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Montana Administrative Register Notice 2-43-591 No. 24   12/27/2019    
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BEFORE THE PUBLIC EMPLOYEES' RETIREMENT BOARD

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 2.43.1302, 2.43.2110, 2.43.2114, 2.43.2120, 2.43.2309, 2.43.2315, 2.43.2610, 2.43.2902, 2.43.3008, 2.43.4020, and 2.43.4620, all pertaining to the operation of the retirement systems and plans administered by the Montana Public Employees' Retirement Board and repeal of ARM 2.43.3601 pertaining to allocation of additional employer contributions on behalf of Montana university system employees in the optional retirement program

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NOTICE OF PROPOSED AMENDMENT AND REPEAL

 

NO PUBLIC HEARING CONTEMPLATED

 

TO: All Concerned Persons

 

1. On February 28, 2020, the Public Employees' Retirement Board proposes to amend and repeal the above-stated rules.

 

2. The Public Employees' Retirement Board will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the Montana Public Employee Retirement Administration no later than 5:00 p.m. on January 17, 2020, to advise us of the nature of the accommodation that you need. Please contact Kris Vladic, Montana Public Employee Retirement Administration, P.O. Box 200131, Helena, Montana, 59620-0131; telephone (406) 444-2578; fax (406) 444-5428; TDD (406) 444-1421; or e-mail kvladic@mt.gov.

 

3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

 

            2.43.1302 DEFINITIONS Undefined terms used in this chapter are consistent with statutory meanings. Defined terms will be applied to the statutes unless a contrary meaning clearly appears. For the purposes of this chapter, the following definitions apply:

           (1) through (9) remain the same.

(10) "Filed" or "filed with the board" generally means the electronic delivery or mailing of a form or payment in a properly addressed stamped envelope which is properly addressed to MPERA or the board.

(a) The If the form or payment is mailed, the postmark date will be used to determine the date on which filing occurs.

(b) remains the same.

(c) If the form is faxed or e-mailed electronically delivered to MPERA, it is considered filed on the day it is received in the MPERA office, provided a hard copy is received in the MPERA office within five working days of the filing date, because an original signature is required.

            (11) through (24) remain the same. 

            (25) "Signature" includes an electronic signature as defined in 30-18-102, MCA.

            (25) through (27) remain the same but are renumbered (26) through (28).

 

AUTH: 19-2-403, MCA

IMP:      19-2-403, MCA

 

REASON:  The current language of (10) only addresses the delivery of forms sent via traditional mail.  The board desires to update language under (10) to account for forms delivered electronically and also desires to repeal the current language of (10) which states, "which is properly addressed to MPERA or the board" as it creates confusion with the proposed new language of "electronically delivered" which would appear as an optional precedent filing instruction.

 

The current language of (10)(a) is ambiguous to the delivery method used for form submittal but speaks to "postmark date" which is specific to traditional mail.  The board desires to clarify that this portion of the rule only applies to traditional mail service.

 

The current language of (10)(c) speaks to forms delivered only via fax or email.  The board desires to amend this rule to allow for additional mediums of electronic delivery if the board deems them appropriate.  Presently, when a form is delivered electronically, the current language requires a hard copy of the form be sent to MPERA via traditional mail within five working days due to an "original signature" requirement for forms.  The board desires to include "electronic signature" as an officially accepted form of signature as permitted pursuant to 30-18-102, MCA.  Upon the formal adoption and acceptance of "electronic signatures" by the board, the "five working day" delivery requirement for signed paper forms would become unnecessarily burdensome.

 

The current language of (25) is proposed by the board to include electronic signatures as officially recognized and defined pursuant to 30-18-102, MCA.

 

2.43.2110 CALCULATION OF HIGHEST AVERAGE COMPENSATION OR FINAL AVERAGE COMPENSATION WITH LUMP SUM PAYMENTS (1) For applicable systems, Lump-sum lump-sum payments made upon termination of employment for paid leave, including banked holiday time, vacation, personal, sick, or compensatory leave must may be included in the calculation of a member's highest average compensation (HAC) or final average compensation by replacing lower consecutive compensation months with the same number of higher consecutive compensation months. 

(2) The number of replacement months and the amount of compensation included in the replacement months is determined by either:

(a) and (b) remain the same.

           (2) remains the same but is renumbered (3).

 

AUTH: 19-2-403, MCA

IMP:      19-2-303, 19-2-506, 19-2-1005, 19-3-108, 19-6-101, 19-7-101, 19-8-101, 19-9-104, 19-13-104, MCA

 

REASON:  Sections 19-3-108, 19-6-101, 19-7-101, 19-8-101, and 19-13-104, MCA, define highest average compensation (HAC) as a specific period of compensation received by the member during "consecutive months" of membership service.  These sections further permit lump sum payments paid to a member upon termination of employment to be used in the calculation of their HAC only to the extent that they are "used to replace, on a month-for-month basis," the regular or normal compensation "for a month or months included in the calculation" of the HAC.  This proposed change is therefore consistent with statute, and (1) is rewritten to promote clarity and understanding with current statute.  The addition of language stating "For applicable systems," in (1) as well as the repeal of reference to "final average compensation" (FAC) in the title of the rule as well as (1) and the repeal of 19-9-104, MCA as implementing statutory authority is necessary as lump sum payments upon termination of employment in the Montana Police Officers' Retirement System (MPORS) are not permitted to be included in a MPORS member's FAC by statute.

 

2.43.2114 REQUIRED EMPLOYER REPORTS (1) All reporting agencies shall file the following employer reports, for member and nonmember employees no later than five working days after each regularly occurring payday:

(a) and (b) remain the same.

(c) a working retiree report, which includes:

(i) a PERS retiree performing work in a PERS-covered position as an employee, an independent contractor, or through a professional employer arrangement, an employee leasing arrangement, or a temporary service contractor. A working retiree returning to a PERS-covered position in other than employee status is defined as a "worker" for purposes of this rule;

(ii) a SRS retiree performing work in a SRS-covered position as an employee;

(iii) a FURS retiree performing work in a FURS-covered position as an employee.

(2) through (10) remain the same.

           

AUTH: 19-2-403, MCA

IMP:     19-2-506, 19-3-315, 19-3-316, 19-3-412, 19-3-1106, 19-3-1113, 19-3-2117, 19-7-1101, MCA

 

REASON:  Pursuant to Sections 19, 26, and 32, Chapter 195, Laws of 2017, all systems now have working retiree provisions.  As such, it is no longer necessary to list each system under (1)(c)(i), (c)(ii), and (c)(iii) that (c), "a working retiree report," was previously applicable to.  In addition, the PERS portion of the rule under (1)(c)(i) is already covered in statute at 19-3-1106, MCA, and should not be duplicated in rule.

 

            2.43.2120 REINSTATEMENT -- CREDIT FOR LOST TIME (1) remains the same.

            (2) An involuntarily terminated member who refunds or retires prior to being returned to employment as the result of a suit, court order, arbitration, or out-of-court settlement and who is awarded retroactive compensation as a result because of the claim may petition the board for membership service and service credit to be granted for the period of time lost, provided the.

            (a) The retired member repays must repay all retirement benefits, plus the actuarially assumed rate of interest on the benefits.

            (b) The member who refunded must repay all accumulated contributions, plus the actuarially assumed rate of interest on the accumulated contributions.

            (3) and (4) remain the same.

 

AUTH: 19-2-403, MCA

IMP:     19-2-303, MCA

 

REASON: Current language addresses inactive and retired members who are reinstated to covered-employment. The rule is silent with respect to members who refunded their accumulated contributions prior to being reinstated. The issue was brought to the board by a reinstated employee who had refunded his account. The board determined to treat the refunded member similarly to a retired member and directed that this rule be amended accordingly.

 

            2.43.2309 SERVICE PURCHASES BY INACTIVE VESTED MEMBERS

            (1) remains the same.

            (2) The inactive vested member's most recent termination date will be considered the purchase request date for all service purchases other than refunded service, which is addressed in 19-2-603, MCA and PERS retroactive service, which is addressed in 19-3-505, MCA.

            (a) remains the same.

            (b) Interest, equaling the actuarially assumed rate of return for the trust fund in effect on the member's most recent termination date, will be charged and compounded monthly annually until the member completes payment for the cost of the purchase.

            (3) remains the same.

 

AUTH: 19-2-403, MCA

IMP:    19-2-603, 19-2-715, 19-2-908, 19-3-401, 19-5-301, 19-6-301, 19-7-301, 19-8-301, 19-9-301, 19-13-301, MCA

 

REASON: The purchase of refunded service and the purchase of retroactive service are specifically addressed in statute. The cost of either service is not determined based on an inactive member's most recent termination date. Therefore, both service purchase types should be excluded from this rule, not just refunded service.

 

Additionally, MPERA compounds interest on service purchases on an annual basis and applies the interest monthly. This process resulted in an inadvertent reference in rule to compounding monthly rather than annually as determined by the board.

 

The repeal of 19-2-715, MCA as implementing statutory authority is necessary as it is for the purchase of public service by an active member and this rule is for service purchase by inactive members.

 

            2.43.2315 CREDIT FOR SERVICE IN THE UNIFORMED SERVICES (1) If an actively employed member of PERS, JRS, HPORS, SRS, GWPORS, MPORS, or FURS is called to duty for a period or periods of service in the uniformed services, the member receives membership service for that time and may receive service credit and membership service within the member's retirement system for that time, provided the member:

            (a) through (10) remain the same.

 

AUTH: 19-2-403, MCA

IMP:     19-2-704, 19-2-707, MCA

 

REASON: USERRA mandates that USERRA time counts toward vesting for retirement system members who return to covered employment following USERRA regardless of whether the USERRA time is purchased by the retirement system member. If the USERRA time is purchased by the retirement system member, the time counts toward vesting and for benefit calculation purposes.

 

            2.43.2610 DESIGNATION OF BENEFICIARY BY RETIREES, ALTERNATE PAYEES, AND CONTINGENT ANNUITANTS (1) remains the same.

            (2) The Except as provided in (3), the designation of beneficiary shall be effective immediately upon filing with MPERA.

            (3) If a retirement system member who has applied for retirement dies prior to receipt of their initial retirement benefit, the member's beneficiary must revert to the beneficiary or beneficiaries designated on their retirement system membership card.

 

AUTH: 19-2-403, MCA

IMP:    19-2-801, 19-2-907, 19-3-1501, 19-5-701, 19-7-1001, 19-8-1105, MCA

 

REASON: Section 19-2-801(4)(c), MCA provides that the beneficiary or beneficiaries named on the member's retirement application become effective when the member retires. A member who dies prior to receipt of their initial retirement benefit is not a retired member. Therefore, the beneficiary designation on the retirement application is not yet effective and the beneficiary designation on the membership form controls.

 

            2.43.2902 DEATH PAYMENTS, SURVIVOR BENEFITS, AND OPTIONAL RETIREMENT BENEFITS (1) Upon the death of an active or inactive member, the member's designated beneficiary or statutory beneficiary must submit a certified copy of the member's death certificate and a completed death claim form to MPERA. A statutory beneficiary must also submit adequate documentation confirming their status as a surviving spouse or dependent child. Documentation can include, but it is not limited to, birth and marriage certificates.

            (2) through (7) remain the same.

 

AUTH: 19-2-403, MCA

IMP:      19-2-801, 19-3-1201, 19-5-801, 19-5-802, 19-6-901, 19-6-902, 19-6-903, 19-7-901, 19-8-1001, 19-8-1002, 19-8-1003, 19-9-1101, 19-9-1102, 19-13-902, 19-13-903, MCA

 

REASON:  Current language of the rule is silent with respect to the documentation required of statutory beneficiaries of deceased members needing to be furnished to establish legal proof of relation to the decedent in order to receive a benefit.  This proposed amendment provides the board's staff with authority to request and receive additional documentation to establish a statutory beneficiary's legal proof of relation to the decedent.

 

            2.43.3008 FAMILY LAW ORDERS – CONTENTS AND DURATION FOR DEFINED BENEFIT PLANS (1) and (2) remain the same.

            (3) FLOs for participants who are in more than one retirement system, choose to be in a DROP, or are eligible for multiple monthly benefit payments from the same retirement system must specify the benefit or benefits to which the FLO applies. If a benefit is not included in a FLO, it is not subject to distribution pursuant to the FLO.

            (3) through (5) remain the same but will be renumbered (4) through (6).

 

AUTH: 19-2-403, 19-2-907, MCA

IMP:     19-2-907, MCA

 

REASON: The current rule does not specifically address participants subject to Family Law Orders (FLOs) who are members of multiple retirement systems, eligible for multiple benefits from the same retirement system, or in a Deferred Retirement Option Plan (DROP).  This proposed amendment clarifies that FLOs for participants who receive multiple benefit payments must specifically include each benefit payment in the FLO for it to be subject to distribution under the FLO.  The board desires this additional language to be included in order to increase administrative and judicial efficiency by minimizing the need of board staff for requests for clarification and amendment of FLOs filed with it covering participants who receive multiple benefit payments.

 

            2.43.4020 EMPLOYMENT AFTER THE DROP PERIOD - PAYMENTS 

(1) remains the same.

(2) The participant's monthly service retirement benefit payments for the pre-DROP and the post-DROP period will begin the month following the month in which the participant terminates post-DROP HPORS-covered employment.

(3) remains the same.

(4) The surviving spouse or dependent child(ren) in existence at the time of the participant's death will receive both continuing monthly service retirement benefit payments. If there is no surviving spouse or dependent child(ren) at the time of the participant's death:

(a) any remaining accumulated contributions attributable to the pre-DROP period will be paid to the designated beneficiary for that benefit payment; and

(b)  any remaining accumulated contribution attributable to the post-DROP period will be paid to the designated beneficiary for that benefit payment.

 

AUTH: 19-2-403, 19-6-1003, MCA

IMP:      19-6-1003, 19-6-1007, MCA

 

REASON: The board has noted that it is not unusual for Deferred Retirement Option Plan (DROP) participants to continue working post-DROP. Statute mandates that the post-DROP retirement benefit be calculated separately from the pre-DROP retirement benefit. This separate benefit structure requires that each of the distinct retirement benefits be deducted from the accumulated contributions attributable to the period during which the benefit was earned. This proposed amendment supports the board's decision and provides the board's staff with authority for the payment of any outstanding accumulated contributions in the event of the member's death.

 

            2.43.4620 EMPLOYMENT AFTER THE DROP PERIOD - PAYMENTS 

            (1) remains the same.

            (2) The participant's monthly service retirement benefit payments for the pre-DROP period and the post-DROP period will begin the month following the month in which the participant terminates post-DROP employment.

            (3) remains the same.

            (4) The surviving spouse or dependent child(ren) in existence at the time of the participant's death will receive both continuing monthly service retirement benefit payments. If there is no surviving spouse or dependent child(ren) at the time of the participant's death:

(a) any remaining accumulated contributions attributable to the pre-DROP period will be paid to the designated beneficiary for that benefit payment; and

(b)  any remaining accumulated contribution attributable to the post-DROP period will be paid to the designated beneficiary for that benefit payment.

 

AUTH: 19-2-403, 19-9-1203, MCA

IMP:      19-9-1207, MCA

 

REASON: The board has noted that it is not unusual for Deferred Retirement Option (DROP) participants to continue working post-DROP. Statute mandates that the post-DROP retirement benefit be calculated separately from the pre-DROP retirement benefit. This separate benefit structure requires that each of the distinct retirement benefits be deducted from the accumulated contributions attributable to the period during which the benefit was earned. This proposed amendment supports the board's decision and provides the board's staff with authority for the payment of any outstanding accumulated contributions in the event of the member's death.

 

4. The Public Employees' Retirement Board proposes to repeal the following rule:

 

2.43.3601 ALLOCATION OF ADDITIONAL EMPLOYER CONTRIBUTIONS ON BEHALF OF MONTANA UNIVERSITY SYSTEM EMPLOYEES IN THE OPTIONAL RETIREMENT PROGRAM

 

AUTH: 19-2-403, 19-3-2104, MCA

IMP:     19-3-2104, MCA

 

REASON:  Sections (1)(a), (1)(b), and (1)(c) constituting the entirety of this rule are proposed to be repealed due to the Public Employees' Retirement System's Defined Benefit Plan's (PERS DB) unfunded actuarial liability created by PERS members electing to participate in the DCRP or the Montana University System Retirement Program (MUS-RP), otherwise known as the plan choice rate unfunded actuarial liability (PCR UAL), being fully paid off in the first quarter of 2016.  Therefore, pursuant to 19-21-214(4), MCA, the percentage of compensation in (1)(a) of the rule of 1.00%, (1)(b) of the rule of 0.27%, and (1)(c) of the rule of the 0.1% additional employer contribution that commenced on July 1, 2014 must be allocated to the member's retirement account and is no longer used to pay down the PCR UAL.

 

5. Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to: Montana Public Employee Retirement Administration, P.O. Box 200131, Helena, Montana, 59620-0131; telephone (406) 444-3154; fax (406) 444-5428; or e-mail mpera@mt.gov, and must be received no later than 5:00 p.m., January 24, 2020.

 

6. If persons who are directly affected by the proposed amendments wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments they have to Kris Vladic at the above address no later than 5:00 p.m., January 24, 2020.

 

7. If the Public Employees' Retirement Board receives requests for a public hearing on the proposed amendments from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed amendment; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those directly affected has been determined to be 8,159 based on approximately 81,590 participants in the Defined Benefit Retirement Plans.

 

8. The Public Employee Retirement Administration maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 5 above or may be made by completing a request form at any rules hearing held by the Montana Public Employee Retirement Administration.

 

9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

 

10. With regard to the requirements of 2-4-111, MCA, the Public Employees' Retirement Board has determined that the amendment and repeal of the above-referenced rules will not significantly and directly impact small businesses.

 

 

/s/ William Holahan                                    /s/ Marty Tuttle                                

William Holahan                                         Marty Tuttle

Chief Legal Counsel                                   President

and Rule Reviewer                                     Public Employees' Retirement Board

           

Certified to the Secretary of State December 17, 2019.

 

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