OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 27 Final Analysis
134th General Assembly
Click here for S.B. 27’s Fiscal Note
Version: As Passed by the General Assembly
Primary Sponsor: Sen. Hottinger
Effective date: September 7, 2021
Effective Date:
Christopher Edwards, Attorney
SUMMARY
 Authorizes state government employers to automatically enroll new state employees in
the Ohio Public Employees Deferred Compensation Program and prescribes procedures
for an employer to elect or cease automatic enrollment.
 Requires the Ohio Public Employees Deferred Compensation Board to establish the
deferral amounts from the compensation of employees automatically enrolled in the
program and specify the investment options into which those amounts will be invested.
DETAILED ANALYSIS
Public Employees Deferred Compensation
The act authorizes employers of state employees to automatically enroll new state
employees in the Ohio Public Employees Deferred Compensation Program.1 Under continuing
law, both state and local government employees may elect whether to participate in the
program. Under the program, a portion of a participating employee’s income is deferred and
invested for retirement free of federal and state income tax until these amounts are paid to the
employee. The Ohio Public Employees Deferred Compensation Board must administer the
program to result in favorable tax treatment under the federal Internal Revenue Code (I.R.C.).2
The Board has established the plan under I.R.C. 457(b), which permits pretax deferrals, and
1 R.C. 148.042.
2R.C. 148.04 and Ohio Public Employees Deferred Compensation Program, Frequently Asked Questions,
available here.
July 1, 2021
Office of Research and Drafting LSC Legislative Budget Office
adopted a plan document that governs the plan.3 The program is distinct and separate from the
state retirement systems.4
Automatic enrollment
Under the act, an employing authority cannot elect or cease automatic enrollment if
doing so conflicts with a collective bargaining agreement between the employer and an
exclusive representative (essentially, a union) representing its employees. The Supreme Court,
House of Representatives, Senate, Legislative Service Commission, Secretary of State, State
Auditor, State Treasurer, or Attorney General is the employing authority for their employees.
The Director of Administrative Services is the employing authority for other state officials and
employees who are paid by Director of Budget and Management warrant (OBM warrant).5
An employing authority that elects automatic enrollment for new employees must
notify the Board. Automatic enrollment begins as soon as administratively practical for the
Board and the employing authority. An eligible employee is automatically enrolled if one of the
following occurs on or after the date the employing authority begins automatic enrollment:
 The employee initially begins employment with the employing authority.
 An employee who had been but is not currently contributing to the program separates
from employment and begins employment with the same or a different employing
authority that has elected automatic enrollment.
 A state employee transfers employment from an employing authority that has not
elected automatic enrollment to another state government position with an employing
authority that has elected automatic enrollment (but, this does not apply to an
employee who is already participating in the program).6
An employing authority that elects automatic enrollment must provide an employee
subject to it with notice of the employee’s rights and obligations in the manner prescribed by
the Board.7 The act does not indicate whether an employee who is automatically enrolled may
choose not to participate. However, the plan document specifies the employee has 90 days
after notice of automatic enrollment is given to make an affirmative election to opt-out before
deferrals are made.8
3 26 United States Code 457(b) and Ohio Public Employees Deferred Compensation Program, Amended
Plan Document as of March 1, 2020, available here.
4 R.C. 148.04(D). See Ohio Public Employees Deferred Compensation Program, Frequently Asked
Questions, available here.
5 R.C. 148.042(A) and (F), by reference to R.C. 4117.01, not in the act.
6 R.C. 148.042(B)(1) and (C).
7 R.C. 148.042(E).
8 Ohio Public Employees Deferred Compensation Program, Amended Plan Document as of March 1,
2020, Section 2.02, available here.
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An employing authority may cease automatic enrollment of its employees by notifying
the Board and specifying the date it will cease, which must be at least 90 days after the
employing authority sends the notice. Ceasing automatic enrollment does not affect the
employees already enrolled. An employee who begins employment after automatic enrollment
ceases may still choose to enroll. An employing authority that ceases automatic enrollment may
subsequently elect automatic enrollment by notifying the Board.9
Deferral amounts and investment options
Under the act, the Board establishes the amounts to be deferred from the
compensation of employees automatically enrolled. The Board cannot establish deferral
amounts that exceed the lesser of 10% of an employee’s compensation or the maximum
contribution permitted by federal law.10 For 2021, the general limit on the amount that may be
deferred is the lesser of the participant’s annual compensation or $19,500, although
participants who are within three years of normal retirement age or have reached age 50 and
who wish to “catch up” may have higher amounts deferred.11
These contributions are in addition to the contributions employees must make to the
state retirement systems. State retirement system employee contributions range from 10% of
salary for most members of the Public Employees Retirement System to 14% of salary for State
Teachers Retirement System members.12 Employers also contribute to the state retirement
systems.
The act also requires the Board to specify the investment options into which deferred
amounts will be invested for employees who are automatically enrolled.13 Under continuing
law, an employee who elects to participate initially chooses the options into which the deferred
amounts are invested.14 After enrollment, whether automatically or by election, the plan
document permits an employee to change the investment option allocation of the deferred
amounts.15
9 R.C. 148.042(B)(2).
10 R.C. 148.042(D).
11 Internal Revenue Service, Retirement Topics – 457(b) Contribution Limits, available here.
12R.C. 145.47 and 3307.26, not in the act, and Ohio Public Employees Retirement System, Reference
Tables: “Contribution Rates,” available here.
13 R.C. 148.042(D).
14R.C. 148.04(A) and Ohio Public Employees Deferred Compensation Program, Investments, available
here.
15Ohio Public Employees Deferred Compensation Program, Amended Plan Document as of March 1,
2020, Section 2.06, available here.
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Tax treatment
The Board is required by continuing law to undertake to obtain as favorable conditions
of tax treatment as possible regarding distribution of deferred amounts and earnings,
beneficiary designations, and optional provisions. Under the act, the Board’s duty in this regard
is subject to the program plan, rather than being subject to “applicable contract provisions” as
under former law. The act adds a new requirement that the Board take all actions necessary to
ensure the program qualifies as an eligible deferred compensation plan under I.R.C. 457(b).16
Informational materials
Continuing law, relocated under the act, requires state government employers, at the
time each new employee completes initial employment paperwork, to both:
 Provide the employee with materials supplied by the Board regarding the benefits of
long-term savings through deferred compensation; and
 Secure, in writing or electronically, the employee’s election to participate or not
participate in the program.
Under the act, however, these requirements do not apply for employees who will be
automatically enrolled. Also, if an employee who is already a program participant transfers
employment from one position paid by OBM warrant to another such position, the new
employer is not required to secure the employee’s election of whether to participate.17
Contract
The act eliminates the requirement that an employer contract with an employee on the
employee’s application for participation in the program. It instead requires an employer to
enroll an employee in the program on the employee’s application to participate, on the
employee’s election to participate on first being employed, or by automatic enrollment if the
employer has elected to do so under the act.
Under continuing law, a “participating employee” means an eligible employee who is
having compensation deferred under the program. Under the act, that compensation is
deferred pursuant to either (1) an agreement entered into with the employee’s employer and
the Board (rather than a contract, as under former law) or (2) automatic enrollment in the
program.18
16 R.C. 148.04(C).
17 R.C. 148.041 (relocated from R.C. 148.04(B) and (C)(1)).
18 R.C. 148.01(A)(3) and 148.04(B).
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HISTORY
Action Date
Introduced 01-26-21
Reported, S. Insurance 03-02-21
Passed Senate (32-1) 03-10-21
Reported, H. Insurance 05-19-21
Passed House (76-18) 05-26-21
21-SB27-134/ts
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As Passed by the General Assembly


Statutes affected:
As Introduced: 148.01, 148.04
As Reported By Senate Committee: 148.01, 148.04
As Passed By Senate: 148.01, 148.04
As Reported By House Committee: 148.01, 148.04
As Passed By House: 148.01, 148.04
As Enrolled: 148.01, 148.04