Bill Summary – FastDemocracy

Stricken language would be deleted from and underlined language would be added to present law.
                                           Act 171 of the Regular Session
 State of Arkansas                   As Engrossed:       H2/13/23
 94th General Assembly                        A Bill
 Regular Session, 2023                                                             HOUSE BILL 1187
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 By: Representative A. Collins
 By: Senator K. Hammer
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                                   For An Act To Be Entitled
                AN ACT TO AMEND AND UPDATE THE LAW CONCERNING THE
                LUMP-SUM DEATH BENEFIT UNDER THE ARKANSAS TEACHER
                RETIREMENT SYSTEM; TO CLARIFY THE ADMINISTRATION OF
                THE LUMP-SUM DEATH BENEFIT UNDER THE ARKANSAS TEACHER
                RETIREMENT SYSTEM; TO CLARIFY THE ELIGIBILITY OF A
                RETIRED MEMBER AND A T-DROP PARTICIPANT TO RECEIVE A
                LUMP-SUM DEATH BENEFIT UNDER THE ARKANSAS TEACHER
                RETIREMENT SYSTEM; TO DECLARE AN EMERGENCY; AND FOR
                OTHER PURPOSES.
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                                               Subtitle
                         TO AMEND AND UPDATE THE LAW CONCERNING
                         THE LUMP-SUM DEATH BENEFIT UNDER THE
                         ARKANSAS TEACHER RETIREMENT SYSTEM; AND
                         TO DECLARE AN EMERGENCY.
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 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:
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        SECTION 1.       Arkansas Code § 24-7-720 is amended to read as follows:
        24-7-720.        Lump-sum death benefit — Definition.
        (a)(1)(A)        If prior to July 1, 2007, an active member of the Arkansas
 Teacher Retirement System with five (5) or more years of actual service,
 including actual service for the year immediately preceding the member's
 death, dies in employer service before retirement, then a lump sum of up to
 ten thousand dollars ($10,000) shall be paid to such persons as he or she
 shall have nominated by written designation duly executed and filed with the
     *LHR041*                                                                    02-13-2023 09:59:54 LHR041
     As Engrossed:    H2/13/23                                                    HB1187
 Board of Trustees of the Arkansas Teacher Retirement System If an active
 member, T-DROP participant, or a retired member with five (5) years of actual
 service, including actual service for the year immediately preceding the
 member's death, dies before July 1, 2007, then one (1) lump-sum death benefit
 of up to ten thousand dollars ($10,000) shall be paid in equal shares to each
 person designated by the member as a beneficiary in the manner required by
 the Arkansas Teacher Retirement System.
                    (B)   If on or after July 1, 2007, an active member of the
 Arkansas Teacher Retirement System with ten (10) or more years of actual
 service dies in employer service before retirement, then a lump sum of up to
 ten thousand dollars ($10,000) shall be paid to the persons he or she has
 nominated by written designation executed and filed with the board Effective
 July 1, 2009, if a member who retired or became a T-DROP participant on or
 before July 1, 2007, with five (5) or more years of actual service dies, then
 one (1) lump-sum death benefit of up to ten thousand dollars ($10,000) shall
 be paid in equal shares to each person designated by the member as a
 beneficiary in the manner required by the system.
                    (C)   If an active member, T-DROP participant, or a retired
 member with ten (10) or more years of actual service dies on or after July 1,
 2007, then one (1) lump-sum death benefit of up to ten thousand dollars
 ($10,000) shall be paid in equal shares to each person designated by the
 member as a beneficiary in the manner required by the system.
                    (D)(i)     If a member accrues a minimum of ten (10) years of
 actual, contributory service, regardless of noncontributory service accrued
 in combination with the contributory service, the member shall receive the
 maximum lump-sum death benefit as determined by the Board of Trustees of the
 Arkansas Teacher Retirement System under this section.
                             (ii)    Upon the member’s death, the maximum lump-sum
 death benefit shall be paid in equal shares to each person designated by the
 member as a beneficiary in the manner required by the system.
                             (iii)   The board may set a lump-sum death benefit for
 noncontributory service as the board deems appropriate.
            (2)    If there are no designated persons who survive the member,
 the lump sum shall be paid to the member's estate If a member designates more
 than one (1) beneficiary, the lump-sum death benefit shall be divided equally
 amongst each designated beneficiary.
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     As Engrossed:       H2/13/23                                                  HB1187
               (3)    If all of the member's designated beneficiaries do not
 survive the member, the lump-sum death benefit shall be paid to the member's
 estate.
      (b)(1)     If a retired member of the system dies prior to July 1, 2007,
 and the retired member accrued five (5) or more years of actual service,
 including actual service for the year immediately preceding the member's
 death, then a lump sum of up to ten thousand dollars ($10,000) shall be paid
 to such persons as he or she shall have nominated by written designation duly
 executed and filed with the board.
               (2)    If a retired member of the system dies on or after July 1,
 2007, and the retired member accrued ten (10) or more years of actual
 service, including actual service for the year immediately preceding the
 member's death, then a lump sum of up to ten thousand dollars ($10,000) shall
 be paid to such persons as he or she shall have nominated by written
 designation duly executed and filed with the board.
               (3)    If there are no designated persons who survive the member,
 the lump sum shall be paid to the member's estate.
      (c)(b)     The amount of the lump-sum death benefit payments under this
 section shall be set periodically and not more often than annually by rules
 and resolutions of the board as the board determines is actuarially
 appropriate for the system.
               (d)(1)    For determining eligibility for the lump-sum death
 benefit under this section, “actual service” means service rendered in a
 position covered by the system.
               (2)    “Actual service” does not include purchased or free credited
 service or reciprocal service.
      (e)(1)(c)(1)       A benefit enhancement provided for under this section
 shall not be implemented if it would cause the system's unfunded actuarial
 accrued liabilities to exceed an eighteen-year amortization.
               (2)    If the system's unfunded actuarial accrued liabilities
 exceed an eighteen-year amortization, a benefit enhancement provided for
 under this section shall not be implemented until the unfunded actuarial
 accrued liability is reduced to a level less than the standards prescribed by
 § 24-1-101 et seq.
      (f)(1)(d)       Pursuant to the board's fiduciary duty, the board shall
 implement this benefit provision for lump-sum death benefit payments by
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     As Engrossed:       H2/13/23                                                      HB1187
 either making the lump-sum death benefit payments directly from the system or
 by purchasing a group life insurance policy for the benefit of system
 members.
               (2)    A lump-sum payment under this subsection is intended to be
 exempt from income tax.
      (g)   Effective July 1, 2009, a retired member of the system who retired
 on or before July 1, 2007, and had five (5) or more years of actual service
 credited in his or her account at retirement shall have the lump-sum death
 benefit paid upon the retired member's death under subsection (b) of this
 section.
      (h)(e)     A lump-sum death benefit payment under this section is intended
 to be exempt from income tax.
      (i)(f)     For eligibility under this section, a member is considered
 active for an additional fiscal year following the last fiscal year that the
 member renders actual service in a position reported to the system by a
 covered employer and the member obtains at least one-fourth (¼) year of
 service credit.
      (j)(1)(A)       If a member accrues a minimum of ten (10) years of actual,
 contributory service, regardless of noncontributory service accrued in
 combination with the contributory service, the member shall receive the
 maximum lump-sum death benefit as determined by the board under this section.
                       (B)   Upon the member's death, the lump-sum death benefit
 shall be paid to persons the member selects by written designation executed
 and filed with the board.
               (2)    The board may set a lump-sum benefit for noncontributory
 service as the board deems appropriate.
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      SECTION 2.       EMERGENCY CLAUSE.       It is found and determined by the
 General Assembly of the State of Arkansas that the operations of a state
 public retirement system are complex; that the Arkansas Teacher Retirement
 System must be able to meet the needs of its members as anticipated by the
 General Assembly; that certain provisions of the Arkansas Teacher Retirement
 System Act need revision and updating to bring them into conformance with
 sound public pension policy and actuarial requirements; that the current
 provisions of the Arkansas Teacher Retirement System Act create ambiguity as
 to the proper administration of the lump-sum death benefit and the
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     As Engrossed:   H2/13/23                                                 HB1187
 eligibility of a retiree and T-DROP participant to receive a lump-sum death
 benefit; that the revisions and updates are of great importance to members of
 the Arkansas Teacher Retirement System and to other citizens of the State of
 Arkansas; that as the Arkansas Teacher Retirement System operates on a fiscal
 year of July 1 to June 30, a July 1, 2023, effective date is necessary in
 order to allow the provisions within this act to begin on the first day of
 the fiscal year and to allow for a structured and proper administration of
 the procedures referenced in this act; that the updates and revisions to the
 Arkansas Teacher Retirement System Act are of great importance for actuarial
 purposes and for the improvement and protection of member benefits under the
 Arkansas Teacher Retirement System; and that this act is necessary in order
 to maintain an orderly system of benefits for the members of the Arkansas
 Teacher Retirement System.   Therefore, an emergency is declared to exist, and
 this act being necessary for the preservation of the public peace, health,
 and safety shall become effective on July 1, 2023.
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                                  /s/A. Collins
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                                APPROVED: 3/2/23
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