Bill Summary – FastDemocracy

67th Legislature                                                                                                 SB 387.1
                                                  SENATE BILL NO. 387
                                              INTRODUCED BY B. HOVEN
  3
   A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING TEACHER RETIREMENT SYSTEM
   POLICY; ESTABLISHING A TIER THREE FOR NEW HIRES IN THE TEACHERS' RETIREMENT SYSTEM;
   REQUIRING THE TEACHERS' RETIREMENT BOARD TO ESTABLISH ANNUALLY AN INTEREST CREDIT
   RATE; PROVIDING DEATH AND DISABILITY BENEFITS FOR TIER THREE MEMBERS; REQUIRING A
   MEMBER TO ELECT A CONTRIBUTION RATE AT THE TIME OF HIRE; ESTABLISHING A GRADED
   VESTING SCHEDULE FOR EMPLOYER MATCH; PROVIDING FOR A POSTRETIREMENT EMPLOYMENT
   AND PURCHASE OF PREVIOUS SERVICE CREDIT IN THE NEW TIER; ESTABLISHING MINIMUM AND
   MAXIMUM INTEREST CREDIT RATES; GRANTING THE BOARD THE POWER AND DUTY TO
   ADMINISTER THE NEW TIER; REQUIRING OVERSIGHT BY THE STATE ADMINISTRATION AND
   VETERANS' AFFAIRS INTERIM COMMITTEE; REQUIRING THE BOARD TO SEEK A RULING OF THE
   INTERNAL REVENUE SERVICE; PROVIDING FOR AN ALTERNATE RETIREMENT SYSTEM MATCH FOR
   VESTING BASED ON A RULING FROM THE INTERNAL REVENUE SERVICE; REQUIRING THE BOARD TO
   CERTIFY WHEN THE NEW TIER IS OPERATIONAL; PROVIDING DEFINITIONS; AMENDING SECTIONS
   19-20-101, 19-20-102, 19-20-104, 19-20-201, 19-20-501, 19-20-602, 19-20-605, 19-20-716, 19-20-731, 19-20-
   732, 19-20-733, 19-20-801, 19-20-902, 19-20-1001, AND 19-20-1002, MCA; AND PROVIDING EFFECTIVE
   DATES.”
 20
   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
 22
              Section 1. Section 19-20-101, MCA, is amended to read:
              "19-20-101. Definitions. As used in this chapter, unless the context clearly indicates otherwise, the
   following definitions apply:
              (1)   "Accumulated contributions" or "account balance" means the sum of all the amounts deducted
   from the compensation of a member or paid by a member and credited to the member's individual account in
   the annuity savings account, together with interest, minus any amount deducted for correction of errors and the
                                                                -1-                     Authorized Print Version – SB 387
67th Legislature                                                                                                    SB 387.1
   aggregate amount of all retirement benefit payments and refunds of accumulated contributions paid to or on
   behalf of the member, or interest credit.
              (2)   "Actuarial equivalent" means a benefit of equal value when computed upon the basis of the
   mortality table and interest rate assumption set by the retirement board.
              (3)   "Alternate beneficiary" means an estate or an individual not designated as a beneficiary but that
   becomes a beneficiary pursuant to 19-20-1005.
              (4)   "Average final compensation" means a member's highest average earned compensation,
   determined pursuant to 19-20-805, on which all required contributions have been made.
              (5)   "Beneficiary designation" means the process that the retirement system prescribes pursuant to
   this chapter by which a person authorized by law designates one or more beneficiaries.
              (6)   "Beneficiary designation record" means either the hard copy form or electronic record prescribed
   by the retirement system and used by a person authorized by law to designate one or more beneficiaries.
              (7)   "Benefit recipient" means a retired member, a joint annuitant, or a beneficiary who is receiving a
   retirement allowance.
              (8)   "Contingent beneficiary" means a designated beneficiary with the right to receive any benefit or
   refund of accumulated contributions payable if there is no eligible primary beneficiary.
              (9)   "Contribution match" means a match of a vested tier three member's accumulated contributions,
   determined in accordance with this chapter, and combined with the member's accumulated contributions at the
   time of the member's retirement or withdrawal or on the member's death prior to retirement or withdrawal.
              (9)(10)   "Creditable service" is that service defined by 19-20-401.
              (10)(11) "Date of termination" or "termination date" means the last date on which a member performed
   service in a position reportable to the retirement system.
              (11)(12) "Designated beneficiary" means one or more primary beneficiaries or contingent beneficiaries
   designated pursuant to 19-20-1006.
              (12)(13) (a) "Earned compensation" means, except as limited by subsections (12) (13)(b) and (12)
   (13)(c) or by 19-20-715, remuneration paid for the service of a member out of funds controlled by an employer
   before any pretax deductions allowed under the Internal Revenue Code are deducted.
              (b)   Earned compensation does not include:
                                                                  -2-                     Authorized Print Version – SB 387
67th Legislature                                                                                                      SB 387.1
              (i)   direct employer premium payments on behalf of members for medical, pharmaceutical, disability,
   life, vision, dental, or any other insurance;
              (ii) any direct employer payment or reimbursement for:
              (A)   professional membership dues;
              (B)   maintenance;
              (C)    housing;
              (D)    day care;
              (E)   automobile, travel, lodging, or entertaining expenses; or
              (F)   any similar form of maintenance, allowance, or expenses;
              (iii) the imputed value of health, life, or disability insurance or any other fringe benefits;
              (iv) any noncash benefit provided by an employer to or on behalf of a member;
              (v)   termination pay unless included pursuant to 19-20-716;
              (vi) compensation paid to a member from a plan for the deferral of compensation under section 457(f)
   of the Internal Revenue Code, 26 U.S.C. 457(f);
              (vii) payment for sick, annual, or other types of leave paid to a member prior to termination from
   employment or accrued in excess of that normally allowed;
              (viii) incentive or bonus payments paid to a member that are not part of a series of annual payments;
              (ix) a professional stipend paid pursuant to 20-4-134; or
              (x)   any similar payment or reimbursement made to or on behalf of a member by an employer.
              (c)   Adding a direct employer-paid or noncash benefit to an employee's contract or subtracting the
   same or a similar amount as a pretax deduction is considered a fringe benefit and not earned compensation.
              (13)(14) "Employer" means:
              (a)   the state of Montana;
              (b)   a public school district, as provided in 20-6-101 and 20-6-701;
              (c)   the office of public instruction;
              (d)   the board of public education;
              (e)   an education cooperative;
              (f)   the Montana school for the deaf and blind, as described in 20-8-101;
                                                                    -3-                       Authorized Print Version – SB 387
67th Legislature                                                                                                     SB 387.1
              (g)   the Montana youth challenge program, as defined in 10-1-101;
              (h)   a state youth correctional facility, as defined in 41-5-103;
              (i)   the Montana university system;
              (j)   a community college; or
              (k)   any other agency, political subdivision, or instrumentality of the state that employs a person who is
   designated a member of the retirement system pursuant to 19-20-302.
              (14)(15) "Extra duty service" means service in an educational services capacity that is not
   compensated as part of the normally assigned duties and functions of a school district teacher, administrator, or
   other employee but is regularly assigned to one or more school district teachers, administrators, or other
   employees as part of the regular operation of the school district's curricular and extracurricular programs.
              (15)(16) "Full-time service" means service that is:
              (a)   at least 180 days in a fiscal year;
              (b)   at least 140 hours a month during at least 9 months in a fiscal year; or
              (c)   at least 1,080 hours in a fiscal year under an alternative school calendar adopted by a school
   board and reported to the office of public instruction as required by 20-1-302. The standard for full-time service
   for a school district operating under an alternative school calendar must be applied uniformly to all employees
   of the school district required to be reported to the retirement system.
              (16)(17) "Individual" means a human being.
              (18) "Interest credit" means the rate of interest as determined by the board pursuant to [section 20]
   and credited to a tier three member's annuity savings account.
              (17)(19) "Internal Revenue Code" has the meaning provided in 15-30-2101.
              (18)(20) "Joint annuitant" means the one person that a retired member who has elected an optional
   allowance under 19-20-702(2), (4), or (5) has designated to receive a retirement allowance upon the death of
   the retired member.
              (19)(21) "Member" means a person who has an individual account in the annuity savings account.
   Unless otherwise specified, "member" refers to a tier one member or a tier two member.
              (20)(22) "Normal form" or "normal form benefit" means a monthly retirement benefit payable only for
   the lifetime of the retired member.
                                                                    -4-                    Authorized Print Version – SB 387
67th Legislature                                                                                                    SB 387.1
              (21)(23) "Normal retirement age" means an age no earlier than 60 years of age.
              (22)(24) "Part-time service" means service that is not full-time service. Part-time service must be
   credited in the proportion that the actual time worked compares to full-time service.
              (23)(25) "Position reportable to the retirement system" means a position in which an individual
   performs duties that would entitle the person to active membership in the retirement system under the
   provisions of 19-20-302.
              (24)(26) "Primary beneficiary" means a designated beneficiary with a first right to receive any benefit or
   refund of accumulated contributions payable upon the death of the individual authorized by law to make the
   designation.
              (25)(27) "Regular interest" means interest at a rate set by the retirement board in accordance with 19-
   20-501(2)(a).
              (26)(28) "Retired", "retired member", or "retiree" means a person who is considered in retired member
   status under the provisions of 19-20-810.
              (27)(29) "Retirement allowance" or "retirement benefit" means a monthly payment due to a retired
   member who has qualified for service or disability retirement or due to a joint annuitant or beneficiary.
              (28)(30) "Retirement board" or "board" means the retirement system's governing board provided for in
   2-15-1010.
              (29)(31) "Retirement system", "system", or "plan" means the teachers' retirement system of the state of
   Montana provided for in 19-20-102.
              (30)(32) "Service" means the performance of duties that would entitle the person to active membership
   in the retirement system under the provisions of 19-20-302.
              (31)(33) "Termination" or "terminate" means that the employment relationship between the member
   and the member's employer has been terminated as required in 19-20-810.
              (32)(34) (a) "Termination pay" means any form of bona fide vacation leave, sick leave, severance pay,
   amounts provided under a window or early retirement incentive plan, or other payments contingent on the
   employee terminating employment.
              (b)   Termination pay does not include:
              (i)   amounts that are not wages under section 3121 of the Internal Revenue Code, determined without
                                                                 -5-                      Authorized Print Version – SB 387
67th Legislature                                                                                                    SB 387.1
   regard to the wage base limitation; and
              (ii) amounts that are payable to a member from a plan for the deferral of compensation under section
   457(f) of the Internal Revenue Code, 26 U.S.C. 457(f).
              (33)(35) "Tier one member" means a person who became a member before July 1, 2013, and who has
   not withdrawn the member's account balance.
              (36) "Tier three member" means a person who became a member on or after [the effective date of this
   act] or who, after withdrawing the member's account balance, became a member again after [the effective date
   of this act].
              (34)(37) "Tier two member" means a person who became a member on or after July 1, 2013, or who,
   after withdrawing the member's account balance, became a member again after July 1, 2013.
              (35)(38) "Vested" means that a member has been credited with at least 5 full years of membership
   service upon which contributions have been made and has a right to a future retirement benefit.
              (36)(39) "Written application" or "written election" means a written instrument, required by statute or
   the rules of the board, properly signed and filed with the board, that contains all the required information,
   including documentation that the board considers necessary."
 16
              Section 2. Section 19-20-102, MCA, is amended to read:
              "19-20-102. Retirement system -- policy. (1) The state teachers' retirement system created under
   the provisions of Chapter 87, Laws of 1937, is the state teachers' retirement system of the state of Montana,
   and the provisions of this chapter do not affect or impair the validity of any action taken by its governing board
   or the rights of any person arising under the provisions of Chapter 87, Laws of 1937, or any subsequent
   amendment to this chapter. The state teachers' retirement system is known as "The Teachers' Retirement
   System of the State of Montana" and in that name shall transact all business of the retirement system, hold its
   assets in trust, and have the powers and privileges of a corporation that may be necessary to administer the
   provisions of this chapter.
              (2)   It is the policy of the state to:
              (a)   provide equitable retirement benefits to:
              (i)   tier one or tier two members of the teachers' retirement system based on each member's normal
                                                                     -6-                  Authorized Print Version – SB 387
67th Legislature                                                                                                      SB 387.1
   service and salary; and
              (ii) a tier three member of the teachers' retirement system based on the member's accumulated
   contributions and contribution match.
              (b)   limit the effect on the retirement system of isolated salary increases received by a member,
   including but not limited to end-of-career promotions or one-time salary enhancements during the member's last
   years of employment; and
              (c)   limit the compensation that a tier one or tier two retired member may earn after retirement while
   working in a position that would normally be covered under the teachers' retirement system to the amount
   determined under 19-20-731.
              (3)   It is the policy of the state to ensure that public employees are reported to the correct public
   retirement system. The retirement system shall enter into memoranda of understanding with the public
   employees' retirement board to exchange retirement system-related confidential information regarding
   members, former members, or retirees. A memorandum must state that:
              (a)   the information may be used only for reasons related to verifying appropriate pension plan
   participation; and
              (b)   the requesting retirement system agrees to protect the confidentiality of the information and will
   disclose the requested information only as necessary to conduct official business."
 18
              Section 3. Section 19-20-104, MCA, is amended to read:
              "19-20-104. Guarantee by state. Regular interest charges and interest credit payable, the creation
   and maintenance of reserves in the pension accumulation account, and the maintenance of accumulated
   contributions in the annuity savings account, as provided for in this chapter, and the payment of all retirement
   allowances, refunds, and other benefits granted under the retirement system are obligations of the state of
   Montana."
 25
              Section 4. Section 19-20-201, MCA, is amended to read:
              "19-20-201. Administration by retirement board -- jurisdiction and venue for judicial review. (1)
   T