited
16
17 into defined contribution system accounts. In selecting investment
17
18 options for participants in the plan, the Board shall give due
18
19 consideration to offering investment options provided by business
19
20 entities that provide guaranteed lifetime income in retirement such
20
21 as annuities, guaranteed investment contracts, or similar products.
21
22 The Board may amend any of its existing contracts with its current
22
23 service providers to perform substantially the same type of service
23
24 the provider is currently performing for the Board, to facilitate
24
Req. No. 387 Page 8
 RBS No. 387
1 the timely introduction of the new defined contribution system
1
2 created by this act. Thereafter, the contracting process for the
2
3 selection of service providers carrying out duties related to the
3
4 administration of the plan shall be the same as the selection
4
5 process for other providers selected by the Board.
5
6 SECTION 5. NEW LAW A new section of law to be codified
6
7 in the Oklahoma Statutes as Section 17-215 of Title 70, unless there
7
8 is created a duplication in numbering, reads as follows:
8
9 A. Each participating employer under the Teachers’ Retirement
9
10 System of Oklahoma shall pick up under the provisions of Section
10
11 414(h)(2) of the Internal Revenue Code of 1986, as amended, and pay
11
12 the contribution which the participating employee is required by law
12
13 to make to the System for all compensation earned after the date as
13
14 of which an employee begins to participate in the defined
14
15 contribution system. Although the contributions picked up are
15
16 designated as participating employee contributions, the
16
17 contributions shall be treated as contributions being paid by the
17
18 employer in lieu of contributions by the participating employee in
18
19 determining tax treatment under the Internal Revenue Code of 1986,
19
20 as amended, and the picked-up contributions shall not be includable
20
21 in the gross income of the participating employee until the amounts
21
22 are distributed or made available to the participating employee or
22
23 the beneficiary of the participating employee. The participating
23
24 employee, by the terms of this System, shall not have any option to
24
Req. No. 387 Page 9
 RBS No. 387
1 choose to receive the contributions so picked up directly and the
1
2 picked-up contributions must be paid by the employer to the System.
2
3 B. Contributions by the participating employee into a 457(b)
3
4 plan may not be picked up by the employer but shall b