1| STATE OF OKLAHOMA | | | 2| 1st Session of the 59th Legislature (2023) | | | 3|SENATE BILL 882 By: Montgomery | | | 4| | | | 5| AS INTRODUCED | | | 6| An Act relating to the Teachers' Retirement System of | | Oklahoma; directing creation of defined contribution | 7| system for members entering after certain date; | | establishing provisions for new members entering | 8| system; requiring Teachers' Retirement System of | | Oklahoma to gain federal distinction and | 9| authorization; directing System to offer Roth | | individual retirement account option; providing for | 10| members to borrow against certain plans subject to | | federal requirements; directing promulgation of rules | 11| by System; establishing employee and employer | | contributions subject to certain limitations; | 12| directing distribution of funds in defined | | contribution system; allowing the Legislature to | 13| modify certain rates at any time with certain | | employee rights reserved; providing for certain funds | 14| to be paid by certain date to System; establishing | | process for certain fund distribution through the | 15| Office of Management and Enterprise Services; | | requiring employee contributions to be fully vested; | 16| providing vesting schedule for employer | | contributions; providing for investment options to be | 17| determined by employee or System; providing for | | System to contract with certain entities for certain | 18| plan options; providing for payment of certain | | revenues to System; providing for deposit of funds | 19| with existing defined benefit plan; providing for | | effect of enactment on certain rights; prohibiting | 20| certain collection activity with respect to funds; | | authorizing offsets; providing for enforcement of | 21| qualified domestic orders; defining term; prescribing | | procedures with respect to alternate payees; | 22| prescribing content; imposing restrictions; | | authorizing promulgation of rules; providing for | 23| codification; and providing an effective date. | | | 24| | | | Req. No. 387 Page 1 ___________________________________________________________________________
1| | | | 2|BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA: | | | 3| SECTION 1. NEW LAW A new section of law to be codified | | | 4|in the Oklahoma Statutes as Section 17-211 of Title 70, unless there | | | 5|is created a duplication in numbering, reads as follows: | | | 6| A. Effective July 1, 2024, the Teachers' Retirement System of | | | 7|Oklahoma shall establish a defined contribution system for newly | | | 8|employed persons of any participating employer of the System. | | | 9| B. A person employed on or after July 1, 2024 shall become a | | | 10|participant in the defined contribution system and the member shall | | | 11|not accrue any service credit in the defined benefit system | | | 12|previously established by the System. | | | 13| C. The Board of Trustees of the Teachers' Retirement System of | | | 14|Oklahoma shall take any action that is reasonable and necessary to | | | 15|have the defined contribution system authorized by this act to be | | | 16|recognized as a tax-qualified plan as defined by 26 U.S.C. Section | | | 17|457. The Board shall take whatever action is reasonable and | | | 18|necessary to obtain confirmation from the Internal Revenue Service | | | 19|that the 457 plan is consistent with the requirements of 26 U.S.C. | | | 20|Section 457. | | | 21| D. 1. In addition to the plans offered by the defined | | | 22|contribution system, the System shall also offer a Roth individual | | | 23|retirement account subject to any limitations under Section 408A(c) | | | 24|of the Internal Revenue Code of 1986, as amended. | | | Req. No. 387 Page 2 ___________________________________________________________________________
1| 2. Members of the System may borrow against any account under | | | 2|their defined contribution plan, provided such borrowing is in | | | 3|compliance with the Internal Revenue Code of 1986, as amended. | | | 4| E. The System shall promulgate rules to effectuate the | | | 5|provisions of this act. | | | 6| SECTION 2. NEW LAW A new section of law to be codified | | | 7|in the Oklahoma Statutes as Section 17-212 of Title 70, unless there | | | 8|is created a duplication in numbering, reads as follows: | | | 9| A. Employee contributions to the defined contribution system | | | 10|established under Section 1 of this act shall be a default of six | | | 11|percent (6%) and shall allow for a minimum contribution of four | | | 12|percent (4%) of compensation. Employee contributions to the defined | | | 13|contribution system that are eligible for an employer match shall | | | 14|not exceed a percentage, based on the employee's compensation, which | | | 15|would exceed the maximum amount allowed pursuant to Section 415 of | | | 16|the Internal Revenue Code of 1986, as amended. | | | 17| B. Except as otherwise provided by subsection C of this | | | 18|section, employers of employees who become participants in the | | | 19|defined contribution retirement system shall match the employee | | | 20|contribution paid on a monthly or more frequent basis at the rate of | | | 21|six percent (6%) based on the same compensation amount used to | | | 22|compute the employee contribution amount. | | | 23| C. If an employee selects a contribution rate of seven percent | | | 24|(7%) or more, but not higher than allowed pursuant to the maximum | | | Req. No. 387 Page 3 ___________________________________________________________________________
1|annual contribution limit prescribed by Section 415 of the Internal | | | 2|Revenue Code of 1986, as amended, the employer matching amount shall | | | 3|be seven percent (7%). | | | 4| D. The initial four percent (4%) employee contribution shall be | | | 5|the only mandatory contribution of an employee participating in the | | | 6|defined contribution retirement system created by this act. These | | | 7|funds shall be placed by the Teachers' Retirement System of Oklahoma | | | 8|in either a 401(a) plan or a 457(b) plan, to be determined by the | | | 9|Board of Trustees of the Teachers' Retirement System of Oklahoma to | | | 10|maintain the plan consistent with the Internal Revenue Code. Any | | | 11|employee contributions eligible to be matched under this section | | | 12|over the four percent (4%) initial contribution shall be considered | | | 13|voluntary deferrals of compensation and placed in a 457(b) plan. | | | 14|All employer matching funds shall be placed in a 401(a) plan. | | | 15| Any contribution rate that is more than the four percent (4%) | | | 16|rate can be chosen by the participating employee upon the employee's | | | 17|initial participation and can be changed once per month. The | | | 18|employee contribution rate chosen shall continue until the employee | | | 19|elects to change the contribution rate, terminates service, or | | | 20|retires. | | | 21| E. The employer match as set forth in subsection B of this | | | 22|section may be increased at any time by the Legislature without | | | 23|affecting the then-existing rights of participating employees and | | | 24|beneficiaries to encourage participating employees to accumulate | | | Req. No. 387 Page 4 ___________________________________________________________________________
1|deferred income reserves for themselves and their dependents. The | | | 2|employer match may be decreased at any time by the Legislature | | | 3|without affecting the then-existing rights of participating | | | 4|employees and beneficiaries in order to provide funding as may be | | | 5|needed to reduce the unfunded liabilities of the defined benefit | | | 6|plan as set forth in Section 17-101 et seq. of Title 70 of the | | | 7|Oklahoma Statutes, but shall not be less than six percent (6%) for | | | 8|any year during which the defined contribution plan is maintained. | | | 9| SECTION 3. NEW LAW A new section of law to be codified | | | 10|in the Oklahoma Statutes as Section 17-213 of Title 70, unless there | | | 11|is created a duplication in numbering, reads as follows: | | | 12| A. Except as otherwise provided by this section, employers | | | 13|shall make payment to the required matching amount as provided by | | | 14|Section 5 of this act within five (5) business days of the member's | | | 15|payroll pay date. The Teachers' Retirement System of Oklahoma shall | | | 16|ensure the payment is credited to the defined contribution system | | | 17|account of the member as soon as possible. | | | 18| B. All employee contributions to the defined contribution | | | 19|system shall be affected by salary deductions from the salary of the | | | 20|employee and shall be remitted by the participating employer to the | | | 21|System for deposit into the defined contribution system account | | | 22|maintained on behalf of the employee. | | | 23| C. Participating employers whose salary deductions and employer | | | 24|contributions are not remitted to the System through the Office of | | | Req. No. 387 Page 5 ___________________________________________________________________________
1|Management and Enterprise Services shall either send all remittances | | | 2|by electronic funds transfer, or place all remittances in a bank | | | 3|account from which the System can debit the amount due, both within | | | 4|five (5) business days of the payroll pay date of the member. | | | 5|Payroll data shall be remitted by the same deadline. | | | 6| D. The Office of Management and Enterprise Services shall | | | 7|cooperate with the Board of Trustees of the Teachers' Retirement | | | 8|System of Oklahoma to ensure compliance with this act. | | | 9| E. Each employer which has employees participating in the | | | 10|defined contribution system shall pay to the System in the same | | | 11|manner and at the same time required for contributions under this | | | 12|section an amount to reimburse the cost of administration of the | | | 13|defined contribution system, as determined by the Board of Trustees | | | 14|of the Teachers' Retirement System of Oklahoma. | | | 15| 1. The Board shall certify each year to the Office of | | | 16|Management and Enterprise Services and to participating employers | | | 17|whose salary deductions and employer contributions are not remitted | | | 18|to the System through the Office, the determined amount for the | | | 19|administrative cost of the defined contribution system which will be | | | 20|required to be paid for each participant. | | | 21| 2. Each employer shall pay at least monthly to the System the | | | 22|sum sufficient to satisfy the obligation under this section as | | | 23|certified by the Board. | | | 24| | | | Req. No. 387 Page 6 ___________________________________________________________________________
1| F. The account of each employee participating in the defined | | | 2|contribution system shall consist of the amount in the account plus | | | 3|credits representing employer and employee contributions and minus | | | 4|debits representing any losses, other decrements, or expenses under | | | 5|the system and any distributions made to the employee under the | | | 6|system. | | | 7| SECTION 4. NEW LAW A new section of law to be codified | | | 8|in the Oklahoma Statutes as Section 17-214 of Title 70, unless there | | | 9|is created a duplication in numbering, reads as follows: | | | 10| A. Members shall at all times be vested at one hundred percent | | | 11|(100%) of the amount of their employee contributions. Members shall | | | 12|have retirement discretion over these contributions within the | | | 13|available options offered by the Board of Trustees of the Teachers' | | | 14|Retirement System of Oklahoma. | | | 15| B. Members shall be vested with respect to the employer | | | 16|matching amounts deposited into their defined contribution system | | | 17|account according to the following schedule based on years of | | | 18|participating service: | | | 19| Year 1 20% | | | 20| Year 2 40% | | | 21| Year 3 60% | | | 22| Year 4 80% | | | 23| Year 5 and thereafter 100% | | | 24| | | | Req. No. 387 Page 7 ___________________________________________________________________________
1| C. Members shall have investment discretion over all employer | | | 2|contributions. | | | 3| D. For the purposes of determining a member's right to withdraw | | | 4|employer matching contributions and any investment gains upon such | | | 5|employer contribution matching amounts, the vesting percentages | | | 6|apply at the end of each full year of service as described in | | | 7|subsection B of this section. | | | 8| E. For members who do not select any investment options, the | | | 9|Board shall establish default investment options for the | | | 10|contributions received form members and default investment options | | | 11|for matching employer contributions. | | | 12| F. To the extent that participants leave employment and have | | | 13|not vested in all the employer contributions, the nonvested | | | 14|contributions may be used to offset costs of administering the plan. | | | 15| G. The Board shall contract with one or more business entities | | | 16|to create a range of choices regarding investment of funds deposited | | | 17|into defined contribution system accounts. In selecting investment | | | 18|options for participants in the plan, the Board shall give due | | | 19|consideration to offering investment options provided by business | | | 20|entities that provide guaranteed lifetime income in retirement such | | | 21|as annuities, guaranteed investment contracts, or similar products. | | | 22|The Board may amend any of its existing contracts with its current | | | 23|service providers to perform substantially the same type of service | | | 24|the provider is currently performing for the Board, to facilitate | | | Req. No. 387 Page 8 ___________________________________________________________________________
1|the timely introduction of the new defined contribution system | | | 2|created by this act. Thereafter, the contracting process for the | | | 3|selection of service providers carrying out duties related to the | | | 4|administration of the plan shall be the same as the selection | | | 5|process for other providers selected by the Board. | | | 6| SECTION 5. NEW LAW A new section of law to be codified | | | 7|in the Oklahoma Statutes as Section 17-215 of Title 70, unless there | | | 8|is created a duplication in numbering, reads as follows: | | | 9| A. Each participating employer under the Teachers' Retirement | | | 10|System of Oklahoma shall pick up under the provisions of Section | | | 11|414(h)(2) of the Internal Revenue Code of 1986, as amended, and pay | | | 12|the contribution which the participating employee is required by law | | | 13|to make to the System for all compensation earned after the date as | | | 14|of which an employee begins to participate in the defined | | | 15|contribution system. Although the contributions picked up are | | | 16|designated as participating employee contributions, the | | | 17|contributions shall be treated as contributions being paid by the | | | 18|employer in lieu of contributions by the participating employee in | | | 19|determining tax treatment under the Internal Revenue Code of 1986, | | | 20|as amended, and the picked-up contributions shall not be includable | | | 21|in the gross income of the participating employee until the amounts | | | 22|are distributed or made available to the participating employee or | | | 23|the beneficiary of the participating employee. The participating | | | 24|employee, by the terms of this System, shall not have any option to | | | Req. No. 387 Page 9 ___________________________________________________________________________
1|choose to receive the contributions so picked up directly and the | | | 2|picked-up contributions must be paid by the employer to the System. | | | 3| B. Contributions by the participating employee into a 457(b) | | | 4|plan may not be picked up by the employer but shall be a voluntary | | | 5|deferral of the employee's compensation. Participating employers | | | 6|within the System that have established 457(b) or Roth individual | | | 7|retirement account plans for their employees shall have the | | | 8|obligation to ensure that their employees do not exceed the maximum | | | 9|annual contributions to the plan under the Internal Revenue Code. | | | 10| SECTION 6. NEW LAW A new section of law to be codified | | | 11|in the Oklahoma Statutes as Section 17-216 of Title 70, unless there | | | 12|is created a duplication in numbering, reads as follows: | | | 13| A. Notwithstanding any other provision of the statutes | | | 14|governing the Teachers' Retirement System of Oklahoma to the | | | 15|contrary, each participating employer shall remit to the System the | | | 16|difference between the amount of money which would be remitted to | | | 17|the System using the employer contribution rate required by Section | | | 18|17-108.1 of Title 70 of the Oklahoma Statutes and the amount of | | | 19|money required for the participating employer to make the required | | | 20|matching contribution amount on behalf of a participating employee | | | 21|who participates in the defined contribution system authorized | | | 22|pursuant to the provisions of Section 2 of this act. | | | 23| B. The System shall deposit the monies remitted to it by | | | 24|employers having participating employees in the defined contribution | | | Req. No. 387 Page 10 ___________________________________________________________________________
1|system created by this act, as described by subsection A of this | | | 2|section, into the existing defined benefit pension plan authorized | | | 3|pursuant to Section 17-101 et seq. of Title 70 of the Oklahoma | | | 4|Statutes to reduce the liabilities of the defined benefit pension | | | 5|plan. | | | 6| SECTION 7. NEW LAW A new section of law to be codified | | | 7|in the Oklahoma Statutes as Section 17-217 of Title 70, unless there | | | 8|is created a duplication in numbering, reads as follows: | | | 9| A. Except as otherwise provided by this section or in Section 2 | | | 10|of this act, no alteration, amendment, or repeal of this act shall | | | 11|affect the then-existing rights of participating employees and | | | 12|beneficiaries but shall be effective only as to rights which would | | | 13|otherwise accrue hereunder as a result of services rendered by an | | | 14|employee after such alteration, amendment, or repeal. Any benefits, | | | 15|fund, property, or rights created by or accruing to any person under | | | 16|the provisions of this act shall not be subject to execution, | | | 17|garnishment, or attachment, or any other process or claim | | | 18|whatsoever, and shall be unassignable, except as specifically | | | 19|provided by this section. Notwithstanding the foregoing, the Board | | | 20|of Trustees of the Teachers' Retirement System of Oklahoma may | | | 21|offset any amounts held by a participant in the plan or beneficiary | | | 22|to pay a judgment or settlement against a participating employee or | | | 23|beneficiary for a crime involving the System, for a fraud or breach | | | 24|of the participating employee's fiduciary duty to the System, or for | | | Req. No. 387 Page 11 ___________________________________________________________________________
1|funds or monies incorrectly paid to a participating employee or a | | | 2|beneficiary, provided such offset is in accordance with the | | | 3|requirements of Section 401(a)(13) or similar provisions of the | | | 4|Internal Revenue Code of 1986, as amended. The offset applies to | | | 5|any assets held in the plan which may otherwise be payable to a | | | 6|participating employee or beneficiary from the plan administered by | | | 7|the Board. | | | 8| B. 1. The provisions of subsection A of this section shall not | | | 9|apply to a qualified domestic order as provided pursuant to this | | | 10|subsection. | | | 11| 2. The term "qualified domestic order" means an order issued by | | | 12|a district court of this state pursuant to the domestic relation | | | 13|laws of this state which relates to the provision of marital | | | 14|property rights to a spouse or former spouse of a participating | | | 15|employee or provision of support for a minor child or children and | | | 16|which creates or recognizes the existence of the right of an | | | 17|alternate payee, or assigns to an alternate payee the right, to | | | 18|receive a portion of the funds payable with respect to a participant | | | 19|in the plan. | | | 20| 3. For purposes of the payment of marital property, to qualify | | | 21|as an alternate payee a spouse or former spouse must have been | | | 22|married to the related participating employee for a period not less | | | 23|than thirty (30) continuous months immediately preceding the | | | 24| | | | Req. No. 387 Page 12 ___________________________________________________________________________
1|commencement of the proceedings from which the qualified domestic | | | 2|order issues. | | | 3| 4. A qualified domestic order is valid and binding on the Board | | | 4|and the related participating employee only if it meets the | | | 5|requirements of this subsection. | | | 6| 5. A qualified domestic order shall clearly specify: | | | 7| a. the name and last-known mailing address (if any) of | | | 8| the participating employee and the name and mailing | | | 9| address of the alternate payee covered by the order, | | | 10| b. the amount or percentage of the participating | | | 11| employee's funds or assets to be paid by the System to | | | 12| the alternate payee, | | | 13| c. the number of payments or period to which such order | | | 14| applies, | | | 15| d. the characterization of the benefit as to marital | | | 16| property rights or child support, and | | | 17| e. each plan to which such order applies. | | | 18| 6. A qualified domestic order meets the requirements of this | | | 19|subsection only if such order: | | | 20| a. does not require the System to provide any type or | | | 21| form of benefit, or any option not otherwise provided | | | 22| under state law as relates to the System, | | | 23| b. does not require the System to provide increased | | | 24| benefits, and | | | Req. No. 387 Page 13 ___________________________________________________________________________
1| c. does not require the payment of funds or assets to an | | | 2| alternate payee which are required to be paid to | | | 3| another alternate payee pursuant to another order | | | 4| previously determined to be a qualified domestic order | | | 5| or an order recognized by the System as a valid order | | | 6| prior to July 1, 2024. | | | 7| 7. This subsection shall not be subject to the provisions of | | | 8|the Employee Retirement Income Security Act of 1974 (ERISA), 29 | | | 9|U.S.C., Section 1001 et seq., as amended from time to time, or rules | | | 10|and regulations promulgated thereunder, and court cases interpreting | | | 11|the act. | | | 12| 8. The Board shall promulgate such rules as are necessary to | | | 13|implement the provisions of this subsection. | | | 14| 9. An alternate payee who has acquired beneficiary rights | | | 15|pursuant to a valid qualified domestic order must fully comply with | | | 16|all provisions of the rules promulgated by the Board pursuant to | | | 17|this subsection to continue receiving his or her benefit. | | | 18| SECTION 8. This act shall become effective November 1, 2023. | | | 19| | | | 20| 59-1-387 RD 1/19/2023 11:42:19 AM | | | 21| | | | 22| | | | 23| | | | 24| | | | Req. No. 387 Page 14